12/06/2014 Asia Business Report


12/06/2014

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backlog. He blamed it on a surge in applications earlier this year. Time

:00:00.:00:00.

for the latest is best used live from Singapore `` latest business

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news live from Singapore. Indonesia's Central Bank meets for

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the first time since campaigning began in the presidential elections.

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And fierce competition. Our Asia India is taking off on its maiden

:00:23.:00:27.

flight. What does this mean for other rivals? Thank you for joining

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us on Asia Business Report on BBC World News. Indonesia's central

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banks to make bank meets today `` Central Bank meets today. An

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interest rate move is not expected. The spotlight is on the outlook for

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Southeast Asia's a guest economy. This is the key to the government's

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political fortunes. `` South East Asia's biggest economy. I spoke to

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an investment officer. He explains why it is unlikely that the bank of

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Indonesia will change its markets policy. US long`term interest rates

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have been coming down in recent months. So there is really no

:01:11.:01:13.

pressure for Indonesia to raise rates. Inflation ran at 7.3% in the

:01:14.:01:18.

month of May. So there is really no pressure for the central bank to

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raise rates. Having said that, a longer term issue is for Indonesia

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to keep attracting capital. To fund investment and to fund the growth of

:01:27.:01:31.

the economy. Why not cut rates now? We saw a slowdown in the Indonesian

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economy in 2013. Yet again in the first quarter of 2014 it stands at

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5.2%. Isn't there a case for them to reduce the cost of borrowing now

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rather than later? Indonesia's economy is held down by subsidies.

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Basically electricity and energy prices are subsidised by 2.5% of

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GDP. As a consequence, the government has to reduce those

:01:58.:02:00.

subsidies to spend that money on infrastructure and other more

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important things. How can they attract foreign investment when they

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have that minimum export and looser Labour laws? There is a shift in

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terms of investment focus. Away from resource`based investments. Mining,

:02:15.:02:17.

towards manufacturing. So you see big Japanese automakers, tyre

:02:18.:02:23.

makers, cars Tomic setting up big plants in Indonesia in recent

:02:24.:02:26.

months. They may have problems in terms of it attracting foreign

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investment, but the biggest asset right now is the large population of

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240 million people. They support the domestic economy. Indonesia last

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year got $22 billion of investment. That's not too bad. When you

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consider that China got about 115 billion. So Indonesia does get a

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fairly large foreign investment. The issue is to change the quality, the

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nature of that investment away from mining to as manufacturing. China is

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investing to build railways on the roads, airports along the Yangtze

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River. To help promote business along its waterways. It is the

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government's latest attempt to sustain high growth rates. It is

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that nation's third largest and joins the inland provinces to

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Shanghai. Japanese engineering giant Mitsubishi has joined forces with

:03:17.:03:22.

German firm Siemanns to come up with a French offer to rival that of

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General Electric. They are due to put up a proposal to the board next

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week. Toyota has decided and added 650,000 cars all in Japan to the

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recall list. It issued the list last year over a defect in passenger

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airbags. That takes the number of cars recalled over the issue to 2.8

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million. Shares in a have plummeted after the airline cancelled an order

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for 70 aircraft. It says it is, confident that new orders in the

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coming months will compensate for the cancellation. Malaysia's airline

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is said to be the first airline to fly in these skies. Air Asia India

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is becoming the fourth Budget carrier after space jet. Our

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correspondent reports. I am here at the Bangalore airport, one of the

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largest in the country. It is from here that Air Asia India's landmark

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flight will take off to Goa with 180 passengers. For its maiden flight

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the airline was selling tickets at $17. That is cheaper than a second

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class train ticket. That has triggered an airfare war with other

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domestic carrier slashing fares and offering heavy discounts. All this

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means great news for travellers, but that may not be the case for Indian

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airlines. Because financially, most of them are struggling. The combined

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losses of Indian airlines have been running into billions of dollars.

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Due to high taxes on fuel and steep airport charges, which have pushed

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up costs. A couple of airlines, including Kingfisher, had to shut.

