MNCs in the News-2018-01-12

China

China’s State Council has “decided to ease regulations for enterprises investing in Free Trade Zones (FTZs).” Among other things, it will allow “wholly foreign-owned entertainment (WFOE) venues to provide services in FTZs and permit foreign investors to invest in Internet access businesses.” Restrictions relating to gas stations, foreign-funded urban-rail traffic projects, and WOFE dealing with the design, production, and repair of defined size aircraft and helicopters also will be adjusted. China’s FTZs are about testing policies as well as “integrating the economy with international practices” (“China Relaxes Regulations for Investors in Free Trade Zones,” China Daily, January 10, 2018, http://www.chinadaily.com.cn/a/201801/10/WS5a555265a3102e5b17371b58.html)

In an online survey sent to its customers, Marriott International listed Hong Kong, Macao, Taiwan, and Tibet as individual countries. In response, China shut down the Chinese language websites of Marriott International in China for a week and, for a period of time, its Chinese mobile phone app. Exacerbating Marriott’s woes, one of Marriott’s social media accounts “liked” a post from a group supporting an independent Tibet. To make amends, Marriott’s CEO made a strong apology and promised to take “necessary” disciplinary action against staff involved (“China Shuts Marriott’s Website over Tibet, Taiwan Error,” BBC News, January 11, 2018, http://www.bbc.com/news/business-42658070)

On February 28, Apple will turn over its iCloud data services for Chinese mainland users to Guizhou-Cloud Big Data which not only will operate the service but store all data within China. The transfer is occurring because of China’s 2017 Cybersecurity Law which mandates tech firms to store all of the data they generate from China inside China as well as Ministry of Industry and Information Technology policy which says Chinese companies are the only ones that can offer cloud services in China (Zhang Erchi and Han Wei, “Apple Hands off China iCloud Data Operations,” Caixin, January 10, 2018, https://www.caixinglobal.com/2018-01-11/apple-hands-off-china-icloud-dat...)

During French President Emmanuel Macron’s recent visit to Beijing, French Finance Minister Bruno Le Maire said “France welcomes long-term investments from China, but only after screening deals to ensure French assets are not ‘looted.’” One of Macron’s goals in visiting China was to bring more balance to the relationship which meant reducing the trade deficit and, also, according to Le Maire, “protecting French technologies and setting limits on Chinese investments in France.” Le Maire stressed that in reviewing Chinese investments his ministry would reject many deals (Michel Rose, “France Welcomes Chinese Investment, Not ‘Looting’: Minister,” Reuters, January 9, 2018, https://www.reuters.com/article/us-china-france-trade-lemaire/france-wel...)

Japan

Japanese carmakers Toyota Motor Corp. and Mazda Motor Corp. have selected the state of Alabama for a joint-venture (JV) United States (US) production facility. The two companies’ decision to open a new US factory came last year after US President Donald Trump pressured foreign firms to move more manufacturing to the US and threatened Toyota with steep tariffs on its cars produced in Mexico. The factory entails a USD $1.6 billion investment, will produce 300,000 cars a year, and will employ nearly 4,000 workers (“Toyota and Mazda pick Alabama for $1.6bn US investment–reports,” BBC News, January 10, 2018, http://www.bbc.com/news/business-42630820)

Japan’s NEC Corporation, a multinational provider of information technology (IT) services, acquired Britain’s Northgate Public Services Limited (NPS) for USD $640 million in a bid to increase its international presence. NEC partly bought Northgate NPS due to the British government’s promotion of digitalization which aims to transition services to online formats and reduce costs through online options, making investment into Britain’s IT sector attractive. Since Northgate NPS services over 700 systems and operates in more than 70 countries, the deal also improves NEC’s international reach (“NEC acquires UK-based IT services company Northgate Public Services,” Japan Today, January 11, 2018, https://japantoday.com/category/business/nec-acquires-uk-based-it-servic...)

South Korea

South Korea’s state-operated Korean Development Bank (KDB) will set a price floor on the sale of its struggling construction firm Daewoo Engineering & Construction (Daewoo E&C). Bidders for the Korean company include China State Construction Engineering Corp (CSCEC) and Singapore’s Elion International Holding. Problems remain as the Korean government is opposing the sale of Daewoo E&C at “giveaway prices” and Daewoo E&C’s labor union is protesting the sale of the company to CSCEC, claiming it is an “outflow of national wealth” (Jung Min-hee, KDB to Set Lower Limit on Sale Value of Daewoo E&C,” Business Korea, January 8, 2018, http://www.businesskorea.co.kr/english/news/industry/20229-drawing-magin...)

South Korean carmaker Hyundai Motor Co invested an undisclosed sum of money into Singapore’s Grab in an effort to expand its presence in the Southeast Asian ride-sharing market. South Korean carmakers are looking for expansion opportunities outside of China as political tensions between the two countries continue to deter investment in the region’s largest economy. Hyundai and Grab will jointly develop auto-services in Southeast Asia, focusing on using Hyundai’s eco-friendly car models and paving the way for a Hyundai plant in the region (Hyundai invests in Grab to gain ‘foothold’ in Southeast Asia ride-hailing market,” Reuters, January 11, 2018, https://www.reuters.com/article/us-hyundai-motor-grab/hyundai-invests-in...)

