MNCs in the News-2014-03-07

During the first week of March, more than 1,000 workers went on strike at an IBM factory to object to a forthcoming US $2.3 billion deal between Lenovo and IBM that would transfer Lenovo IBM’s x86 server business to Lenovo. The strikes stopped production at IBMs manufacturing facilities in Shenzhen. The workers wanted greater payments for those who agreed to shift to Lenovo as well as greater severance packages for those who decided to leave. The workers said they were acting independently of the All China Federation of Trade Unions, which “had never done anything to help protect their rights” (Tom Mitchell and Charles Clover, “IBM Workers Strike in China over Terms of Lenovo Takeover,” Financial Times, March 6, 2014).

Moving to address concerns in the US and elsewhere about Huawei, which some Western governments and analysts believe the Chinese government and military controls, Huawei has produced a multi-volume publication providing information on Huawei’s major stockholders. According to the publication, 99 percent of the company is owned by its 80,000 of its 150,000 employees, with most staff owning tens of thousands of shares and a small number owning millions. The volume is unlikely to satisfy worries, especially in the US Congress, because it does not provide full information about Director shareholdings and about the rights of managers including Huawei’s founder (Demetri Sevastopulo, “Huawei Pulls Back the Curtain on Ownership Details,” Financial Times, Feb. 27, 2014).

Yasuda Engineering Co., Ltd. will take part in the construction of an underground drainage canal in Indonesia, pursuant to a public tender. Yasuda and two other Japanese firms will participate in this project, estimated to be worth 1.6 billion yen. Yasuda’s project shows the ability of Japanese small-to-medium sized enterprises (SMEs) to supply unique infrastructure products and services in Southeast Asia. Governments in these host countries are eager to support these projects and thus Japanese firms have a greater chance to take market share. The Japanese government has been promoting the export of infrastructure overseas through the private-public joint initiatives (“Small-medium sized firms have a business chance in infrastructure overseas, unique products in roads and water pipes,” Nikkei, March 3, 2014, http://www.nikkei.com/article/DGXNZO67622670R00C14A3TJE000/; “3 Japanese firms will take part in an Indonesian underground water pipe project in architecture and operation,” Kensetsunews, Jan. 8, 2014, http://www.kensetsunews.com/?p=24110)

On March 4, South Korea’s Financial Supervisory Service (FSS) Governor Choi Soo-hyun mentioned at a FSS forum that South Korea’s pension market was likely to yield new business opportunities for foreign financial firms. As a result of South Korea facing an aging society, there likely will be a growing demand for new products and services for retirees. Many believe that Korea’s pension system needs to develop by attracting foreign financial firms because such firms offer advanced asset management know how (Na Jeong-ju and Park Ji-won, “Regulator invites foreign companies to pension market,” The Korea Times, March 4, 2014, http://www.koreatimes.co.kr/www/news/biz/2014/03/488_152686.html

On March 7, the President of GM Korea Sergio Rocha said that GM’s biggest challenge this year would be rising labor costs. His comments followed the Korean Supreme Court’s notable decision that bonuses should be paid as ordinary wages, which led to GM pondering about a possible exit from Korea or severe production cuts. Due to the increasing labor costs and decreasing demand, it is expected that the production of Chevy cars in Korea will be cut 20 percent by 2016. Rocha further argued that the Supreme Court’s decision would affect other foreign automobile MNCs (Choi Kyong-ae, “GM Korea chief says labor costs are biggest challenge,” The Korea Times, March, 2014 http://www.koreatimes.co.kr/www/news/biz/2014/03/123_152864.html)

The Korean government has decided to ease regulations governing the private equity market in order to encourage M&A activities in Korea. Specifically, on March 6, the Finance Ministry announced that the government would amend some strict regulations on private equity firms and provide capital for M&As. These new steps are intended to boost start-ups and improve the business environment for small-to-medium sized enterprises, which the government hopes will eventually become global companies. Finance Minister Hyun Oh-seok said that fostering start-ups via M&A was one of President Park Geun-hye’s economic plans (Oh Kyu-wook, “Korea aims to expand M&A market by 75%” The Korea Herald, March 6, 2014, http://www.koreaherald.com/view.php?ud=20140306001268)

Collaboration between Singapore’s national water agency PUB and Japanese company Meiden Singapore has led to the incorporation of new technology in an industrial water treatment at the Jurong Water Reclamation Plant. The new technology will include an increase in biogas production during the treatment process, which could meet as much as half of the plant's power needs, a 30 percent increase from current biogas output. Previously, industrial water was treated then discharged into the sea, but with the use of the shared technologies, there will be a higher quality of treated water. which can be recycled back for industrial use (Monica Kotwani, “New water recycling and treatment plant opens in Jurong,” March 7, 2014, Channel News Asia, http://www.channelnewsasia.com/news/singapore/new-water-recycling/102416...)