MNCs in the News-2017-06-16

China

The United States (US) Service Employees International Union has been moving to protect the interests of fifty-some franchisees of McDonald’s Corp. in China in the wake of McDonald’s sale of its self-owned stores to Citic Group and Carlyle Group. SIEU believes the McDonald’s sale will put pressure on franchisees with adverse consequences for McDonald’s workers. The Hong Kong Confederation of Trade Unions separately has expressed concern the McDonald’s deal will force Citic and Carlyle to cut costs and, relatedly, worker wages (Yang Ge, “U.S. Labor Group Voices Concern over Sale of McDonald’s Stores in China,” Caixin, June 12, 2017, http://www.caixinglobal.com/2017-06-12/101100749.html)

The US is moving to intensify its review of Chinese investment in high-tech, especially in areas like artificial intelligence and machine learning, due to fears China could use advanced technologies for military purposes and gain the upper hand in strategic industries. The US particularly wants to strengthen the Committee on Foreign Investment in the United States (CFIUS) so it can examine investments through vehicles such as joint ventures, minority stakes, and early stage start-ups that are not currently subject to CFIUS review or export controls (Phil Stewart, “U.S. Weighs Restricting Chinese Investment in Artificial Intelligence,” Reuters, June 14, 2017, http://www.reuters.com/article/us-usa-china-artificialintelligence-idUSK...)

In response to news that Washington is on the path to tightening its review of Chinese investment in the high-tech sector, a Chinese Foreign Ministry spokesman Lu Kang stated “‘we believe there should not be undue political dimensions imposed on commercial takeovers, let alone political intervention.” While not addressing American suspicions directly, Lu instead highlighted that “‘the economic and trade cooperation between China and the US is in nature for win-win results’” and added that “‘we hope that the US side can provide a sound environment for Chinese enterprises’” (“China Warns against ‘Politicizing’ M&As,” Global Times, June 14, 2017, http://www.globaltimes.cn/content/1051742.shtml)

Canyon Bridge Capital Partners LLC, a Chinese-backed buyout fund that agreed to acquire US Lattice Semiconductor in November 2016, will submit its deal for CFIUS review for a rare of third time. Canyon Bridge and Lattice, which stress the latter does not manufacturer military grade products or have vulnerable factories, are hoping US administration progress in appointing key government officials, who are part of the CFIUS review process, will allow for the completion of their deal review (Liana B. Baker and Greg Roumeliotis, “Exclusive: China-backed Fund in Third Bid for U.S. to Approve Chip Deal-Sources,” Reuters, June 11, 2017, http://www.reuters.com/article/us-lattice-m-a-canyonbridge-exclusive-idU...)

The Thai government is considering using its powers to allow Chinese engineers to work on a Thai-Sino railway without going through normal domestic licensing procedures. The government touts that this will allow a 252-km Thai-Sino railway to make faster progress and help to connect the country with Laos and southern China. Thai engineer associations criticize the plan saying it is unfair to Thai engineers, will not help Chinese engineers develop the local knowledge that they need, and will limit cooperation and technology transfer (Kornchanok Raksaseri and Chatrudee Theparat, “China Rail Expert Plan under Fire,” Bangkok Post, June 15, 2017, http://www.bangkokpost.com/news/politics/1268619/china-rail-expert-plan-...)

Japan

16 Japanese defense firms, including Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and ShinMaywa Industries, will, in a first, separately display military goods at Japan’s Maritime Air Systems and Technologies Asia (MAST) exhibition, the country’s only dedicated arms show. Japan hopes promoting industrial military ties in the region will increase its and its companies’ positions. Tokyo is pushing South East Asian countries to attend MAST and a separate military technology seminar partly to counter growing Chinese regional influence (Tim Kelly and Nobuhiro Kubo, “Arms show offers Japan venue to build military ties in Southeast Asia,” Japan Today, June 12, 2017, https://japantoday.com/category/politics/arms-show-offers-japan-venue-to...)

Japanese companies are evaluating their business relations and assets in Qatar following allegations Qatar has funded terrorism. Over 45 Japanese companies have operations in Qatar, with future operations now uncertain. Beyond this, many of Qatar’s neighbors, including Saudi Arabia, recently severed ties with it, making travel to the country difficult. While Japanese companies only rely on Qatar for 10 percent of the country’s oil and natural gas, many companies also import from Saudi Arabia. Due to the Saudi-Qatar split, Japanese companies have to be cautious (“Japanese firms watching warily as Qatar crisis unfolds,” The Japan Times, June 11, 2017, http://www.japantimes.co.jp/news/2017/06/11/business/japanese-firms-watc...)

South Korea

Due to continued anger over South Korea’s installation of the Terminal High Altitude Area Defense (THAAD) missile system, China has imposed heavy restrictions limiting the ability of 24 South Korean manufacturing, food, and cosmetic companies to do business in China. China blacklisted these firms on the grounds of quality deficiency and safety violations. China now requires them to submit to additional quality inspection before their products can enter the country and also limits their export capabilities (“China blacklists 24 S. Korean firms, restricts trade of food, cosmetics: KITA,” Yonhap News Agency, June 16, 2017, http://english.yonhapnews.co.kr/news/2017/06/16/0200000000AEN20170616001...)

