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extra staff are tackling the backlog and his has blamed it on a surge | :00:00. | :00:07. | |
which has led to a backlog. Time now for all the latest business news | :00:08. | :00:16. | |
from Singapore. Thank you for joining us on Asia Business Report | :00:17. | :00:18. | |
on BBC World News. Indonesia's Central Bank meets today. Fierce | :00:19. | :00:29. | |
competition as Air Asia India takes off for its maiden flight. What will | :00:30. | :00:45. | |
it mean for its rivals? Indonesia's Central Bank meets today. An | :00:46. | :00:48. | |
interest rate move is not expected. The spotlight is on the outlook for | :00:49. | :00:50. | |
south`east Asia's biggest economy. This is the key to the government's | :00:51. | :00:53. | |
political fortunes. I spoke to an investment officer. He explains why | :00:54. | :00:58. | |
it is unlikely that the Bank of Indonesia will change its markets | :00:59. | :01:04. | |
policy. US long`term interest rates have been coming down in recent | :01:05. | :01:07. | |
months. So there is really no pressure for Indonesia to raise | :01:08. | :01:11. | |
rates. Inflation ran at 7.3% in the month of May. So there is really no | :01:12. | :01:21. | |
pressure for the Central Bank to raise rates. Having said that, a | :01:22. | :01:24. | |
longer term issue is for Indonesia to keep attracting capital. To fund | :01:25. | :01:27. | |
investment and to fund the growth of the economy. Why not cut rates now? | :01:28. | :01:31. | |
We saw a slowdown in the Indonesian economy in 2013. Yet again in the | :01:32. | :01:34. | |
first quarter of 2014 it stands at 5.2%. Isn't there a case for them to | :01:35. | :01:39. | |
reduce the cost of borrowing now rather than later? Indonesia's | :01:40. | :01:44. | |
economy is held down by subsidies. Basically electricity and energy | :01:45. | :01:46. | |
prices are subsidised by 2.5% of GDP. As a consequence, the | :01:47. | :01:54. | |
government has to reduce those subsidies to spend that money on | :01:55. | :01:56. | |
infrastructure and other more important things. How can they | :01:57. | :02:04. | |
attract foreign investment when they have that minimum export and looser | :02:05. | :02:08. | |
labour laws? There is a shift in terms of investment focus. Away from | :02:09. | :02:10. | |
resource`based investments. Mining, towards manufacturing. So you see | :02:11. | :02:15. | |
big Japanese automakers, tyre makers, car companies setting up big | :02:16. | :02:18. | |
plants in Indonesia in recent months. They may have problems in | :02:19. | :02:25. | |
terms of it attracting foreign investment, but the biggest asset | :02:26. | :02:28. | |
right now is the large population of 240 million people. They support the | :02:29. | :02:34. | |
domestic economy. Indonesia last year got $22 billion of investment. | :02:35. | :02:37. | |
That's not too bad. When you consider that China got about $115 | :02:38. | :02:40. | |
billion. So Indonesia does get a fairly large foreign investment. The | :02:41. | :02:45. | |
issue is to change the quality, the nature of that investment away from | :02:46. | :02:52. | |
mining to as manufacturing. `` towards. China is investing to build | :02:53. | :02:57. | |
railways on the roads, airports along the Yangtze River. To help | :02:58. | :02:59. | |
promote business along its waterways. It is the government's | :03:00. | :03:02. | |
latest attempt to sustain high growth rates. It is that nation's | :03:03. | :03:13. | |
third largest river and joins the inland provinces to Shanghai. | :03:14. | :03:15. | |
Japanese engineering giant Mitsubishi has joined forces with | :03:16. | :03:18. | |
German firm Siemanns to come up with a French offer to rival that of | :03:19. | :03:26. | |
General Electric. They are due to put up a proposal to the board next | :03:27. | :03:29. | |
week. Toyota has decided and added 650,000 cars all in Japan to the | :03:30. | :03:40. | |
recall list. It issued the list last year over a defect in passenger | :03:41. | :03:43. | |
airbags. That takes the number of cars recalled over the issue to 2.8 | :03:44. | :03:46. | |
million. Shares have plummeted after the airline cancelled an order for | :03:47. | :03:59. | |
70 aircraft. That is Dubai's Emirates Air. It says it is, | :04:00. | :04:03. | |
confident that new orders in the coming months will compensate for | :04:04. | :04:05. | |
the cancellation. Malaysia's airline is said to be the first airline to | :04:06. | :04:09. | |
fly in these skies. Air Asia India is becoming the fourth budget | :04:10. | :04:22. | |
carrier after Space Jet. As well as Indigo and Go Air. Our correspondent | :04:23. | :04:25. | |
reports. I am here at the Bangalore airport, one of the largest in the | :04:26. | :04:29. | |
country. It is from here that Air Asia India's landmark flight will | :04:30. | :04:32. | |
take off to Goa with 180 passengers. For its maiden flight the airline | :04:33. | :04:36. | |
was selling tickets at $17. That is cheaper than a second class train | :04:37. | :04:42. | |
ticket. That has triggered an airfare war with other domestic | :04:43. | :04:44. | |
carrier slashing fares and offering heavy discounts. All this means | :04:45. | :04:49. | |
great news for travellers, but that may not be the case for Indian | :04:50. | :04:53. | |
airlines. Because financially, most of them are struggling. The combined | :04:54. | :04:58. | |
losses of Indian airlines have been running into the billions of | :04:59. | :05:05. | |
