MNCs in the News-2017-03-03

China

China’s need for elderly care, especially higher end services relating to more serious conditions such as clients with Alzheimer’s and semi-dependent and dependent elderly people, is attracting foreign investors like French nursing home operator Colisee Group. These firms not only see niche opportunities given the lack of domestic competitors and a growing market, but also find a supportive policy environment. The national and subnational governments already have been cooperating with foreign companies in order to address a growing need as China’s elderly population surges (Li Wenfang, “France’s Colisee to Tap China’s Elderly Care Biz,” China Daily, March 6, 2017, http://europe.chinadaily.com.cn/business/2017-03/06/content_28442923.htm)

China’s fear of capital flight in the face of massively plunging reserves has led Beijing to institute a stricter review process on overseas deals, even those already approved. This has imperiled some deals like Dalian Wanda’s plan to buy Dick Clark Productions for USD $1 billion. Observers are no longer certain deals involving state-owned enterprises (SOEs) or connected individuals/companies will get done. Still, China’s State Administration of Foreign Exchange has not rejected any deals and the deal pace outpaces a similar period in 2015 (Don Weinland, “China Capital Crackdown Threatens Wave of Overseas Buyouts,” Financial Times, February 28, 2017, https://www.ft.com/content/091677dc-f8ec-11e6-bd4e-68d53499ed71)

Data on Chinese outward foreign direct investment (FDI) is often poor, leading to incorrect assessments of what is transpiring and raising the chance of poor decision making. Regarding the former, some have claimed Chinese outward FDI (OFDI) in 2016 reached USD $250 billion, but it more likely ran $170 billion. One problem is many analyses count “fake deals” which are in actuality “trial balloons.” Beyond the data problem, the failure of many deals is incorrectly attributed to political problems when other factors were key (Derek Scissors, “China’s Troubled M&A Deals Do Not Signal Overseas Hostility,” Financial Times, March 2, 2017)

Japan

Japan’s Takata Corp recently pleaded guilty in a US federal court to a felony charge, part of a USD $1 billion settlement that includes creating compensation funds for car makers ($850 million) and victims of its faulty airbag inflators ($125 million). The settlement paves the way for the firm’s eventual restructuring or sale, an unsuccessful process to date. Following its deal with US authorities, Takata has agreed to pay a USD $25 million fine and has 30 days to make its victim compensation payment (Joseph White, “Takata plea, compensation deal clears path to potential sale,” Reuters, February 28, 2017, http://www.reuters.com/article/us-takata-settlement-idUSKBN1662EA)

Nissan Motor Co. faces a demand from a US federal workplace safety agency to pay a fine of more than USD $21,000 due to a worker at its Mississippi plant having lost three fingers last July. The agency says Nissan’s plant should have better trained its workers. The agency issued the citations weeks before a United Auto Workers pro-unionization rally. The firm also is facing a potential fine of USD $29,000 due to a worker death in November 2016 at its Tennessee assembly plant (“Nissan faces safety fine in Mississippi as union rally looms,” Asahi Shimbun, March 3, 2017, http://www.asahi.com/ajw/articles/AJ201703030021.html)

Korea

Lotte Group has agreed to trade land needed to deploy the planned Terminal High Altitude Area Defense (THAAD) system despite China’s threat of economic sanctions. Lotte’s board made the decision last week and it signed the relevant contract with the Korean defense ministry soon afterwards. The land Lotte handed over used to be a golf course and, in exchange, it will receive a state-owned military site near Seoul. To date, China’s sanctions relating to THAAD have included blocking access to Korean songs and dramas (Song Jung-a, “South Korea’s Lotte defies China over missile shield,” Financial Times, February 27, 2017, https://www.ft.com/content/4d27ccfe-fccb-11e6-96f8-3700c5664d30)

Following United States (US) President Donald Trump’s threats of hefty tariffs on products imported from Mexico, LG Electronics announced plans to construct a 74,000 square meter home appliance manufacturing plant in Clarksville, Tennessee. It recently signed a memorandum of understanding with the State of Tennessee for the plant, which, starting from 2019, will manufacture washing machines. The new Tennessee plant is expected to cover LG’s entire production for the US market while its Mexican plant will manufacture products geared towards Latin America (Hwang In-hyuk, “LG Elec to build home appliance factory in Tennessee, U.S.,” Pulse News, March 1, 2017, http://pulsenews.co.kr/view.php?sc=30800021&year=2017&no=142743)

Indonesia

The dispute between Indonesia and American mining giant Freeport McMoran Inc. has reached a new level with Freeport shutting down production, firing workers, and threatening international arbitration. Although Indonesia President Jokowi is optimistic about the possibility of reaching a settlement, others are worried about the consequences for export earnings and FDI, which may impose high political costs on the government. At the same time, the situation presents an opportunity for Jokowi’s government to demonstrate it is strongly determined to reform the mining sector (Siwage Dharma Negara,” Indonesia faces test in push for mining reforms,” Straits Times, March 2, 2017, http://www.straitstimes.com/opinion/indonesia-faces-test-in-push-for-min...)

During King Salman’s visit to Indonesia this month, Indonesia and Saudi Arabia discussed investment opportunities including three oil refineries, a power plant and other infrastructure projects such as roads, housing and sanitation. Saudi Aramco and Indonesian oil company Pertamina will sign a USD $6 billion investment in a refinery joint venture near central Java and the two countries signed various other agreements worth USD $1 billion, with Indonesia saying it hoped for USD $25 billion of new investments from Saudi Arabia (Konradus Aliandu & Yosi Winosa,“Indonesia to Woo Saudi King With $25b Investment Opportunities,” Jakarta Globe, February 28, 2017, http://jakartaglobe.id/business/indonesia-woo-saudi-king-25b-investment-...)

Thailand

Pratch Rujivanarom, “Law needed to regulate Thai investors’ abuses abroad: Thai, Myanmar groups,” The Nation, February 26, 2017, http://www.nationmultimedia.com/news/national/30307348

Lamonphet Apistniran, “Uttama: Japan and S Korea express support for SMEs,” Bangkok Post, March 2, 2017, http://www.bangkokpost.com/business/news/1207393/uttama-japan-and-s-kore...

Malaysia

“Malaysia can’t survive on its own, minister tells China critics,” Free Malaysia Today, March 2, 2017, http://www.freemalaysiatoday.com/category/nation/2017/03/02/malaysia-can...

“Azalina: Saudi Aramco’s Rapid investment proves Opposition wrong,” Malaymail Online, March 1, 2017, http://www.themalaymailonline.com/malaysia/article/azalina-saudi-aramcos...

Vietnam

“Foreign investors step up local company acquisitions,” Vietnam Net, February 27, 2017, http://english.vietnamnet.vn/fms/business/173479/foreign-investors-step-...

“Japan trends towards Vietnam,” Vietnam Net, March 1, 2017, http://english.vietnamnet.vn/fms/business/173558/japan-trends-towards-vi...