MNCs in the News-2016-02-12

In November 2015, the Shanghai municipal government released a framework plan to link the Shanghai Free Trade Zone (SFTZ) with the Shanghai Zhangjiang National Innovation Demonstration Zone which was designed to create a base for the manufacturing of biological medicine. The Zhangjiang Zone allows for the separation of R&D and production which, in turn, means companies with a marketing authorization can focus on their competencies and also can outsource production to contract manufacturing organizations (CMOs). Pursuant to the new policy, Boehringer Ingelheim China (a subsidiary of the German parent) is working with BeiGene Ltd. to produce a tumor immunity medicine (“Shanghai FTZ Boosts Innovation of Pharmaceuticals,” China.org.cn, February 6, 2016, http://www.china.org.cn/business/2016-02/06/content_37751853.htm)

Japan’s Sharp has been suffering losses for years. Originally, Japanese policymakers were thinking of using the Innovation Network of Japan fund to bailout the company by buying the firm and merging it with other troubled domestic technology firms. However, decision makers eventually came to the view that foreign direct investment (FDI) in Sharp might be desirable, especially given the government’s goal of doubling FDI to $300 billion by 2020. Sharp’s Board, influenced by this, and a new corporate governance code opted for the highest bid by Taiwan’s Foxconn, which may send a signal that Japan is open for inward FDI (Takashi Umekawa and Emi Emoto, “Sharp Shows Japan Inc May Be More Open to Foreign Interest,” Reuters, February 5, 2016, http://www.reuters.com/article/us-sharp-japan-idUSKCN0VE1TU)

The Australia government plans to spend more than USD $35 billion to upgrade its submarine fleet. Japanese companies are some of the leading candidates to construct the systems, with German and other businesses also competing to win the contract. To give it a leg up in the competition, Mitsubishi Heavy Industries has said that “‘it will be happy to oblige,’ if asked to build all of the new vessels” in Australia. Mitsubishi has credibility because it is one of the companies involved in building Japan’s Soryu-class submarine. Mitsubishi also has been working to win public support through full-page newspaper ads (Kaori Takahashi, “Mitsubishi Heavy Willing to Build Subs Down Under,” Nikkei Asian Review, February 12, 2016, http://asia.nikkei.com/Business/Companies/Mitsubishi-Heavy-willing-to-bu...)

South Korea decided to shut down the Gaeseong Industrial Complex (GIC) to sanction North Korea for its recent long-range missile launch and nuclear test in violation of United Nations resolutions. In retaliation, North Korea expelled all workers and seized all South Korean assets (land, property, equipment) in the GIC. The GIC has received South Korean investments of about USD $851 million since 2004. According to Seoul, there were 124 South Korean firms located in the GIC, employing roughly 55,000 North Korean workers and less than 1,000 South Korean workers. The Inter-Korean Cooperation fund will cover the losses of some firms (Yi Whan-Woo, “Seoul Axes Gaeseong Industrial Complex,” Korea Times, February 10, 2016, http://www.koreatimes.co.kr/www/news/nation/2016/02/116_197665.html; Yi Whan-Woo, “N. Korea Expels Workers, Freezes Assets in Gaeseong,” Korea Times, February 11, 2016, http://www.koreatimes.co.kr/www/news/nation/2016/02/116_197778.html; Jung Min-hee, “Losses of Companies in Kaesong Industrial Complex Likely to Snowball,” Business Korea, February 11, 2016, http://www.businesskorea.co.kr/english/news/politics/13802-symbol-inter-...)

Korea’s Daewoo Engineering & Construction (Daewoo E & C) secured a bid to build a USD $480 million bridge linking Bidupur and Kacchi Dargah in India. The project, commissioned by an Indian state-run enterprise, the Bihar State Road Development Corp. Ltd., will involve Daewoo E & C partnering with India’s largest builder, Larsen & Toubro, to construct a 22.8-kilometer six-lane bridge and connection roads. The project is anticipated to run about 48 months and is the first major construction deal the company has won in India since India and South Korea upgraded the bilateral relationship to a “special strategic partnership” (Lee Song-hoon, “Daewoo E&C Wins US$480 Million Deal to Build Bridge in India,” Business Korea, February 12, 2016, http://www.businesskorea.co.kr/english/news/industry/13823-bridge-constr...)

Indonesia intends to liberalize FDI restrictions in nearly 50 sub-sectors including e-commerce, retail, healthcare, film, and tourism to promote economic growth, diversification, and competition. Cabinet Secretary Pramono Anung said, “‘this policy is not about liberalization, it is to encourage economic modernization.’” Wholly owned foreign businesses will not be allowed in all areas, but areas will be opened up and majority ownership stakes will become possible in some sectors. The removal of numerous sectors from the country’s negative list will please foreign investors who have pushed for greater accesses and fretted about government anti-FDI tendencies over the past year or so (“Indonesia plans ‘big bang’ opening of economy to foreign investment,” The Economic Times, February 10, 2016, http://economictimes.indiatimes.com/news/international/business/indonesi... Avantika Chilkoti, “Indonesia Launches ‘Big Bang’ Liberalisation,” Financial Times, February 11, 2016)