dollars. Due to high taxes on fuel and steep airport charges, which | :05:06. | :05:08. | |
have pushed up costs. A couple of airlines, including Kingfisher, had | :05:09. | :05:15. | |
to shut due to the same reasons. So how is Air Asia India planning to | :05:16. | :05:24. | |
make money? If you look at demand and supply, there is a lot more | :05:25. | :05:27. | |
capacity that the Indian market can take on in terms of air traffic. | :05:28. | :05:31. | |
With that being said, our model has always been about low fares, keeping | :05:32. | :05:34. | |
the fares low, make sure that we make it affordable enough that | :05:35. | :05:38. | |
people can fly. Bringing that model into India, keeping our costs razor | :05:39. | :05:43. | |
thin. The new airline's main partner is a group which is joining hands | :05:44. | :05:46. | |
with Singapore airlines to start another domestic carrier later this | :05:47. | :05:52. | |
year. Last year, Abu Dhabi`based Etihad invested in jet Airways. This | :05:53. | :05:55. | |
means more flight options for passengers. And also renewed | :05:56. | :06:02. | |
interest in Indian aviation. But financially for the new entrant, it | :06:03. | :06:06. | |
will not be a smooth ride. In Asia's third largest economy. | :06:07. | :06:20. | |
on American players like Amazon and eBay. This comes ahead of their | :06:21. | :06:22. | |
share sale in the US. I spoke to the Asia`Pacific chief executive who | :06:23. | :06:27. | |
explained why Alibaba is likely to succeed. I think they will apply the | :06:28. | :06:36. | |
same principles that they have. I think we should not forget that in | :06:37. | :06:39. | |
2006, eBay had 80% market share of the e`commerce in China. And Alibaba | :06:40. | :06:49. | |
was a late starter. It wiped out eBay very quickly on two principles. | :06:50. | :06:53. | |
One was putting in touch sellers and buyers, the second was not taking a | :06:54. | :06:55. | |
cut money out of marketing tools in an | :06:56. | :07:04. | |
ecosystem they created. And I believe they will do exactly the | :07:05. | :07:07. | |
same thing in the, maybe not to the same extent, but the principal will | :07:08. | :07:16. | |
remain the same. ``in the United States. So should Amazon and eBay be | :07:17. | :07:20. | |
worried with the entry of Alibaba? They should, but they should be | :07:21. | :07:23. | |
worried for the growth of Alibaba for quite awhile now. This is only | :07:24. | :07:31. | |
the beginning. The main platform of Alibaba will be without ads. What | :07:32. | :07:37. | |
kind of business model do they have? How will they be making money? The | :07:38. | :07:43. | |
fact that they will be out of advertising, is not dissimilar to | :07:44. | :07:47. | |
what they do in China. I think they will make money by monetising | :07:48. | :07:49. | |
marketing tools and services to the stores is as opposed paid | :07:50. | :08:02. | |
advertising. `` to the stores as opposed to paid advertising. | :08:03. | :08:06. | |
Electronic cigarettes. Details have not been exposed, but the firm | :08:07. | :08:09. | |
expects to wrap up acquisition in the second quarter of the 2014 | :08:10. | :08:22. | |
fiscal year. Analysts believe that E`cigarettes will eventually outsell | :08:23. | :08:24. | |
traditional cigarettes in some markets. Moving on now. In | :08:25. | :08:37. | |
Indonesia, the country's big commercial banks are testing out a | :08:38. | :08:39. | |
scheme called branchless banking. Life in this village has been like | :08:40. | :08:43. | |
this for a generation. But change is on its way here. For decades, | :08:44. | :08:46. | |
farmers like this man have struggled to access basic financial services. | :08:47. | :08:49. | |
The nearest bank is 16 kilometres away. But a new scheme means he can | :08:50. | :08:52. | |
transfer money and save right here in a small shop in his village. | :08:53. | :09:05. | |
TRANSLATION: If I put my money in this branch, I have to wait for a | :09:06. | :09:09. | |
minibus to take me. Here I can withdraw my money faster and get to | :09:10. | :09:14. | |
the rice field earlier. Shopkeepers here work as agents for the bank, | :09:15. | :09:30. | |
carrying out simple transactions. Increasing access to financial | :09:31. | :09:33. | |
institutions is crucial if Indonesia is to boost economic growth in rural | :09:34. | :09:36. | |
areas. 28 million people in areas like this were living below the | :09:37. | :09:39. | |
poverty line last year. Critics say that Indonesian farmers need access | :09:40. | :09:42. | |
to credit. This scheme does not offer that. TRANSLATION: In order | :09:43. | :09:45. | |
for this scheme to work, banks need to provide borrowing services in | :09:46. | :09:51. | |
rural areas. If it is simple transactions, like saving money and | :09:52. | :09:54. | |
withdrawing funds, it is going to have limited success. But while this | :09:55. | :10:01. | |
initiative may be a step in the right direction, some observers say | :10:02. | :10:10. | |
it doesn't go far enough. And before we go, here is a quick | :10:11. | :10:13. | |
look at the markets. Asian stocks are in negative territory in early | :10:14. | :10:18. | |
Thursday trading. US equities fell overnight following the World Bank's | :10:19. | :10:21. | |
production of its global growth forecast. | :10:22. | :10:28. | |
Thank you for investing your time in us. | :10:29. | :10:41. | |
The main news stories this hour. After seizing two cities in two | :10:42. | :10:48. | |
days, Islamist militants appear to be | :10:49. | :10:49. |