Asia Monitor July 2019

Notable Developments: China-North Korea

In June 2019, Chinese President Xi Jinping visited North Korea for a two-day trip to revive relations between the two countries. It was the fourth time President Xi and North Korean leader, Kim Jong-un, have met but this was the first time Xi visited Pyongyang. During the bilateral talks, China offered to provide North Korea with an economic aid package in exchange for the country to return to the negotiating table with regards to nuclear disarmament. This trip came at an important time as China seeks to re-establish its influence over North Korea as Pyongyang develops a closer relationship with the Trump Administration.

G20 Osaka

This year’s G20 summit, the annual meeting of the heads of state and governments of the largest twenty economies in the world, was held in Osaka, Japan. The participants of the G20 summit discussed key themes such as the global economy, trade and investment, women’s empowerment and health amongst others. On the sidelines of the summit, key bilateral talks were held between the American and Chinese delegations to discuss the ongoing trade war. The talks ended with a positive outcome as President Trump agreed to suspend implementing additional tariffs on Chinese goods. During the summit, a new global initiative titled “Osaka Blue Ocean Vision” was introduced. The initiative is aimed at reducing the amount of plastic in oceans by 2050 and is strongly supported by the G20 community.

Focus Industry: The Cricket World Cup 2019

The International Cricket Council (“ICC”) Cricket World Cup takes places every four years and for the 2019 games it has been hosted by England & Wales. (The ICC is the authority that regulates all cricket matches and governs the sport for all its 144 members). The World Cup is scheduled to take place from 30 May 2019 to 14 July 2019. There are ten teams taking part in the competition of which five are from Asia. The Asian competitors include India, Pakistan, Sri Lanka, Bangladesh and Afghanistan. In addition, England, Australia, New Zealand, South Africa and West Indies are competing for the trophy.

Cricket is a popular sport in South Asia with India and Pakistan holding one of the fiercest cricketing rivalries dating back to their independence in 1947. The two nations played each other in the 2019 Cricket World Cup at Manchester’s Old Trafford ground on 16 June 2019 with an estimated 1 billion people watching the match worldwide. The demand for tickets for this match significantly outstripped supply with the resale value of tickets estimated to be between USD600 to USD3,700, a stark contrast to the original price of a ticket which sold for USD190.

The commercial importance of the World Cup to the ICC has reached its peak this year. The Council is estimated to generate revenue of c.£400MM (USD501MM), coming solely from broadcasting rights according to Sportcal. For this year’s World Cup, the ICC has signed up more than 20 contracts with sponsor brands, including CocaCola, Uber and the food company, Britannia Industries. Almost a third of the sponsors are from India, the country that will benefit the most from the competition.

India has one of the world’s best teams and cricket is without a doubt the most popular sport in the country. The Board of Control for Cricket in India (“BCCI”) is the sport's largest entity and the richest cricket board in the world, de facto deciding on the competitions’ matters. The BCCI is expected to receive up to USD650MM of the USD3BN in revenue that the ICC will generate between 2015 and 2023 from television rights, compared to USD141MM received by the English Cricket Board and USD87MM received by the Australian Cricket Board. India’s six-week annual T20 cricket competition, the Indian Premier League (“IPL”), generated USD6.3BN in revenue in 2018. In the same year, sponsorship revenues amounted to almost USD1.5BN. In 2017, Star Distribution India, one of the country’s largest media companies, bought the broadcasting rights of the IPL for USD2.4MM and for this year’s ICC Cricket World Cup, the company aims to meet its target revenue of USD143MM, counting on an audience of 1.5BN people.

Investment Manager Commentary

China is North Korea’s most important ally in terms of bilateral trade and diplomatic relations. However, Pyongyang’s fixation with developing nuclear weapons has put a strain on the relationship with Beijing as China is in support of the United Nation’s resolutions to impose sanctions on the country. China strongly supports a peaceful Korean Peninsula as it fears that a collapsed regime in North Korea would send thousands of North Korean refugees into its country. With Kim Jong-un meeting regularly with the American and South Korean governments, China has had to re-establish itself to ensure that it can have a significant impact with respect to developments on the Korean Peninsula and to protect its own interests.

In 2014, the BCCI along with the England and Australia cricket boards forced a restructuring of the ICC which put India firmly in control of world cricketing matters. Given that the ICC is heavily dependent on revenues from India, it is no surprise that they wield the power. For example, the BCCI has refused to allow Indian players to take part in other T20 tournaments apart from the Indian Premier League as they want to ensure the IPL retains its global stature. As a result, it has halted the development of the game across the world and makes cricket less inclusive. For instance, the BCCI played a pivotal role in reducing the number of teams participating in the Cricket World Cup from 16 to 10. As long as the BCCI keeps generating significant revenues it will continue to ‘play’ the game as it sees fit.

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