MNCs in the News-2014-01-17

The President of Toray Industries, Inc. (Japan), Sadayuki Sakakibara, will become the next Chairman of Nippon-Keidanren, Japan’s Business Federation. Keidanren is the largest interest group in the financial, economic community in Japan. Since Toray Industries has actively invested in Korea in the past, has promised to invest $287 million by 2018, and has strong ties with Korea, Sakakibara’s new role may have a positive influence on the troubled Japan-Korea relationship. Furthermore, Sakakibara is a member of Prime Minister Abe Shinzo’s Council for Industrial Competitiveness, has strong ties with the current administration, and is expected to work closely with the government (“Toray Chairman Sakakibara to become a Nippon-Keidanren Chairman,” J Chuo Nippou, Jan. 10, 2014, http://japanese.joins.com/article/416/180416.html; and “China and Korea’s VIP, Toray, High Hope for ‘Sakakibara-Keidanren,’” Nikkei, Jan. 14, 2014, http://www.nikkei.com/article/DGXNASFK10031_Q4A110C1000000/)

From 2015 onward, the Japanese government will tax foreign-based Internet book and music sellers. Since they previously were not taxed, foreign-based internet book and music sellers like Amazon USA were able to exploit the tax regime to offer lower priced goods. This led competing Japanese firms to pressure the government to tax foreign companies in order to eliminate tax-related price differentials. Following the EU, the government will obligate foreign-based internet firms to register with the Japanese Tax Agency. The plan is to start taxes in October 2015 when the national consumption tax increases to 10% (For full information, see “Tax on Foreign Internet Service, Starting from 2015,” Reuters, Jan. 14, 2014, http://jp.reuters.com/article/businessNews/idJPTYEA0D03R20140114; and “Tax on Foreign Based Internet Services from 2015,” Nikkei, Jan. 14, 2014, http://www.nikkei.com/article/DGXNASFS1300L_T10C14A1MM8000/)

According to the Korea Chamber of Commerce and Industry (KCCI), more than half of surveyed foreign companies are dissatisfied with the investment environment in Korea. The key drivers of these sentiments include economic volatility, excessive regulation, tense relations with labor unions, a lack of policy consistency, and the public’s hostile sentiments toward conglomerates. In particular, foreign companies are worried about government legislation/regulation relating to the calculation of ordinary wages, working hour reductions, and tax law (“Majority of Foreign firms dissatisfied with Korean Investment climate: Poll,” The Korea Herald, Jan. 16, 2014, http://www.koreaherald.com/view.php?ud=20140113000694)

ExxonMobil recently announced a multi-billion-dollar expansion of its Singapore Chemical Plant. It specifically announced plans to build an advanced “cracker” that will allow it to directly process crude oil into petrochemical products like ethylene and propylene, thereby skipping some traditional refining steps and, accordingly, reducing raw material costs, energy consumption, and carbon emissions. The plan was spurred not only by an improving end market situation, but also by strong Singaporean government support. This support includes government efforts to ensure an adequate supply of skilled workers as well as continuing efforts to enhance the country’s infrastructure (For full information, see “Singapore Seeks Energy, Chemical Industry Growth,” Ship & Banker, Jan. 10, 2014, http://shipandbunker.com/news/apac/657036-singapore-seeks-energy-chemica... and “Exxon Begins World’s 1^st Crude-Cracking Petrochemical Unit,” Business Recorder, Jan. 21, 2014, http://www.brecorder.com/fuel-a-energy/193/1146137/)

To boost domestic industrial production, Indonesian finally instituted a ban on the export of unprocessed materials, two years after the ban became a law. The ban faced strong opposition from foreign mining players such as Freeport McMoRan and Newmont. Still, foreign mining company pressure succeeded in inducing the government to give some exemptions to firms with plans to build smelters and that already were exporting certain types of concentrated products. The ban comes at a time when foreign mining firms are feeling increasingly unwelcome due to extreme policy uncertainty and the possibility that forthcoming elections could lead to new changes (Ben Bland, “Indonesia Slaps Ban on Mineral Exports,” Financial Times).