Indonesia will allow greater foreign ownership in industries such as pharmaceutical raw materials manufacturing, restaurants, and cold storage, allowing foreign investors to take up to 100 percent stakes. In other industries like business services, conferences, and airport support, the maximum foreign-investment limit will be raised to 67 percent. At the same time, 19 industries will be closed for foreign investment. President Joko Widodo said more industries (retail, fisheries, and digital economy) will be liberalized in the second or third round and the purpose of reform is to lure more foreign capital to offset poor export performance and create more jobs (“Indonesia allows more foreign ownership into toll roads,” The Star Online, February 12, 2016, http://www.thestar.com.my/business/business-news/2016/02/12/indonesia-al...)

Indonesian filmmakers expressed positive sentiment about the government’s plans to allow foreign participation in film production as well as the cinema industry. One reason is that a 2009 law requires that more than 60 percent of the films screened in cinemas must be Indonesian films and this requirement will be easier to fulfill with more cinemas. Another reason is that 87 percent of screens are located in Java (35 percent in Jakarta) while other places have few access to movies. It is hoped FDI will change this situation as well as lead to more diversity and vibrancies in the industry (Lisa Siregar, “Indonesian cinema industry now open for foreign investors,” Jakarta Globe, February 11, 2016, http://jakartaglobe.beritasatu.com/features/indonesian-cinema-industry-n...)

The Indonesian government will provide a legal guarantee to PT Kereta Cepat Indonesia China (KCIC), the organization that may be in charge of the country’s first high-speed railway project. The guarantee assures “that the project will not be affected by regulatory changes and that the government will not unilaterally cancel the concession agreement.” If the concession is approved, the company may operate the railway for up to 50 years, though it will not win exclusive station rights. To win the concession, KCIC needs to submit a revised feasibility study. Apart from this, it will have to meet eight other requirements (Ayomi Amindoni, “Govt grants non-budget warranty for high-speed train,” The Jakarta Post, February 10, 2016, http://www.thejakartapost.com/news/2016/02/10/govt-grants-non-budget-war...)

Thailand’s Board of Investment (BOI) is confident the country’s new investment promotion policy and cluster-promotion scheme, which supports projects using advanced technologies and innovations, will attract leading foreign electronics companies to increase their investment in the country. Last year, the BOI ratified 319 projects, including 173 software projects, eight telecommunications projects, and two cloud-service projects. Well-known companies like NMB-Minebea, Fujikura Electronics, Sony Technology (Thailand), and Mitsubishi Electronic Consumer Products have invested in the country due to leverage government support. The BOI not only supports original equipment manufacturers, but also stresses the promotion of product designs (“BOI Believe Cluster Policy Will Draw Electronics Investment,” The Nation, February 9, 2016, http://www.nationmultimedia.com/business/BOI-believe-cluster-policy-will...)

Thailand’s Commerce Ministry is planning to launch its second foreign-investment project for small- and medium-enterprises. Major Thai corporations which are experienced in doing business abroad will be selected and paired with in experienced SMEs in order to assist them in going abroad. Areas targeted for investment primarily include the so-called CLMV nations (i.e., Cambodia, Laos, Myanmar and Vietnam), and other ASEAN countries. The purpose of this project is to increase Thailand’s revenue and link trade with investment and tourism. The Commerce Ministry will not just help with identifying partners, but also make lists of targeted foreign investments and business opportunities (“2nd Overseas-investment Mentor Project for SMEs,” The Nation, February 10, 2016, http://www.nationmultimedia.com/business/2nd-overseas-investment-mentor-...)

Malaysia expects more investments from China as companies in China are accelerating going abroad despite the unfavorable world economy. Also, Chinese companies are encouraged by the Belt and Road initiatives, which fuel the development of greater investment in Malaysia. In recent years, investment from China to Malaysia has been increasing quickly with Chinese investment flowing into various industries such as technology, nuclear power, and infrastructure construction. Although the increase of investment is slowed down in 2015 compared with the former two years, the Malaysian government is optimistic about the future Chinese inward FDI prospects (“Malaysia upbeat on prospect of increasing Chinese investment,” Shanghai Daily, February 10, 2016, http://www.shanghaidaily.com/article/article_xinhua.aspx?id=319595)

Foreign businessmen in the Philippines express their hope the next President of the country will focus on economic reforms and enhancing governance so the economy can start to grow at 10 percent in coming years. The executive vice-president of the European Chamber of Commerce of the Philippines (ECCP) said foreign businessmen hope that the next administration will cultivate and support an environment that enables FDI to hit a value of USD $10 to $12 billion annually. Henry Schumacher also suggested the future administration focus on increasing infrastructure spending, passing a Fair Competition Law, and making permanent a public-private partnership program (Jon Viktor D. Cabuenas, “Foreign Businesses Dare Next President to Grow GDP by 10%,” GMA News, February 9, 2016, http://www.gmanetwork.com/news/story/554557/money/economy/foreign-busine...)