>>abirached: this week on world business >>: straitened relations, why taiwan and china are starting to make tentative steps towards closer ties. >>: i myself feel that this is about the right pace, but a lot of people from the business sector they are still complaining too slow. >>: in the second part of our series on egypt, the obama effect, we look at why being conservative paid off for the country's financial sector. >>: this cautiousness, in a way, helped the banking sector for sure to go through one of the wildest financial crises the world has ever experienced. >>:and european pharmaceutical companies are paying the price for cutting back on research

and development. >>: about a decade ago they accounted for around 70% of new drug discoveries - but now it's more like 30%. >>abirached: hello and welcome. i'm raya abirached and this is world business, your weekly insight into the global business trends shaping our lives. it's been less than a year and a half since ma ying-jeoh becamepresident of taiwan, replacing the stridently pro-independence chen shui-bian -- who was deeply distrusted by china's government. that change hasn't just calmed the tensions between taiwan and the mainland, but has also ushered in the most rapid and far reaching advances in cross-strait ties in sixdecades.

>>reporter: a public services announcement tells people taiwan's government may be opening the door to mainland china, but it's keeping the house safe. >>: it's been just over a year since taiwan and china opened direct air and sea links for the first timein decades. >>: since then, taiwan has for the first time opened up a host of sectors including manufacturing, retail, restaurants and financial services to investment from mainland china. >>: while china's economy is rapidly rebounding and set to grow at least 7% this year, taiwan's gdp is likely to shrink by a record 3.5 per cent .the liberalization of economic ties with the mainland, hasbrought some rare cheer to taiwan's business people. >>huang: i myself feel that this is about the right pace, but a lot of people from the business sector they are still complaining:

too slow. we should move forward, more quicker. >>reporter: the political opposition disagrees: >>bi-khim: what we are concerned now is that president ma is moving forward in opening up certain strategic sectors in taiwan to chinese investment and we feel that is dangerous to taiwan's survival. >>reporter: the government still isn't allowing chinese investment in key industries such as semi-conductors or lcd manufacturing, in which taiwan holds a technological edge. >>shin-yuan: the government is adopting a responsible policy. on the one hand we are trying to overcome so many barriers which we think definitely need to be taken away, on the other hand we also want to protect our own competitiveness. >>reporter: until now, taiwanese companies have invested as much as 200 billion dollars in

the mainland, but no investment has come the other way. >>: and with a free trade agreement between china and southeast asia's asean bloc set to take effect next year, taiwan's exporters are also in serious danger of losing out to their regional opposition. >>shin-yuan: when you are not in this game, if you are excluded from this game then you are bound to suffer a lot. you will be marginalized. >>reporter: taiwan and china look set to start talks on a free trade deal later this year. the opposition sees it as another step towards creeping reunification with the mainland. >>bi-khim: we really need to put more energy into strengthening our trade relations with other regions. our ties with china are already so deep. in fact they are too deep for taiwan's own security sake. >>reporter: at this early stage, the benefits of improved

cross-strait relations may still be more psychologicalthan statistical...for instance, in boosting investor confidence. >>: take taiwan's stock market. it was one of the world's leading performers in the first half of the year. >>huang: this is a very good result. if you consider under this recession, this is really very very good. if there's no recession probably it would be even better. >>reporter: but analysts warn that the liberalization and improvement in ties can't continue at the current pace...not after decades of mistrust and hostility...and with the question of taiwan's political status unresolved. >>huang: we are getting into the more sensitive complicated process and eventually we will touch the most sensitive political issues. but i do not think it's in the next three years >>reporter: by which time president ma hopes he will be re-elected

to a second term in office. >>abirached: president obama's decision to deliver his first speech to the muslim world in cairo helped focus attention on the five years of egyptian economic reforms that, despite the global crisis, still led to gdp growth last yearercent. now the government has introduced the next phase ofreforms: the creation of a unified, single, regulatory body designed to broaden access to capital and usher in a new wave of growth. >>reporter: this year egypt's largest leasing company, incolease, found it had almost met its annual performancetarget six months early. one reason, according to its ceo, was that businesses knew the company would give them a decision on financing within 15 days - as opposed to the three or four months it would usually take the country's banks. >>ibrahim: this actually attracted a lot of conventional bank clients

