MNCs in the News-2015-09-04

Shanghai market supervision authorities fined Pfizer USD $15,570 for signing agreements with four drugstore chains that involved payments to the chains in return for them promoting Pfizer’s erectile dysfunction drug Viagra. The stores specifically had to “display Viagra as a recommended product” and had to display it in a “prominent, fixed place on prescription-drug counters with a certain quantity of display and specific space.” Regulatory authorities said such “under-the-counter” deals were prohibited, confiscated illegal profits from Pfizer, and ordered an end to the practice. Pfizer apologized and said the problem was an “inaccurate execution” of its display agreements with pharmacies (Wang Hongyi, “Viagra Puts Pfizer in the Regulatory Glare,” China Daily, August 28, 2015, http://www.chinadaily.com.cn/business/2015-08/28/content_21731198.htm)

Taiwan’s Electric and Electronic Manufacturer’s Association (TEEMA) ranked Suzhou’s industrial park the top investment destination for Taiwanese firms. Suzhou replaced Kunshan, which had previously occupied the top slot for the past six years. Other top ranked destinations included Xiamen, Chengdu, and Hangzhou’s Xiaoshan district. Mainland government policies like the Silk Road initiative, pilot free trade zones, and incentives for startups played an important role in shaping the rankings. According to the TEEMA, the Yangtze River Delta is the favorite region for Taiwanese businesses operating in China with Suzhou a favorite of high-tech firms and Shanghai a favorite of service firms (Chen Man-Nung, “Suzhou Tops Annual Investment Ranking for Taiwanese Firms,” WantChinaTimes.com, August 31, 2015, http://www.wantchinatimes.com/news-print-cnt.aspx?id=20150831000031&cid=...)

The Chief Investment Officer of the CDB Fan Haibin said that the $1.6 trillion bank, which received $48 billion from the government this year, is increasing its support for Chinese firms and funds (e.g., the China-Africa Development Fund) buying energy and minerals in order to secure resources and help Chinese firms bring new technology back to China. Fan observed “‘the world economy remains in a trough and some of the asset prices are very good…the timing of acquisitions is very good.’” Still, it is worth noting Chinese firms have been caution and have not been major energy investors this year (“China’s Biggest Policy Bank Readies War Chest for Resource Deals,” Bloomberg News, September 1, 2015, http://www.bloomberg.com/news/articles/2015-08-31/china-s-biggest-policy...)

China Railway Rolling Stock Corporation (CRRC), China’s largest high-speed rail car maker, has broken ground on a factory in Springfield, Massachusetts (US) that will build about 300 cars for the Boston subway. The project is expected to bring 150 manufacturing and 100 construction jobs and came to fruition because Massachusetts instituted a “Made in Massachusetts” requirement for the project. CRRC also is mandated to work with local parts suppliers. CRRC Vice-President Yu Weiping described the project as complicated with a “business and cultural environment…vastly different from other markets,” but a start to getting a piece of a potentially “big pie” (“China’s High-Speed Rail Maker Launches Operation in US,” China.Org.cn, September 4, 2015, http://www.china.org.cn/business/2015-09/04/content_36498847.htm)

The US will impose sanctions on Chinese individuals and companies to punish China for its “cyber theft of commercial and economic information from US organizations” and to deter similar activities in the future. The US specifically aims to counter Chinese efforts to steal commercial secrets with a mix of tools including diplomacy, trade actions, law enforcement, and sanctions “‘on individuals or entities that engage in certain significant, malicious cyber-enabled activities.’” In April US President Barack Obama signed an executive order proclaiming a national emergency, though US frustrations, especially among US tech companies, have been brewing for a number of years (Demetri Sevastopulo, “US to Hit Chinese Hackers with Sanctions,” Financial Times, September 1, 2015; Demetric Sevastopulo, Gina Chon, and Charles Clover, “US to Hit China Hackers before Xi’s Washington Visit,” Financial Times, September 3, 2015)

Japanese firms such as Hitachi, Ezaki Glico, and others are working with Japanese universities such as the University of Tokyo and government agencies such as the Ministry of Economy, Trade, and Industry and the Ministry of Education, Culture, Sports, and Science & Technology on a program to attract information technology students from around Asia, especially India. The program, which hopes to fuel next-generation research and development in Japan, will entail a combination of study and internships. In April, the Japanese and Indian governments already agreed to enhance the exchange between the two countries’ IT professionals (“Japan Sets Sights on Indian Tech Students,” Nikkei Asian Review, September 4, 2015, http://asia.nikkei.com/Business/Companies/Japan-sets-sights-on-Indian-te...)

Indonesia’s Investment Coordinating Board (BKMP) chief Franky Sibarani said in a briefing that Indonesia attracted the greatest amount of investment among the members of (ASEAN) in the first semester of 2015. Franky described the flows, which amounted to US $13.66 billion, as showing that “‘Indonesia remains the main investment destination in ASEAN.’” Indonesian inward FDI was much higher than that received by Vietnam and Malaysia and in Franky’s view showed resiliency despite the slowing of the global and Indonesian economies (“Indonesia Gains Highest Investment in ASEAN,” The Jakarta Post, August 31, 2015, http://www.thejakartapost.com/news/2015/08/31/indonesia-gains-highest-in...)

