MNCs in the News-2016-08-05

In late July, the new United Kingdom (UK) government surprised everyone by announcing it wanted to review the new power plant at Hinkley Point that is to be built by a consortium involving EDF (France) and China General Nuclear Power Corporation (CGN), the latter holding a 30+ percent stake in the project. Analysts conjecture the delay has to do with the new government’s concerns about the project’s immense 18-30 billion pound cost, especially vis-à-vis non-nuclear alternatives, the amount to be paid for the consortium for electricity, and the new Prime Minister’s dislike of many of previous Chancellor George Osborne’s initiatives (Ben Thompson, “What Now for Hinkley Point,” BBC News, July 29, 2016, http://www.bbc.com/news/business-36925219; Anushka Asthana and Graham Ruddick, “Government Seeks to Reassure Investors as Hinkley Point C Delayed,” The Guardian, July 30, 2016, https://www.theguardian.com/uk-news/2016/jul/29/government-seeks-to-reas... George Parker, “Hinkley Reveals May’s Methods,” Financial Times, August 1, 2016)

Many wonder if the new British government’s move to delay a decision on Hinkley Point has to do with concerns about a Chinese state-owned enterprise (SOE) being involved in critical infrastructure. After all, new British Prime Minister Theresa May’s chief of state Nick Timothy previously warned about the possibility of China building weaknesses into computer systems that it could use to shut down Britain’s energy grid. Such concerns may have intensified given China’s continuing rise and assertiveness. CGN’s reaction to the delay has been muted with it noting it “‘respected the new government’s need to familiarize itself with the project’” (Carrie Gracie, “Is China the Hitch for the Hinkley Point Deal?” BBC News, July 29, 2016, http://www.bbc.com/news/world-36922898; Carrie Gracie, “Hinkley Point: Theresa May’s China Calculus,” BBC News, July 31, 2016, http://www.bbc.com/news/world-36937511)

The Chinese Foreign Ministry said it “‘noted’” the new British government’s decision on Hinkley and that China “‘hopes Britain can reach a decision as soon as possible, to ensure the projects’ smooth implementation.’” In a letter in the Financial Times, Chinese Ambassador to the UK Liu Xiaoming took a slightly stronger stance, saying the delay had “brought the two countries to a ‘crucial historical juncture’ and “hinted ‘mutual trust’ could be in jeopardy if the UK Government decided not to approve the deal.” Some feel the UK government’s move may endanger the “Golden Era” of relations between the two countries (James Kynge and Lucy Hornby, “Hinkley Decision Threatens UK ‘Golden Era’ with China,” Financial Times, July 31, 2016; Ben Blanchard, “China Calls for British Nuclear Project to Proceed,” Reuters, August 1, 2016, http://www.reuters.com/article/us-edf-britain-china-idUSKCN10C1JM; “China Warns of ‘Crucial Juncture’ Over Hinkley Delay,” BBC News, August 8, 2016, http://www.bbc.com/news/business-37016120)

France recently awarded contracts for its first industrial-scale offshore floating wind power projects. CGN European Energy, a subsidiary of China’s nuclear power firm CGN, in partnership with French new-energy firm Eolfi, won a tender for one of these projects. Per the contract, the consortium will build a floating wind power project in the sea off the coast of the island of Groix in Brittany that is intended to generate 24MW of power. The project will have four floating wind turbines (“China Nuclear Giant CGN Wins French Wind Power Contract,” China Daily, July 26, 2016, http://europe.chinadaily.com.cn/business/2016-07/26/content_26220160.htm)

South Korea’s Environmental Ministry announced it had “banned sales and cancelled certifications of tens of thousands of Volkswagen vehicles” because of suspicions that [Volkswagen] had prepared fraudulent emissions and noise level test reports. South Korea’s Environmental Ministry already had prohibited 14 models and will add 66 models to the ban list, though there will no mandatory recall requirement. The Ministry also imposed a USD $16 million fine on Volkswagen for false emissions tests. Audi Volkswagen Korea said “it was regrettable for the ministry to have taken the sternest measures, and that it will review possible responses to the ministry’s decision” (“S. Korea Bans Sales, Cancels Certification of 83,000 Volkswagen Vehicles,” Xinhua, August 2, 2016, http://news.xinhuanet.com/english/2016-08/02/c_135558082.htm)