to come to leasing as an alternative source of finance. >>reporter: egypt's banking system is known for its cautious approach - due, in part, to a series of comprehensive reforms: >>shawky: from restructuring their balance sheets, for higher reserve requirements for non performing loans from bring very picky and up to international standards when giving credit. >>reporter: the reforms meant that when the global financial crisis struck egypt's banking sector was largely untouched. yasser al mallawany is ceo of one of the region's leading investment banks. >>mallawany: i think we're very, very lucky by the management and the focus of plans that took place in the banking sector. >>reporter: the reform process; the privatisation of some state owned banks such as the bank of alexandria; the fact that egypt, with a population of 80 million people, is severely under-banked, and the sector's cautious nature also helped convince foreign institutions such as credit agricole to move into egypt. >>guillemin: this cautiousness, in a way, helped the banking sector

for sure to go through one of the wildest financial crises the world has ever experienced. >>reporter: the changes to the banking industry were a key part of the government's reform programme - showing investors that egypt was a place they could do business. >>nazif: investors look for safety in terms of transparency of the system. they don't like surprises, the want to see ahead. they want to see commitment on the part of the government. >>reporter: that's not to say, though, that the country's economy was unaffected by the global financial crisis. >>boutros-ghali: we have growth rates that have dropped from seven point two - to four, four and a half - but we have weathered the storm better than most. >>reporter: but egypt needs bigger growth levels than that to address its high levels of poverty. one way the government is trying to make that happen is the creation a single regulator, which will be eventually supervise all its non-banking financial institutions including: the capital markets, insurance, leasing

and mortgage industries. it will, according to the country's minister of investment, build on the current reforms: >>mohieldin: in governance, in prudential regulation, in enhancing supervision but focussing on the role the efficiency of financial intermediation, of mobilising savings and of directing them to investments. >>reporter: the aim of the setting up a single regulator is to create efficiencies across all the non banking financial sectors. for example the country's entire mortgage industry is currently not much more than $600 million due, amongst other reasons, to such basic issues as proof of ownership. the government is now creating a definitive countrywide property database. >>darwish: we are surveying areas, one zone after another, and creating the record for each property unity, apartment, piece of land, whatever. and this record will show who's the owner. >>reporter: the authority's new chairman maintains that the development of a mortgage industry will create synergies with other non-banking sectors.

>>el-din: you have a growing mortgage market in egypt, it's a market that needs to be insured. >>reporter: and just one week after the establishment of the new regulatory body the national bank of egypt announced the creation of a new 1.8 billion dollar mortgage fund. the insurance industry too, according to the chairman of the country's biggest insurance holding company, will also benefit. >>abdallah: i think the egyptian insurance sector is very promising and i'll tell you why - we have 80 million that in my judgement have been under insured for a long time. >>reporter: and the country's minister of trade and industry does acknowledge the pressing need to spur investment. >>rachid: we need to open up all the veins and other channels of financing and definitely today areas like leasing and insurance and all these kinds of savings and investments, they need to more and more energised. >>o'sullivan: putting in place this authority is an indication that egypt is taking the development of the financial markets outside

the banking sector very seriously as alternatives sources of liquidity and capital. >>reporter: the end result, it's hoped, will be an increase in the speed of economic growth. >>ibrahim: the turnover of funds in the system, actually, if this is going to increase - this will lead to moregrowth, and more businesses, and will create more job opportunities for the egyptians. >>reporter: and, ultimately, this will be the acid test for the new authority: if the people in egypt's streets see the reforms have made a positive difference to their lives. >>abirached: still to come on world business... as companies cut back on advertising across the world, agencies are having to adapt rapidly to survive. >>: soccer in the states - can the world's favourite sport really hit the back of the net in the us? >>: and why pharma companies could soon be using mechanical scientists to cut the cost of r and d >>: getting robots to do research... and the rest in just a moment on world

business... >>abirached: difficult economic times mean many companies are looking for ways to lower spending on advertising. but that's not all they're looking for. the internet has become both a new advertising channel and away to streamline how advertising is done. innovation is now the name of the game. >>cave: we don't really regard ourselves as being in the agency market, we regard ourselves as being creative entrepreneurs >>moszynski: we started the agency because we felt it was time for a new type of global agency >>law: if you take all the overhead out you become much faster on your feet, if you go to the world for solutions you get ten times the number of solutions to solve

a problem. >>reporter: the advertising industry is worth billions of dollars worldwide and in some developed countries it can contribute up to 1.5% of gross national income. >>: and at a time when change seems to be a global mantra, some ad agencies are exploring new ways of doing business that are quite different from those of a traditional agency. >>: one of these pioneers is erasmus, which partners with companies in creating, communicating and owning brands. >>cave: we might get an approach or a phone call or we might have an idea for a particular branded goods or services, form a business plan or get it to a certain stage and then invite people to partner with us in the creation of that brand. so we operate a different model really it's much more venture based. >>reporter: rather than focus on an ad campaign that generates this year's fees, specialist agencies like erasmus enter into partnership agreements with their clients that give