After weeks of speculation about whether or not Chinese or Japanese firms would win a contract to build a high-speed rail from Jakarta to Bandung, Indonesia cancelled the project. President Joko Widodo said it made more sense to build a medium-speed train because the number of stations would prevent a high-speed train from reaching its top speeds. Moreover, a medium-speed train would be 30-40 percent cheaper. Many anticipated China would win the high-speed rail project because of Chinese firms’ ability to build the project relatively cheaply and quickly. Some believe the decision will negatively impact the perceptions of Chinese investors (“Indonesia Hesitates on China vs. Japan Bullet Train Bids,” China.Org.Cn, September 3, 2015, “Indonesia Scraps High-Speed Railway Plan,” China.Org.Cn, http://www.china.org.cn/business/2015-09/03/content_36491483.htm; September 4, 2015, http://www.china.org.cn/business/2015-09/04/content_36496912.htm; “Scrapping Indonesia’s Bullet Train Leaves Top Investors Confused,” The Star Online, September 4 2015, http://www.thestar.com.my/Business/Business-News/2015/09/04/Scrapping-In...)

Reportedly as a result of the Indonesia’s government unwillingness to provide it free land, Foxconn Technology Group cancelled plans to invest in a factory in Indonesia. It is not clear what this means for Foxconn’s overall plan, announced last year, to invest US $1 billion in Indonesia in areas such as phones, televisions, and telecommunications services. Aside from the alleged land issues, Foxconn confronts a new Indonesian law which takes effect in 2017 and requires “firms that sell smartphones and tablets in Indonesia to produce 40 percent of their content locally,” which will increase costs and restrict intellectual property secrets (“Foxconn Cancels Investment Plan in Indonesia-Kontan,” Nikkei Asian Review, September 1, 2015, http://asia.nikkei.com/Business/Companies/Foxconn-cancels-investment-pla...)

Thai Deputy Prime Minister Somkid Jatusripitak called upon the Board of Investment (BoI) and Industry Ministry to “speed up studying the possibility of offering additional privileges to those who invest in seven business clusters in SEZs.” Somkid said “‘privileges should be competitive to even entice those who plan to relocate their production base to other countries.’” The seven clusters are food processing, automotive and parts, electronics and parts, petrochemical, information technology and textiles. Investors in SEZ already receive generous incentives like income tax exemptions, increased tax deductions for the cost of transport and electricity, and exemptions on machinery import duties (Chatrudee Theparat, “Seven Clusters in for Extra Perks in SEZs,” Bangkok Post, August 31, 2015, http://www.bangkokpost.com/business/news/674580/seven-clusters-in-for-ex...)

Vietnam’s realized inward FDI flows for the first eight months of 2015 ran USD $8.5 billion, an increase of 7.6 percent over the previous year. Vietnam attracted investment of $13.3 billion over the same period, an increase of 30 percent. The FDI is for more than 1600 projects with more than 75 percent, on a value basis, going into the processing and manufacturing industry. South Korean firms remain the biggest investors in the country followed by the UK. One marquee investment was a $3 billion Samsung project to boost investment an existing display module plant in Bach Ninh in Vietnam (“FDI Disbursement Rises by 7.6% in 12 Months,” Viet Nam News, August 28, 2015, http://vietnamnews.vn/economy/275081/fdi-disbursement-rises-by-76-in-12-...)

Mongolian Minister Mendsaikhan Enkhsaikhan who is negotiating a deal over the massive Tavan Tolgoi coal mine project with a consortium involving Mongolian Mining Corp., China’s Shenhua, and Japan’s Sumitomo Corp., said he doubted a deal would be struck soon. In April Mongolia’s parliament speaker blocked a deal and it was left in the hands of lawmakers to resolve. Enkhasikhan stated “‘at this moment, it’s less than 10% that it will be approved by parliament and will be implemented.’” He called on investors to be patient and said it was better to proceed slowly on a project of such immense scale (“Mongolia Unlikely to Seal US$4bil Coal Mine Deal, Says Minister,” The Star Online, September 4, 2015, http://www.thestar.com.my/Business/Business-News/2015/09/04/Mongolia-unl...$4bil-coal-mine-deal-says-minister/)

The Asia-Pacific Economic Cooperation (APEC) Forum has launched a fund “to promote open markets for trade and investment and sustainable development in mining.” Australia’s Ambassador to APEC said, “‘we are seeking to improve access to metals and minerals critical to the future of development and prosperity in the Asia-Pacific.’” The fund will “subsidize information sharing, training and policy research” to support goals like eliminating trade barriers, job creation, and wage growth. Its main focus will be public-private partnerships to promote good regulation, education, and innovation and technology cooperation. It also aims minimize pollution, promote fair labor practices, and empower women (APEC Mining Task Force, “Fund to Deepen Public-Private Collaboration in Mining Trade, Investment,” August 31, 2015, http://www.apec.org/Press/NewsReleases/2015/0831_MTF.aspx)

*The information compiled in the MNCs in the News digest is gathered from sources believed to be reliable, but the Wong MNC Center does not guarantee their accuracy. The content of the MNCs in the News digest does not necessarily represent the view of the Wong MNC Center, its Board of Directors, or its Advisory Board, but is intended for the non-commercial use of readers in order to foster debate and discussion and to facilitate and stimulate research.