MNCs in the News-2016-06-10

During a meeting with 15 high-level foreign corporate executives in Beijing in early June, Chinese Premier Li Keqiang stated “‘the Chinese government will take more measures to attract foreign investors by cultivating a market which is more fair, equal, and transparent.’” Li emphasized to the executives, who were participating in the Fourth Global CEO Council Round Table Summit, which focused on “opportunities and challenges for multinational corporations during China’s 13^th Five-year Plan,” that China was “restructuring and upgrading its economy” and that the “enormous market potential…in sectors such as telecommunications, healthcare, and sports” would “provide new opportunities for multinational corporations” (“Premier Vows to Create Transparent, Fair Market for Foreign Investors,” China.Org.Cn, June 9, 2016, http://www.china.org.cn/business/2016-06/09/content_38633652.htm)

China’s Xiaomi recently struck a deal with Microsoft (MSFT), the United States (US) technology giant, pursuant to which it will buy approximately 1,500 patents (relating to voice communications, multimedia, and cloud computing) from the latter. For Xiaomi, the deal will help them export phones to foreign markets that have been closed because of questions relating to Xiaomi product’s potential violations of others’ intellectual property rights. For MSFT, the deal puts their Office and Skype products on Xiaomi phones and helps them improve their image in China where they are facing an antitrust investigation and discontent over required operating system upgrades (Charles Clover, “Xiaomi to Buy 1,500 Patents from Microsoft,” Financial Times, June 1, 2016; Jeremy Wagstaff, “Microsoft Sells Patents to Xiaomi, Builds ‘Long-Term Partnership,” Reuters, June 1, 2016, http://www.reuters.com/article/us-microsoft-xiaomi-idUSKCN0YN2VM)

There are some who forecast that political uncertainties and campaign rhetoric/extremism associated with the US presidential election will lead Chinese companies to become cautious about investing in the US. In the words of one analyst, “‘the identity, let alone the foreign policy of the incoming presidential candidate in the U.S. isn’t exactly clear, and it is fair to say there is considerable uncertainty about how that will play out in the China market.’” And it just is not likely that deals that need Committee on Foreign Investment in the United States (CFIUS) review will get it before the November election (Denny Thomas, “Chinese M&A Surge Seen Ebbing as U.S. Campaign Heats Up,” Reuters, June 6, 2016, http://www.reuters.com/article/us-china-m-a-slowdown-idUSKCN0YS2JR)

The US Commerce Department has given a subpoena to Huawei Technologies pursuant to an investigation into the latter’s dealings with countries like Cuba, Iran, North Korea, Sudan, and Syria. The Commerce Department wants to know if Huawei illegally exported or re-exported US technology to these countries. Huawei said it has a “‘strict code of conduct, rigorous training, and detailed policies relating to export control compliance.’” According to Ma Yu, a researcher with the Chinese Academy of International Trade and Economic Cooperation, the US action may have to do with the targeting of China as a threat to US telecommunications jobs (“US Subpoenas China’s Huawei in Probe over Exports to Syria, Others: NY Times,” The China Daily, June 3, 2016, http://www.chinadaily.com.cn/business/tech/2016-06/03/content_25603106.htm; Zhong Nan and Ma Si, “Huawei Probe May Signal ‘Protectionism,’” The China Daily, June 4, 2016, http://www.chinadaily.com.cn/business/2016-06/04/content_25608959.htm)

According a recent statement by Alibaba chairman Jack Ma, his company, is cooperating fully with the US Securities and Exchange Commission (SEC) investigation, that began earlier this year, into Alibaba’s “accounting practices, including consolidation policies and transaction data, for potential violations of federal securities laws.” Alibaba’s Ma observed that the best way to deal with uncertainties and confusion about his company was “‘transparency and communications’” (“Alibaba Actively Assisting SEC Investigation: Jack Ma,” China Daily, June 3, 2016, http://www.chinadaily.com.cn/business/2016-06/03/content_25606453.htm)

Despite controversies over various islands in and maritime boundaries in the South China Sea with China, newly elected Philippines’ President Rodrigo Duterte stated at a news conference that he would be pleased to receive Chinese bids for two railway projects, one linking Manila with other places in Luzon and one for a network on Mindanao. He emphasized, though, he would not change his position on South China Sea islands like the Scarborough Shoal just because China was building a railway for his country. Previously, he had indicated he was willing to make such a tradeoff (Alastair Wanklyn, “Duterte May Invite China to Bid for Railway Projects,” The Japan Times, May 30, 2016, http://www.japantimes.co.jp/news/2016/05/30/asia-pacific/duterte-says-he...)