them a long-term interest in a brand. >>: and it's not just commercial relationships that are changing. >>: most advertising networks have offices in numerous cities and this model hasn't changed in a long time. >>harrison: but out to prove you don't need a bricks and mortar presence all over the world to run internationalcampaigns is london advertising, they have just this one office here in london. >>moszynski: because of the benefits of the internet we believe it's possible to do most of that work from londonwithout that type of overhead which is incredibly expensive and adds a lot of time and effort to the whole process. >>reporter: for international campaigns, london advertising has access to strategic planners in over 100 marketsalong with a network of 400 copywriters. >>: but it's online where this agency has really changed the rules. in a normal ad campaign, any changesmust be communicated to all the relevant parties, a process that involves phone calls, emails and much

chasing. >>: london advertising's online system means calls and emails are replaced with automated processes, email alerts and an approval system for the client that doesn't require documents to be faxed or scanned. >>: and despite launching just 2 weeks after the collapse of lehman brothers so far the economy hasn't hurt business. >>moszynski: our expectations were far surpassed because within 3 months we were able to secure clients on every continent. we were appointed by mandarin oriental hotel group to work within 25 markets and this wasthe first time they've appointed an agency that doesn't have a network to handle their global advertising. >>reporter: at the law firm group, this model is taken even further. >>: using teams in 21 countries the group is able to operate in 91 marketplaces with no actual headquarters. >>law: the conventional model for an advertising agency network is you'd have all of your skill sets housedin one building in one capital city and then replicate or clone, if you like,

the exact same set ofskill sets in another capital city. what we do is atomize that concept and we utilize the skill sets of specialists all around the world to help in other markets as well as their own. >>reporter: in a recent case, the moscow team put a brief on the group's network for a campaign about road safety. ultimately the team in holland supplied the russians with the winning idea. >>law: what we do is we give all of our work, all of our thinking, strategy, creativity, - we give it to each other free. on the understanding that at the point the client buys the work the team or the office that provided it gets paid. >>reporter: as for the future of the advertising industry andy law has no doubts. >>law: i think it will be a smaller cottage based industry with people flowing freely from one company to another. i do not see huge monolithic, global, concrete organizations with huge footprints all around the world.

>>reporter: advertising goliaths beware. >>abirached: medicine has a long history of innovation - the ancient egyptians are thought to have performed surgery nearly five thousands years ago and medical tools like forceps & surgical needles were developedby the romans. things have come a long way since then and with one new development could go a lot further. >>reporter: as the developed world grows older and sicker and developing nations get richer and fatter, demand for health care will only grow. obama wants to bring 46million uninsured americans into his country'spatchy health system, while in china a $120 billion scheme to expand health insurance for the country's poor has been announced. but reform on this scale is going to require innovation. >>nicholls: european pharma companies have

been dropping behind in terms of drug discovery. about a decade ago they accounted for around 70% of the new drug discoveries - but now it's more like 30%. one reason isthat pharma companies have not been maintaining growth in r&d spending. in fact now as the recession kicks in they are starting to cut spending even further. >>reporter: and europe's big drugs companies have held r&d spending steady at around 15% of revenue over the past decade. compare that to american firms, who's spending has risen to 18% and it's easy to see why they now hold the lion's share - 65% - of new drug discoveries. >>: but scientists at aberystwyth university in wales think they have developed something that should help put europe back on the pharma map. >>russell: so professor adam, how does it feel to be experiencing such a huge amount of success with your work here? of course

adam isn't going to answer me because adam is in fact a computer. he's part of the robot scientist here at aberystwyth university in wales, and he's the first ever robot to independently discover new scientific knowledge. >>reporter: developed to investigate the function of genes in a yeast cell - a substance commonly used in science as a model for human cells - this intelligent robot works round the clock for zero pay. >>king: adam has a database of knowledge about yeast genetics and it has a model of the yeast cell - this model has bits missing... so there is scientific knowledge which we don't understand. so adam is capable of making hypotheses about what is missing, thinking up experiments to test these hypotheses, andactually physically doing the experiments using laboratory automation equipment it has available toit. >>reporter:

