28/07/2014 Asia Business Report


28/07/2014

Live from Singapore, the essential business news as it breaks and a look ahead to the news that will shape the business day.


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regular sessions in Parliament. The idea would need the approval of the

:00:00.:00:09.

Speaker of the house to go ahead. `` House. Now, Asia Business Report. Is

:00:10.:00:17.

Latin America and the new battleground for Japan's Japan's

:00:18.:00:25.

rivalry with China? Starbucks opens shop in Hanoi. Welcome to the

:00:26.:00:37.

programme. Japan's Prime Minister has kicked off a 5`nation tour of

:00:38.:00:41.

Latin America by signing a series of oil and gas deals with Mexico. Japan

:00:42.:00:46.

has been focused on energy since the Fukushima disaster, which shut down

:00:47.:00:52.

the country's nuclear reactors. It comes hot on the heels of a trip to

:00:53.:00:56.

the region by China's premier Xi Jinping. Both China and Japan are

:00:57.:01:03.

keen to tap into Latin America's natural resources. One of the most

:01:04.:01:09.

important issues around Asia, including in Japan and China, is

:01:10.:01:14.

energy and resources. This is where Shinzo Abe is following China on

:01:15.:01:20.

many accounts. Already into Africa and now into South America. Very

:01:21.:01:24.

important deals have to be signed on oil and gas, which is so important

:01:25.:01:29.

in Japan after nuclear power was switched off. Is it a competition

:01:30.:01:35.

between the two? Is Japan looking for resources as well as other

:01:36.:01:39.

things? There might be some competition in Asia and even in

:01:40.:01:43.

Africa but not so much in South America. Everyone is after resources

:01:44.:01:48.

but for Japan, this is a very important market. When there is a

:01:49.:01:52.

deal on infrastructure or energy, Japan is much more about selling its

:01:53.:01:56.

technology, while China is just trying to connect its market to

:01:57.:02:01.

major projects. We have seen this deal with Mexico. Japan has a

:02:02.:02:06.

free`trade agreement with Mexico. Now they have signed deals in oil

:02:07.:02:10.

and gas. Is this the first of many contracts to be signed over the

:02:11.:02:13.

course of this visit by Shinzo Abe to Latin America? Yes. Mexico is

:02:14.:02:20.

very important because it is the market that connects Japan to the

:02:21.:02:26.

US. It is the energy market. In Brazil, it will be security

:02:27.:02:30.

relations but also energy. The plan was to sell its technology and major

:02:31.:02:35.

infrastructure projects. And Chile is very important because already

:02:36.:02:38.

half of Japan's copper comes out of Chile, and you so important for the

:02:39.:02:47.

electronics industry. Thank you. China's industrial profits continue

:02:48.:02:52.

to expand at a faster pace than expected, due to strong growth in

:02:53.:03:01.

June, when profits rose 18% compared to one year before. The US company

:03:02.:03:04.

that owns the meat supplier at the centre of China's latest food scare

:03:05.:03:14.

is withdrawing all products made by its subsidiary, Husi Foods. It is

:03:15.:03:18.

sending its own representative to Shanghai to investigate claims that

:03:19.:03:28.

Husi Foods sold out of date meet. India's consumption of soft drinks

:03:29.:03:34.

is well below that of China, the US and Europe, but it is growing

:03:35.:03:38.

rapidly. In the budget is a plan to add a 5% tax to show brief history

:03:39.:03:53.

drinks `` to sugary fizzy drinks. Adding some fees to the budget. The

:03:54.:03:57.

debate over soft drinks and their potential harm in large quantities

:03:58.:04:01.

has been bubbling over around the world. India's government has now

:04:02.:04:07.

weighed in, unexpectedly raising taxes on them. I also propose to

:04:08.:04:18.

levy an additional duty of excise of 5% on aerated waters containing

:04:19.:04:25.

added sugar. The extra money will not do much to balance the books but

:04:26.:04:28.

it is certainly an attempt to balance the scales. In the past few

:04:29.:04:32.

years, more and more Indians have been getting health`conscious and

:04:33.:04:36.

consulting experts for guidance on what they should eat and drink.

:04:37.:04:41.

Steering clear of too many fizzy drinks is one piece of basic advice.

:04:42.:04:45.

But there is scepticism about whether this so`called healthy tax

:04:46.:04:50.

will discourage the large majority. They want something to make any

:04:51.:04:54.

impact and to dissuade the public from using fizzy drinks. So, why

:04:55.:05:01.

don't they prohibit advertising such products? Similarly how we have a

:05:02.:05:06.

ban on tobacco and smoking and cigarettes and alcohol? India is not

:05:07.:05:13.

the first country to bring in extra taxation on these products. In

:05:14.:05:17.

fact, it is a list that has been growing and which includes nations

:05:18.:05:24.

like France, Germany and Mexico. Compared to other countries around

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the world, India is a relatively small consumer of fizzy drinks.

