:00:00. > :00:07.extra staff are tackling the backlog and his has blamed it on a surge
:00:08. > :00:16.which has led to a backlog. Time now for all the latest business news
:00:17. > :00:18.from Singapore. Thank you for joining us on Asia Business Report
:00:19. > :00:29.on BBC World News. Indonesia's Central Bank meets today. Fierce
:00:30. > :00:45.competition as Air Asia India takes off for its maiden flight. What will
:00:46. > :00:48.it mean for its rivals? Indonesia's Central Bank meets today. An
:00:49. > :00:50.interest rate move is not expected. The spotlight is on the outlook for
:00:51. > :00:53.south`east Asia's biggest economy. This is the key to the government's
:00:54. > :00:58.political fortunes. I spoke to an investment officer. He explains why
:00:59. > :01:04.it is unlikely that the Bank of Indonesia will change its markets
:01:05. > :01:07.policy. US long`term interest rates have been coming down in recent
:01:08. > :01:11.months. So there is really no pressure for Indonesia to raise
:01:12. > :01:21.rates. Inflation ran at 7.3% in the month of May. So there is really no
:01:22. > :01:24.pressure for the Central Bank to raise rates. Having said that, a
:01:25. > :01:27.longer term issue is for Indonesia to keep attracting capital. To fund
:01:28. > :01:31.investment and to fund the growth of the economy. Why not cut rates now?
:01:32. > :01:34.We saw a slowdown in the Indonesian economy in 2013. Yet again in the
:01:35. > :01:39.first quarter of 2014 it stands at 5.2%. Isn't there a case for them to
:01:40. > :01:44.reduce the cost of borrowing now rather than later? Indonesia's
:01:45. > :01:46.economy is held down by subsidies. Basically electricity and energy
:01:47. > :01:54.prices are subsidised by 2.5% of GDP. As a consequence, the
:01:55. > :01:56.government has to reduce those subsidies to spend that money on
:01:57. > :02:04.infrastructure and other more important things. How can they
:02:05. > :02:08.attract foreign investment when they have that minimum export and looser
:02:09. > :02:10.labour laws? There is a shift in terms of investment focus. Away from
:02:11. > :02:15.resource`based investments. Mining, towards manufacturing. So you see
:02:16. > :02:18.big Japanese automakers, tyre makers, car companies setting up big
:02:19. > :02:25.plants in Indonesia in recent months. They may have problems in
:02:26. > :02:28.terms of it attracting foreign investment, but the biggest asset
:02:29. > :02:34.right now is the large population of 240 million people. They support the
:02:35. > :02:37.domestic economy. Indonesia last year got $22 billion of investment.
:02:38. > :02:40.That's not too bad. When you consider that China got about $115
:02:41. > :02:45.billion. So Indonesia does get a fairly large foreign investment. The
:02:46. > :02:52.issue is to change the quality, the nature of that investment away from
:02:53. > :02:57.mining to as manufacturing. `` towards. China is investing to build
:02:58. > :02:59.railways on the roads, airports along the Yangtze River. To help
:03:00. > :03:02.promote business along its waterways. It is the government's
:03:03. > :03:13.latest attempt to sustain high growth rates. It is that nation's
:03:14. > :03:15.third largest river and joins the inland provinces to Shanghai.
:03:16. > :03:18.Japanese engineering giant Mitsubishi has joined forces with
:03:19. > :03:26.German firm Siemanns to come up with a French offer to rival that of
:03:27. > :03:29.General Electric. They are due to put up a proposal to the board next
:03:30. > :03:40.week. Toyota has decided and added 650,000 cars all in Japan to the
:03:41. > :03:43.recall list. It issued the list last year over a defect in passenger
:03:44. > :03:46.airbags. That takes the number of cars recalled over the issue to 2.8
:03:47. > :03:59.million. Shares have plummeted after the airline cancelled an order for
:04:00. > :04:03.70 aircraft. That is Dubai's Emirates Air. It says it is,
:04:04. > :04:05.confident that new orders in the coming months will compensate for
:04:06. > :04:09.the cancellation. Malaysia's airline is said to be the first airline to
:04:10. > :04:22.fly in these skies. Air Asia India is becoming the fourth budget
:04:23. > :04:25.carrier after Space Jet. As well as Indigo and Go Air. Our correspondent
:04:26. > :04:29.reports. I am here at the Bangalore airport, one of the largest in the
:04:30. > :04:32.country. It is from here that Air Asia India's landmark flight will
:04:33. > :04:36.take off to Goa with 180 passengers. For its maiden flight the airline
:04:37. > :04:42.was selling tickets at $17. That is cheaper than a second class train
:04:43. > :04:44.ticket. That has triggered an airfare war with other domestic
:04:45. > :04:49.carrier slashing fares and offering heavy discounts. All this means
:04:50. > :04:53.great news for travellers, but that may not be the case for Indian
:04:54. > :04:58.airlines. Because financially, most of them are struggling. The combined
:04:59. > :05:05.losses of Indian airlines have been running into the billions of
:05:06. > :05:08.dollars. Due to high taxes on fuel and steep airport charges, which
:05:09. > :05:15.have pushed up costs. A couple of airlines, including Kingfisher, had
:05:16. > :05:24.to shut due to the same reasons. So how is Air Asia India planning to
:05:25. > :05:27.make money? If you look at demand and supply, there is a lot more
:05:28. > :05:31.capacity that the Indian market can take on in terms of air traffic.
