MNCs in the News-2015-07-10

An opinion piece responding to the concerns of foreign companies and others about China’s new National Security Law (NSL) told “foreign businesses in China to put their victim mentality to rest for good and embrace new rules set to protect their own interests.” It stated the NSL was not targeted at foreign firms “legitimate operations nor to block much-needed inbound foreign investment, but to safeguard national security.” It further emphasized that linking national security reviews with investment and trade was nothing new. Finally, it stated that foreign companies, should not be surprised the “lenient” policies of the past are changing (“China Voice: Time for Foreign Businesses to Stop Playing Victims and Embrace New Rules,” Xinhuanet.com, July 7, 2015, http://news.xinhuanet.com/english/2015-07/07/c_134390509.htm)

According to China’s MOFCOM, China’s new FTZs in Guangdong, Tianjin, and Fujian have attracted a significant amount of FDI of around US $3.7 billion by the end of May even though the three new FTZs were only established only about one month earlier. FTZ FDI inflows almost constituted 70 percent of Tianjin’s total FDI inflows and exceeded 53 percent of Fujian’s. The three new FTZs build upon the experience of the Shanghai FTZ, which was designed to “test reform policies and better integrate the economy with international practices in a landscape where China’s old export-reliant model is no longer sustainable” (“China New Free Trade Zones Attracting Overseas Investors,” People’s Daily Online, July 7, 2015, http://en.people.cn/business/n/2015/0707/c90778-8916953.html)

Reuters reported China’s National People’s Congress (NPC) recently published a draft cybersecurity law as part of the country’s effort “‘to safeguard national cyberspace sovereignty, security, and development.’” The draft contains some positive elements relating to the protection of data, but also give the government more rights to obtain information as it inter alia requires internet service providers to “store data collected within China on Chinese territory” and requires approval for data to be stored overseas for business purposes. As well, it could block the dissemination of information. Finally, the government has vague plans to issue specific guidelines for critical industries (Gerry Shih, “China’s Draft Cybersecurity Law Could Up Censorship, Irk Business,” Reuters, July 8, 2015, http://www.reuters.com/article/2015/07/08/us-china-cybersecurity-idUSKCN...)

China has been a major investor in Angola and has provided about US $20 billion in aid since Angola’s civil war ended in 2002. While Angola needs help and confronts a lack of alternatives, many are raising questions about the destination of all the money, Angola’s increasing dependence on China, and the amount of funds flowing to Chinese companies. According to some sources, Angola has had to boost police presence to guard against possible anti-Chinese reactions and Angola’s President Jose Eduardo dos Santos had to keep secret the details of his latest deal with China to guard against a backlash (Herculano Coroado and Joe Brock, “Angolans Resentful as China Tightens its Grip,” Reuters, July 9, 2015, http://www.reuters.com/article/2015/07/09/us-angola-china-insight-idUSKC...)

Japan is hosting a summit of the leaders of the “Mekong Five” (Cambodia, Thailand, Vietnam, Myanmar, and Laos) in Tokyo to promote export, investment, and infrastructure opportunities (bridge, rail, ports, and airports) for Japanese firms and new regional transportation options, to promote Japan’s vision of an “Asia governed by international laws” and regional development to counterbalance China’s rising presence in Southeast Asia. Aside from this, Japan is helping Myanmar and Thailand with their joint Dawei special economic zone, boosting development assistance, with a pledge of new fresh aid worth US $6 billion, and offering advanced Japanese technology and environmental know-how (Michael Peel and Robin Harding, “Japan Launches Fresh Crash and Diplomacy Push to Woo Mekong States,” Financial Times, July 2, 2015; “Japan Pledges 750 Billion Yen for Mekong Development,” Bangkok Post, July 4, 2015, http://www.bangkokpost.com/business/news/612624/japan-pledges-750-billio... “Dawei Bursts into Life with Japanese Aid,” Bangkok Post, July 5, 2015, http://www.bangkokpost.com/business/news/612868/dawei-bursts-into-life-w...)

Japan and China have both been pushing to build a deep-water port in Bangladesh. The Japanese International Cooperation Agency told reporters Japan would start building a deep-water port at Matarbari on Bangladesh’s southeast coast in January, which would seem to make a port by China unnecessary or financially unviable. While Bangladesh views a deep water port as vital given its active textile exporting and the expensive operating costs of its extant ports, it seems to have backed away from the Chinese project due to Indian and US opposition. Japan has already offered substantial support for a major development around Matarbari (Natalie Obiko Pearson, “Japan Beating China to the Port in Bangladesh,” The Japan Times, July 5, 2015, http://www.japantimes.co.jp/news/2015/07/05/national/politics-diplomacy/...)

