MNCs in the News-2017-10-06

China

At a press conference, Gao Feng, a spokesperson for China’s Ministry of Commerce (MOFCOM) stressed that “there would be no discrimination in Chinese industrial policies.” He further emphasized, as noted in a January State Council document, that “‘The State Council has highlighted equality for both domestic and foreign-funded businesses’” and that “‘China’s industrial policies are aimed at guiding and stimulating industries…and will not distort the market.’” Gao’s remarks follow criticisms from US Commerce Secretary Wilbur Ross about China’s subsidies for new energy vehicles and other sectors (“Chinese Official Reassures Foreign Firms over Equal Treatment,” China Daily, September 29, 2017, http://www.chinadaily.com.cn/business/2017-09/29/content_32633215.htm)

For many reasons, Beijing has been inclined to support state-owned enterprises (SOEs) versus other players like private firms. The impact of this is felt strongly by domestic firms, but foreign firms worry, too, about competing against “heavily subsidized Chinese rivals.” Foreign companies also fret about China’s “Made in China 2025” plan which has identified 10 sectors like advanced medical technology, semiconductors, and new energy vehicles that China wants dominate locally and in which it wants to be competitive globally (Jane Cai, “Private Players Feeling Squeezed Out by Beijing’s Support for State-Owned Companies,” South China Morning Post, October 4, 2017, http://www.scmp.com/news/china/economy/article/2113869/past-its-use-date...)

Japan

The Bain Capital led consortium, which finalized a deal for Toshiba’s memory chip business for USD $18 billion, will continue with purchase arrangements despite litigation by Western Digital, a former US joint venture (JV) partner of the Japanese firm. As part of the deal, Toshiba and Hoya Corp., a Japanese medical technology firm, will hold 51.1 percent of voting rights. Toshiba was forced to sell its chip business due to US safety regulations imposed in 2011 which hurt its nuclear reactor business (Yuri Kageyama, “Bain hoping to settle with Western Digital on Toshiba deal,” Japan Today, October 6, 2017, https://japantoday.com/category/business/bain-aims-to-settle-with-wester...)

Chinese authorities recently announced that Japan’s Honda will recall over 245,000 vehicles in China because of concerns about Takata made air bags. Honda and its Chinese JV partner, Guangqi Honda, will start withdrawing cars equipped with the potentially defective air bags soon. The recall means another setback for Takata which already has recalled over 100 million potentially faulty air bags. In September Honda reached a USD $605 million settlement in a lawsuit over faulty air bags in millions of cars on American roads (“Honda to start mass recall in China over Takata air bags,” Japan Times, October 2, 2017, https://www.japantimes.co.jp/news/2017/10/02/business/honda-start-mass-r...)

South Korea

China’s Ministry of Commerce allowed United States (US) technology firm HP Inc. to buy Samsung Electronics’ printer business for USD $1.1 billion. The sale sparked concerns in China’s government about US control of the domestic printing market, prompting conditions that require HP to report prices to government officials, abstain from investing in other A4 printing companies in China, and to not restrict equipment compatibility. HP hopes the technology and talent it acquired will help it enter the competitive Chinese printing market (“China approves HP’s $1.1 billion buy of Samsung’s printer business with curbs,” Reuters, October 6, 2017, https://www.reuters.com/article/us-samsung-elec-hp-printer-china/china-a...)

South Korean appliance makers Samsung Electronics and LG Electronics are investing in US production facilities to fend off Trump administration protectionist tariffs and pressure. Samsung has plans for a USD $380 million factory in South Carolina while LG announced a USD $250 million facility in Tennessee. Whirlpool, a domestic firm, has been lobbying the US government for more protection, filing antidumping lawsuits against the Korean firms, and has filed for a “safeguard petition” to further restrict their access to the US (“Whirlpool’s washer war is balancing act for Trump,” Today Online, October 5, 2017, http://www.todayonline.com/business/whirlpools-washer-war-balancing-act-...)

US Electric Vehicle (EV) company Tesla Motors is planning to increase its investment in South Korea’s EV infrastructure by building 25 charging stations by the end of 2018. The South Korean government’s Ministry of Environment recently changed its government subsidy program to include EVs that take more than 10 hours to fully charge. The subsidy, thus, now includes Tesla’s Model S 90D sedan, prompting the quick expansion decision by Tesla into the local market and a renewed interest in marketing in South Korea (“Tesla accelerates sales drive in S. Korea amid gov’t subsidies,” Yonhap News Agency, October 1, 2017, http://english.yonhapnews.co.kr/business/2017/10/01/0501000000AEN2017100...)