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Durie to the same reasons. So how is Air Asia India planning to make

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money? If you look at demand and supply, there is a lot more capacity

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that the Indian market can take on in terms of air traffic. With that

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being said, our model has always been about low fares, keeping the

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fares low, make sure that we make it affordable enough that people can

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fly. Bringing that model into India, keeping our costs razor thin. The

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new airline's main partner is a group which is joining hands with

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Singapore airlines to start another domestic carrier later this year.

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Last year, Abu Dhabi `based Etihad invested in jet Airways. This means

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more flight options for passengers. And also renewed interest in Indian

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aviation. But financially for the new entrant, it will not be a smooth

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ride. In Asia's third largest economy. China's e`commerce giant

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Aibaba is taking on American players like Amazon and eBay. `` Alibaba.

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This comes ahead of their share sale in the US. I spoke to the

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Asia`Pacific chief executive who explained why Alibaba is likely to

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succeed. I think they will apply the same principles that they have. I

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think we should not forget that in 2006, eBay had 80% market share of

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the e`commerce in China. And Alibaba was a late starter. It wiped out

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eBay very quickly on two principles. One was putting in touch sellers and

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buyers, the second was not taking a cut on the transaction, but making

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money out of marketing tools in an ecosystem they created. And I

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believe they will do exactly the same thing in the, maybe not to the

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same extent, but the principal will remain the same. So should Amazon

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and eBay be worried with the entry of Alibaba? They should, but they

:07:19.:07:24.

should be worried for the growth of Aly Alibaba for quite awhile now.

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This is only the beginning. The 11 main platform of Alibaba will be

:07:33.:07:39.

without ads. What kind of business model that they have you? How will

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they be making money? The fact that they will be out of advertising, is

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not dissimilar to what they do in China. I think they will make money

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by monetising marketing tools and services to the stores is as opposed

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paid advertising. Electronic cigarettes. Details have not been

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exposed, but the firm expects to wrap up acquisition in the second

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quarter of the 2014 fiscal year. Analysts believe that the cigarettes

:08:13.:08:15.

will eventually outsell traditional cigarettes in some markets. The

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Spanish owner of the fashion retailer Zara has reported its

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biggest drop in profits in five years. Net profits fell in the three

:08:25.:08:28.

months to April. More than one third of its sales come from a late

:08:29.:08:32.

Europe, but the sharp rise in the euro against currencies like the

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Japanese yen have reduced the level of profit that are patria did.

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Moving back now `` repatriated. In Indonesia, the country's big

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commercial banks are testing out a scheme called Rustlers banking. As a

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way of `` branchless ranking. Life in this village has been like this

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for a generation. But change is on its way here. For decades, farmers

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like this man have struggled to access ASIC financial services. The

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nearest bank is 16 kilometres away. `` ASIC financial services. But a

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new scheme means he can transfer money and save right here in a small

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shop in his village. `` basic. If I put my money in this branch, I have

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to wait for a minibus to take me. Here I can withdraw my money faster

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and get to the rice field earlier. Shopkeepers here were dumb at work

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as agents for the bank, carrying out simple transactions. `` shopkeepers

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here work as agents for the bank. This is crucial if Indonesia is to

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boost economic growth in rural like this were living below the

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poverty line last year. Critics say that Indonesian farmers need access

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to credit. This scheme does not for this scheme to work, banks need

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to provide borrowing services in rural areas. If it is simple

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transactions, like saving money and withdrawing funds, it is going to

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have limited success. But while this initiative may be a step in the

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right direction, some observers say it doesn't go far enough. And before

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we go, here is a quick look at the markets. Asian stocks are in

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negative territory in early Thursday trading. US equities fell overnight

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following the World Bank's production of its global growth

:10:48.:10:51.

forecast. Thank you for investing your time in

:10:52.:10:58.

The main news stories this our: after seizing two cities in two

:10:59.:11:08.

days, the advance of the Islamist militants in Iraq appears to have

:11:09.:11:12.

been halted north of Baghdad. Sepp Blatter has confirmed he wants to

:11:13.:11:14.

stand as another

:11:15.:11:15.

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