MNCs in the News-2014-05-09

A tainted milk powder scandal in China in 2008 created the space for foreign infant formula brands to gain market dominance. It also spurred Chinese companies to buy foreign infant formula firms and to invest in operations that could repackage formula and import it back China as a foreign product. To defend domestic firms, the Chinese government now requires all diary products made overseas to be registered and all formula sold in China to carry Chinese-language labeling affixed at the source. As well, it has been subsidizing domestic dairy producers and requiring dairy product suppliers to invest in local farms (Lucy Hornby, “China Clamps Down on Baby Formula Imports,” Financial Times, May 5, 2014).

The Korea Trade-Investment Promotion Agency has been supporting the recruitment of recent Korean graduates by Japanese firms. In Korea, newly graduated students find it very challenging to find a job and promoting their recruitment thereby de facto expands the small-scale Korean job market. Furthermore, it will help bolster economic links between Japan and Korea whose present political relationship is frigid. Many Korean students have good foreign language skills and global thinking, skillsets that mesh well with the needs of Japanese firms that are accelerating their overseas activities. About 50 Japanese firms and 3000 Korean students are participating in this scheme (“KOTRA supports the recruitment of Korean students for Japanese firms,” Nikkei, May 9, 2014, http://www.nikkei.com/article/DGXNASGM1704N_Z00C14A5EAF000/)

With the signing of the Agreement between Singapore and the Separate Customs Territory of Taiwan, Penghu, Jinmen, and Matsu on Economic Partnership last month, economic ties between Singapore and Taiwan have been moving forward and firms in Singapore are now being urged to form partnerships with their Taiwan-based counterparts when expanding into emerging markets. Observers note that Singapore and Taiwan have many opportunities for collaboration. For example, Singapore has strong connections to the ASEAN states while Taiwan has deep links with Mainland China. In regards to the electronics sector, Singapore has the supply-chain infrastructure while Taiwanese firms offer manufacturing expertise (Chia Yan Min, "Local firms urged to partner Taiwan peers,” Asia One Business, May 9, 2014, http://business.asiaone.com/news/local-firms-urged-partner-taiwan-peers)

Within one month after Singapore’s sovereign wealth fund GIC opened an office in Brazil looking to increase investments in Latin America, it has partnered with other investors including Temasek Holdings and Tiger Global Management to invest in Netshoes, a Brazilian online sporting goods retailer. With a US $170 million investment, it hopes to capitalize on the popularity of sports in Latin America. Brazil is currently experiencing economic instability and slow growth as a result of the drain of hosting the 2012 World Cup and the joint investment is an important boost for the e-commerce firm (“Singapore invests $212 million in Brazil online sports retailer,” Asia One Business, May 8, 2014, http://business.asiaone.com/news/singapore-invests-212-million-brazil-on...)

The beginning of 2014 witnessed Indonesia imposing a long-planned ban on the export of unprocessed mineral ores in an effort to get mining companies to “‘add value’” rather than just “‘export earth.’” While it is unclear if Indonesia’s effort to promote investment in resource processing will work in the medium- or long-term, the near-term effects of the policy have become manifest with mineral exports falling, workers laid off, and foreign exchange earnings and investor sentiment adversely affected. Foreign companies are building multi-billion dollar factories, but it is not clear if refined ores from them will be competitive on global markets (Ben Bland, “Indonesia’s Gamble on Ore Export Ban Starts to hit Home,” Financial Times, May 7, 2014).

A government corruption case in 2013 that led to the revocation of more than 100 resource exploration licenses held by foreign and local investors, frictions between Mongolia and Rio Tinto, Mongolia’s largest investor, over the division of benefits and costs relating to the Oyu Tolgoi copper mine, economic problems, and a falling currency have led foreign investors to dramatically cut their investments in Mongolia. Spurred by economic crisis and negative investor sentiments, Mongolian officials are striving to come up with mechanisms to restore licenses and to resolve disagreement with Rio Tinto relating to Oyu Tolgoi (James Wilson, “Mongolia Set to End Dispute with Investors over Mining Licenses,” Financial Times, May 5, 2014)