Indonesia

Jakarta’s Ministry of Finance will reevaluate its investment attraction programs after no companies applied in 2017. The Indonesian government offered tax allowances and tax holidays for five to ten years for firms investing in metal production, oil refining, machinery, agricultural processing, and other “pioneering” industries. Though the ministry believes unclear tax procedures are to blame, it will reassess tax regulations, adjust tax incentives to current investment trends, and more clearly outline incentive policies to attract foreign investment (Ardinda Putri, “Gov’t Back to Drawing Board as Investors Shun Tax Incentives,” Jakarta Globe, January 9, 2018, http://jakartaglobe.id/featured-2/govt-back-drawing-board-investors-shun...)

Jakarta and US based Freeport-McMoRan have yet to resolve a host of operational issues which plague the future of the Grasberg mine. The two parties aim finish negotiations over the US mining company’s majority divestment in Indonesia’s Grasberg copper and gold mine by June this year. Freeport’s continued investment in a USD $2.1 billion Indonesian smelting facility also requires the government’s attention as the company demands clarification regarding its legal status after its Contract of Work expires in 2021 (Adinda Putri, “Indonesia to Finish Negotiations with Freeport by June,” Jakarta Globe, January 12, 2018, http://jakartaglobe.id/business/indonesia-finish-negotiations-freeport-june)

Thailand

Japanese carmaker Nissan Motors shortlisted Thailand as the possible location for its Asia-Pacific electric vehicle (EV) manufacturing facility due to the Thai government’s “Thailand 4.0” policy which offering attractive investment incentives. Nissan also acknowledges that locating its plant in Thailand will enhance its ability to sell future models into the Association of Southeast Asian Nations (ASEAN) free trade zone. Nissan currently is conducting feasibility studies and gauging the interests of ASEAN markets for its EVs as well as assessing the EV-related infrastructure deficiencies in ASEAN nations (Piyachart Maikaew, “Nissan shortlists Thailand for EV facility,” Bangkok Post, January 8, 2018, https://www.bangkokpost.com/business/news/1392138/nissan-shortlists-thai...)

At a time when China’s Hainan Rubber Industry Group plans to make further investments in the Thai rubber market, Thailand’s Minister of Agriculture and Cooperatives warned Chinese investment in the country’s rubber plantations must be “carefully considered” and “not impact local farmers.” Bangkok’s concerns arise from the potential of Chinese investors to engage in price dumping and undermine national efforts to reduce rubber plantations to drive up rubber prices. China, the world’s largest rubber consumer, is looking to increase Southeast Asian rubber imports (Apinya Wipatayotin, “Minister urges caution over Chinese investment in rubber farms,” Bangkok Post, January 7, 2018, https://www.bangkokpost.com/business/news/1391594/minister-urges-caution...)

Malaysia

The Sultan of Malaysia’s state of Johor invested USD $100 million in Sri Lanka’s first pharmaceutical manufacturing sector after Sri Lanka’s Board of Investment approved the construction of a special industrial zone by Malaysia’s Pharma Zone and Sri Lanka’s State Pharmaceuticals Manufacturing Co. The Sultan expressed hope the investment would promote commercial and diplomatic relations between Sri Lanka and Johor. The Sultan of Johor, through Pharma Zone, will aid local pharmaceutical manufactures in setting up facilities and build infrastructure in the zone (“Johor Sultan invests US $100m in Sri Lankan pharmaceutical manufacturing zone,” New Straits Times, January 9, 2018, https://www.nst.com.my/business/2018/01/323367/johor-sultan-invests-us10...)

Vietnam

Foreign enterprises will be able to provide logistics services in Vietnam after February 20, 2018, according to a new policy decree by Hanoi. Foreign firms will be able to own and operate shipping containers, warehouses, transport and customs agencies, as well as related services. Foreign investors may also buy shares in Vietnamese logistics firms, up to a 51 percent cap. Hanoi requires foreign owned ships flying Vietnamese flags to have a Vietnamese captain and first deputy, and drivers for overland logistics operations must be Vietnamese nationals (“Foreign logistics firms now allowed in VN,” Vietnam News bizhub, January 9, 2018, http://bizhub.vn/news/foreign-logistics-firms-now-allowed-in-vn_291274.html)

While Vietnam’s successfully divested state-owned enterprises (SOEs) Vinamilk and Sabeco last year, divestment efforts for other SOEs like Song Da and Becamex IDC failed to draw much attention from institutional investors or raise satisfactory amounts of funds. Still the government will try this year to sell stakes in another 64 previously state-owned firms such as Vietnam Paper Corporation, MobiFone, and diverse property and energy companies. The planned divestment of P&T Tour will be the second attempt after a failed sale in 2017 (“State company shares remain unappealing to some investors,” Vietnamnet, January 9, 2018, http://english.vietnamnet.vn/fms/business/193258/state-company-shares-re...)