At the beginning of June, it was reported that Japanese investigators from Japan’s transport ministry had raided the headquarters of Suzuki Motor Corp. as part of an investigation into Suzuki’s improper fuel economy tests. Suzuki itself had disclosed it may have conducted the fuel economy tests improperly. It was not that long ago that Japanese officials raided another major Japanese car firm Mitsubishi Motors Corp. which had misrepresented the fuel efficiency of its cars. Suzuki blamed a lack of financial resources and pressure to develop new models and engines as the reason behind its lapses (Naomi Tajitsu Chang-Ran Kim, “Japanese Investigators Raid Suzuki Motor Over False Tests,” Reuters, June 2, 2016, http://www.reuters.com/article/us-suzuki-motor-compliance-raid-idUSKCN0Y...)

To deal with the legacy of 40,000 Chinese laborers who were forcibly relocated to Japan during the Second World War and forced to work as slave laborers at then Mitsubishi Mining Corp.’s coal mines, Mitsubishi Materials recently entered into a settlement with 3,700 victims (many descendants of the original laborers) pursuant to which it issued them an apology as well as 100,000 yuan compensation. The settlement follows the filing two years ago of a suit against Mitsubishi in a Chinese court. In 2015, Mitsubishi apologized to US prisoners of war that it had used as slave laborers during WW II (“Mitsubishi Materials in Deal with WW2 Forced Labourers,” BBC News, June 1, 2016, http://www.bbc.com/news/business-36425923)

Mitsui is aiding the Malaysian government to bring its massive $18.7 billion, 20-year urban development project, Iskandar Malaysia, to fruition. The project, which is about three times the size of Singapore, is designed to create a multi-functional city that can attract businesses, people, and money from all over the world. Mitsui is contributing its infrastructure expertise, building offices, condos, hospitals, and leisure facilities, and has “introduced cutting-edge Japanese technologies to support the project.” Mitsui is partnering with a Malaysian government owned company on the project and gained the opportunity through a series of strategic investments, partnership activities, and so on (Takashi Nishioka, “Mitsui in Big on Malaysia Project to Build High-Tech Metropolis,” Nikkei Asian Review, June 10, 2016, http://asia.nikkei.com/Business/Companies/Mitsui-in-big-on-Malaysia-proj...)

A Japanese-Indonesian consortium called Bhimsena Power Indonesia, involving Japan’s Electric Power Development and Itochu Corporation and Indonesia’s Adaro Power, will begin construction on a multi-billion dollar coal-fired power plant that had been long delayed due to land acquisition and lawsuits by local residents because all land acquisition and legal issues were resolved. The project is financed by the Japan Bank for International Cooperation and a number of major Japanese banks such as Sumitomo Mitsui Banking Corporation. “The consortium will build, own, and operate the power plant, and will sell the electricity to state utility Perusahaan Listrik Negara for 25 years” (Erwida Maulia, “Construction of Indonesia’s Largest Coal Plant Begins,” Asian Nikkei Review, June 8, 2016, http://asia.nikkei.com/Business/Companies/Construction-of-Indonesia-s-la...)

Nissan’s corporate headquarters plans to file an administrative litigation against the South Korean government for being asked to stop selling the Qashqai SUV because of allegations the latter manipulated exhaust data. The Korean Ministry of Environment imposed 340 million won penalties on Nissan Korea, brought criminal charges against Nissan Korea’s president, and issued a recall order for the already sold Qashqais. Nissan’s headquarters officially stated that Qashqais sold in South Korea are in compliance with the Euro 6 emissions standard and the South Korean government’s exhaust gas emissions regulations and that the company has never tampered with its exhaust systems (Jung Min-hee, “Nissan Planning to File Administrative Litigation Against Korean Government,” Business Korea, June 9, 2016, http://www.businesskorea.co.kr/english/news/industry/14925-gas-emission-...)

