MNCs in the News-2014-01-10

Harbin Bank will apply soon for an international public offering on the Hong Kong stock market, the first in what may be a series of “smaller” mainland Chinese banks seeking such a listing. The trend results from two dynamics. The first is the desire of these smaller banks to bolster their capital adequacy ratios. The second is the inability of such banks to list on the Shanghai and Shenzhen exchanges due to domestic regulatory obstacles. While recent mainland bank IPOs have not been warmly received, some banks hope to leverage their partnerships with foreign financial institutions to launch successful IPOs (Ray Chan, “Harbin Bank Aims to Raise US$1 billion as Hong Kong’s First Bank IPO of 2014, South China Morning Post, Jan. 15, 2014, http://www.scmp.com/business/banking-finance/article/1406001/harbin-bank...).

Manassen Foods, an Australian supplier and distributor of local and international foods, in which stated-owned Bright Food Group Co., Ltd., China’s second-largest food producer, took a USD$ 500 million majority stake in 2011, has purchased Mundella Foods, a private dairy company, and will make it a wholly owned subsidiary. Bright Foods has been acquiring or targeting firms in Oceania and Europe in the wine, cereals, and other areas in order to diversify its product offerings, increase overseas sales, and globalize its distribution chain. The deal shows continued Australian receptiveness to Chinese foreign direct investment despite some bumps in recent years (He Wei, “Bright Food Gets 2^nd Aussie Firm,” China Daily, January 14, 2014, http://europe.chinadaily.com.cn/business/2014-01/14/content_17234268.htm).

During a visit to Japan in early January, Turkish Prime Minister Tayyip Erdogan met with Japanese Prime Minister Abe Shinzo and signed a US$ 22 billion nuclear power plant and technology export agreement. Per this accord, a Mitsubishi Heavy Industries led joint venture will build Turkey’s second nuclear power plant. Mitsubishi already has set up a promotion office in Turkey to negotiate contracts and handle other preparations. The aforementioned plant will use the “ATMEA1” design, developed by Mitsubishi and French firm Areva. Some have questioned if Turkey plans to exploit its deal with Japan to enrich uranium, which Turkey denies (“Mitsubishi Heavy Industries Establishes a New Promotion Office to Strengthen the Turkish Nuclear Power Plant Project,” Nikkei Business Publications Inc., Jan. 9, 2014, http://business.nikkeibp.co.jp/article/emf/20140109/257996/; and “Turkish Energy Minister Denies Uranium Enrichment Intention,” Hurriet Daily News, Jan 9, 2014, http://www.hurriyetdailynews.com/turkish-energy-minister-denies-uranium-...)

Nippon Asahan Aluminium Co., Ltd., consisting of 11 companies and organizations including JICA, Sumitomo Kagaku, and Mitsubishi Kagaku, owns and operates PT Indonesia Asahan Aluminum, a venture in which the Indonesian government has 41.2% stake. This venture was once considered a symbol of the Japan-Indonesia friendship yet because of long-standing disputes over various issues, Nippon Asahan has gone to arbitration. The Japanese government was concerned, though, that this might hurt the Japan-Indonesia relationship so the venture and the Indonesian government came to an agreement that the Nippon Asahan would sell the joint venture to the Indonesian government for $600 million (“A Japanese cartel sells an aluminum joint venture to the Indonesian government,” Nikkei, Dec 9, 2014, http://www.nikkei.com/article/DGXNASDD090SR_Z01C13A2TJ2000/; and Yuka Oobayashi, “Japanese Asahan CEO Says An Indonesian Joint Venture May Be Sold Or Appeal For Arbitration If There Is No Agreement By October,” Reuters, Sept 13, 2013, http://jp.reuters.com/article/businessNews/idJPTYE98B09G20130912)

On January 10, the Korean government proposed bigger tax breaks for foreign MNCs in order to encourage such firms to relocate their headquarters and Research & Development (R&D) centers to Korea. It is believed that tax benefits will stimulate value-added investments, particularly in R&D. The Korean government has been moved to action by the fact that even though Korean has witnessed a steady flow of foreign investment since it concluded its FTAs with the EU and the US the amount of foreign capital inflows fell from US$ 10.6 billion to US$ 9.48 billion last year (Kyong-ae Choi, “More benefits for foreign R&D Centers,” The Korea Times, Jan., 10, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/01/123_149492.html)

Last week the Korean Fair Trade Commission fined Johnson & Johnson Korea 1.86 billion won for violating the Fair Trade Law. According to the FTC, Johnson & Johnson Korea used its dominant market position to force partner opticians to sell its products at a fixed price without any type of discounts and partner opticians were not permitted to buy products at lower prices from the company. Since the company tried to control retail prices through unfair trade deals, it violated the Korea’s Fair Trade Law. The company admitted its violation and accepted the FTC’s decision (Tae-jong Kim, “Johnson & Johson fined W 1.9billion,” The Korea Times, Jan., 10, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/01/123_149489.html)