12/09/2014 Asia Business Report

warned breaking away from the UK could lead to price rises and job

cuts. Now on BBC News, all the latest business news live from

Singapore. More jobs and greater economic

process ` how innovation can help Asian countries find a way. How

cut`price smartphones are helping millions to go mobile in India, and

creating huge opportunities for businesses.

Welcome to Asia Business Report. I'm Sharanjit Leyl. No other region in

the world has achieved growth at the rate of Asia over the last three

decades, but their central bank is warning that to avoid being stuck in

the middle`income track, countries have to move away from agriculture

and low`end manufacturing and engage in technology, skills and services.

Their country invest millions in innovation, but can they manage its

benefits? Asian Development Bank has tracked it for the first time,

ranking Japan in first. Korea is on its heels, with many following

behind. Myanmar, Pakistan and Cambodia are at the bottom of the

list. Earlier I spoke to a correspondent from Asian Development

Bank. We are developing an index that measures the efficiency. And

when I say efficiency, I am talking about infrastructure and

innovations, but most importantly, to see whether we have converted

that into efficiency of output. This index is unique in that it is able

to do that, and can also tell you whether a country has the capacity

to innovate, incentives to do so, and did the right kind of

environment for innovation. It seems like it is dependent on many

different factors, but the greatest amount of innovation and creativity,

whereabouts is it in Asia, and in which sectors? We say Japan, of

course, is the number one in our CPI index. They have done pretty well in

things like patents. Technology, they are quite good. Asia in general

have a tendency to not include this innovation and creativity as part of

their education, and this is where they will have to do a lot in the

future, including new education. Earlier we were talking about

inputs, and how it is measured through patents. But Singapore is a

country which has been spending incredible amount of innovation and

technology, but is behind Laos. Why is that? That's right. It is one of

the most efficient in terms of the knowledge economy. It input is

number one. Its output is not, we say with all the input you have

provided, there is opportunity to get better outputs. I wouldn't

regard this negatively, but there is potential to do so much more. Some

of the smaller countries do not have it. That is the good part of the

index ` often innovation is seen as something only in the reach of the

developed countries, but it is equally important for smaller

countries. Countries like Laos, as you mentioned. Innovation is also a

key theme of the World Economic Forum. But if China is going to

continue to grow, they will need to make some changes. Now we go to our

correspondent. What can you tell us? I expect to come here with much more

brands, innovation, and capabilities. They still lack a lot

of management capabilities, to move into the second phase. Including how

to be competitive in terms of cost. The market, Labour markets, has been

increasing prices, and wages, for a number of years now. Now they

realise they are not as competitive. Certainly not as

competitive as they should be compared with other parts of Asia

like Vietnam and Cambodia and so on. So you have to find ways to cut

costs elsewhere. So this is what the western world have been through for

many, many years. And these capabilities the western world can

bring to China right now. Does that mean that you can no longer rely on

a business model of making things here and selling them elsewhere? You

have to make them here and sell them here? Exactly right. Exactly right.

In the vast majority of products will not be competitive any more in

the next decade, produced here and sold everywhere in the world. Are

you seeing a difference in what the Chinese government wants from

investors, and what they like to see before welcoming investors into the

country? Absolutely. They are really looking for innovation, and research

and development. The incentives are now much more towards bringing

engineers and capabilities and technology versus bringing just

manufacturing. There is a lot of concern about the large number of

anti`trust investigations involving foreign companies in China. Do you

think it is a level playing field here for foreign businesses? There

is a perception, for sure, that the legislation is not as clear or as

equally managed across the board. Is the perception real or not is

difficult to say. But it is certainly some cases, recent cases,

where the general feeling is that the local company has been having

some advantages. You think foreign companies should be worried about

that? I think they should watch, not only China but elsewhere. This is

true in many other countries where there is some kind of protectionism

of the local production. We can talk about France, or we can talk about

Russia, I think China is not an exception. A lot of attention on

smartphones this week, the release of the latest Apple iPhone could

shake things up at the top of the market. But in India, consumers are

being bombarded with low`priced smart devices, these cheaper

handsets are set to open new online opportunities, as millions of people

take to the Internet for the first time. Now we go to our

correspondent. India is going mobile. Smartphone sales have almost

doubled from the same time last year, as low`cost models have hit

the market, putting devices into the hands of huge numbers of Indians for

whom they were previously out of reach. To go to location if you are

looking for consumer electronic in Delhi is here. They are doing risk

business, but if you want a really cheap deal, you have to go online.

Mozilla just launched the Cloud FX. The price is just $US33. All these

smartphones mean one thing. More, many more, Indians are now online,

over 500 millilon in three years' time. ATKearney believe Indian

companies should grab this opportunity, and provide immediate

content, mobile phones, and other media to the masses. They say it

could earn the telcos $6 billion in three years. The movie industry is

big, music is big. What has not happened yet is an Indian oriented

service has not been created. There are a lot of global players already

trying to make a play in India, but there is a lot of vernacular content

which will be asked for by Indian consumers. Mobile retail could also

be much bigger than it is today, but only if new users can be coaxed into

shopping online. The mobile app developer LetsGoMo is adept at

overcoming consumer reluctance, and believe new consumers need to be

offered incentives to purchase online, and an option to pay in

cash. Not everybody has money in India, and if you were going to go

to any income, you would see cash on delivery as an option for low`value

products. Late last month, the government announced a programme to

boost financial inclusion, which could allow increased mobile

banking. Cash may be king for now, but it appears that India's online

business ecosystem may be taking shape. You can catch more of that

and other stories over the weekend. Before we go, Starbucks is

reconsidering its dress code for its workers. Staff with tattoos have

been told to keep them completely under wraps. But the coffee giant

may now be changing its mind, with an internal e`mail saying that they

are revisiting their dress code, including the tattoo policy. Let's

have a look at the markets now. Because they are fairly mixed this

morning. You can see the Nikkei in Japan has actually edged up a little

bit more. Since it opened, there is a lot of crucial data that investors

are waiting for from China this weekend. Industrial production and

retail sales will be released on the weekend. That has somewhat

influenced market direction at the moment. And that is it for this

edition of Asia Business Report. Thank you for watching. We have

Sport Today coming up next. The top stories this hour: Cleared

of murder, but it is not over yet. On Friday Oscar Pistorius finds out

if he is cleared or convicted of the manslaughter of his girlfriend. Ten

Arab countries agree to join the American coalition against the

jihadists of the militant group Islamic State. An actor best known

for his role in the 1980s TV sitcom Bread has been chosen as the

Conservative candidate in the Clacton by`election. Giles Watling,