30/07/2014 Asia Business Report


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


Singapore with all the latest business news.


Lessons from MH17. How aviation chiefs are improving safety for


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


part of the economy, family business.


Welcome to Asia Business. Top aviation industry bosses have


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


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


of Flight MH17 two weeks ago over eastern Ukraine.


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


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


about the information coming from individual countries about how safe


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


by competition and economic uncertainty. Later today, we will


get an indication of how the national carrier in Singapore,


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


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


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


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


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


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


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


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


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


emerged after MH17 that Singapore Airlines was flying over that part


of eastern Ukraine more frequently than Malaysia Airlines. Are all


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


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


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


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


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


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


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


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


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


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


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


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


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


2011 earthquake that crippled the Fukushima nuclear power plant. The


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


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


US tech giant Microsoft is under scrutiny in China. Chinese


authorities raided Microsoft offices. They say that Microsoft


breached competition rules with their new system. Our correspondent


has more. Things have changed for Microsoft


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


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


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


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


against piracy. Its prospects of selling legal software in China


looks best when it was negotiating with the government to purchase


legal software. The announcement of an investigation into the company


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


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


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


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


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


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


turning up the heat on foreign corporations. We have seen


pharmaceutical companies, fast food companies and now technology


companies that are being scrutinised very carefully by the Chinese


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


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


pricing. It is detecting local companies, something that happened


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


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


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


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


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


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


series of Family Businesses, our correspondent reports. Preparing a


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


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


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


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


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


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


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


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


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


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


the business to the younger generation, many companies in


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


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


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


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


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


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


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


succession challenges for many Taiwanese companies put a question


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


the first generation entrepreneurs do not want to give up their


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


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


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


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


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


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


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


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


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


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


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


from Honda and Tokyo electron, despite the bad industrial


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


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


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


Gaza is continuing. The


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