Month: March 2018

Uber Technologies has agreed to sell its Southeast Asian business to bigger regional rival Grab, the ride-hailing firms said on Monday, marking the U.S. company’s second retreat from an Asian market.

The industry’s first big consolidation in Southeast Asia, home to about 640 million people, puts pressure on Indonesia’s Go-Jek, which is backed by Alphabet’s Google and China’s Tencent Holdings Ltd.

A shake-up in Asia’s fiercely competitive ride-hailing industry became likely earlier this year when Japan-based SoftBank Group Corp’s Vision Fund made a multibillion-dollar investment in Uber. SoftBank owns stakes in most major global ride services companies, and executives have indicated they favored consolidation.

SoftBank already had investments in Grab and India’s Ola, and Vision Fund Chief Executive Rajeev Misra had urged Uber to focus less on Asia and more on profitable markets such as Latin America, a person familiar with the matter said.

Grab President Ming Maa told Reuters that SoftBank CEO Masayoshi Son was “highly supportive” of the deal, which he called “a very independent decision by both” Grab and Uber.

Uber will take a 27.5 percent stake in Singapore-based Grab and Uber CEO Dara Khosrowshahi will join Grab’s board. Grab was last valued at $6 billion after a financing round in July.

“It will help us double down on our plans for growth as we invest heavily in our products and technology,” Khosrowshahi said in a statement.

The Competition Commission of Singapore (CCS) said it has the mandate to review whether any mergers will result in a “substantial lessening of competition” and take any action to intervene in the deal, but it has yet to receive notice from the companies.

The deal will help bolster Grab’s meal-delivery service, which will merge with Uber Eats, compete with Go-Jek. Go-Jek has become a dominant player and powerful rival in Indonesia, the region’s biggest economy, and it has rapidly expanded beyond ride hailing to digital payments, food delivery and on-demand cleaning and massage.

Ride-hailing companies throughout Asia have relied heavily on discounts and promotions, driving down profit margins and increasing pressure for consolidation.

Uber, which is preparing for a potential initial public offering in 2019, lost $4.5 billion last year and is facing fierce competition at home in the United States and across Asia, as well as a regulatory crackdown in Europe.

Uber invested $700 million in its Southeast Asia business.

Uber previously sold operations in China and Russia to local rivals under former CEO Travis Kalanick. The deal with Grab is the first operations sale by Khosrowshahi, who started in September.

More consolidation

But Uber’s CEO does not want to make these mergers a pattern, and said he has no plans to do another sale in which it consolidates its operations in exchange for a minority stake in a rival.

“It is fair to ask whether consolidation is now the strategy of the day, given this is the third deal of its kind…The answer is no,” Khosrowshahi said in a note to employees that was shared with Reuters. “One of the potential dangers of our global strategy is that we take on too many battles across too many fronts and with too many competitors.”

SoftBank is also an investor in India’s Ola, another competitive and costly market where rivals have heavily subsidized rides in an effort to gain market share. But a source familiar with Uber’s strategy said the company was going to step up its battle with Ola in India, where Uber has close to 60 percent of the market, by some estimates, but is losing money.

SoftBank’s Misra sees opportunities for mergers and joint ventures between SoftBank-backed ride-hailing companies, particularly for collaborating on research and development, but the investor would never get actively involved with management decisions, the person familiar with the matter said.

Uber includes the United States, Australia, New Zealand and Latin America among its core markets — regions where it has more than 50 percent market share and is profitable or sees a path to profitability.
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White House officials are looking into whether $500 million in loans that went to Trump administration senior adviser Jared Kushner’s family real estate company may have spurred ethics or criminal law violations, according to the head of the federal government’s ethics agency.

David J. Apol, acting director of the Office of Government Ethics, said in a letter sent late last week to Rep. Raja Krishnamoorthi that the White House Counsel’s office told him that officials were probing the loans to Kushner Cos. and whether “additional procedures are necessary to avoid violations in the future.”

