MNCs in the News-2015-10-02

China’s National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), and other agencies met with foreign business representatives to solicit their perspective on China’s investment environment. A secretary-general of the NDRC said, “the government will step up efforts in improving efficiency and transparency, and further optimizing the investment environment.” The vice-president of the European Union Chamber of Commerce in China noted his members were happy China was moving to a negative list model and had progressed in cutting red tape. However, they had concerns about opportunities for foreign companies in state-owned enterprise (SOE) reform and China’s security review system (Lan Lan, “NDRC: Wider Prospects for Foreign Investment,” China Daily, September 29, 2015, http://www.chinadaily.com.cn/business/2015-09/29/content_22009011.htm)

Chinese authorities are investigating Schindler, a Swiss lift and escalator manufacturing firm, for possible bribery. In tandem with this, Chinese police took two Chinese managers (including the local managing director) away for questioning. According to media reports, possible charges relate to embezzlement, the acceptance of bribes, and the payment of bribes. Schindler “said it is working closely with authorities on the case and will provide further information as soon as proven facts’ have been established” (“2 Schindler Execs Face Bribery Scrutiny,” China.org.cn, September 27, 2015, http://www.china.org.cn/business/2015-09/27/content_36693695.htm

According to an investigation by Hong Kong-based “Students and Scholars against Corporate Misbehavior” (SACOM) involving undercover workers and interviews, Lens Technology, a supplier of touchscreen glass to Apple, mistreats its workers. The alleged mistreatment includes forced overtime, severe restrictions on breaks, wages unjustly withheld for weeks, a failure to make required social security payments, and an unsafe factory working environment including dust and polluted water. SACOM pressed Apple to rectify the problems at its supplier and “‘to fulfill its corporate responsibility…to give workers a workplace with dignity and respect.” SACOM previously targeted Japanese retailer Uniqlo for its flawed supply chain (“Apple Supplier ‘Exploits its Workers,” China.org.cn, September 26, 2015, http://www.china.org.cn/business/2015-09/26/content_36686639.htm)

China’s MOFCOM announced that it had fined Canadian train maker Bombardier and CSR Nanjing Puzhen, a local unit of CRRC, a giant train SOE which came into being after the merger of CSR Corporation and China CNR, for creating a 250 million RMB joint venture (JV) prior to receiving required government approvals. A Bombardier spokesman said “regulatory notification was introduced while the company and its Chinese counterpart were already involved in negotiations over the JV.” MOFCOM fined Bombardier and CSR Nanjing Puzhen USD $25,000 each (“China Fines Bombardier and Local Firm for Joint Venture,” BBC News, September 30, 2015, http://www.bbc.com/news/business-34398273)

China’s MOFCOM slapped Microsoft and Shanghai Oriental Pearl Media Co. (BesTV), Microsoft’s Xbox console venture partner, with a reprimand and imposed a minor fine of USD $31,430, for minor violations of antitrust rules. The two companies failed to inform MOFCOM that their JV, formed in 2013 to sell the Xbox in the China market, exceeded a market share that “usually triggers a disclosure requirement.” The case is unrelated to MOFCOM’s investigation of whether or not Microsoft violated anti-competition laws regarding sales of its Windows operating system and Office software suite (“Microsoft, Partner Rapped over Breach of Rules in Console Venture,” China Daily, September 30, 2015, http://www.chinadaily.com.cn/business/2015-09/30/content_22016902.htm)

Numerous Chinese corporate executives accompanied Chinese President Xi Jinping during his recent state visit to the US. In contrast to Xi’s last trip to the US when he was Vice-President, a majority of firms were privately owned. Furthermore, more than 25 percent of the firms were tech firms (Alibaba, Baidu, and Tencent) whereas in 2012 the percentage ran less than 10 percent. Some commentators view the composition of the business delegation as evidence of China’s shift to a new model emphasizing consumption, services, and high-tech. Many firms in the delegation have investments in the US or partnerships with American firms (Lyu Chang and Gao Yuan, “High-Tech Heavyweights Eye US Investments,” China Daily, September 30, 2015, http://www.chinadaily.com.cn/business/tech/2015-09/30/content_22017073.htm)

Unisplendor, part of Tsinghua Unigroup, a SOE, announced it would pay US $3.8 billion for a 15 percent stake in Western Digital, which manufactures storage drives. Unisplendor would obtain one board seat as part of its purchase, but would not have voting rights equivalent to its stake. Tsinghua Unigroup emerged into the spotlight this summer when news reports indicated the firm intended to make an offer for Micron Technology. Unisplendor’s acquisition still has to go through a Committee on Foreign Investment in the US (CFIUS) review. This year China has been aggressive in US tech acquisitions, laying out $5.9 billion (Tom Mitchell, “Chinese Tech Group Buys into US Data Storage Company Western Digital,” Financial Times, October 1, 2015; “Sino-US Tech: Poor Relations,” Financial Times, October 1, 2015).

