Dubai Pepsi bottler loses fizz ahead of sugar ‘sin tax’

Dubai Refreshment, the company that bottles Pepsi in Dubai, reported a fall in second-quarter sales. (Reuters)
Updated 14 August 2017
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Dubai Pepsi bottler loses fizz ahead of sugar ‘sin tax’

LONDON: The Dubai-based Pepsi bottler lost some of its fizz in the second quarter as sales retreated.
Dubai Refreshment, which bottles Pepsi and other sodas such as Mountain Dew and 7Up, reported a 12 percent fall in second-quarter profit to 24.7 million dirhams ($6.7 million) as sales also declined by about 1 percent to 229.3 million dirhams.
Soft-drink sales have boomed across the Gulf helped by the region’s youthful population, but the rollback of government subsidies and moves to encourage healthier diets, while reducing levels of obesity, have put soda-makers in the crosshairs of regulation.
Pepsi last month reported a second-quarter profit that topped analyst estimates as sales ticked up by about 2 percent.
But the company flagged up higher raw material costs driven by the strong US dollar and operating cost inflation in some Middle East, North African and Asian markets.
“Consumption of sugary soft drinks is high in the region, and will in all likelihood continue to grow for the foreseeable future,” said Euromonitor International analyst Matthew Berry in a January 2017 report. “However obesity in the Gulf is a ticking time bomb and governments are starting to move to avert the looming public health crisis.
“This could potentially make these countries some of the most promising markets for health-positioned drinks in the world, but it will also pose a threat to sugar-heavy categories that have found the Gulf states to be a rare bright spot at a time of anti-sugar feeling.”
The cost of fizzy drinks in the Gulf have been among the lowest in the world historically, but consumers will soon have to get used to paying more with the introduction of both sugar taxes and value-added tax (VAT).
The UAE Federal Tax Authority said in May that energy drinks would be hit with a 100 percent tax in the last quarter of the year while sugary fizzy drinks would also be targeted with a 50 percent tax. That move follows the decision by Saudi Arabia to impose a special tax on sugary drinks, as well as on cigarettes, starting last June.


Malaysia reviews China infrastructure plans

Malaysia’s former PM Najib Razak (AFP)
Updated 18 June 2018
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Malaysia reviews China infrastructure plans

  • Malaysia's scandal-mired former PM Najib Razak signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.
  • New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

KUALA LUMPUR: Malaysia has been a loyal partner in China’s globe-spanning infrastructure drive, but its new government is to review Beijing-backed projects, threatening key links in the much-vaunted initiative.

Kuala Lumpur’s previous regime, led by scandal-mired Najib Razak, had warm ties with China, and signed a string of deals for Beijing-funded projects, including a major rail link and a deep-sea port.

But the long-ruling coalition was unexpectedly voted out last month by an electorate alienated by allegations of corruption and rising living costs.

Critics have said that many agreements lacked transparency, fueling suspicions they were struck in exchange for help to pay off debts from the financial scandal which ultimately helped bring down Najib’s regime.

The new government, led by political heavyweight Mahathir Mohammed, has pledged to review Chinese deals seen as dubious, calling into question Malaysia’s status as one of Beijing’s most cooperative partners in its infrastructure push.

China launched its initiative to revive ancient Silk Road trading routes with a global network of ports, roads and railways — dubbed “One Belt, One Road” —  in 2013.

Malaysia and Beijing ally Cambodia were seen as bright spots in Southeast Asia, with projects in other countries often facing problems, from land acquisition to drawn-out negotiations with governments.

“Malaysia under Najib moved quickly to approve and implement projects,” Murray Hiebert, a senior associate from think-tank the Center for Strategic and International Studies, told AFP.

Chinese foreign direct investment into Malaysia stood at just 0.8 percent of total net FDI inflows in 2008, but that figure had risen to 14.4 percent by 2016, according to a study from Singapore’s ISEAS-Yusof Ishak Institute.

However, Hiebert said it was “widely assumed” that Malaysia was striking quick deals with China in the hope of getting help to cover debts from sovereign wealth fund 1MDB.

Najib and his associates were accused of stealing huge sums of public money from the investment vehicle in a massive fraud. Public disgust at the allegations — denied by Najib and 1MDB — helped topple his government.

Malaysia’s first change of government in six decades has left Najib facing a potential jail term.

New Prime Minister Mahathir Mohamad has announced a planned high-speed rail link between Kuala Lumpur and neighboring Singapore will not go ahead as he seeks to reduce the country’s huge national debt.

The project was in its early stages and had not yet received any Chinese funding as part of “One Belt, One Road.” But Chinese companies were favorites to build part of the line, which would have constituted a link in a high-speed route from China’s Yunnan province to trading hub Singapore, along which Chinese goods could have been transported for export.

Work has already started in Malaysia on another line seen as part of that route, with Chinese funding — the $14-billion East Coast Rail Link, running from close to the Thai border to a port near Kuala Lumpur.

Mahathir has said that agreement is now being renegotiated.

Other Chinese-funded initiatives include a deep-sea port in Malacca, near important shipping routes, and an enormous industrial park.

It is not clear yet which projects will be amended but experts believe axing some will be positive.

Alex Holmes, Asia economist for Capital Economics, backed canceling some initiatives, citing “Malaysia’s weak fiscal position and that some of the projects are of dubious economic value.”

The Chinese foreign ministry did not respond to request for comment.

Decoder

What is the "One Belt, One Road" initiative?

The “One Belt, One Road” initiative, started in 2013, has come to define the economic agenda of President Xi Jinping. It aims to revive ancient Silk Road trading routes with a network of ports, roads and railways.