Krishnamoorthi, an Illinois Democrat, had asked Apol on March 1 about a New York Times report in February that Kushner Cos. accepted $184 million in loans from Apollo Global Management and $325 million from Citigroup last year over a span of several months after Kushner met with officials from the two firms. As President Donald Trump’s son-in-law and key adviser, Kushner plays an influential role in domestic and foreign policy decisions.

Both companies have insisted their officials did nothing wrong in meeting with Kushner. Both firms had financial interests overseen by the federal government at the time and both firms – either independently or through industry groups – backed elements of the tax reform legislation that passed Congress last year with support from Trump.

In one case cited by the Times, Citigroup lent $325 million to Kushner Cos. in spring 2017 shortly after Kushner met with Citi’s chief executive, Michael Corbat. Last week, Citigroup’s general counsel told several Democratic lawmakers in a letter that the loan was “completely appropriate.”

In a second case, Kushner met several times with Apollo co-founder Joshua Harris and discussed a possible White House job – followed by Apollo’s loan of $184 million to the Kushner family firm. An Apollo spokesman previously told The Associated Press that Harris “never discussed with Jared Kushner a loan, investment, or any other business arrangement or regulatory matter involving Apollo.”

In the letter to Krishnamoorthi, Apol responded to several of her questions about Kushner’s conduct during the period when his family’s real estate firm received the two loans. Apol was careful not to offer legal opinions on Kushner’s behavior, instead noting that “the White House is in a position to ascertain the relevant facts related to possible violations and is responsible for monitoring compliance with ethics requirements.”

Apol said he raised those questions with White House officials “to ensure that they have begun the process of ascertaining to determine whether any law or regulation has been violated.” During the conversations, “the White House informed me that they had already begun this process,” he said.

A spokeswoman for Kushner Cos. said Monday night that the firm had not received any correspondence or other notifications from the White House or OGE.

A spokesman for Jared Kushner at the White House was not immediately available to comment on Apol’s confirmation of the probe.
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Indonesia’s strict crackdown on illegal foreign fishing boats is paying off, according to new research.

Kicking out interlopers has relieved pressure on the country’s overtaxed fisheries at no cost to its domestic industry, the study says, and may point the way for other countries to make their fisheries more sustainable.

About a third of the world’s commercial fish populations are overfished, according to the U.N. Food and Agriculture Organization. 

One study estimated that restoring depleted fisheries would ultimately generate $53 billion in additional annual profits. 

But reducing overfishing usually means putting unpopular restrictions on local fishers to allow populations to recover.

“Telling fishers to stop fishing for a few months or years would be something that’s not that realistic,” said study lead author Ren Cabral at the University of California, Santa Barbara.

Violators will be sunk

But in Indonesia, as in many developing countries, locals are only part of the equation. Many foreign vessels fished the country’s waters, often illegally.

The study notes that the country lost an estimated $4 billion per year to illegal fishing before 2014, when the government banned foreign fishing vessels in its waters.

Since then, more than 300 ships found violating the ban were evacuated and sunk.

Cabral and colleagues wanted to see what the impact had been.

Using government registries, vessel tracking data and satellite imagery, they saw a drop of more than 90 percent in the time foreign vessels spent in Indonesian waters. That meant at least a quarter less fishing activity overall.

“That’s huge,” Cabral said.

The study is published in the journal Nature Ecology & Evolution. 

“You have a large benefit, but the cost to local people is zero,” said marine biologist Boris Worm at Dalhousie University, who was not involved with this research.

Do this first

“This paper argues, I think convincingly, that this is the first thing you should do: if you want to fix fisheries in your country, first, kick out the fishers that don’t need to be there,” he added.

Worm notes that the study could only account for large vessels that are required to carry tracking equipment. It could not assess what smaller vessels are doing.

“You’re really only seeing the tip of the iceberg,” he said. “The tip of the iceberg is getting smaller, which is good in this case. But there are a whole lot of problems below.”

With foreign fishing boats out of the way, local fishers are filling in the gap. If not managed properly, they could undo the benefits of fighting illegal fishing, Cabral said.

If Indonesia continues to ban illegal fishing and also manages local fishing sustainably, the study estimates profits would be 12 percent higher in 2035 compared to today.