:05:29.:05:37.

These so`called healthy taxes have been effective in other parts of the

:05:38.:05:44.

region. It has been shown by sudden researchers that a 10% rise in price

:05:45.:05:49.

creates a 4% drop in consumption. Monetary changes, increasing

:05:50.:05:52.

monetary prices, tend to be more effective than the other ways of

:05:53.:05:55.

trying to prevent somebody will discourage somebody on drinking or

:05:56.:05:59.

consuming something that would cause future health problems. Those

:06:00.:06:03.

figures, are they specifically for alcohol or more broadly? We have

:06:04.:06:08.

seen taxation on fizzy drinks in other jurisdictions. From what I

:06:09.:06:14.

have seen for alcohol... There is some for tobacco as well. It does

:06:15.:06:19.

show that in general, price changes tend to be more effective than

:06:20.:06:22.

things like education, advertisements and so on. What does

:06:23.:06:27.

this mean for the business bottom line? If it does cut consumption,

:06:28.:06:31.

does it move that consumption to other products? Businesses will find

:06:32.:06:38.

a fall in consumption affecting their business, so they will start

:06:39.:06:44.

producing more healthy things like fruit juices. With alcohol

:06:45.:06:50.

consumption, the interesting thing is that with heavy drinkers, the

:06:51.:06:55.

monetary change does not change consumer behaviour. The same with

:06:56.:06:59.

heavy users of tobacco. Do you see these tax changes is becoming more

:07:00.:07:02.

common in Asia as governments become more aware of their health budgets?

:07:03.:07:06.

What we have just seen, this monetary change does affect

:07:07.:07:11.

consumption. If that reduction in health issues in the future offsets

:07:12.:07:16.

the dropping consumption, that is something that they want to do but

:07:17.:07:22.

unfortunately, how much savings will you actually get in the future? Is

:07:23.:07:26.

too far the future to see and it is too cause. So far, it is an excuse

:07:27.:07:31.

for them to raise taxes more than really to reduce health issues for

:07:32.:07:42.

the future. Now, coffee. How does a global chain target a marker that

:07:43.:07:50.

already has a top products? Coffee is huge in Vietnam. The south`east

:07:51.:07:55.

Asian nation is the world's second largest exporter of coffee. There

:07:56.:08:02.

are more coffee shops crammed into Hanoi than probably anywhere on

:08:03.:08:07.

earth, so opening a cafe in Vietnam's capital could be a bit of

:08:08.:08:12.

a gamble. But this month, Starbucks is making an aggressive push,

:08:13.:08:18.

opening three branches in this bustling city, possibly one of its

:08:19.:08:23.

most challenging markets yet. It is unique and special in that there is

:08:24.:08:27.

a long and deep coffee history and heritage in Hanoi and many things in

:08:28.:08:36.

Hanoi happen over coffee. The US copy chain already has 11 outlets in

:08:37.:08:43.

two other Vietnamese cities but France's coffee legacy is most

:08:44.:08:48.

visible in the capital. Most city streets overflow with coffee shops

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that sell one cup for as little as 50 cents. Black coffee in Starbucks

:08:52.:08:58.

costs about $2, about half the average daily wage. TRANSLATION: I'm

:08:59.:09:04.

not concerned about the competition because we have a number of regular

:09:05.:09:09.

customers. Some have been drinking coffee here for the last 61 years.

:09:10.:09:15.

Hanoi's first Starbucks drew the crowd on opening day but the

:09:16.:09:18.

question is if it can keep up the momentum, as many Vietnamese people

:09:19.:09:22.

feel financially squeezed. The country is mired in debt, hit by

:09:23.:09:27.

bankruptcies and last year suffered its slowest growth in four years.

:09:28.:09:32.

Not everybody has the money to spare. TRANSLATION: I think all

:09:33.:09:38.

types of coffee... It certainly makes things seem more interesting.

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But for me, I prefer Vietnamese traditional coffee. The streetside

:09:44.:09:46.

coffee is more down`to`earth and it suits my wallet. Starbucks hopes to

:09:47.:09:54.

brew up profits in Hanoi but the coffee giant might just find that it

:09:55.:10:02.

is not everybody's cup of tea. Now, a quick check of the markets.

:10:03.:10:07.

Australia has opened slightly weaker but Japan, after opening weaker, has

:10:08.:10:09.

turned around. That is it for this edition of Asia

:10:10.:10:23.

Business Report. We are on Twitter, don't forget to follow us there.

:10:24.:10:25.

Thank you for watching. This is BBC News. The headlines:

:10:26.:10:40.

Israel and Hamas have carried out more attacks, with both sides

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accusing each

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