MNCs in the News-2017-08-04

China

The United States (US) Donald Trump administration is considering using Section 301 of the US Trade Act of 1974 as a basis for investigating China’s failure to protect intellectual property rights (IPR) and requirements that US firms share their technologies to gain access to the China market. The administration is acting not only because of its concerns about the massive US trade deficit, but also to address American business displeasure with Chinese IPR and forced technology transfer policies (Gillian Wong and Jill Colvin, “US Plans Trade Probe over China’s Demands for Tech Transfers,” The Washington Post, August 2, 2017, https://www.washingtonpost.com/national/reports-us-plans-trade-action-ov...)

Foreign business associations and consultants are expressing worries about the Chinese government’s crackdown on non-government approved virtual private network (VPN) tools that allow users to get around barriers to accessing the internet outside China. They feel restrictions on VPN usage, coupled with requirements to store data in China and obtain permission to transmit data outside China, could limit their access to information, to communicate with affiliates, suppliers, and customers, increase operating costs, and make their corporate data vulnerable to theft (Liza Linin and Josh Chin, “China’s VPN Crackdown Weighs on Foreign Companies There,” Wall Street Journal, August 2, 2017, https://www.wsj.com/articles/chinas-vpn-crackdown-weighs-on-foreign-comp...)

China’s Ministry of Finance has issued a guideline to enhance the “financial management of overseas investments made by state-owned enterprises (SOEs).” The guideline requires SOEs to “assign a specific person from top management to be in charge” of an SOEs entire investment process, conduct adequate due diligence taking into account a specific set of risk factors, and “control costs, register foreign currency transactions, and maintain accounting records.” SOEs also must establish good reporting/tracking systems informing them what is going on and allowing for SOEs to take remedial action (“China Strengthens Supervision of SOE Overseas Investments,” Xinhuanet, August 2, 2017, http://news.xinhuanet.com/english/2017-08/02/c_136494364.htm)

One week after announcing it would invest USD $10 billion in Wisconsin to build a factory for assembling liquid crystal displays, Foxconn Technology Group, the world’s largest electronics manufacturer, announced it is planning a multi-billion dollar investment (with no specific figure given) in Michigan to undertake R&D work relating to self-driving vehicles and artificial intelligence and deep learning. The investment may have something to do with Trump’s initiative to boost manufacturing in the US (Celia Chen, “Foxconn Gives Trump’s Jobs Vow a Shot in the Arm with Multibillion Dollar Investment in Michigan,” South China Morning Post, August 6, 2017, http://www.scmp.com/business/companies/article/2105577/foxconn-gives-tru...)

Japan

3,700 employees at Nissan’s Mississippi factory will soon vote on whether to join the United Auto Workers (UAW). Nissan initially picked Mississippi for its USD $3.3 billion plant due to low wages, government tax breaks, and the absence of unions, but fears it will be unable to efficiently manage the plant if the UAW vote passes. Nissan has also been accused by the National Labor Relations Board for violating federal labor law and influencing the decisions of workers through the threat of layoffs (Jeff Amy, “Nissan workers in Mississippi vote on whether to unionize,” Japan Today, August 3, 2017, https://japantoday.com/category/business/nissan-workers-in-mississippi-v...)

Japan’s JFE Holdings Inc. is considering further investment into India’s JSW Steel Ltd to acquire failing steel mills in India’s eastern provinces. India’s Prime Minister Narendra Modi has resolved to build smart urban centers, an industrial corridor, and a new rail system, leading JFE to anticipate increased demand for steel products. The Reserve Bank of India has been permitted to force indebted steel mills to foreclose, allowing investors to reinvigorate steel production (Swansy Afonso and George Smith Alexander, “JSW Steel seeks Japanese investment to acquire distressed Indian firms,” Deal Street Asia, August 3, 2017, https://www.dealstreetasia.com/stories/jsw-steel-open-japanese-investmen...)

South Korea

South Korean firms are struggling to do business in the Middle East due to government indifference and rising political tensions. For example, South Korea’s POSCO Daewoo has cancelled a USD $1 billion plan for a vehicle production plant with Saudi Arabia’s government because the Saudi government has not fulfilled its investment obligations. LG International also faces uncertainty about its electrical vehicle production and infrastructure deal with the Iranian carmaker Khodro due to Iran’s conflicts with neighboring Sunni majority states and growing friction with the US (Lee Hyo-sik, “POSCO, LG struggles in Middle East,” The Korea Times, July 31, 2017, http://www.koreatimes.co.kr/www/tech/2017/08/694_233954.html)

South Korea’s LA Cable & System has signed a USD $195 million contract with Qatar’s state owned utilities firm to expand the country’s power grid system. The deal is part of the Qatari government’s USD $2.3 billion infrastructure investment initiative to upgrade facilities before the 2022 World Cup and to support the country’s growing population. This deal is the biggest cable expansion project undertaken by Qatar thus far and represents the largest cable infrastructure deal of any South Korean firm in the Middle East (Jung Min-hee, “LS Cable Wins 219 Billion Win Deal in Qatar,” BusinessKorea, August 3, 2017, http://www.businesskorea.co.kr/english/news/industry/18858-largest-cable...)

