MNCs in the News-2017-11-03

China

As part of its contribution to sanctions against North Korea which continues to test missiles and nuclear weapons in defiance of United Nations (UN) sanctions, China has “ordered all North Korean businesses in the country [including joint ventures/JV] to wind down by mid-January.” This is affecting North Korea restaurants and North Koreans involved in animation, mining, and software development. However, North Korea businesses in a JV with a majority Chinese partner or that are “nonprofit organizations” likely will continue to operate (Yu Bokun, “North Korean Businesses in China Start Countdown as Deadline for Closure Looms,” Caixin, October 27, 2017, https://www.caixinglobal.com/2017-10-27/101162227.html)

Financial Times research has revealed German publisher Springer Nature has been censoring journal access at the bequest of Beijing, removing more than one thousand articles from the websites of journals such as the Journal of Chinese Political Science in China. These articles contain terms China considers sensitive. Springer is not the only publisher to engage in such behaviors. Cambridge University Press previously did, but retreated after a huge backlash from academics and others. Springer said it was obligated to comply with local distribution laws (Ben Bland, “Outcry as Latest Global Publisher Bows to China Censors,” Financial Times, October 31, 2017)

Based upon interviews with more than 100 professionals, one consultancy reports the outlook for cross-border mergers is quite positive with seventy percent of those interviewed believing China will be one of the key players in outward foreign direct investment (FDI) over the next 12 months. In the case of China, many expect that China’s Belt and Road Initiative (BRI) will be a force propelling greater outward FDI (OFDI) while cheap financing and excess cash globally are expected to support greater global OFDI (Cheng Yu, “Outlook for Cross-Border Mergers Positive,” China Daily, October 30, 2017, http://www.chinadaily.com.cn/business/2017-10/30/content_33893794.htm)

Japan

Following President Rodrigo Duterte’s official visit to Japan, the Philippines was able to secure USD $6 billion in Japanese investments across 18 different investment deals. After meeting with several Japanese businesses and signing numerous memoranda of understanding, letters of intent, and joint venture agreements, the Philippines has drawn Japanese corporations into its shipbuilding, metals, agribusiness, transportation, renewable energy, and infrastructure industries. Japan also committed to fund Manila’s new subway system, drawing praise from Filipino state officials for its development assistance (Catherine Pillas and Butch Fernandez, “Duterte visit to Japan yields $6 billion in investment pledges,” BusinessMirror, October 31, 2017, https://businessmirror.com.ph/duterte-visit-to-japan-yields-6-billion-in...)

Japan’s Mitsui Engineering and Shipbuilding Co. announced plans to build a gantry crane manufacturing plant in Indonesia’s newly established Batam Island free trade zone. Mitsui intendeds to take advantage of Jakarta’s initiatives to attract foreign investment to harness the region’s growing demand for cargo-moving machinery. The Japanese manufacturer believes the move to the Indonesian market will save more than 10 percent in production costs and has already made plans to expand the Indonesian plant in 2020 (“Mitsui Engineering to open crane plant in Indonesia betting on growing cargo-handling demands,” Japan Times, October 30, 2017, https://www.japantimes.co.jp/news/2017/10/30/business/corporate-business...)

South Korea

South Korea hopes to prepare a package of large-scale investments in China that will be announced during the upcoming China-South Korea bilateral summit. Seoul hopes its support for greater South Korean investments in China will ease conflicts between the two countries flowing from its decision to host United States (US)’s THAAD missile systems. Already, two multibillion-dollar deals by Samsung Electronics and LG Display have surfaced, though details of the investments are likely to be withheld until during the summit (Lee Wan and Cho Kye-wan, “South Korea to announce plans for large-scale investment in China,” the hankyoreh, October 27, 2017, http://english.hani.co.kr/arti/english_edition/e_international/816392.html)

South Korea’s Ministry of Trade, Industry and Energy (MOTIE) will soon decide whether to approve LG Display’s multibillion dollar OLED production facility investment in China after concerns were raised about possible technology theft and job loss. Through MOTIE has approved exports of OLED products to China in the past, the assembly of OLED screens is considered by Seoul to open a possible route for China to close the technology gap with South Korea and may cost other Korean businesses their competitive advantages (Cho Jin-young, “LG Display’s Investment in China to Be Approved by Korean Gov’t,” BusinessKorea, October 31, 2017, http://www.businesskorea.co.kr/english/news/industry/19674-jumping-first...)

