30/11/2013 Talking Business with Linda Yueh

Now, on BBC News it is time for Talking Business.

Is the commodity boom over? Will food prices continue to rise? Plus,

its Black Friday, the biggest shopping day in America. Will US

consumers be spending this year? I am Linda Yueh and we are talking ``

Talking Business. Welcome to the show. It has ban

dramatic run that lasted for over a decade. Globally, commodity prices

such as iron ore, copper, energy have doubled since the early 2000s.

It has gone on so long it has been dubbed the commodity supercycle. Not

even a financial crisis could dent it. Commodity prices refell but

recovered rapidly. Prices doubled between 2009 and 2011, but since

then, prices have fallen by more than 20%, becoming what is

technically called a bear market. The biggest factor is likely the

slowing of China. If the commodity boom is over, what

will be the impact? One country that has seen the ups and the downs is

Mongolia. Is it a precautionary tale for other resource dependent

countries? Joining me to discuss this the Cabinet secretary and

member of Parliament and has held various positions in the Mongolian

Government, a respective from an investment company. And Tony Nash.

Welcome to all of you. Let me start with you minister. Mongolia has been

rescued four times in the last 22 year, the last time was during the

2008 crisis. Are you sure that you have got the

policies right so far in commodities? Yes, we are quite sure,

because you know, as you say, we are experience it happened, because of

the historical past we experienced these kinds of thing, we used to the

biggest empire in the world, so we used to be a satellite country, to

post the Communist regime. On the foreign investment, one of the

issues is you were not treatmenting foreign investors equally but you

have changed that policy, was it wrong in the first place? Yes, that

is what I am trying to explain. We experienced a very good period of

time, the worldwide company started... Why we need foreigner,

and that is some kind of political game, also national people that we

no longer need for money. We started to experience a problem, and our

inflation rate, and without money there was the biggest issue in the

social sphere, our life, and that is why people started to understand

now. Without in technology, without this money, without this no how from

developed countries, there is no way for the Government to succeeder, for

the country to succeed. That is why we started to behave wisely and we

started the treat foreign investors as equally as local investor, so we

enacted new law, a new law investment, and we no longer going

to divide between foreign and locals. We will ask what will they

need from us. Two words, predictability and sustainability.

You have corrected it. Have they done enough to reassure you this

kind of policy mistake won't occur again in the future? Well I think

the legislative advances are welcomed and it is a great first

step and a key point of the legislation is the fact it will

require more than a majority of two thirds of Government, in order to

change this investment. Sorry all members of Parliament, now that,

that is I think is a huge bonus and think that means we will have

stability with regards to this investment law. From my perspective,

the challenge is still remain with inest vester confidence. While this

is a great first step and there has been other fantastic legislative

progress with the secures law, that will help my business in the future,

give me many more opportunities to invebs on the Mongolian Stock

Exchange, we need a large catalyst to reignite in Mongolia and

investment flows: It sound to me like there is a first step, but

Mongolia has made a number of mistemperatures? Do you think they

have `` mistakes. Do you think they have done enough? What we need to

see is time. I think we, the continuity of enforcement, the

continuity of implementation of this new investment law, is what many

investors want to understand. So we look at say the rights issue, coming

out in January, this big copper mine. We look at foreign investment.

We see how some of the licenses that were pulled a couple of months ago,

whether that is redistributed, this short of thing, under the new mining

law, foreign investors are looking for a sense of continuity and

consistency, so if we are looking at things like the a major mining area

as you although, I think it is going to be a couple 06 years off before

people can have confidence in that level of investment in Mongolia. Let

me bring you in minister, one of the things that investors will worry

about, is if copper prices, or commodity prices continue to

decline, it resulted in a rescue just a few years ago, can you give

an assurance your policies will not result in the fifth rescue in just

over two decades? . There is no need, that is why we need from

others mistakes and achievement. In Norway and Europe, and considering

some mistakes because of this Dutch disease, we really understood that

we really need good policy on this one, that is why we are talking

about rainbow policy it consists of seven colours and mining is only one

of the sense we need to find all the six colourings, and we need to talk

not only about mining but other sectors of the economy. Mongolia is

very good on cashmere because the quality of cashmere, it is number

one in the world, and we have corrected with the Italian big name

company, also our local factory, they will be very good investment on

cashmere, and cashmere from 500 million businesses, could be five,

six billion business, and next the step is tourism. Mongolia can be

very good, and that is why we need to talk about the colours of the

economy, and when we, when rainy days come as you say, we will be

confident. Are you confident they are not going to need a rescue. The

track record isn't very good? I am confident. Since 2008 there have

been significant changes and that does give me confidence. I started

investing in 2010 and I continue to invest. I think a at the moment

Mongolian asset prices have been beaten up horrendously, this is a

perfect time to enter the market and gain exposure. Tony, the issue to me

this is the key issue, if you have been rescued so many times and it's

a very resource dependent company, are you confident they have got it

right and won't need another rescue? First I have to give them credit.