it's the kind of repetitive but essential work normally undertaken by research technicians - but adam can work faster, across more experiments and with much greater accuracy than his human counterparts. >>martin: so with this 384 well plate, a human would take maybe 1 or 2 days to accurately fill it with different experiments... and then it would take probably a period of 2 days to actually analyse the contents of these wells, either under a microscope or visibly. so the robot can fill one of these plates in3 minutes, far more accurately than i would ever be able to fill with just a standard pipette with all my human error. >>reporter: adam can carry out up to 1,000 experiments a day - that's the work of dozens of people. there's still work to be done to maximise efficiency - but the current running costs for adam are around $500 a day. that's in the same ball park as 2 technicians. their creators believe that robots like these will one day drastically reduce the cost

of scientific research. >>abirached: 13 years ago, following the success of the 1994 world cup, major league soccer, america's top flightprofession football league was established. it was an attempt to bring the world's favourite game to a nation where it had always struggled to gain a foothold. in 2007 david beckham joined the mls in a multimillion dollar move, designed to boost its popularity...but has his presence really helped, and is the mls on the right path if soccer is to have a future in the states? >>reporter: game night in washington dc where the la galaxy, along with star player david beckham are in town. the crowd isn't huge, but boisterous...the football more industrious than dazzling...in other words...a fairly typical occasion for a league moving into its 14th season.... >>payne: we're definitely in a growth period still our league. we're kind of entering i guess

our early adolescence. >>reporter: an adolescent league that now involves 15 teams. but 3 more plan to join over the next 2 seasons, keen to mirror the experience of the mls's two most recent expansion franchises... >>namoff: if you look at the expansion team of seattle, they're averaging upwards of over 25000 a game. for anexpansion team that's unheard of... >>courtemanche: in other clubs such as toronto they play in a 20000 seat stadium and have sold out every match in their 3 years of existence. >>reporter: in philadelphia...they're confidently building a soccer specific stadium that'll be ready for the team's first mls game, with a 19000 capacity... >>debusschere: the public response has been phenomenal. we have over 7000 season tickets already and that's with a very limited, if nothing at all marketing campaign. >>reporter: a new mls franchise now costs

$30 million dollars, up from just $10m four years ago. but tv revenuesare still meagre, average attendances are struggling to get beyond the 16000 mark, and a study by forbes last year estimated only 3 franchises are actually operating at a profit... >>: our revenues haven't grown the last few years the way we'd like them to. >>reporter: and if you listen to a typical sports radio station, like this one in washington dc, home of the league's most successful ever team.. . it's unlikely you'll hear them chatting about soccer.... >>pollin: the way we talk about soccer is pretty much in reference to will soccer ever rise above the level itis right now...but in terms of actual discussion of games and players, there's very little of that. >>reporter: which is where beckham comes in....in 2007, the league relaxed its rules to allow each team to buy one designated player.

so beckham's $6.5m pay packet only dents the galaxy's annual $2.3million salary cap by $415000. it was a move designed to bring more starpower...and attention to the league... >>jong: well, for a typical home game this season dc united have been pulling in 15, 16000 fans. tonight, thanks to beckham, 20000. so he is making a difference on that count. but is he making a difference tothe mls? >>quaranta: any time you get a player of his quality and exposure its always good. >>courtemanche: when the galaxy signed david beckham in january of 2007. you could arguably say there was probably not a football supporter on this planet that now didn't know the los angeles galaxy and major league soccer. >>jong: has he made a diff to football's, soccer's profile over here? >>pollin: i don't think so. other than his profile, but i don't think he's done for the game what they expected him to do. >>payne: i think david's been good for the league.

>>jong: david do you think you're making a difference? >>beckham: i would like to think so...but only time will tell. >>reporter: the average league attendance has increased by around 1000 since beckham arrived, but while he's drawn in fans and sold shirts, his team has hardly set the league alight, and an unexpected loan spell to ac milan has generated lots of negative publicity about both beckham's loyalty and the standard of the league... >>payne: i think frankly the controversy's been good. >>namoff: you're talking about it now, so regardless if it is bad press, it still is press. >>donovan: last year was difficult clearly, but we're happy with where he is and what he's doing for us and forthe league. >>jong: is america still working for david beckham? >>beckham: what do you think? i think so. i'm enjoying it and i'm enjoying the soccer and i'm enjoying playing with these guys. >>reporter: whether or not he's helping...next year, 10 of the league's 16 teams will be playing in their own soccer specific stadiums, crucial for generating the revenues

that could ultimately finance salaries for star players... >>reporter: recent exhibition games, such as this one between the la galaxy and barcelona, which drew 93000 fans, show there is an appetite for top quality football in the usa. however...there's still a long way to go... >>abirached: that's it for this week's world business. thanks for watching. we'll see you again at the same time next week.