SINGAPORE (July 29): “Generally speaking, you have resilience in the services sector and in the construction sector. At the same time, this outlook is getting worse and worse. And it’s getting worse and worse in manufacturing, especially. And it’s getting worse and worse in those countries where manufacturing is very important.” — Mario Draghi, president of the European Central Bank, on the economic outlook, at a July 25 press conference.
Record penalty for violation of user privacy
Facebook has agreed to pay US$5 billion ($6.8 billion) in a settlement with the US government. The US Federal Trade Commission says the penalty is “the largest ever imposed on any company for violating consumers’ privacy and almost 20 times greater than the largest privacy or data security penalty ever imposed worldwide”.
The settlement comes after a lengthy federal investigation that started after it emerged that millions of users’ data was improperly obtained by the now-defunct Cambridge Analytica.
Under the deal, Facebook would have to form a board committee to oversee data privacy practices. It would also have to increase its oversight over third-party apps. Founder and CEO Mark Zuckerberg must personally certify that the company’s data privacy practices comply with the commission’s requirements. Zuckerberg would be liable for civil and criminal penalties in the case of false certification.
Facebook was also found to have misrepresented its privacy settings and other user tools, which led to users sharing their information.
Separately, the US Securities and Exchange Commission also announced a settlement with Facebook over claims that the company failed to adequately inform its investors that the platform’s user data may have been obtained without the users’ permission, or done so in violation of Facebook’s policies. The settlement includes a fine of more than US$100 million.
Indonesian government responsible for wildfire damage
Indonesia’s Supreme Court has affirmed a lower court ruling holding President Joko Widodo, his cabinet and various regional administrators accountable for the failure to control the wildfires in 2015 that resulted in a blanket of toxic haze over the region.
“The conclusion is the government should fulfil its obligation to protect its citizens against the disaster. It should work on necessary efforts to stop wildfires from happening,” said a Supreme Court spokesperson after the ruling on July 19.
The ruling stemmed from a lawsuit filed by environmentalists and residents of Central Kalimantan, among the most affected by the disaster, demanding that the government take responsibility for the wildfires and treatment of the survivors.
The president, the environment and forestry minister, health minister and central Kalimantan governor have now been ordered to build a hospital to provide free treatment for the haze survivors. Other hospitals in the region were also told do the same. And, the government must disclose which companies owned the burnt lands and the amount of each company’s environmental guarantee fund.
However, the attorney-general of Indonesia has since come out in defence of the government, saying it had acted on this issue. “Recent statistics show that forest fires have decreased in numbers. Many individuals and companies have also been charged in court, and will eventually be convicted,” said Attorney-General H M Prasetyo.
As for the verdict, the government says it intends to file for a case review through its lawyer. This has brought fresh criticism from activists.
Meanwhile, Indonesia’s weather agency has warned that this year’s dry spell could be worse than the last.
Monetary easing expected in Singapore
Singapore’s headline inflation has eased in June, rising just 0.6% y-o-y. Core inflation, which excludes prices of accommodation and private road transport, rose a lower 1.2% y-o-y last month, compared with 1.3% in May.
The drop is a result of lower services and retail inflation, as well as a steep decline in the cost of electricity and gas. Private road transport inflation and accommodation costs have also driven headline inflation down.
Economists are surprised by the extent of the slowdown in 2Q2019, and are eyeing the incoming labour market report and purchasing managers’ index data over the same period as key to guiding the Monetary Authority of Singapore’s (MAS) policy stance in October.
“In the past, there tended to be some payback in activity following a contraction as sharp as the one in 2Q2019. Should this reversion not be apparent in the 3Q2019 high-frequency data, this would increase the likelihood of an October MAS [easing] against the extant view of an April 2020 [easing],” says Ong Sin Beng, a JPMorgan economist.
Mueller refutes Trump’s claim
Former US special counsel Robert Mueller has rejected President Donald Trump’s assertion that he has been exonerated by Mueller’s report. In his July 24 testimony before the US Congress, Mueller also decried Trump’s encouragement of WikiLeaks’ release of Democrat emails as “problematic” and raised concerns about the Trump campaign’s openness to receiving Russian assistance becoming the “new normal”.
Mueller’s appearance before US legislators comes months after the release of his report on the investigation into Russian interference in the 2016 US presidential election.
Future of 737 Max in doubt
Boeing is mulling reducing or scrapping the production of the 737 Max aircraft, amid ongoing regulatory hurdles.
The 737 Max has been grounded since March after fatal crashes in Ethiopia and Indonesia within six months, putting a dent in Boeing’s fastest-selling aircraft. The aircraft manufacturer expects the 737 Max to fly again by year-end, though industry officials believe a January 2020 date is more likely.
CEO Denis Muilenburg remains confident that the plane will be flying again in October. “Should our estimate of the anticipated return to service change, we might need to consider possible further rate reductions or other options, including a temporary shutdown of the Max production,” said Muilenburg to investors in a conference call recently.
Boeing had been working with regulators worldwide on fixes for its MCAS anti-stall software until last month, when the US Federal Aviation Administration found a new problem that required rectifying, delaying the 737 Max’s return to the air.
Production of the 737 Max has been reduced from 52 to 42 aircraft a month, leading to high costs as parts are priced according to volume, and delivery suspension has hit Boeing’s cash flow and margins.
On July 24, Boeing reported its largest-ever quarterly net loss of US$2.9 billion.
Jollibee buys Coffee Bean
The Philippines’ largest food service operator Jollibee Foods Corp is taking over Los Angeles-based Coffee Bean & Tea Leaf (CBTL) for US$100 million as part of its global expansion. Jollibee is acquiring the loss-making brand from private equity firm Advent International and other private investors.
CBTL has 1,189 outlets across the US, Southeast Asia and the Middle East, with nearly three-fourths of its outlets franchised. Jollibee will be acquiring the brand as part of a joint venture, with US$100 million invested in an 80% stake in a Singapore holding company, while a partner in its Vietnam coffee and restaurant business takes the other 20%.
Jollibee will fork out an additional US$250 million, set aside to pay off CBTL’s debt. The amount will be paid back by the holding company.
The buyout is set to add 14% to Jollibee’s global system-wide sales and 26% to its total store network. “The acquisition of CBTL will be Jollibee’s largest and most multinational so far, with business presence in 27 countries,” says Jollibee chairman Tony Tan Caktiong in a statement.