South Korea’s Daewoo Engineering and Lotte Engineering & Construction each signed memorandums of understanding (MOUs) with Laos’s Petroleum Trading Lao Public Co. (PTL) for hydroelectric power facilities on the Mekong River, sea ports, and special economic zones. South Korea’s government run Development Bank and the Korea Trade Insurance Corp. also signed an MOU with the Laotian petroleum company to provide loans and insurance guarantees for local construction projects. The deals seem to tie to Laos’s move to be an electricity producer for its neighbors (“Daewoo Engineering signs MOU for infrastructure projects in Laos,” The Korea Herald, June 16, 2017, http://www.koreaherald.com/view.php?ud=20170616000550)

Indonesia

The Indonesian government is offering Chinese investors an opportunity to participate in a railway construction project in Bali. The new railway is expected to lead to “an equal spread of tourists” on the island, as it facilitates tourist visits to North Bali rather than Nusa Dua or Denpasar where tourists currently are concentrated. Aside from this, Indonesian Maritime Affairs Minister Luhut Binsar Pandjaitan is scheduled to visit Beijing in the near future to follow-up the May meeting between Indonesian President Joko Widodo and Chinese President Xi Jinping (“Govt Pitches Railway Project in Bali to China,” Tempo.com, June 15, 2017, https://en.tempo.co/read/news/2017/06/15/056884922/Govt-Pitches-Railway-...)

Thailand

At the Greater Mekong Investment Forum 2017, CAT Telecom (CAT), a state-owned enterprise and Thailand’s leading provider of international telecommunications services, announced its readiness to welcome the “Thailand 4.0” era and its intention to strengthen connectivity in the Greater Mekong Subregion by means of digital infrastructure development. At the Forum, CAT announced that Thailand’s geographical position could not only facilitate trade and investment, but also make Thailand the main digital hub in Southeast Asia (“CAT's infrastructure development plans continue to drive Thailand to be the digital hub of GMS,” Bangkok Post, June 12, 2017, http://www.bangkokpost.com/business/news/1267163)

Malaysia

In a recently filed lawsuit the US government alleged that money “misappropriated from a Malaysian state fund” was used to partly finance the USD $2.2 billion takeover of Houston-based Coastal Energy in 2014. Malaysian financier Low Taek Jho collaborated with Compañía Española de Petróleos SAU and gained a “nearly immediate” 600 percent return on investment without any commercial basis. Part of the misappropriated money has allegedly been transferred to the accounts of Malaysian Prime Minister Najib Razak (Rozanna Latiff and Nathan Layne, “Misappropriated 1MDB Funds Helped Finance $2.2 Billion Energy Firm Deal - U.S. Lawsuit,” Reuters, June 13, 2017, https://www.reuters.com/article/us-malaysia-scandal-usa-idUSKBN1941JH)

During his visit to Indonesia, Malaysia’s International Trade and Industry Minister Datuk Seri Mustapa Mohamed announced that Malaysian businesses will continue to invest in Indonesia, as Malaysia has confidence in Indonesia’s strong economy and efforts to reduce “red tape” for investors. Between 2008 and 2016, Malaysia’s investment in Indonesia reached around USD $15 billion and Indonesia invested around USD $2.6 billion in Malaysia. Malaysia promised to put forward proposals that will be further discussed during the upcoming Joint Investment & Trade Committee Meeting to enhance trade (Daljit Dhesi, “Malaysia to Increase Investments in Indonesia,” The Star, June 13, 2017, http://www.thestar.com.my/business/business-news/2017/06/13/malaysia-to-...)

Vietnam

During a meeting with Australian businesses, Vietnam’s Deputy Prime Minister Truong Hoa Binh encouraged businesses from both sides to build investment partnerships in various areas including infrastructure, high technology, and renewable energy, and emphasized Vietnam’s desire to advance its investment environment “to enter ASEAN’s leading group.” Australian representatives expressed their willingness to promote bilateral exchanges. As of the end of March, Australia has 396 projects in Vietnam with a total value of USD $1.82 billion (“Vietnam Hopes for Sustainable Economic Ties with Australia,” Nhan Dan Online, June 12, 2017, http://en.nhandan.org.vn/politics/item/5269902-vietnam-hopes-for-sustain...)

Vietnam has developed a new decree to deal with transfer pricing used by multinational companies as a way to avoid taxes. Experts opine the decree has brought Vietnamese law “more into line with global legal standards.” The decree showcases changes in Vietnamese tax registration and evaluation of related-party transactions, and will create effective regulations and monitoring of multinational corporations. However, experts identified a few problems implementing the decree, including a lack of local level data (“New Decree A Game Changer for Transfer Pricing,” Viet Nam News, June 12, 2017, http://vietnamnews.vn/economy/378132/new-decree-a-game-changer-for-trans...)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.