They took a faulty foreign investment policy and within, you

know, within a short time they turned it round, kale up with a new

law and came up with a credible way forward. That is very good. In terms

of commodities, will the bottom fall out of commodities? We don't see the

bottom falling out of commodities in the medium term, so we think that

there is a sustainable market there, obviously the shine has come off

some of them, but most of Mongolia's exports go to China. China will

continue to grow between 7.5`8% for the next seven years so there is a

market for what Mongolia is selling, and you know, our view is by 2020

Mongolia's economy will be three times what it was, in 2011. So there

is rapid growth. Sustain growth. What we are more concerned about is

the implementation of that policy, right? There is I would say an

uncomfortable overlap of the business class and the political

elites. It is a small country. It is hard to avoid that on some level.

The transparency has to come about, the transparency of how decisions

are made, the transparency of how, say, company leadership is place,

how political activities are doled out, that sort of thing there is

some progress but that has to continue, it has to continue. I

think this is something that Mongolian Government is aware of. It

is sthot just an issue e for Mongolia it is an issue for

countries like Australia, Canada and Africa. It account toser more than

40% of the exports of these country, the impact is also on consumer, to

necessities like petrol, utilities, food, there have been double digit

price increases that have squeezed household incomes. Where they head

from here matters. You started off down this line Tony, you think they

have a level. Elaborate, what do you mean? Largely sideways. It is not as

if economies are going to rock it off, unless we see major fixed asset

investment globally, unless we see a return to rapid global growth. When

you look at the US states that have a good way forward, it is slower

than many people would want, when we look at Europe which is turning the

corner, when we look at Japan which is back on a path to growth, so

major, you know, major economies are moving ahead again. China is

accelerating again and they are announcing major investment project.

Minister you are the best tern person to tell us, what are you

banking on in terms of where copper prices are heading? That is where

Government has started to make a change. When we deal with commodity

price, we may only deal for one year or two years, for example the

Chinese part, an agreement for a very long period of time, 20 years

and we are going to sell them our coal until one million tonne, this

kind of agreement, this kind of arrangement gives us some kind

pro`techion. What price are you putting on coal? The prices will be,

you know, based on this every day, average things. Is this stable, like

Tony suggests? For now, it went to the bottom. Now there is no room to

go down, but it slowly will increase. I am going to put this to

you Tony. We have been talking about falling commodity prices as if it a

bad thing. I am looking at my petrol bill and I am thinking wouldn't it

be good if commodity prices came down, wouldn't we benefit consumer,

the world economy if we weren't paying huge price increases? This is

what you have in some things like oil and gas in the US. You have

supply induced price reductions and is helping manufacturing economies

like the US. Some of these supply constraint is around rising prices

over several decades has hurt concern `` consumers like you. It

has been great to have these commodities, but in real terms they

have been rising. With the advent of things like than conventional is, we

have a change in the pricing of things like gas. So, does that help

people? I think it does. When we look at things like global

manufacturing over the last few years, that has been a step

downwards. Are we looking at a step downwards in commodity prices?

Possibly. We have seen that since the recession. But we are now seeing

that in gas prices. Do you agree? You are a consumer as well as an

investor. Do you see prices for consumers being a good thing for

lots of companies if they are looking at consumers doing better

because they will not be paying all of that disposable incomes on

necessities. All we look at his investments and we invest in many

sectors of the economy. Fuel prices is a big issue in Mongolia. There is

no control on production at the moment. What has been traditionally

imported from Russia, the product is coming in from China as well.