Indonesia

Indonesia’s inward FDI (IFDI), excluding investment banking and the oil and gas sector, amounted to USD $8.3 billion in the third quarter, up 12 percent year over year (YOY). The bulk of IFDI in the third quarter went into metal, machinery, electronics, and mining. Singapore was the major investor during this period. Indonesia’s President, Joko Widodo, has implemented a host of regulatory changes to attract foreign direct investment to the country and wean the domestic market off of private consumption (Hidayat Setiaji and Wilda Asmarini, “Foreign Direct Investment into Indonesia Inches Up in Q3,” Jakarta Globe, October 30, 2017, http://jakartaglobe.id/business/foreign-direct-investment-indonesia-inch...)

Anti-Chinese sentiments appear to be increasing in Indonesia after Chinese IFDI hit a record USD $2.67 billion last year, prompting Indonesia’s Finance Minister to issue a statement that any stigma regarding Chinese investments relates to information problems or Indonesian domestic politics. Though Jakarta has pushed heavily for more overseas sources of capital, China’s rapidly expanding investments are creating fears of an Indonesian economy dominated by Chinese firms. Tensions are still high among Indonesian Muslims after Jakarta’s former ethnically Chinese governor was accused of insulting the Koran (“Indonesian minister says no stigma attached to China investment,” Nasdaq, November 3, 2017, http://www.nasdaq.com/article/indonesian-minister-says-no-stigma-attache...)

Thailand

Thailand’s Central Group and China’s JD.com announced a USD $528 million JV that will provide Thailand with an open system online marketplace. The JV is being developed within the framework of the Thai government’s “Thailand 4.0” initiative which promotes investment in the skillsets needed in a digital world, increasing the competitiveness of small to medium sized businesses, and potentially transforming Thailand’s eastern region into a digital hub for Southeast Asia (Kwanchai Rungfapaisarn, “Central joint venture with JD.com hailed as a game changer for country,” Nation Multimedia, November 3, 2017, http://www.nationmultimedia.com/detail/Corporate/30330685)

Thailand’s state-owned PTT Exploration and Production booked another USD $558 million impairment charge due to delays in moving ahead with investment on its Canadian Mariana Oil Sands project. The firm has continued to put off investment into its Canadian oil fields due to poor expected profits following its industry assessments and feasibility studies. The total cost of the delay has risen to USD $1.8 billion, resulting in the Thai firm suffering a third-quarter loss of USD $264 million (“Thailand’s PTTEP incurs $264 mln loss after delaying Canadian oil sands projects,” Reuters, November 2, 2017, https://www.reuters.com/article/pttep-results/thailands-pttep-incurs-264...)

Malaysia

In its annual Economic Report, Malaysia, among other things, details the general benefits of the BRI for participants as well as the Association of Southeast Asian Nations as a whole. Kuala Lumpur expects that the BRI will have a positive impact on Malaysia’s ability to attract FDI, access new markets, and diversity its products and services given Malaysia’s “‘strategic location along the Maritime Silk road.’” Malaysia also expects that the BRI will reduce shipping times and cost (“Malaysia says it stands to reap benefits from Belt and Road Initiative,” China Daily, October 27, 2017, http://www.chinadaily.com.cn/business/2017-10/27/content_33780518.htm)

Vietnam

Japanese official development assistance (ODA) programs, administered by the Vietnam Office of the Japan International Cooperation Agency (JICA), are boosting Japanese FDI in Vietnam. In the first half of this year, over USD $450 million has been granted to 50 projects led by Japanese companies like Idemitsu Kosan Co., Kato Group, and Nikko Foods. Many Japanese firms use services provided by JICA, such as feasibility studies or market surveys, to assist their investment activities, or exploit ODA funding to supplement their initiatives (“Projects funded by ODA luring in Japanese firms,” Vietnamnet, November 3, 2017, http://english.vietnamnet.vn/fms/business/189520/projects-funded-by-oda-...)

Vietnam’s Ministry of Planning and Investment (MPI) has released statistics detailing Vietnam’s USD $28.24 billion in IFDI this year. The MPI’s Foreign Investment Agency revealed that the majority of IFDI came from Asia-Pacific Economic Cooperation (APEC) countries, which constituted 85 percent of total IFDI. Notably, all major investments in October came from APEC companies like South Korea’s Lotte Group and Samsung Display, Japan’s Marubeni Corporation, and Singapore’s Nam Dinh 1 Power Co. Hanoi believes that hosting APEC 2017 will provide a boost to investments from APEC economies (“Vietnam expects $30 billion FDI by year-end,” Vietnamnet, October 31, 2017, http://english.vietnamnet.vn/fms/business/189352/vietnam-expects--30-bil...)

*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.