Instead of a high-speed train connecting Jakarta-Bandung, Indonesia ultimately opted for a semi-high speed project. Raising the ire of Japan, China is likely to win this project because its financing package does not require Indonesia to commit any funds whereas Japan’s does. Still, “Indonesia is keeping open the possibility of Japan working” on the project and Indonesian president Joko “Jokowi” Widodo sent a special representative to Japan to meet with Japanese Prime Minister Shinzo Abe and communicate Indonesia’s requirements which include no Indonesian state loans, funds, or risk sharing. Jokowi also will have a special envoy meet with Chinese representatives (Ina Parlina and Dylan Amirio, “RI Sends Envoys to Japan, China to Discuss Train Project,” The Jakarta Post, September 29, 2015, http://www.thejakartapost.com/news/2015/09/29/ri-sends-envoys-japan-chin... Robin Harding, Avantika Chilkoti, and Tom Mitchell, “Japan Cries Foul after Indonesia Awards Rail Contract to China,” Financial Times, October 1, 2015)

Indonesia’s Energy and Mineral Resources Ministry reported that inward foreign investment in the energy, mining, and oil and gas exploration and production areas is likely to fall far short of government goals for 2015. The main culprit seems to be falling commodity prices, which dampen investor desires to expand production. To date, Indonesia has received US $20.87 billion in the aforementioned areas, almost half in the oil and gas sector and its 2015 target is $45.59 billion. The government is moving to stabilize and encourage greater investment by streamlining bureaucracy and deregulating the sector by eliminating a number of rules (Raras Cahyafitri, “Investment in Energy Well Below Govt Target,” The Jakarta Post, September 29, 2015, http://www.thejakartapost.com/news/2015/09/29/investment-energy-well-bel...)

At the 13^th World Chinese Entrepreneurs Convention, an Indonesian government representative touted the government’s plan to cut the corporate income tax from 25 to 18 percent and to provide a tax amnesty as part of the government’s initiatives to bring in more foreign investment. The representative encouraged Chinese entrepreneurs to invest in Indonesia’s programs to shift away from reliance on commodities to value added manufacturing. He also pushed Chinese entrepreneurs to put money in infrastructure such as toll roads, seaports, and power plants, and downstream industries. Other conference speakers touted the attractive opportunities created by the decline in commodity prices (Ni Komang Erviani, “Govt Hopes to Seduce Chinese Investors,” The Jakarta Post, September 28, 2015, http://www.thejakartapost.com/news/2015/09/28/govt-hopes-seduce-chinese-...)

The European Association for Business and Commerce (EABC) reported that Thailand remains an attractive destination for European businesses to invest even though the country has had a slew of problems lately including protests, a coup, and terrorism. Businesses saw opportunities for gains in growth, profitability, and sales over the next six months. However, there are concerns about legislation requiring foreign firms to hire locals and to give Thais majority ownership in firms. The EABC based its conclusion on a survey of executives of small- to medium sized enterprises, many of which had been in Thailand for more than 10 years (“EABC Upbeat about Thai Investment,” Bangkok Post, September 26, 2015, http://www.bangkokpost.com/business/news/707800/eabc-upbeat-about-thai-i...)

Singapore’s state-linked infrastructure firm Sembcorp Industries, which is engaged in power generation, water treatment, and other businesses, recently concluded a US $390 million deal to develop and operate a 426-megawatt natural gas power plant in Bangladesh’s Sirajganj district which is northwest of Dhaka. Sembcorp, which already operates similar plants in Singapore and Vietnam and has been expanding into India and Myanmar, will have a 71 percent in the JV for the project while the Bangladesh government will have the remainder. The project, which is supposed to be operational by 2018, is Bangladesh’s first public-private partnership (Mayuko Tani, “Investing in Bangladesh to Meet Growing Power Demand,” Nikkei Asian Review, September 30, 2015, http://asia.nikkei.com/Business/Companies/Investing-in-Bangladesh-to-mee...)

Vietnam’s Department of Economic Zones Management, which is part of the Ministry of Planning and Investment, said that Vietnam has had a surge in the number of industrial parks. These industrial parks drew in US $8.7 billion of foreign direct investment (FDI) between January and September this year, accounting for almost 67 percent of the country’s total inward FDI flows of $11 billion. Many of the projects in the industrial parks relate to garment and textiles, electronics, and manufacturing processing. The parks seek to provide good infrastructure, access to educational facilities, and specialized institutions, among other resources desired by investors (“Increasing Numbers of Industrial Parks Draw Foreign Investment,” Viet Nam News, September 29, 2015, http://vietnamnews.vn/in-bai/276388/increasing-numbers-of-industrial-par...)

At a seminar in Cambodia hosted by the Vietnamese embassy, the Vietnamese Business Association in Cambodia (VBAC), and the Association of Vietnamese investors in Cambodia, it was revealed that Vietnam was one of Cambodia’s top five investors in April, pouring US $3.2 billion into the country. This money has gone into rubber plantations, fertilizer plants, a hospital, and telecommunications projects. Vietnamese firms asked their government to do more to help them do business in Cambodia and asked the VBAC to help knit a tight business community. Vietnamese government representatives noted that Vietnamese firms in Cambodia could help promote economic cooperation (“VN a Top Investor in Cambodia,” Viet Nam News, October 1, 2015, http://vietnamnews.vn/in-bai/276481/vn-a-top-investor-in-cambodia.htm)