Economist 5/11/15

  1. Suzuki Mehran, Pakistan’s bottom-of-the-range car has barely changed since its debut in 1989. Taxi drivers complain that parts straight from the factory quickly have to be replaced.The Mehran is the only small car available—and you have to wait for months to get one. At $6,250 for the basic model, it is not cheap. It costs a third more than the Indian equivalent, the Suzuki Maruti—which was phased out altogether last year.The roads are clogged with Toyota Corollas and a few Honda Civics—almost invariably white. They are assembled locally and are years behind in offering airbags, anti-lock braking systems and even electric windows as standard.The industry is carved up among just three Japanese brands, Suzuki, Honda and Toyota, assembling cars with imported parts in joint ventures with local players. They enjoy the protection of high tariffs and other Byzantine rules. It is meant to encourage “indigenisation” of production.
  2. On May 4th Bharti Retail said it would join up with Kishore Biyani, one of India’s retail pioneers. Bharti’s 200-plus stores, most of them small, will be folded into Future Retail, one of Mr Biyani’s three listed enterprises. Future’s 370 stores have a higher average floor space and a much greater combined turnover. Bharti’s hypermarkets may eventually trade under Future’s Big Bazaar banner, but its small supermarkets will keep their Easyday logo. Bharti will get a 9% stake in the combined firm. This will rise to around 15% if the merger meets its initial goals.India’s supermarket chains account for just 2% of food and grocery sales. Profits are meagre because revenues have not kept pace with rents.The cost of shared functions such as marketing, procurement and logistics can be spread across more stores. The combined firm should be able to bargain for better terms from local manufacturers of packaged foods or personal-care products,
  3. THE European Union may have removed most barriers to physical trade, but online it remains a prime example of provincialism. Digital businesses still have to deal with 28 sets of national contract laws, adding an estimated €4 billion-8 billion ($4.5 billion-9 billion) a year to their costs. Only 15% of European consumers say they have ever crossed an EU border while shopping online. Only 4% of internet traffic from EU countries goes to online services in another European country, whereas 54% of it goes to services in America. On May 6th European Commission published its “Digital Single Market Strategy”.It wants to establish common rules for online purchases, integrate telecoms regulations, push postal services to offer better and cheaper parcel delivery across EU borders and reduce the burden on businesses caused by varying VAT regimes. More controversial are the commission’s plans to harmonise copyright law, in particular its plan to ban “geo-blocking. Europeans are often barred from accessing online services in another EU country—in some cases because of copyright and other laws, but often for no apparent reason.To help startups scale up, the commission calls, for instance, for any newly established EU company to be able to expand its operations across borders and become pan-European within a month, completing all the necessary registrations online.
  4. The theme-park business, which earns annual revenues of $7.5 billion in western Europe, is attracting other new entrants. Last July Cinecittà, an Italian film studio, opened its first theme park near Rome. And a giant theme park and resort with 15,000 hotel rooms, also based on Paramount Pictures’ films, is due to open in south-eastern Spain next year.The developers’ enthusiasm is surprising, given the poor performance of Disneyland Paris, Europe’s largest theme park. Hit hard by the recession and heavily debt-laden, its owner, Euro Disney, last turned a profit in 2008.PortAventura, near Barcelona, the only Spanish theme park making money, said in November that its profits had fallen year on year by 18% to just €13m.To balance the books, parks are trying to get visitors to spend more rather than seeking to attract greater numbers.Burger joints have been joined by new gourmet restaurants. Expensive new rides that take guests on different routes each visit.Disney says it has stepped up efforts to market the resort to wealthy Russians and Arabs, who may pay $10,000 or more to stay in the resort’s best hotel suites.
  5. Mr Shinzo Abe, Japan’s prime minister is serious in his endeavour to “rev up the hydrogen revolution”. His government is paying generous subsidies of about ¥3m ($25,000) per fuel-cell vehicle (each currently costs around ¥7m) to residents of Tokyo; the city has pledged a total of ¥45 billion for hydrogen-related infrastructure ahead of the Tokyo Olympics in 2020. Toyota, a Japanese carmaker introduced the world’s first commercial hydrogen car, which Toyota has named “Mirai”: “the future”.Japan plans to install small hydrogen fuel-cell units in over 5m homes by 2030. The government hopes that hydrogen cars could be the next hit for Japan Inc, which has lost ground globally in computers and electronics. Unlike electric cars, which have a limited driving range and take hours to recharge, hydrogen vehicles run for up to 650 kilometres on a full tank and take just a few minutes to fill up. Their exhausts emit nothing but water vapour.

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