Korea’s Doosan Heavy Industries & Construction won a 460 billion won deal from Kuwait’s Ministry of Electricity & Water to build a desalination plant. It is significant deal for the company, which won the deal in competition with global leading plant builders from France and Spain because of its unique pre-treatment technologies. Doosan Heavy Industries & Construction will complete the construction plant by November 2018, and subsequently will be responsible for the operation and maintenance of the plant until November 2023. The facility will process 270,000 tons of seawater/day into fresh water for 900,000 people (Jung Min-hee, “Doosan Heavy Industries Wins 460B Won Desalination Plant Order in Kuwait,” Business Korea, June 1, 2016, http://www.businesskorea.co.kr/english/news/industry/14846-desalination-...)

One expert says that there have been no significant improvements in Indonesia’s investment performance. Compared with previous years, the country’s economic growth has decreased and the unemployment has increased. Poor implementation results from overlapping regulations and a lack of coordination between technical ministries and between central and local governments. The 12 packages only help to address normative regulations and have not functioned well in increasing the country’s competitiveness and people’s purchasing power. The expert suggested the government should focus on labor-intensive industries to decrease the unemployment rate and should realize businesspeople also need consistency from the government, not just deregulation (Ayomi Amindoni, “Economic policy packages ineffective so far, says economist,” The Jakarta Post, June 3, 2016, http://www.thejakartapost.com/news/2016/05/30/economic-policy-packages-i...)

Indonesia’s launch of a three-hour business licensing service is expected to attract large-scale investments and create more jobs. Investors have been enjoying the new licensing process, which has quickened from 6 to 7 months to only 3 hours. However, the new process only applies to investments that are more than US $7.33 million or create more than 1000 jobs and many investors feel there are unclear requirements for obtaining licenses from ministries. Furthermore, there are still many bottlenecks like document requirements. Even so, the fast-track service has facilitated investment of US $10.38 billion from 59 firms during the past year (Ayomi Amindoni, “BKPM eyes realized-investment growth of 20 percent this year,” The Jakarta Post, May 30, 2016, http://www.thejakartapost.com/news/2016/05/30/bkpm-eyes-realized-investm... Anton Hermansyah, “Fast-track service facilitates US$10 billion in investment,” The Jakarta Post, June 10, 2016, http://www.thejakartapost.com/news/2016/06/10/fast-track-service-facilit...)

According to the Investment Coordinating Board (BKPM) Chairman Franky Sibarani, a Japanese investor expressed interest in investing in Indonesia’s US $5.45 billion (Rp365 billion) sea toll road project while other Japanese companies expressed interest in other projects and industries. The sea toll road is critical for cargo shipping from East Java Province to the country’s eastern regions and Sibarani hopes that the project will be realized this year. During his visit to Japan, Sibarani visited three cities including Fukuoka, Nagoya, and Tokyo, where he promoted investment opportunities in Indonesia, making presentations to 67 businessmen in Fukuoka and 118 in Nagoya (“Indonesia’s sea toll project to receive Rp365 billion Japanese investment,” Antara News, June 10, 2016, http://www.antaranews.com/en/news/105131/indonesias-sea-toll-project-to-...)

Uber proposed the Thai Transport Ministry amend public transport regulations so that its motorcycle drivers could provide services with their private vehicles legally without wearing taxi vests. The current law in Thailand fines those who use private vehicles to provide public transportation services and drivers who have no proper license or do not dress in line with Department of Land Transport’s (DLT) regulations. Last month, the DLT ordered GrabBike and UberMoto to stop operating for violating public transport regulations. A panel was set up to find solutions with a focus on passenger safety and fairness to existing motorcycle taxi drivers (Amornrat Mahitthirook, “Uber asks to be legalized,” Bangkok Post, June 8, 2016, http://www.bangkokpost.com/business/tourism-and-transport/1004437/uber-a...)

Expert urged the Vietnamese government to check the legal framework on environmental protection and set strict standards on FDI projects. Mass fish deaths in four provinces are seen as a clarion call for tighter environmental regulations to avoid future disasters. According to Dang Hung Vo, a former Deputy Minister of MONRE, environmental standards in the 2003 decree were low and only suitable for the previous development period when they were implemented to attract more foreign investment. Experts also urged more participation of social organizations and people in environmental supervision. Some suggested to setting up a committee to control water pollution (“Experts urge strict enforcement of environmental standards on FDI projects,” Vietnam net, May 31, 2016, http://english.vietnamnet.vn/fms/environment/157107/experts-urge-strict-...)