30/06/2014 Asia Business Report


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to "working for a fair deal with Britain". Now on BBC News all the


latest business news live from Singapore.


Euphoric financial markets are out of step with economic reality, a


major report warns. And, it should be a time of fasting, but food


prices in Indonesia are expected to rise during the Muslim holy month of


Ramadan. Welcome to Asia Business Report. A major rally in global


financial markets is out of sync with a shaky economic outlook, that


is the view of the bank of International settlements, that is


regarded as the central bank of central banks, and focuses on


regulation. In its annual report, it warned emerging markets are at risk


of a run`up in stock and property prices. I asked Michael McCarthy in


Sydney why that was the case. The current concerns are that they will


withdraw the stimulus too abruptly, that will knock risk assets around,


and bring share markets crashing down. The BIS is pointing out that


the deflation concerned markets are not as large as some would expect,


and there is a great risk in keeping rates too low for too long, and


borrowing goes up, and then when the rates go up, we will have an asset


price crash. We have heard this before, we heard it during the


financial crisis, the World Bank and others warned that low interest


rates in the West were sparking inflows that were unsustainable into


the emerging markets in Asia. It is not new, why aren't they more


prepared for it? It is not new, you're correct, it is a long way in


global markets that could break at any time. They are trained to


balance it, and keeping in mind that systemic risks to banks are a key


aspect of their function. China was highlighted in the report, as facing


a possible banking crisis, what is that due to? Is that due to the


easing of monetary policy as well? China's economy is common to a large


extent, isolated from international investment, with currency controls


and inflow controls that authorities keep there, but a buoyant trade


feeds into the economy in China. Any stomping on the brakes could have an


impact. There is concern at BIS that the Chinese banking system is


opaque, they are concerned about shadow banking taxes, and there are


concerns that there will be a flow`on effect through the Chinese


economy. In other business news, BNP Paribas


are expected to plead guilty to criminal charges of violating


American sanctions with rogue nations. They are alleged to have


hid $30 billion of transactions involving blacklisted countries


including Iran, Sudan and Cuba. According to reports, BNP Paribas


could pay a record $9 billion penalty.


France plans to set up a Paris`based pay system that will use their


system, it signed on Sunday with their counterpart, along to


participate in the trade. Major European financial centres like


London and Luxembourg have competed to trade using China's currency,


which is gaining international use. Argentina is set to enter a


technical default for the second time in 15 years today as they


strike a last`minute deal with creditors. They were ordered by a US


court to make interest payments on their default in bonds which they


have been trying to avoid through a lengthy legal battle. They would


lose access to international markets if it he faults on its payments. ``


defaults. The World Bank has been making loans to poor countries since


it was founded in 1945, but the world 's most famous lender is now


undergoing its first restructuring in nearly two decades. Starting this


week, it will provide itself between 14 global practices that focus on


areas like energy and agriculture. Our correspondent spoke to the chief


financial officer about the move. It is a push to stay relevant. We set


up this ambition to eradicate poverty, it is amazing. It has


helped people on Earth since day one, we believe that, within our


reach, we can eradicate poverty. I am happy that we can consider this


objective, and I will be happier if we reach it. The World Bank


president aims for a further $400 million in cost savings, where will


it come from and will it result in job cuts? In the restructuring,


within the organisation, you have to address cost issues, that is in any


private sector organisation, true the government and true for an


organisation like ours, we want to make the institution more efficient,


then maybe job impacts, of course, but to minimise this, we have made


these decisions before which have had no impact. We had to address


these things regularly and properly, not every 20 years, a key issue is


that we want an organisation that is, to a certain extent, a little


bit too bureaucratic, driven by processes, and as rules`based, but


it needs to be more productively managed. Muslims around the world


began the holy month of fasting this weekend, in Southeast Asia, and in


Indonesia, the world 's most populous Muslim nation, that means


an increased demand for staple goods. Fasting and feasting can


often see prices jump dramatically in Southeast Asia 's largest


economy. But, the price of food could be on the minds of voters this


month. Now we go to our correspondant.


This weekend, millions of Indonesians began fasting, for the


Muslim holy month of Ramadan. And, as you see pretty much every year,


prices of fruits, vegetables, meats, they begin to rise, it is no


different this time around. This woman has been running this stall in


this market for the last 15 years. She says that this time around,


prices have gone up about 20%. Over here, you can see the major staples


of the Indonesian market, soya beans, that can be fried or boiled,


they go in soups. Over here, these bright red chilies, an important


part of Indonesian cuisine, but this year, the price rises are coming


against the backdrop of a presidential election. Many of the


street vendors here have been telling me that this time around,


they have not seen politicians come out to promise them lower prices in


the way that they normally do in the Muslim holy month of fasting. But


what they have seen is party members coming out to try to get votes from


their preferred candidates. The economy is a major issue in this


election. Whoever becomes Indonesia 's next president will have to


tackle the challenge of rising prices for this country.


India's new government will deliver its first budget next month, one


issue that will be under focus is the gap between what India sells


abroad and what it buys in for its own needs. It imports more than it


exports, which makes the economy vulnerable, as businesses try to


find markets abroad, they are worried. Now we go to our


correspondant. For the past 30 years, the


components made here have been sold around the world. Finding their way


into products like microwave ovens and machines used in hospitals.


Customers include global giants like Siemens and General Electric.


Despite the strong credentials, business is proving difficult. This


computer charger will be exported to countries like Germany, Canada and


France. Over the last few years, the cost of manufacturing these products


in India is often more expensive compared to other Asian countries,


because of that, the price tends to be higher. Due to these reasons,


buyers in America and Europe find some Indian made products less


attractive. The property is not really going down, it is time to


find a customer, and because of the global competition, costs are


reducing. The value of goods that they export is a sensitive topic.


Every month, it imports more than it sells abroad. Figures change


monthly, but recently, the gap has been about $10 billion. This has


been a cause for serious concern. To counter it, the government put curbs


on imports of gold. The yellow metal is the second biggest item on


India's import list after oil. It help to narrow the trade deficit.


Rather than restricting what comes in, the new government wants to


focus on increasing what goes out by giving a big push to home`grown


manufacturing. To achieve that, it is pursuing the idea of exporting


high`value products for military and defence. The Exporters are hoping


that next month 's budget will give them some temporary reprieve,


perhaps, with more tax rebates. But, more important, is India's new trade


policy due later in the year. The long`term plan is what the countries


manufacturers need to fill in the crucial trade gap.


You can get more of our stories and updates on the website, that is it


for this edition of Asia Business Report. We have Sport Today coming


up next. Thank you for watching. I'm Adnan Nawaz. The top stories


this hour. Iraqi government forces are continuing an offensive to


recapture the city of Tikrit, which Sunni insurgents seized earlier this


month. It's not


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