Indonesia

An Indonesian official revealed only 27 percent of foreign investment pledges were fulfilled in the last 10 years, resulting in a loss of USD $50 billion in investment across 190 projects. Foreign investors cite Indonesia’s complex licensing requirements, governmental uncertainties, and issues with acquiring needed plant and capital. Other investors pulled projects from Indonesia after the local government failed to deliver on promised facilities. Indonesia’s government is looking to address investor concerns, in part, by introducing a single application process with assistance for investors (Jon Afrizal, “Only about 30% investment pledges realized: Official,” The Jakarta Post, October 2, 2017, http://www.thejakartapost.com/news/2017/10/02/only-about-30-investment-p...)

US mining firm Freeport-McMoran has rejected Indonesian’s latest divestment plan requiring it to relinquish 51 percent of shares in its Grasberg mine, which the company agreed to return in exchange for full control of the mine until 2041. Recently, Indonesia’s audit agency discovered Freeport has yet to pay USD $460 million in royalties due, delaying discussions of a billion-dollar investment plan for the mine’s aging infrastructure. Tensions between Indonesia’s government and Freeport have caused a jump in international copper prices (Neil Hume, “Copper price jumps on Freeport-Indonesia deal concerns,” Financial Times, October 3, 2017, https://www.ft.com/content/1a015a16-c756-3fed-abe0-4d2108d95d67)

Thailand

Thailand’s Singha Estate Plc announced a USD $1.5 billion project to build hotels, shopping centers, and entertainment complexes in the Maldives as part of the Thai and Maldivian governments’ efforts to advance a “Two Countries, One Destination,” initiative which aspires to promote tourism in both countries. Several other Thai hospitality, hotel, and transportation companies expanded investment in the Maldives after the Maldivian government pledged USD $5 billion to improve infrastructure over the next five years (Suchat Sritama, “Maldives banking on tide of Thai investment,” Bangkok Post, October 3, 2017, https://www.bangkokpost.com/business/news/1335547/maldives-banking-on-ti...)

Malaysia

Honeywell, a US based Fortune 100 company, opened a new office in Kuala Lumpur, Malaysia, to serve as its headquarters location for the Association of South East Asian Nations (ASEAN) region. Honeywell’s headquarters, which brought an investment of USD $500 million and created 120 high profile jobs, represents the first multinational company to participate in the Malaysian Investment Development Authority’s Principle Hub Initiative which aims to attract foreign investment into emerging technology and communications industries to service the greater ASEAN region (“Honeywell launches Asean headquarters in Malaysia,” Digital News Asia, October 3, 2017, https://www.digitalnewsasia.com/business/honeywell-launches-asean-headqu...)

Vietnam

South Korean investment makes up more than 30 percent of all foreign direct investment in Vietnam. However, mounting tensions on the Korean peninsula are making potential investors wary of the possible disruption to supply chains which may occur if a conflict breaks out. Moody’s, a credit rating firm, says Vietnam’s dependence on South Korean conglomerates, such as Kumho Construction, Posco Group, and Hanjin Logistics, makes the country vulnerable to investment setbacks if these firms must redirect their attention to domestic concerns (Minh Nga, “Tensions on Korean peninsula may hit Vietnam’s economy hard: Moody’s,” VN Express International, October 4, 2017, https://e.vnexpress.net/news/business/tensions-on-korean-peninsula-may-h...)

Vietnam’s Chamber of Commerce and Industry will host two Vietnam-Japan Trade and Cultural Exchange Programs with the theme “Attracting Infrastructure Investment – Mekong Tourism Development Platform” to attract USD $346 million for tourism related development projects. Japan is currently Vietnam’s second largest source of investment, but concentrates most of its investment in manufacturing, resource extraction, or technology related industries. The Vietnamese government hopes to boost tourism in the Mekong Delta by enticing Japanese businesses into developing commercial services, hotels, and entertainment complexes through 24 tourism connected projects (“Can Tho hosts events to attract Japanese investors,” Vietnam News, October 4, 2017, http://bizhub.vn/news/can-tho-hosts-events-to-attract-japanese-investors...)