:05:32. > :05:34.With that being said, our model has always been about low fares, keeping
:05:35. > :05:38.the fares low, make sure that we make it affordable enough that
:05:39. > :05:43.people can fly. Bringing that model into India, keeping our costs razor
:05:44. > :05:46.thin. The new airline's main partner is a group which is joining hands
:05:47. > :05:52.with Singapore airlines to start another domestic carrier later this
:05:53. > :05:55.year. Last year, Abu Dhabi`based Etihad invested in jet Airways. This
:05:56. > :06:02.means more flight options for passengers. And also renewed
:06:03. > :06:06.interest in Indian aviation. But financially for the new entrant, it
:06:07. > :06:20.will not be a smooth ride. In Asia's third largest economy.
:06:21. > :06:22.on American players like Amazon and eBay. This comes ahead of their
:06:23. > :06:27.share sale in the US. I spoke to the Asia`Pacific chief executive who
:06:28. > :06:36.explained why Alibaba is likely to succeed. I think they will apply the
:06:37. > :06:39.same principles that they have. I think we should not forget that in
:06:40. > :06:49.2006, eBay had 80% market share of the e`commerce in China. And Alibaba
:06:50. > :06:53.was a late starter. It wiped out eBay very quickly on two principles.
:06:54. > :06:55.One was putting in touch sellers and buyers, the second was not taking a
:06:56. > :07:04.cut money out of marketing tools in an
:07:05. > :07:07.ecosystem they created. And I believe they will do exactly the
:07:08. > :07:16.same thing in the, maybe not to the same extent, but the principal will
:07:17. > :07:20.remain the same. ``in the United States. So should Amazon and eBay be
:07:21. > :07:23.worried with the entry of Alibaba? They should, but they should be
:07:24. > :07:31.worried for the growth of Alibaba for quite awhile now. This is only
:07:32. > :07:37.the beginning. The main platform of Alibaba will be without ads. What
:07:38. > :07:43.kind of business model do they have? How will they be making money? The
:07:44. > :07:47.fact that they will be out of advertising, is not dissimilar to
:07:48. > :07:49.what they do in China. I think they will make money by monetising
:07:50. > :08:02.marketing tools and services to the stores is as opposed paid
:08:03. > :08:06.advertising. `` to the stores as opposed to paid advertising.
:08:07. > :08:09.Electronic cigarettes. Details have not been exposed, but the firm
:08:10. > :08:22.expects to wrap up acquisition in the second quarter of the 2014
:08:23. > :08:24.fiscal year. Analysts believe that E`cigarettes will eventually outsell
:08:25. > :08:37.traditional cigarettes in some markets. Moving on now. In
:08:38. > :08:39.Indonesia, the country's big commercial banks are testing out a
:08:40. > :08:43.scheme called branchless banking. Life in this village has been like
:08:44. > :08:46.this for a generation. But change is on its way here. For decades,
:08:47. > :08:49.farmers like this man have struggled to access basic financial services.
:08:50. > :08:52.The nearest bank is 16 kilometres away. But a new scheme means he can
:08:53. > :09:05.transfer money and save right here in a small shop in his village.
:09:06. > :09:09.TRANSLATION: If I put my money in this branch, I have to wait for a
:09:10. > :09:14.minibus to take me. Here I can withdraw my money faster and get to
:09:15. > :09:30.the rice field earlier. Shopkeepers here work as agents for the bank,
:09:31. > :09:33.carrying out simple transactions. Increasing access to financial
:09:34. > :09:36.institutions is crucial if Indonesia is to boost economic growth in rural
:09:37. > :09:39.areas. 28 million people in areas like this were living below the
:09:40. > :09:42.poverty line last year. Critics say that Indonesian farmers need access
:09:43. > :09:45.to credit. This scheme does not offer that. TRANSLATION: In order
:09:46. > :09:51.for this scheme to work, banks need to provide borrowing services in
:09:52. > :09:54.rural areas. If it is simple transactions, like saving money and
:09:55. > :10:01.withdrawing funds, it is going to have limited success. But while this
:10:02. > :10:10.initiative may be a step in the right direction, some observers say
:10:11. > :10:13.it doesn't go far enough. And before we go, here is a quick
:10:14. > :10:18.look at the markets. Asian stocks are in negative territory in early
:10:19. > :10:21.Thursday trading. US equities fell overnight following the World Bank's
:10:22. > :10:28.production of its global growth forecast.
:10:29. > :10:41.Thank you for investing your time in us.
:10:42. > :10:48.The main news stories this hour. After seizing two cities in two
:10:49. > :10:49.days, Islamist militants appear to be