MNCs in the News-2017-06-02
A story in Global Times pronounced corporate announcements, surveys, and inward foreign direct investment (FDI) patterns show “China remains popular among foreign investors despite reports that foreign companies are leaving amid increasing labor costs.” It opined this was due to China’s shift to high-technology and services and “improved business environment.” Foreign interest in high-tech is indicated by inward FDI (IFDI) data which shows investment in the sector was up 12.4 percent year-over-year (YOY) for the first four months of the year, hitting USD $5.3 billion (Zhang Ye, “Nation Still in Favor with Foreign Investors,” Global Times, May 30, 2017, http://www.globaltimes.cn/content/1049233.shtml).
The Cyberspace Administration of China announced China will delay for 18 months the implementation of a regulation on cross-border data movement originally supposed to go into effect on June 1. However, the rest of China’s cybersecurity law, which has rules pertaining to hardware and software security reviews, the storage of data in China, and so on, will go into effect as planned. Foreign business interests have expressed concerns the law is unclear, might risk their trade secrets, and might be used in a discriminatory fashion (Joe McDonald, “China Postpones Portion of Cybersecurity Law,” The Washington Post, May 31, 2017, https://www.washingtonpost.com/world/asia_pacific/china-postpones-portio...).
Chinese outward FDI (OFDI) in Malaysia, which has been growing dramatically since 2012, has been heavily oriented towards the real estate sector (construction and property) with relatively little going into other areas such as electronics, logistics/warehousing, and communications. This has led to the creation of a thousands of construction jobs, though many are for low-skilled workers. Nevertheless, looking at greenfield projects, on a “per-project basis Chinese investment created three times as many jobs as Chinese investment and was more than 3.5 times greater in value” (“ASEAN Data View: China Creating Jobs in Malaysia-but Low Skilled,” Financial Times, May 23, 2017)
Japanese multinational corporations are looking to renegotiate their liquefied natural gas (LNG) contracts with Qatar Petroleum (QP), Qatar’s state owned LNG producer, following increased LNG production in Australia and Nigeria. Qatar may force Japanese companies out of their investments in QP projects if they push too hard in negotiations, or switch to new LNG providers. As a result, Marubeni Corp and Mitsui Co may each lose between 7.5 and 9 percent stake in Qatargas projects if they abandon QP as a LNG supplier (“Qatar talks tough on project stakes in Japan LNG contract talks,” Japan Today, June 1, 2017, https://japantoday.com/category/business/Qatar-talks-tough-on-project-st...)
Japanese corporations are increasingly partnering with South Korean ones on overseas projects due to new Korean President Moon Jae In’s focus on economic initiatives. Japanese companies can leverage their advanced technology and financial institutions in combination with lower Korean construction costs to boost competitiveness in overseas markets. Examples include Mitsubishi Corp and JGC Corp. partnerships with Korean firms in Southeast Asia resource production initiatives. As well, Sumitomo Corp., a diversified Japanese conglomerate, is partnering with a Korean food manufacturer to penetrate Vietnam’s food sector (“S. Korean business circle seek closer ties with Japan,” The Japan News, May 30, 2017, http://the-japan-news.com/news/article/0003719002)
Hyundai Engineering and Hyundai Engineering and Construction won a USD $890 million power plant construction deal in Malaysia with Chinese owned, Malaysian power producer, Edra Global Energy Berhad. The project is for a combined-cycle gas turbine power plant, which will become the largest in Southeast Asia once completed. Experts say this year “will be very promising” for Korean multinational construction firms as oil prices are stabilizing with Iran, one of Korea’s biggest oil exporter, “becoming politically stable” under new Iranian President Hassan Rouhani’s leadership (Jhoo Dong-chan, “Hyundai Engineering wins power plant deal in Malaysia,” Korea Times, June 1, 2017, http://www.koreatimes.co.kr/www/tech/2017/06/693_230461.html)
Samsung Heavy Industries has won a USD $2.5 billion deal, which is part of a larger joint venture (JV) run by Eni, Italy’s state owned energy firm, China Petroleum Corp., and Korea Gas, Korea’s state owned natural gas producer, to build a liquefied natural gas (LNG) facility off Mozambique’s coast. The floating natural gas production facility, which should be completed by 2020, is expected to produce 3 million tons of LNG annually and will represent more than half of Samsung Heavy Industries’ overseas production contracts (Shim Woo-hyun, “Samsung Heavy Industries Secures $2.5b contract,” The Korea Herald, June 2, 2017, http://www.koreaherald.com/view.php?ud=20170602000661)
The Indonesian government promises to ease business burdens for investors who operate in its special economic zones. J akarta plans to improve local infrastructure facilities, including airports, the network of highways leading to tourist sites, as well as other public facilities. The government also seeks to fix “the management system” in tourism areas. According to Indonesian Tourism Minister Arief Yahya, “ideally” one authority should manage a tourist site. He stated this would “slash the bureaucracy process” as well as affect the management process of such a location (“Indonesia Offers Ease of Business in Tourism Sector,” Tempo.com, May 26, 2017, https://en.tempo.co/read/news/2017/05/26/056878862/Indonesia-Offers-Ease...)
Malaysia and China will organize meetings in the near future to move forward with proposals for the construction of three new ports along the Strait of Malacca, and the joint development of the Bandar Malaysia project. The visit by the Chinese delegation to Malaysia is part of “a quick follow-up” on the infrastructure initiatives that Malaysian Prime Minister Najib Razak and Chinese President Xi Jinping discussed on the margins of the recently held One Belt, One Road conference in Beijing (Leslie Lopez, “Malaysia and China to meet over port projects and Bandar Malaysia,” The Strait Times, May 31, 2017, http://www.straitstimes.com/asia/se-asia/beijing-kl-to-meet-over-port-pr...)
A recent survey by the Japanese Chamber of Trade and Industry Malaysia (Jactim) and the Japan External Trade Organization (JETRO) suggests that this year’s Japanese investment in Malaysia “may rise by at least 30%,” driven by “gradual improvement” in the local economy. Jactim also projects that the upcoming elections in Malaysia may spur more Japanese investment as it may increase political stability. Moreover, Tokyo is encouraging Japanese businesses “to show more interest” in the country (Ho Wah Foon, “Japanese Investments Are Looking Up,” The Star Online, May 28, 2017, http://www.thestar.com.my/news/nation/2017/05/28/japanese-investments-ar...)
Vietnamese lawmakers called at the recent National Assembly for public private partnerships to attract both domestic and foreign private investment in the railway sector. Although the Vietnamese government encourages investment in the development of its railway system, so far little capital has flowed into this sector. Various deputies blamed the “monopoly of State-owned enterprises” for this situation and pledged to revise the law in order to eliminate SOE domination. The vote on the revised Law on Railway will have place later on this month (“NA Urges Railway Investment,” Viet Nam News, May 31, 2017, http://vietnamnews.vn/politics-laws/377430/na-urges-railway-investment.h...)
During a roundtable talk on US-Vietnam investment cooperation in New York, Vietnam’s Prime Minister Nguyen Xuan Phuc stated “the time is ripe for US businesses to engage more strongly in the economic restructuring of Vietnam.” The Prime Minister highlighted “finance-banking” and “State-owned enterprise equitization” as sectors for further involvement by American firms. The US is one of the top investors in Vietnam with 835 projects, with total FDI of around USD $10.2 billion (“Time Ripe for US Firms to Further Engage in VN’s Restructuring: PM Nguyen Xuan Phuc,” Vietnam Net, May 31, 2017, http://english.vietnamnet.vn/fms/business/179446/time-ripe-for-us-firms-...)