MNCs in the News-2015-02-27
In mid-February China introduced rules limiting the use of foreign technology in Chinese banks unless foreign firms reveal sensitive source codes or use Chinese intellectual property, which led to widespread protest by American and European firms and demands their governments take action. More recently, the Chinese government has dropped Apple, Citrix, Cisco, and McAfee from its official list of approved products. According to commentators, China’s action reflects its desire to help domestic firms such as Huawei and ZTE as well as its concern about information security. The latter concern was exacerbated by Edward Snowden’s revelations about National Security Agency spying (Christian Oliver and Tom Mitchell, “EU and US Groups Sound Alarm on China Security Rules,” Financial Times, February 26, 2015; “China ‘Drops US Tech Giants’ From Approved List,” BBC News, February 26, 2015, http://www.bbc.com/news/technology-31640539)
Sundar Pichai, Google’s Senior Vice President of Products, told attendees at Google’s I/O Developers conference that Google would welcome a chance to serve the millions of individuals in China using phones equipped with Google’s Android operating system, but are unable to use features like Google Play. Although Google’s services have been largely blocked in the country since it left in 2012, Pichai said Chinese developers had a lot of interest in Google Play and he thought of China as a “huge opportunity in which we are playing as an enabling platform and hopefully have a chance to offer other services” (He Yini, “Google Upbeat About Reentering China: Forbes,” China Daily, February 27, 2015, http://www.chinadaily.com.cn/business/tech/2015-02/27/content_19671156.htm)
China’s anti-corruption campaign has disrupted the China National Petroleum Corporation’s construction of distribution networks associated with the Sino-Myanmar natural gas pipeline in southwestern China. This coupled with low gas prices, political disruptions in Myanmar, and the slow development of natural gas markets in southwestern China has led to far less usage of the natural gas pipeline, inaugurated in July 2013, than originally expected. In tandem with this pipeline, Myanmar and China also have built an oil pipeline that will distribute energy from Africa, Myanmar, and the Middle East to China (“Sino-Myanmar Gas Pipeline Running at One Third of Capacity,” WantChinaTimes.com, February 26, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150226000023&cid=...
In a speech in Tokyo, Japanese Prime Minister Abe Shinzo stated his administration, working with prefectural governors and city mayors, intended to advance a number of measures to promote inward foreign investment. He also said he would appoint senior vice ministers or vice Cabinet ministers to work directly with foreign firms that planned significant investments in Japan. On top of this the government would work to increase the number of hospitals and restaurants in the country that could provide services in multiple languages and would work to improve airport infrastructure to receive foreign business jets (“Abe Vows to Promote Foreign Investment,” The Japan News, February 24, 2015, http://the-japan-news.com/news/article/0001958441)
One of the pillars of Abenomics, Japanese Prime Minister Abe Shinzo’s plan for reinvigorating the economy is a weaker yen. This is driving Japanese firms to make overseas investments now for fear that investments will become much more expensive if they “don’t strike now.” Of course, other factors such as the greater future growth potential of other countries, Japan’s continuing weak economy, and huge, low earning corporate cash hordes totaling almost US $2 trillion play a role, too. In 2014, Japanese companies spent $56 billion on overseas acquisitions. Two months in 2015, they already have spent almost half that amount (Antoni Slodkowski, “Japan Inc Shops Abroad to Duck Bleak Domestic Prospects,” Reuters.com, February 24, 2015, http://www.reuters.com/assets/print?aid=USKBN0LS0E120150224)
A Japanese railway consortium is likely to win major order totaling 400 billion yen from Qatari state-run railway company to build a three subway line subway system in Doha. The project is part of the infrastructure work that Qatar is undertaking in preparation for the 2022 World Cup soccer finals that it will host. Other than a win for the companies like Mitsubishi Heavy Industries and France’s Thales Group that are participate in the consortium the successful bid is a win for Japanese Prime Minister Abe Shinzo who is championing increased infrastructure exports as a way to boost Japanese growth (“Japan-Led Group to Win Qatar Subway Order,” The Japan News, February 20, 2015, http://the-japan-news.com/news/article/0001946697)
Japan has concluded a US $275 million loan agreement with Kenya that will fund the second phase of Kenya’s expansion of its Mombasa port, a project that will dramatically increase the port’s container capacity. Japan’s loan to Kenya is the largest loan that it has ever made to Kenya since 1963 and will increase business opportunities for Japanese construction and other firms. Of note, China is building a US $3.8 billion railway in Kenya that will link the Mombasa port to Nairobi, Kenya’s capital. Beyond this, China is building a harbor in Bagamoyo that will compete with the Mombasa port (Liang Shih-huang, “Japan Rivals China in East Africa Investment,” WantChinaTimes.com, February 24, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150224000020&cid=...)
At a gathering of 40 foreign firm CEOs and representatives from entities such as Siemens Korea and the Australian Chamber of Commerce, Korea’s Minister of Trade, Industry, and Energy Yoon Sang-Jick lobbied foreign businesses to increase their investments in Korea. He said the government would do everything it could to meet its goal of attracting US $20 billion in foreign investment. He touted “Korea has become an ideal place for multinational companies seeking to expand in Asia” on the back of the free trade agreement that Korea concluded with China and noted “the government will better listen to foreign companies” (Lee Hyo-Sik, “Foreign Firms Asked to Invest More,” Korea Times, February 23, 2015, http://www.koreatimes.co.kr/www/news/biz/2015/02/123_173989.html)
Indonesia has been moving to increase the percentage of industrial activity undertaken domestically. In tandem with this and a policy to encourage a “low cost, green car,” it requires manufacturers of such a car to use 40 percent local content the first year, 60 percent the third year, and 80 percent by the fifth year. This policy is a disincentive to foreign firms that do not have a large domestic base and has led US auto giant GM to decide to discontinue manufacturing cars in Indonesia. GM’s decision also relates to increasing competition from Japanese firms and high material costs (Jeremy Grant, “GM to End Indonesia Vehicle Manufacturing,” Financial Times, February 26, 2015)
Vietnam is a signatory to various international trade agreements including with the member states of the Association of Southeast Asian Nations that have forced it to cut tariffs and open certain sectors to wholly-owned foreign investment. In the wake of its changes, companies from Japan, Korea, and Thailand such as Tokyo Mart, Diaso, Lotte, Berli Jucker, and Tokyo Shop have poured into the market, opening supermarkets and retail stores. This has severely intensified competition on domestic firms, but will benefit consumers and encourage Vietnam firms to upgrade their capabilities, consolidate, and otherwise improve their operations (“VN Retailers Face Pressure as Foreign Firms Enter the Market,” Viet Nam News, February 24, 2015, http://vietnamnews.vn/in-bai/266708/vn-retailers-face-pressure-as-foreig...)
*The information used herein is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content in this section does not necessarily represent the official view of the Wong MNC Center, its Board of Directors, or its Advisory Board.