On the other hand, if local fishing remains unchanged, 2035 profits would drop by half as fish populations declined.

“The next step would be Indonesia managing their local fishing effort,” Cabral added. “If they do that, they can definitely get the benefit from their policies.”

 
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A delegation of Indian CEOs visiting Myanmar and the launch of a new India-Myanmar business chamber in Yangon have sought to inject life into stagnant economic ties between the two neighboring countries.

Since 2011, when the military junta launched political and economic reforms, Myanmar’s future prosperity has been predicated on its strategic location between India and China, two giant economies and population centers.

Yet, while China has poured billions into mega infrastructure and energy projects and continues to dominate trade with Myanmar, flagship Indian infrastructure projects in western Myanmar have run behind schedule and over budget.

Bilateral trade — topped by beans and pulses from Myanmar and sugar and medicines from India — has hovered around the $2 billion mark since 2011, less than a fifth of the trade volume with China and falling well below targets set by a Joint Trade Committee. Though Myanmar’s fourth largest trade partner, India is only its eleventh largest investor.

At an India-Myanmar Business Conclave on March 22 in Yangon, Myanmar’s commercial capital, Indian company directors mingled with Myanmar business leaders while senior government officials mixed frank acknowledgements of underperformance with affirmations of Myanmar’s potential.

India’s Minister of Commerce and Industry C.R. Chaudhary said, “Myanmar is our gateway to Southeast Asia,” recalling two pillars of India’s foreign policy, Act East and Neighborhood First, and stressed the need to “remove trade barriers.”

Next at the podium, Myanmar’s Deputy Minister for Commerce Aung Htoo, talked of boosting India-Myanmar trade to 5 billion over the next three years, as part of a Myanmar government plan made in 2016 to triple all exports by 2020.

Taking time

Speaking to VOA on the sidelines, Gaurav Manghnani, the Myanmar country head of Credera, a trading and investment company with roots in Myanmar’s Indian diaspora, said he didn’t share in the growing pessimism of other foreign investors over the slow pace of economic reform in Myanmar.

“If they’re taking time to get the reforms underway and making sure these reforms are here to stay and forward looking, they won’t make the mistakes other countries have,” he said, citing the lengthy delay in the implementation of the new Companies Act, a law that allows for larger foreign stakes in local companies, as “the best thing that could happen.”

He acknowledged that India-Myanmar trade “has been stagnant at this level for a while now. To push it beyond the current volume of 2 billion requires something different to be done.”

Yet, beyond the formal launching of the new India-Myanmar Chamber of Commerce — aimed at speeding up interaction between Indian and Myanmar businessmen and advising on tie-ups — the March 22 conclave did not feature announcements of new investments or major breakthroughs in deepening ties.

Indian Ambassador to Myanmar Vikram Misri said that work was nearing the “final stage” in two separate infrastructure projects being built on Indian government grants.

These are a section of the Trilateral Highway, running from northeast India across Myanmar to Thailand, and the Kaladan Multi-Modal Transit Transport Project, linking India’s eastern seaport of Kolkata to its landlocked northeastern states via ports, inland water terminals and roads in Myanmar’s Rakhine and Chin states.

Speaking separately to VOA, the ambassador said he expected both projects, conceived respectively in 2002 and 2008, to be finished in 2021. Meanwhile, agreements on the legal movement of people and vehicles across the land border are still under negotiation.

Protectionism

One obstacle to closer ties is the measures taken by India to prop up its own market. In August last year, when monsoon rains produced a bumper harvest in India, causing local prices to plummet, the government imposed quotas on Myanmar beans and pulses, which account for more than 75 percent of Myanmar’s exports to India.

Myanmar’s Deputy Commerce Minister said at the conclave, “Due to recent restrictions by quota from India, Myanmar farmers have suffered a lot this year. I’d like to ask the Government of India to increase the quotas for Myanmar pulses and beans.”

Ambassador Misri defended the move to VOA, saying, “It’s not protectionism for the sake of being protectionist. It is something that is in fact foreseen under the WTO mechanisms in terms of protecting against surges and adverse market conditions.”