Indonesia

Indonesia’s Coordinating Minister for Economic Affairs announced his ministry is focusing its attention on simplifying the investment application process for foreign firms seeking investment licenses. Many want the Indonesian government to revise its negative investment lists which prohibits foreign investment and ownership in some industries. The government says its decision to focus on simplifying and deregulating the license application process is due to the growing economic downturn and need to attract new foreign investors (Putri Adityowati and Andi Ibnu, “Govt Focuses on Simplifying Investment Permit,” Tempo.com, July 28, 2017, https://en.tempo.co/read/news/2017/07/28/056895255,uk.html/Govt-Focuses-...)

Indonesia will start taking bids in September for the construction of six geothermal power plants, having a combined project value of USD $1.02 billion, capable of producing 255 megawatts of power. The expansion of Indonesia’s geothermal energy is consistent with the government’s plan for the country to become the world’s largest producer of geothermal energy by 2021. Foreign investors from the US, Italy, Japan, South Korea, Turkey, and China have already shown interest in making bids for the government contracts (“Indonesia to Auction Off Geothermal Power Projects Worth $1b,” Jakarta Globe, July 31, 2017, http://jakartaglobe.id/business/indonesia-to-auction-off-geothermal-powe...)

Thailand

During a recent ministerial meeting, Thailand and Australia discussed revising the Thailand-Australia Free Trade Agreement. The current agreement, which calls for trade and investment liberalization, entered into force in 2005. However, it has become outdated and revision is required “as the situation has completely changed.” Australia is pushing Thailand to “increase the utilisation rate” of a wider agreement, the ASEAN-Australia-New Zealand Free Trade Agreement to enhance regional trade and investment. Australia’s investment in Thailand ran USD $2.55 billion in 2016 while Thai investment in Australia totaled USD $3.11 billion (“Somkid, Bishop discuss TAFTA revision,” Bangkok Post, August 4, 2017, http://www.bangkokpost.com/business/news/1299507/somkid-bishop-discuss-t...)

Malaysia

Indian Oil Corp Ltd recently announced it is in talks with its partners to search for an alternative, cheaper location for the Pacific Northwest LNG terminal after the recent withdrawal of the lead developer “cast doubt on the future of the Canadian project.” Malaysia's state-owned Petroliam Nasional Bhd (Petronas) recently announced quitting the plan “due to weak global prices.” The state-owned firm was a majority shareholder in the proposed project that has a total value of over USD $28 billion (“Partners look for cheaper site for Pacific NorthWest LNG terminal after Petronas pullout,” The Star Online, August 4, 2017, http://www.thestar.com.my/business/business-news/2017/08/04/indian-oil-p...)

Vietnam

South Korea’s Lotte Group recently signed an Eco-Smart city development contract with Vietnam’s People’s Committee of Ho Chi Minh City. The integrated city will be built in Thu Thiem’s newly designated urban area with an investment amount of USD $884 million Lotte Group expects to receive the needed investment certificate from the government soon, though the feasibility of large projects in Vietnam has recently come under greater government scrutiny. Many recent projects have been stalled or suspended, leading to a retraction of government granted investment certificates (“New wave of billion-dollar FDI projects hits Vietnam,” Vietnam Net, July 30, 2017, http://english.vietnamnet.vn/fms/business/182895/new-wave-of-billion-dol...)

Vietnam’s Prime Minister confirmed that the creation of Vietnam’s first three special economic zones (SEZs) would enjoy special rules to attract greater investment for the country. The Prime Minister cited the need for legislation that will “create a fair, transparent, and stable investment environment and ease barriers to investment.” Vietnam’s Ministry of Planning and Investment will work to draft legislation for the SEZs to be located at Vân Đồn, Bắc Vân Phong, and Phú Quốc Island (“Special econ zones should enjoy special rules: PM,” Vietnam News, August 4, 2017, http://vietnamnews.vn/economy/381413/special-econ-zones-should-enjoy-spe...)

*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.