MNCs in the News-2016-02-05

Shanghai’s Jiading People’s Court has issued verdicts relating to a food safety scandal involving OSI China, a subsidiary of US OSI Group, that broke in 2014 relating to the re-use of bad meat and deceptive labeling. The court fined the Shanghai and Hebei branches of OSI China, which supplied food chains like McDonald’s and Yum Brands, around USD $360,000 and imposed prison sentences on 10 of its employees. OSI criticized the verdicts as “unjust” while the presiding judge said OSI China broke China’s Food Safety Law. OSI said it was the victim of a smear campaign and is considering appealing (“Chinese Court Punishes Fast Food Supplier, Executives,” China.org.cn, February 1, 2016, http://www.china.org.cn/business/2016-02/01/content_37712266.htm; Adam Jourdan, “China Court Fines OSI, Jails Employees over Food Scandal,” Reuters, February 1, 2016, http://www.reuters.com/article/us-osi-china-trial-idUSKCN0VA235; Rachel Chang and Megan Durisin, “U.S. Food Supplier Weighs Appeal after China Court Jails Workers,” Bloomberg Business, February 1, 2016, http://www.bloomberg.com/news/articles/2016-02-01/shanghai-court-fines-o...)

Chinese media reported China’s General Administration of Quality Supervision, Inspection, and Quarantine have ordered German car giant Volkswagen to recall more than 2,000 Touareg SUVs in China because “batteries in the car could short-circuit if water gets in the trunk.” According to reports, “Volkswagen will install drain valves for the affected vehicles free of charge” (“Volkswagen Recalling 2,120 SUVs over Fire Hazard,” China Daily, January 30, 2016, http://www.chinadaily.com.cn/business/motoring/2016-01/30/content_233200...)

Even though China has been trying to control capital outflows in recent months, there seems to be no sign of Chinese OFDI abating as shown by ChemChina’s, a state-owned enterprise (SOE), recent USD $43 billion bid for Switzerland’s Syngenta, a globally prominent seeds and pesticides company. After all, OFDI fits with the government’s strategic of transforming the economy from “low-value manufacturing to high-growth production,” its quest to “build global champions,” and “upgrading its economy and bringing long-term value.” This said, some analysts note “‘some companies have been restricted in the purchase of (foreign exchange) FX (Lisa Jucca, “Though Trying to Stem Capital Outflows, China Will Press on with Foreign Buys,” Reuters, February 3, 2016, http://www.reuters.com/article/us-china-m-a-idUSKCN0VC0ZP)

Some sources contend the China-Indonesia high speed rail connecting Jakarta and Bandung has been held up because Indonesia’s transportation ministry “had not yet signed off on the construction permits or the concession agreement” due to the fact that required documents had not been submitted or had been improperly submitted. Some attributed the problem to the difficulties of operating in Indonesia while others pointed to the failure of Chinese firms to understand local procedures and requirements. China’s Foreign Ministry retorted the project was not suspended while a China Railway Co. Ltd. official stated “‘the construction of the railway is going smoothly’” (Ben Bland, “Chinese $5.5bn High-Speed Rail Project Held up in Indonesia,” Financial Times, January 28, 2016; “China Says Indonesian High-Speed Railway Project Not Suspended,” China.Org.cn, January 29, 2016, http://www.china.org.cn/business/2016-01/29/content_37696502.htm)

SOE COSCO, a Chinese shipping company, is seeking to win a contract to “run the port of Limassol [container terminal and multipurpose terminal] on the island of Cyprus.” Limassol Port is Cyprus’s main port and serves most of its cargo and passenger traffic. Cyprus hopes the development of the port can make it a gateway port especially for “hydrocarbon support services.” In January, Chinese Foreign Minister Wang Yi said China “wants to help turn the eastern Mediterranean island nation into a regional shipping hub.” Chinese media say investment in the region is part of the One Belt, One Road initiative (Maria Petrakis, “COSCO to Bid for Port of Limassol in Cyprus,” China Daily, January 29, 2016, http://www.chinadaily.com.cn/business/2016-01/29/content_23301148.htm)

Responding to a petition signed by over 1 million people accusing it of abetting the slaughter of elephants, Yahoo Japan “said it will strengthen its policies to remove illegal ivory from its online marketplace.” Yahoo said it did not permit sales of raw ivory, though it did not ban sales of ivory ornaments produced prior to the 1989 international treaty banning raw ivory sales. The Environmental Investigation Agency said Yahoo could do more do deal with issues like fake documents and ivory marking and registration. Yahoo would not promise to block all sales, but did not reject reconsidering its policies (“Yahoo Under Pressure over Ivory Sale on its Auction Site,” BBC News, January 27, 2016, http://www.bbc.com/news/technology-35424555)

Meeting in Tokyo, Japanese Foreign Minister Fumio Kishida and Iranian Minister of Economic Affairs and Finance Ali Taiebnia concluded a bilateral investment pact that will give Japanese firms opportunities to invest in Iranian resource (oil and gas) and other sectors as well as export goods such as autos to Iran. The signing of the pact comes almost immediately after the conclusion of a nuclear deal that allowed for the lifting of economic sanctions on Iran. Taiebnia expressed an interest in Japanese motorcycles, renewable energy products, and agricultural processing. Suzuki already has begun to talk about restarting its operations in Iran (“Japan Signs Investment Pact with Iran to Boost Economic Ties,” The Japan Times, February 5, 2016, http://www.japantimes.co.jp/news/2016/02/05/business/japan-signs-investm...)

