05/05/2016 Asia Business Report

Malaysia scandal fund one MDB loses its board of directors as questions

continue about its finances. And these pieces of Amber are worth more

than their weight in gold because of surging Asian demand.

Good morning, Asia. Hello, world. It's a Thursday. Glad you could join

us. I'm Rico Hizon. The decision to dissolve the board of advisors at

Malaysia's State fund, one MDB, puts the spotlight yet again on the Prime

Minister. It's the latest twist in a long-running scandal that has

gripped Malaysia and made headlines around the world. One MDB holds more

than 11 billion US dollars in debts that last week defaulted on a major

bond repayment, raising concerns about its finances. It's also being

investigated in around ten countries, including Switzerland,

the United States, Singapore and Hong Kong, and earlier I was asking

a reporter what the future was for the fund. That's a really tricky

question. It's already missed an interest payment of $15 million last

week and defaulted on a bond. It's reportedly asked investors to hold

off on any requests the early payment, possibly even a waiver, so

the future is looking great. Presumably the new board of advisers

will have to be appointed, and not shared by the Prime Minister

himself, who of course set up the fund in 2009, and the whole idea was

to promote development, but, as we've been reporting, numerous

allegations of corruption, and somehow $700 million, possibly even

more, ended up in his private bank account, which he and the fund

repeatedly denied any wrongdoing, but as you say, the fund faces

investigations in ten countries. What if 1MDB does not meet its

obligations going for $11 billion? That's a huge amount of money. Could

there be a knock-on effect on the overall Malaysia economy? I think

it's fair to say that. It's very difficult to put an exact figure on

what the reputational damage has been, but it's fair to say, if you

are investing in Malaysia, you would be concerned about this ongoing

scandal, and this scandal came at a time when the economy has been

facing falling oil prices, so it definitely has affected the economy

in that way, and of course ordinary Malaysians, who's been listening,

watching the news about this scandal, they obviously feel quite

annoyed about having to pay this tax on all the money has been moved

around. In other business news, Japanese

airbag manufacturer Takata will more than double its recall of faulty

airbags after US authorities said they found further safety defects

with their products. The company will add upto 40 million more

airbags to its recall, this affecting vehicles from 12

carmakers. Faulty Takata airbags have been linked to deaths and more

than 100 injuries and some 30 million airbags have already been

recalled. Tesla motors say they are on track

to produce 500,000 vehicles a year by 2018. That's two years earlier

than expected. The optimism comes as the US electric car maker reported

first-quarter loss of almost $300 million, up from $150 million year.

The loss was in line with investors' expectations and the

announcement that it was increasing production sends its shares up 4% in

after hours US trading. We are just days away from the

Philippine election and investors are watching closely to see who will

take over from President Akido. Since he took over four years ago,

the economy and public finances have improved. I asked, why despite

strong growth rates, the country was still rated very low when it comes

to the ease of doing business. The Philippines certainly has become a

tiger economy under President Akino, who has had a focus on economic

reforms and better economic management, but still the

Philippines does lag in the ease of doing business index compared to

many other Asian countries. And I think some of the issues around that

include government bureaucracy, issues around corruption, which

although the Akino government has been fighting, it still work in

progress. Do you think the next president of the Philippines will be

able to improve and follow through on the reforms already started by

President Akino? I think it's crucial that the Philippines

administration that now comes into office does put a high focus on

continued economic reforms, because, per capita GDP in the Philippines is

still low, poverty levels are among the highest in Southeast Asia -

there's a lot of work still to do, and to create the opportunities in

manufacturing, they've got to attract foreign investment, so

there's got to be a good interaction with the foreign business are keen

there's got to be a good interaction with the foreign business are --

community. A lot of people on the ground are saying, whether it's a

crimebusting Mayor, Senator or Vice President, the economy will expand

6-7% in 2016, but the big question is, can this be sustained over the

next couple of years? I think definitely the 2016, the growth path

is very much set on track for around 6% growth. In our view, we think the

Philippines can sustain six or even higher growth in the next five

years. Well, it's the business that has

taken up the accommodation industry. In just a few years, Airbnb has

moved from a small San Francisco start-up to one of the world's most

valuable technology companies worth an estimated $25 billion. Asia is a

major part of its expansion plans and India is now getting a big push.

Simon Atkinson caught up with the co-founder of Airbnb in Delhi and

asked how much the company has two localise its business to work in a

new like India. Sometimes you do have to customise for the local

contacts. We have an office that will help make that assessment.

Maybe the best example of what we have elsewhere is in China. China is

a market that is known to be very difficult for Western companies, and

there we've had to enter great with the local payment networks, the

local social networks, so in much of the world you have Facebook.

Facebook is blocked actually, in China and on our website, there are

benefits because the account is automatically populated. In China,

instead we've integrated with Webo to do the same thing but that means

a lot of work for us. When you enter a Newmarket, you come up against

different types of regulation. This week in Berlin the government has

banned people renting properties. What do you make of that? This is a

new model and the rules often go back decades, never contemplating

this. I think everyone recognises the policies need to be modernised

for the 21st-century and governments are trying to work out how to do

this. Amber has long been used to make

jewellery or ground into powder for traditional medicine here in Asia,

and in the region it's believed to bring luck. Strong demand,

especially from China, has driven up prices, making this very colourful

resin worth more than its weight in gold, but some traders fear risky

times ahead. Chicken fat, egg yolk, cherry,

butterscotch. This isn't food, it's the description of some of the many

shades of amber. The fossilised tree resin has been valued since the

ancient Egyptians, and the Romans used it in medicine. Recently its

popularity as a gemstone has surged, particularly in China, where it's

believed to bring luck and good health. Driven by that Chinese

demand, the value of amber has soared. Five years ago, a piece of

amber like this, wholesale, cost around $2-3 per gram. Now it's $75

-150 times that. This July has been dealing in amber for 20 years. Well,

we believe there's healing properties to it. They like the

colour. It's yellow, and that's the colour of the Emperor. They attach

it to luck. And of course there is the middle-class getting more

prosperous, with more disposable income, and they are going after

things they feel they can keep. Amber is not exactly something easy

to find and its relatively rare. What about inclusions, the ancient

insects and plants trapped inside the resin? How does that add to the

value? Scarcity. I've seen only in more than 20 years and the foot of a

lizard once, and they were asking for just the foot of the lizard, I

think it was stopped 15,000 US dollars. That's really expensive.

Simon says demand for high-quality amber and unusual colours should

remain steady, but he cautions buyers to beware for lower quality

product where the market is more fickle.

Asia-Pacific markets are lethargic in early Thursday trading. With the

US markets moving lower for a second day. Japan is closed for a public

holiday, Hong Kong opening in about 15 minutes' time. Thanks for joining

us. I'm Rico Hizon. Goodbye for now.