MNCs in the News-2016-07-01

At the “Annual Meeting of New Champions” (aka Summer Davos), Chinese Premier Li Keqiang noted “‘the participation of foreign firms is needed in China's efforts to push economic transformation and upgrading…and to realize healthy and sustainable growth.’” He noted that “the country will further ease market access for foreign investment and it is committed to building an environment for fair competition,” though “he did not specify the areas for more relaxed access.” Li observed “despite difficulties or even friction that foreign investors may experience when doing business in China, the vast majority of these companies could earn a high return” (“Li to Open Investment Door Wider,” China.org.cn, June 29, 2016, http://www.china.org.cn/business/2016-06/29/content_38768103.htm)

In 2014, LinkedIn agreed to play by China’s censorship rules in order to enter the country. Moreover, it partnered with China’s Broadband Capital and Sequoia China. LinkedIn is a stark contrast to companies like Google, Facebook, and Qualcomm Inc. which had to leave to China, are blocked in China, or have faced government anti-trust actions and investigations. Some worry that Microsoft’s (MSFT) acquisition of LinkedIn will “interfere with the professional social network’s progress in the country” given MSFT’s complicated relationship with the Chinese government that has multiple bases. MSFT stated that “‘LinkedIn will retain its distinct brand, culture, and independence’” (Alyssa Abkowitz, “For LinkedIn China, Microsoft Deal Is a Complicated Connection,” The Wall Street Journal, June 23, 2016, http://www.wsj.com/articles/for-linkedin-china-microsoft-deal-is-a-compl...)

In a report given to China’s National People’s Congress, it was noted China’s State Owned enterprises (SOEs) “are accelerating the pace in developing overseas businesses.” Per the report, by China’s State Owned Assets Supervision and Administration Commission of the State Council (SASAC), “SOEs, especially centrally administered SOEs, have become the major force of China ready to compete on an international scale.” SASAC reported “overseas investment of China's centrally administered SOEs accounts for 60 percent of the country's total nonfinancial foreign direct investment.” SOEs’ overseas businesses have expanded from resource exploitation to high speed railways, nuclear power plants, and ultra high voltage electricity transmission (“China’s SOEs Speed Up Going Abroad: Report,” China Daily, July 1, 2016, http://www.chinadaily.com.cn/business/2016-07/01/content_25927534.htm)

British Business Minister Sajid Javid told a news conference meant to reassure business organizations and representatives from Britain’s largest trade sectors that the U.K.’s Brexit vote will not affect major investments in the U.K. including a planned large investment by Chinese telecommunications giant Huawei. Javid reported, “Huawei confirmed to the government that its planned 1.3 billion pound ($1.73 billion) investment in the UK will go ahead as planned.” Javid emphasized he planned to conduct negotiations designed to ensuring Britain’s continued access to the single market (“Huawei’s $1.73b Investment in UK to Go Ahead Despite Brexit Vote,” China Daily, June 29, 2016, http://www.chinadaily.com.cn/business/tech/2016-06/29/content_25899074.htm)

Malaysia’s Minister of Transport Liow Tiong Lai told media the open tender for the construction of the 375-km long high-speed railway that would connect Singapore and Malaysia’s Kuala Lumpur, will take place next year. Liow said, “‘Malaysia welcomes China to bid for the project, because China has the most advanced technologies and we believe China could fuse the best technics of diverse countries.’” It is believed Malaysia favors a Chinese firm because of China’s promise of easy, cheap funding. Singapore, however, seems to be leaning towards a Japanese firm because Japan possesses abundant experience and its trains are very safe (“China, Japan Vie for Singapore-Malaysia Rail Project,” China.org.cn, June 23, 2016, http://www.china.org.cn/business/2016-06/23/content_38726189.htm)