“It would have been a calamitous situation for imports to have continued and for the market price to fall even further,” he said, adding, “The longer term answer to this is a diversification of the trade basket that Myanmar has with regard to India.”

Vikram Nehru, a professor​ at the John Hopkins University School of Advanced International Studies, told VOA he was skeptical Indian investment in Myanmar would take off.

“India is an inward looking economy. It’s one of the most protected markets in the world. India​ is not part of the global or regional value chain, unlike China or Japan​,” he said.

Most Indian investments abroad, he explained, “are designed to tap into their host ​markets,” and the Myanmar market remains comparatively small and risky.

“Why would Indian firms be interested? They’d much rather set up in the Indian market of 1.3 billion people, with a per capita income that is higher than Myanmar’s,” he said.
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U.S. stocks surged Monday as fears eased about the possibility of an all-out trade war with China over competing tariff increases.

The closely watched Dow Jones Industrial Average of 30 key stocks jumped by more than 1.5 percentage point in New York in early-day trading and other indexes were also advancing sharply. Earlier, Asian stocks were mixed, while European indexes edged down for the day.

Global markets plummeted last week after U.S. President Donald Trump announced tariffs on $60 billion worth of Chinese imports in an effort to trim $100 billion off the $375 billion trade deficit the U.S. recorded last year with China. Beijing immediately vowed to retaliate with higher import duties on U.S. goods.

But there were signs Monday of easing of tensions between the world’s two biggest economies.

White House trade adviser Peter Navarro told CNBC that U.S. Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer are talking with Chinese officials about trade issues between the two countries. Mnuchin told Fox News he was “cautiously hopeful” that the U.S. would reach a deal to keep China from imposing tariffs on $50 billion worth of U.S. exports.

The Trump administration is asking China to lower tariffs on U.S. car exports and open its markets to U.S. financial service companies. Bloomberg News reported that Mnuchin called China’s Liu He to congratulate him on his appointment as China’s vice premier for economic policy and that the two officials discussed ways the two countries could mutually agree to close the wide trading gap between the two countries.

Chinese Foreign Ministry spokesperson Hua Chunying said China would be willing to meet with U.S. officials to work out the two countries’ trade issues, while China’s foreign ministry urged the U.S. to “stop economic intimidation” over tariffs.

While avoiding mention of the tariff dispute and last week’s sharp drop in stock prices, Trump boasted about the performance of the U.S. economy.

“The economy is looking really good,” he said in a Twitter comment. “It has been many years that we have seen these kind of numbers. The underlying strength of companies has perhaps never been better.”
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Taiwan’s chief trade negotiator is fighting for an exemption to the import tariff hikes announced this month by U.S. President Donald Trump, a testament to how the measures targeting China would spill over to at least one other major Asian industrialized economy.

John Deng, chief negotiator of the cabinet Office of Trade Negotiations in Taiwan, visited Washington last week to seek exemption from steel tariffs of 25 percent and aluminum tariffs of 10 percent. As of Monday the two sides had not reached agreement.

Taiwan-based producers of parts sold onward to China for final assembly of other goods may pay more as well for exports to the United States, analysts in Taipei say. That scenario will come true if Washington goes ahead with plans announced last week to raise tariffs on $50 billion worth of Chinese products.

“Once the big Sino-U.S. trade war starts, not just the (Taiwan) president’s national security units but also related cabinet departments will all closely monitor it and make good responses,” Taiwan Premier William Lai told reporters Friday.

“The most important follow-up is that our economic development measures definitely need to be carried out,” he said.

Steel in the spotlight

China was the world’s biggest steel producer in 2016, when it churned out half a global total of 1.63 billion tons, World Steel Association data show. China’s steel imports to the United States total about 0.01 percent of the Chinese GDP that’s worth about $12 trillion.

But the U.S. steel tariffs do not target only China. Taiwanese manufacturers would take a hit as exporters of finished steel goods to the United States, analysts say. The United States was Taiwan’s third largest steel market in 2016, taking 1.1 million metric tons. 