Minister, final word to you. Would it be better for the world if

commodity prices went down instead of up? You know, Mongolia, we

mentioned is a source rich country. We are committed to prices going

down. It is not good for the country. But it is OK. Putting the

price down on oil for example, but oil shares. Every problem has its

solution, but we need to prepare, we need to have good policy, we need to

have nice conditions for foreign investors. We are quite confident

these three last years, will continue. And also filter through to

other sectors. I would like to thank my panel. Turning from hard

commodities to soft one. Even though energy and metal prices have fallen,

food prices are bucking the trend. Global food rises rose for the first

time in October after falling for nearly half a year. The UN projects

food prices will be higher in the coming decade and even in 2008 when

price rises triggered riots across the developing world. The reason?

Because of the growth of the middle class in developing countries. How

will that impact all others? I went to one of Singapore's famous centres

to find out. We all enjoy a good meal out. Nowhere is that more

apparent than in Singapore, where food is known as a national

obsession. Half of all Singaporeans eat in one of these hawker centres

six times a week. No wonder it is such big business. In the US,

consumers spend the equivalent of 10% of GDP on food. In Britain, food

production is the biggest part of the manufacturing sector. And

globally, more than $4 trillion in revenue is generated by the food

industry every year. It is not just agriculture and food production, it

is all so restaurants and hawker centres like this. How are you? How

much are prices for food risen in the past year?

That is quite a big rise, he is from Shanghai in China he said prices

have gone up why 15%. This begs the question, why have food prices risen

so rapidly? Let's look at the most Singaporean of dishes, chicken rice.

The price of chicken has risen by 84%. The price of rice by 90%. The

price of vegetable oil has doubled in the past eight years. One of the

reasons is because production has not caught up with the changing

eating habits of a growing, global middle class. Also, trade barriers

against agriculture don't help. What is clear is we are likely to

continue to feel the squeeze as we consume our daily meals. Let me go

and find a cultural commentator and ask, why food is such a business.

Hello, how are you? Great to see you. How important is food in Asia?

Food is what we live for. It has always been vital in Asia. The West

rings so many great things to the world. Music, films, art. But food,

you have got to admit Asian food is better than Western food. Tell me a

little bit about the value of food in Asia. I understand it has

attracted criminal attention? Asia was seen as the spice Island to the

Westerners. Today there are gangs, there is a salad trafficking gang in

Hong Kong. They would steal salad items, green vegetables to order.

They took `` it took the serious crime squad to track them down. Even

food items are being auctioned. You might have participated? I did once

did for a jar of source. Very spicy, tangy, fishy source. Usually made in

small quantities. Well worth reading for, you will have to come round and

tasted. I will not ask you how much you paid. What about something else

that has rocketed up in price, Coffey? There is a type of coffee

here in Asia, beans that have been semi`digestive by a type of cat. It

tasted much better. Now it has gone global and you can spend 50 US

dollars on one cup of coffee. I tried to think about the guy who

discovered it. He said, there is some weasel poop, I think I will

brew it up and see what it tastes like. On a more serious note, food

prices is a political issue, especially in India? A politician

can add to his boat simply by saying he is talking to farmers. If he is

talking to the general public, onions will go down. The magic

work, onions, can get a politician straight into power.

Food prices and slowing income growth have squeezed consumer

spending. It may be we see the impact this weekend in America,

because it is Black Friday. Traditionally the biggest day of

shopping. The world's biggest retailer, Walmart has warned of

gloomy times. Will the US consumer be pipped by the record spend of

Chinese buyers on singles Day earlier this month? We report from

New York. A steady stream of customers keep this man and his wife

pretty busy. They own this store and almost everything sells for just $1.

These days, they seem more customers and not just their regulars. People

have lost their jobs, they are losing their houses. They are in

debt. So it is hard for everyone. It is very hard for

to spend money. So, more of them come here because they don't have to

do hunt to find a bargain. It is less money because everything is so

expensive out there. But we manage. It is quick, things are a dollar and

you know what they cost. Since the recession, incomes in the US have

been declining and are barely out pacing inflation, which means people

have less money in their pocket. So, why does that matter if people have

less to spend? What this economy depends on consumers making

purchases and lots of them. If people aren't in the shops, the

economy as a whole, suffers. A typical family are a family on the

middle income level and hats to spend every dime they make to meet

their basic needs. That gets circulated in the economy, causing

growth. Amylase are spending everything they have at it is not

enough to sustain the consumer spending we need for a robust

economic recovery. In an economy that needs consumers to shop, the

people snaking the small Isles are doing their part for the recovery.

Even if it is only $1 at a time. It is all we have time for this week.

Do check out the website and follow me on Twitter. Join me next week.

It is the first day of winter tomorrow.