With the third stage of related clauses of the Korea-EU Free Trade Agreement (FTA) taking effect on July 1, European law firms now can set up joint ventures (JV) with Korean law firms, which means they can hire Korean lawyers and provide advice on Korean law. The FTA led the Korean National Assembly to pass the revised Foreign Legal Consultant Act in February, albeit with some limitations. Based on the revised act, a JV can only be established by the headquarters of a Korean and foreign law firm, with the foreign firm’s stake in the JV limited to 49 percent (Choi He-suk, “EU Law Firms Now Able to Set Up Joint Ventures in South Korea,” The Korea Herald, July 1, 2016, http://www.koreaherald.com/view.php?ud=20160701000333)

Doosan Heavy Industries & Construction has signed a seawater desalination plant construction project, worth of 220 billion won, with an Iranian company Sazeh Sazan, one of the first post-sanctions deals of this kind. The head of the Water BG of Doosan says the summit talks between the South Korean and Iranian presidents were the starting point for the company increasing its presence in the Iranian water market. According to the contract, the Korean company will be responsible for repair, maintenance, design, and equipment supply, with construction scheduled for completion in 2018. The plant will produce freshwater for use in mines (Jung Min-hee, “Doosan Heavy Industries & Construction to Build Seawater Desalination Plant in Iran,” Business Korea, June 29, 2016, http://www.businesskorea.co.kr/english/news/industry/15083-winning-contr...)

According to the Indonesian Investment Coordinating Board (BKPM), two American companies plan to invest in Indonesia’s construction and minerals processing industry. Specifically, the two US companies expressed planned to establish representative offices in the country. According to BKPM chairman Franky Sibarani, the companies would soon start market research in Indonesia and BKPM will help the companies with the investment process. The minerals processing company aims to diversify its business in Indonesia while the construction company seeks to participate in Indonesia’s massive infrastructure projects. Sibarani said although US’ outward investments have been the highest of all, the realization has been limited (“Economy in brief: US firms may invest in construction, minerals,” The Jakarta Post, June 28, 2016, http://www.thejakartapost.com/news/2016/06/28/economy-brief-us-firms-may...)

BKPM Chief Franky Sibarani said Brexit will not have a negative impact on UK investment in Indonesia because direct investments generally are long-term investments. He said Indonesia is now in a good position to attract foreign investments and British companies could use Indonesia as a production base for entry into the global market. BKPM will intensify its relationship with potential investors as the government continues to reform the nation’s investment policies. BKPM representatives in London continue to communicate with British investors on investment services, deregulations to develop an investment friendly climate, infrastructure development, and improving the quality of human resources (Muhamad Nafi, “BKPM Certain Brexit will increase British investment in Indonesia,” Katadata, June 28, 2016, http://en.katadata.co.id/news/2016/06/28/bkpm-certain-brexit-will-increa...)

Total registered FDI in Vietnam during the past half year exceeded US $11.2 billion, a jump of 105 percent year-over-year (YOY). $7.5 billion of the total came from 1,145 newly licensed projects with an increase of 95 percent in capital and 56 percent in the number of projects. The manufacturing and processing industries continued to be the top recipients of FDI sectorally, receiving $8.06 billion or 71 percent of total registered FDI. The second biggest sectoral recipient was real estate with the third largest being science and technology sector. South Korea was the leading investor, followed by Japan and Singapore (“VN attracts over $11b FDI in first half of 2016,” Vietnam News, June 28, 2016, http://vietnamnews.vn/economy/298741/vn-attracts-over-11b-fdi-in-first-h...)

To meet the requirements of foreign investors in the education sector, Vietnam’s Ministry of Education and Training (MoET) is revising several regulations on foreign investment to enhance cooperation in the education and vocational training sector. This will help clear barriers to entry for foreigners to invest in higher education in Vietnam. According to Christopher Jeffery, vice chairman of British Group Vietnam, licensing, facilities, and the development of new programs are three key issues and Vietnam should focus on these challenges in the future. In the short term, Vietnam government should strive to unblock investment into the education and training sector (“FDI lifts education to global standards,” Vietnam net, June 25, 2016, http://english.vietnamnet.vn/fms/education/159307/fdi-lifts-education-to...)