On February 1, the Korean Fair Trade Commission released a report on “Lotte’s current status of shareholdings in its overseas affiliates” pursuant to which it said it would take action if there were differences between what was reported and what the actual situation was. Soon thereafter, it said it had imposed sanctions on Lotte Group founder Shin Kyuk-ho as well as Lotte’s 11 domestic subsidiaries for providing incomplete or false ownership information in violation of Korea’s Fair Trade Act which requires firms with assets over USD $4 billion to report details of ownership structure as well as owner family stakes (Jung Min-Hee, “Fair Trade Commission Imposes Sanctions on Lotte’s False Reporting of Overseas,” Business Korea, February 2, 2016, http://www.businesskorea.co.kr/english/news/features/13753-lotte%E2%80%9...)

The Korea Water Resources Corporation (K-water) signed a memorandum of understanding (MOU) with the Asian Development Bank to improve water management in South Asia by offering and developing its smart water management (SWM) technology in the region. The project, which entails an investment of USD $1.35 million, is designed to introduce SWM technology to four cities in India, Bangladesh, Nepal and Sri Lanka. The project will start this year and run until 2019 with one city being selected each year. The project aims to help countries in South Asia reduce water leakage rates and manage water supply facilities more efficiently (Lee Song-hoon, “K-water Signs MOU with ADB for Water Management Technological Support,” Business Korea, February 04, 2016, http://www.businesskorea.co.kr/english/news/industry/13778-smart-water-m...)

Indonesia’s Telekomunikasi (Telekom) Indonesia, a state-owned telecoms firm as well as the country’s biggest internet service provider, announced it had blocked Netflix over concerns about the content of Netflix’s offerings (which have content that is violent and/or adult oriented) as well as Netflix’s failure to have the requisite local business permits and open an in-country office (as issue for Indonesian government officials, too). The Indonesian government said it was not involved in the action and also that the action “could be reversed if the global video-streaming giant obeyed local laws, particularly on ‘porn’ and ‘radicalism’” and had no copyright infringement (Leo Kelion, “Netflix Blocked by Indonesia in Censorship Row,” BBC News, January 28, 2016, http://www.bbc.com/news/technology-35429036; “Indonesia Telecoms Firm Blocks Netflix over Local Laws, Censorship,” The Star Online, January 28, 2016, http://www.thestar.com.my/tech/tech-news/2016/01/28/indonesia-telecoms-f...)

The Indonesian government has issued several regulations to speed up the development of infrastructure projects. These regulations empower public officials to change or cancel rules hampering the land acquisition process. Also, they will expedite the appointment of construction firms to implement projects and will significantly reduce the time spent acquiring permits. This policy change shows the country’s determination to develop strategic projects, with it having a goal of building 1000 kilometers of new toll roads, 49 dams, and 24 commercial seaports within five years. However, the lack of funding for inter alia land procurement remains a problem confronting the government (Farida Susanty, “New Regulations to Speed Up Projects,” The Jakarta Post, January 29, 2016, http://www.thejakartapost.com/news/2016/01/29/new-regulations-speed-proj...)

Indonesia’s second-largest Muslim organization Muhammadiyah has challenged the China-Indonesia high-speed Jakarta-Bandung railway project, saying that the project may have some issues related to law and the environment. The organization, which consists of 30 million members, demands that the government publish documents relating to the project. Muhammadiyah’s deputy chairman said the environmental feasibility study was completed in only 15 days (a proper study would take one to two years) and more research was needed since the train will pass a rich aquifer and an earthquake-prone area (“Muslim Group Seeks High-Speed Train Transparency,” The Jakarta Post, February 5, 2016, http://www.thejakartapost.com/news/2016/02/05/muslim-group-seeks-high-sp...)

Japanese investors attending an event organized by Thailand’s Joint Standing Committee on Commerce, Industry, and Banking and the Japanese Chamber of Commerce and Industry (JCCI) have encouraged Thailand to join TPP because membership in the TPP will make Thailand a more attractive investment destination, especially for Japanese small and medium-sized enterprises who feel anxieties about rising labor costs. Thailand needs Japanese IFDI to make progress on its infrastructure projects. Piti Tantakasem, a banking officer with TMB Bank, said that Japanese firms had much potential to get involved in Thai infrastructure projects because of their expertise (Sucheera Pinijparakarn, “Japanese Investors Encourage Thai-land to Join Trans-Pacific Partnership,” The Nation, February 3, 2016, http://www.nationmultimedia.com/business/Japanese-investors-encourage-Th...)

Vietnam’s Foreign Investment Agency reported that inward FDI reached USD $1.33 billion in January, a 101.2 per cent increase. Moreover, as of January 20, the country had licensed almost 130 new foreign-invested projects worth more than USD $1 billion, representing a 157.9 percent increase year-over-year. FDI disbursements showed an increase of 23.1 percent, hitting around USD $800 million. Vietnam’s manufacturing and processing sector garnered the largest share of around 16 investment sectors, receiving USD $905 million or 67.8 percent of total IFDI pledges. Singapore was the largest investor in Vietnam followed by Malaysia and China (“VN FDI Surges this Month,” Viet Nam News, January 28, 2016, http://vietnamnews.vn/economy/281785/vn-fdi-surges-this-month.html)

*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.