Canada and Mexico received temporary exemptions on U.S. steel and aluminum tariffs earlier in the month. Taiwan is trying for the same.

Taiwan might have a harder case because it gets much of its raw material from China, analysts say. Even if Taiwan got an exemption from the United States, raw materials suppliers in China might raise prices to offset U.S. tariffs aimed their way.

“Because Taiwan has a lot of companies of that type — manufacturers of steel and aluminum — they import raw material from China, and that’s the thing that the United States minds the most,” said Lin Nan-chun, economist with SinoPac Securities in Taipei. 

“So…the firms that import for production in Taiwan and then export to the United States will be rather heavily impacted if exported to the United States,” she said.

​After returning from the United States Sunday, Taiwan’s trade negotiator said he was “optimistic” about getting an exemption, the local Central News Agency reported. 

Consumer electronics sourced from Taiwan

Trump’s government moved on Thursday from steel to an announcement of increases in tariffs on Chinese imports, across categories, valued at $50 billion. Washington will publish a tentative list of products and seek public comment for 30 days. 

The U.S. government may pick consumer electronics from China as part of its tariff-hike phase announced Thursday, analysts in Asia say. That move could affect Taiwanese tech hardware firms — a pillar of the island’s economy — that are located in China and export to the United States. Hon Hai Precision, for example, assembles iPhones for Apple.

Taiwanese firms also sell precision parts to Chinese electronics developers, which in turn may sell finished goods to the United States.

Semiconductors made up 62.6 percent of Taiwan’s total high-tech exports in the first 10 months of 2017, according to Ministry of Finance data. Flat panels and wireless transmission devices were the second and third highest of all types of tech hardware. Half of those parts for consumer electronics landed in China, including Hong Kong, during that period. 

“The main issue is that Taiwan’s degree of participation in the global supply chain is high, and high participation in the supply chain means we make a lot of intermediate goods,” said Liang Kuo-yuan, president of Taipei think tank Yuanta-Polaris Research Institute. “So the biggest problem now is that Taiwan’s intermediate materials used for electronics are extremely high.”

If the Trump government raises tariffs on made-in-China petrochemicals, Liang added, it would indirectly hit Taiwan the same way.

Petrochemicals were worth about $60 billion, just under one-third of Taiwan’s overall manufacturing sector, in 2016.
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U.S. firearms and ammunition manufacturer Remington has filed for bankruptcy protection in order to reorganize its operations and put in place a debt reduction deal with its creditors.

The company filed its petition for the so-called Chapter 11 bankruptcy Sunday, six weeks after announcing an agreement to reduce its $950 million in debts while transferring ownership.

Remington’s filing listed both its debts and assets between $500 million and $1 billion.

The company is one of the largest firearms makers in the United States and has been in business for 200 years.

But its sales have been slumping, dropping from $865 million in 2016 to $602 million last year. In 2013, it reported more than $1.2 billion in total sales. 

A February document describing the restructuring plan estimated sales will rebound in the coming years, returning to more than $800 million by 2021.

A company report released in October of last year said the decline was due to a number of factors, including “reduced consumer demand and excess inventories,” as well as changes in buying behaviors and a rise in imported products.

It also discussed various government proposals to increase gun regulations, warning that if they were to become law “the cost to the company and its customers could be significant.”

That report, and Remington’s restructuring plan, came before the most recent mass shooting in the United States, a February attack at a Florida high school that left 17 people dead. 

Since that shooting, there has been an increase in calls for more gun control. Several major retailers have instituted changes in gun sales policies that range from stopping gun sales to raising the minimum age of those eligible to purchase firearms. 

Banking giant Citigroup also announced it would require new retail clients to insist on background checks for gun purchases as well as a ban on sales to people under the age of 21. The state of Florida similarly enacted a new law limiting gun purchases to those age 21 and older.

Many Americans believe current gun laws are appropriate or too strict, while a new poll indicates growing support for stricter measures.

The poll by the The Associated Press and NORC Center for Public Affairs Research released Friday said 69 percent of Americans support stricter gun control, up from 61 percent in October 16 and 55 percent when the poll first asked the question in October 2013.
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