30/07/2014 Asia Business Report


30/07/2014

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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had been paid. Those are the headlines. Let's go to

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Singapore with all the latest business news.

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Lessons from MH17. How aviation chiefs are improving safety for

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flights over conflict zones. And, We go to Taipei to see a key

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part of the economy, family business.

:00:27.:00:32.

Welcome to Asia Business. Top aviation industry bosses have

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wrapped up a key meeting in Montreal about reducing risk of flights over

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conflict zones. It comes after the death of 298 people in the downing

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of Flight MH17 two weeks ago over eastern Ukraine.

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. They said they wanted to seek new international laws relating to those

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who make and deploy anti` aircraft missiles. There was a lot of talk

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about the information coming from individual countries about how safe

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it is to fly over their airspace. Thinking back to Ukraine, the

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government had said their airspace was safe and of course, as we

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tragically know, that wasn't the case. I asked the head of IKO

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whether or not he could compel countries who don't live up to their

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duties when it comes to reporting on airspace. What power do we have to

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compel? Not much. But, we depend on the freewheel of the states. To

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implement the globally agreed provisions of the IKO. At the end of

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the meeting, should passengers feel safer? Here is the head of the

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industry 's main trade body, IATA. This is the first time that a

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peaceful civil aircraft has been shot down by the missile like this.

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We have to keep this into perspective. This kind of incident

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is extremely rare. As for any fare increases, I was told that if prices

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did indeed go up, they would be negligible. The message coming out

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of here today is that the system is still working and, there are gaps

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that those here are trying to close. From that report from the shell,

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there is no denying the airline industry is tough business to be in.

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As well as the aviation disasters of recent times, players are affected

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by competition and economic uncertainty. Later today, we will

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get an indication of how the national carrier in Singapore,

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Singapore Airlines, is faring in its first quarter results. Our

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correspondent explains what is at the heart of the problem. What is

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happening in the airline industry is they don't make enough money.

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Singapore Airlines generates 14 billion worth of revenue, it doesn't

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have great margin of safety on what it is able to generate. That isn't

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enough. It does not give it a margin of safety. When you add on extra

:03:40.:03:44.

things, talking about new flight paths, extra insurance, extra fuel

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costs, that will damage the company completely. You talk about the

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flight path over conflict zones. You have heard that in the report. It

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emerged after MH17 that Singapore Airlines was flying over that part

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of eastern Ukraine more frequently than Malaysia Airlines. Are all

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airlines going to have to rethink their flight paths and as a result,

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it will end up costing more. The cost is only one part of the

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equation, the second one is whether they can pass it on to customers.

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Customers will say to themselves, what is more important? A safer

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flight path or a cheaper airline? This is the balance they have. As

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far as airlines are concerned, unless they are pushed into using

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new flight paths, they will say that this is safe enough. That is the

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difficulty they have. They need to balance the cost. Playing a new

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route will cost more fuel and money. Can they pass that cost on to

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customers? I would say passengers will decide. They will ask in future

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which flight path they will be using. If they use one that

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uncomfortable with, they will pay a higher price. In other news, data

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out of Japan shows industrial output fell at its fastest rate since the

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2011 earthquake that crippled the Fukushima nuclear power plant. The

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factory slope reduction by 3% in June from May. The latest sign

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highlights the impact of the recent sales tax rise on consumer demand.

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US tech giant Microsoft is under scrutiny in China. Chinese

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authorities raided Microsoft offices. They say that Microsoft

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breached competition rules with their new system. Our correspondent

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has more. Things have changed for Microsoft

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since its heyday in 2006, when the Chinese President flew to the US to

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have dinner with Microsoft's chairman, Bill Gates, before then

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travelling to the White House. That was the bright point for them. Since

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then, the company has struggled in China. Especially with the battle

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against piracy. Its prospects of selling legal software in China

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looks best when it was negotiating with the government to purchase

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legal software. The announcement of an investigation into the company

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seems to have dimmed the prospect. The government has already banned

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the purchase of Windows 8 software by government buyers. Things are not

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looking good for the company now. Could Microsoft be lumped in with

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the other foreign corporations right our? We are seeing the Chinese

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authorities essentially going after many foreign companies `` right now?

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Absolutely. We have seen Chinese regulators and state`run media

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turning up the heat on foreign corporations. We have seen

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pharmaceutical companies, fast food companies and now technology

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companies that are being scrutinised very carefully by the Chinese

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government. Of course, the government says they are doing this

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to protect the interests of local consumers in an effort to reduce

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pricing. It is detecting local companies, something that happened

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all over the world. However, at some point, the government will have to

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take a back step in its efforts to make things more palatable for

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foreign companies working in China. Now, to Taiwan, where three sisters

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have taken over the running of a family farm and turned it into a

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popular weekend getaway. It has been a smooth transition from one

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generation to the next. Not so for many other families. For the latest

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series of Family Businesses, our correspondent reports. Preparing a

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dish of shrimp, this mother and daughter duo make a good team. Out

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the back, the father is roasting the family's trademark chicken. The

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youngest daughter is in charge of the front desk and seeing guests to

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their rooms. The eldest daughter is the head of marketing and conjures

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up creative beverages in the cafe. TRANSLATION: It just happened. We

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threw the youngest one behind the front desk when she was just two.

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Now, at 22, she is in charge. We are happy the young people have taken

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over managing the farm. They have better ideas about how to run the

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business than we do. Family businesses make up the bulk of

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Taiwan's economy. But, while this family has succeeded in handing down

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the business to the younger generation, many companies in

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Taiwan, including some of the biggest firms, do not have a

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succession plan. They are run by the founders, who are getting on in age,

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but do not have any apparent successors lined up. In fact,

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analysts estimate that 70% of Taiwan's against companies are

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family owned. Bad, only 30% have a succession plan. The companies are

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either too big to be passed down to family members or the offspring are

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not capable or interested in running them. `` But. Experts say the

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succession challenges for many Taiwanese companies put a question

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mark over their future, especially in the mind of shareholders. Most of

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the first generation entrepreneurs do not want to give up their

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position. They still want to make major decisions for the company. As

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a result, the successors do not have a chance. They don't have the chance

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to handle the entire company. I think there is a major crisis in

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Taiwan's business. Experts say that elderly founder is not willing to

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let go in as a reason why Taiwan's economy is staggering. Without

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letting the young generation play a major role, companies might be slow

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to change and ultimately, they risk their future competitiveness. But,

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not the Thai's. It rests very firmly on the next generation.

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A quick look at the markets. on the next generation.

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A quick look at the We have seen gains in the region. The Nikkei is

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continuing its six`month high due to healthy corporate results we saw

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from Honda and Tokyo electron, despite the bad industrial

:10:38.:10:42.

production as we told you about. That is it for this edition of Asia

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Business Report. Thank you for watching. Hello. You are watching

:10:46.:10:56.

BBC News. I am Adnan Nawaz with the top stories: Israel's bombardment of

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Gaza is continuing. The

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