At the Nikkei Bangkok Forum hosted by Japan’s Nikkei Inc. and Thailand’s Board of Investment, Thai Prime Minister Prayut Chano-Cha lobbied for greater Japanese investment in Thailand. Prayut argued Thailand’s special economic zones (SEZs) would be great production bases for Japanese companies once the Association of Southeast Asian Nations (ASEAN) Economic Community (AEC) comes into being. Prayut noted Thailand was an ideal base given its extensive borders with growing economies. He noted the government was working to promote “value-added investment, as well as several infrastructure projects to support logistics” and that this would make Thailand’s SEZs even better investment locations (Lamonphet Apisitniran, “Prayut Makes His Pitch for Border Investment,” Bangkok Post, July 7, 2015, http://www.bangkokpost.com/business/news/615412/prayut-makes-his-pitch-f...)

Speaking about state energy firm Pertamina’s assumption of the gas-rich Mahakam block from Total SA (France) and its Japanese partner Inpex Corp., which he approved as part of the “government’s mission to secure ‘energy sovereignty,’” Indonesian President Joko “Jokowi” Widodo said Pertamina had to maintain good communications “with all stakeholders…to avoid misunderstandings.” The government’s wants to control 70 percent of the block while offering Total and Inpex 30 percent after their contract expires at the end of 2017. Indonesia feels it may need Total and Inpex to play an ongoing role given the size of the block and its complexity (Satria Sambijantoro, “Secure Sovereignty, Avoid Dispute: Jokowi,” The Jakarta Post, July 6, 2015, http://www.thejakartapost.com/news/2015/07/06/secure-sovereignty-avoid-d...)

Indonesia’s Investment Coordinating Board (BKPM) will “revoke thousands of investment permits granted to foreign and local investors who fail to spend money on various projects.” The purpose is less to punish those whose investments were not realized, but rather to “encourage investors to strengthen their commitment to doing business” and to ensure projects still relate to the permits originally issued. The permits to be revoked relate to about 7800 investment licenses given between 2000 and 2006 with a value of roughly US $43.8 billion. The majority of permits to be revoked in terms of numbers were given to foreign investors (Grace D. Amianti, “BKPM to Revoke ‘Idle’ Investment Permits,” The Jakarta Post, July 8, 2015, http://www.thejakartapost.com/news/2015/07/08/bkpm-revoke-idle-investmen...)

Foreign mining companies in Indonesia are required to divest at least 51 percent of their shares to local companies. However, there are reductions in the extent of divestment required if the foreign firm also is involved in refining operations or both refining operations and underground mining. Pursuant to this, Freeport-McMoRan is selling another 10 percent of Freeport Indonesia to Indonesian investors so that the Indonesian side will have 20 percent this year. Indonesia President Widodo has ordered that the Freeport divestment be done according to extent rules providing some stability to Freeport, which concurrently is facing higher royalty payment obligations (Raras Cahyaitri, “Freeport Ready to Divest Shares to Local Firms,” The Jakarta Post, July 4, 2015, http://www.thejakartapost.com/news/2015/07/04/freeport-ready-divest-shar...)

Vietnam has struck separate agreements with Japan and South Korea to cooperate on cybersecurity, posts, telecommunications, broadcasting, training, e-governance, and smart cities. The Vietnamese Minister of Information and Communications and his Japanese and South Korean counterparts, Japan’s Internal Affairs and Communication Minister and South Korea’s Minister of Government Administration and Home Affairs, respectively, also agreed to “enhance investment and business cooperation between enterprises working in the fields of posts, telecomm, and IT” (Vietnam-Japan) and to “enhance their cooperation to boost business investment, as well as encourage ICT companies in Vietnam and South Korea to meet and look for business opportunities” (“Viet Nam, Japan Agree to Boost ICT Co-Operation,” VietNam News, July 9, 2015, http://vietnamnews.vn/economy/272795/viet-nam-japan-agree-to-boost-ict-c... “Vietnam, S Korea Seal ICT Co-Operation Deal,” VietNam News, July 7, 2015, http://vietnamnews.vn/economy/272711/viet-nam-s-korea-seal-ict-co-operat...)

Visiting the US for the first time, Vietnamese Communist Party General Secretary Nguyen Phu Trong spoke at a US Chamber of Commerce and US-ASEAN Business Council roundtable. Trong stated “Vietnam would speed up administrative reforms on tax and customs procedures to create a better investment climate for foreign businesses.” He encouraged US companies to “invest in environmentally friendly, high-tech projects to serve their global business strategies and help develop the two countries’ comprehensive partnership.” During his visit, various American and Vietnamese parties further signed agreements relating to the banking sector, of specific relevance to Citibank, and aviation, germane to Honeywell (“Party Chief Talks Tax Reform with US Firms,” VietNam News, July 10, 2015, http://vietnamnews.vn/economy/272855/party-chief-talks-tax-reform-with-u...)