It has been reported that South Korea’s National Tax Service (NTS) Seoul Regional Office has launched a probe into the Korean affiliate of Huawei Technologies Co. for possible tax evasion. Though no details of the investigation have been disclosed, the probe reportedly focuses on whether or not Huawei manipulated transfer prices in order to reduce its corporate tax payment obligations. The investigations come after prosecutors undertook a raid into Huawei based on an accusation by Ericsson LG that a Huawei executive leaked confidential wireless telecom technology (Lee Sang-duk, “Korea Tax Authorities Are Investigating Huawei’s Korean Office,” Pulse, July 26, 2016, http://pulsenews.co.kr/view.php?year=2016&no=533840)

Indonesia’s Investment Coordinating Board (BKPM) is confident of reaching its realized inward FDI goal (USD $45.3 billion) this year even though it was only halfway in meeting its target. According to BKPM deputy director Azhar Lubis, the hope is the country will reach its target “‘by continuing the fast-track permit process.’” The fast-track permit process is designed for companies with more than 1,000 employees or a minimum investment of Rp 100 billion and reduced the permit processing time from weeks to three hours. The program will be extended to those creating new firms or buying local businesses using repatriated funds (Stefani Ribka, “BKPM on track with investment target,” The Jakarta Post, July 28, 2016, http://www.thejakartapost.com/news/2016/07/28/bkpm-track-with-investment...)

The South China Sea dispute has become a contentious issue among Southeast Asian nations. Nevertheless, in the view of new BKPM chief Thomas Lembong, rising maritime tensions will not affect foreign investment flows to Indonesia including from China. Indeed, realized foreign investment from China increased by 533 percent to $1 billion in the first six months of this year versus $160.2 million for the same period time last year. Indonesia hopes that increased investment from China coupled with greater Chinese tourist flows can help to reduce the large trade deficit between the two countries which Thomas described as “‘very dangerous’” (Stefani Ribka, “SCS dispute poses no threat to investment,” The Jakarta Post, July 30, 2016, http://www.thejakartapost.com/news/2016/07/30/scs-dispute-poses-no-threa...)

According to Indonesia’s new Energy and Mineral Resources Minister Archandra Tahar, Indonesia plans to ensure that all investors in the energy sector, including mining giant Freeport Indonesia, obey the country’s the laws and rules. Tahar said he would force Freeport Indonesia to carry out its divestment obligations, including a plan to build a smelter in Indonesia, per Government Regulation No. 77/2014. The ministry also will provide ensure legal certainty for both domestic and foreign investors that make their investments in accordance with regulations. This will contribute to the welfare of the people by offering more jobs and boosting economic growth (Ayomi Amindoni, “Energy sector investors must abide by law: Minister,” The Jakarta Post, July 29, 2016, http://www.thejakartapost.com/news/2016/07/29/energy-sector-investors-mu...)

Despite years of delay, Thai oil and gas conglomerate PTT PLC says it is still in the process of developing a US$ 20 billion refinery and petrochemical plant in Vietnam. PTT counters doubters by saying the company had assigned the project to its petrochemical subsidiary, IRPC, which has strong experience in the petrochemical business, and adding that the company has already conducted a feasibility study of the project. PTT is searching for a local partner after Saudi Aramco withdrew from the project because of collapsing global oil prices. Back in 2014, Vietnam’s Thai Binh Dinh provincial authority joined the project (Yuthana Praiwan, “PTT Vietnam Plant ‘On Track,’” Bangkok Post, July 28, 2016, http://www.bangkokpost.com/business/news/1046369/ptt-vietnam-plant-on-track)

Registered FDI in Vietnam over the past seven months reached nearly US $12.9 billion, an increase of 47 percent YOY. Foreign investors poured $8.7 billion of fresh capital into 1,408 projects and augmented the capital of 660 existing projects by $4.2 billion. The manufacturing and processing sector continues to attract the greatest amount of IFDI, receiving over $9.1 billion, accounting for 71 percent of the nation’s total IFDI. The real estate sector is the second largest IFDI recipient sector, receiving $957 million. South Korea took the lead as the largest source of FDI, followed by Singapore, Hong Kong, and Taiwan (“Foreign investment in Vietnam surged 47%,” Vietnam News, July 29, 2016, http://vietnamnews.vn/economy/300314/foreign-investment-in-viet-nam-surg... )

*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.