MNCs in the News-2017-11-24

China

As a result of a Chinese Ministry of Public Security order, Apple removed Skype’s voice and instant message service app and those of other Voice over Internet Protocol services from its China app store. This supposedly happened at other Chinese app stores. The reported reason was the failure of these apps to comply with local law. The event follows a series of Chinese government measures over the past few months that have entailed stricter action against virtual private network apps and the intensified blocking of WhatsApp (Yang Ge, “Apple Hangs Up on Skype in China,” Caixin, November 22, 2017, https://www.caixinglobal.com/2017-11-22/apple-hangs-up-on-skype-in-china...)

A Financial Times investigation revealed that secondary school interns working illegal overtime at a Foxconn iPhone X factory in Henan. Apple stated that the interns chose to work these hours voluntarily, but Foxconn should not have allowed it. Foxconn told the BBC that after the report “it took ‘immediate action to ensure that no interns are carrying out any overtime work.’” It added interns were not a major portion of its China workforce. The working conditions at Apple suppliers have been an issue for some time (“Foxconn Stops Interns’ Illegal Overtime at iPhone X Factory,” BBC, November 23, 2017, http://www.bbc.com/news/business-42090777)

At the 9^th China Overseas Investment Fair and 2017 International Industrial Capacity Cooperation Forum in Beijing, the deputy secretary-general of the National Development and Reform Commission stated that China’s global outward foreign direct investment (FDI) had reached USD $1.4 trillion by the end of 2016 and that the number of local employees working for Chinese companies had risen to 1.3 million and that “Chinese businesses abroad had hired 118,000 more local employees in 2016 than in 2015” (“Chinese Companies Abroad Hire More Local Employees,” China Daily, November 23, 2017, http://www.chinadaily.com.cn/business/2017-11/23/content_34895323.htm)

The Chief Engineer of the China Railway International Group stated that “Chinese companies are carrying out more than 20 railway projects overseas, with a total investment of USD $15 billion. Noteworthy projects include the China-Laos railway, a railway inside Indonesia linking Jakarta with Bandung, and a metro in Lahore (in eastern Pakistan). China also is doing “preliminary” work on a high speed Malaysia-Singapore line and a Moscow-Kazan line in Russia. He touted that “‘Chinese companies have a strong competitive edge in technology, trains, control system, management, and safety’” (“Over 20 Chinese Railway Projects Underway Overseas,” Xinhuanet, November 21, 2017, http://news.xinhuanet.com/english/2017-11/21/c_136769537.htm)

Japan

United States (US) ride-hailing firm Uber was close to reaching an agreement with Japan’s SoftBank group to sell a 14 percent stake in the ridesharing firm for USD $10 billion. Unfortunately for Uber, recently released information about a data theft cover-up, which the firm did not report to authorities and shareholders, has led to investigations into Uber’s conduct. The bad press may push SoftBank to renegotiate the terms of the deal because of the risk of potential legal action (Jim Finkle and Heather Somerville, “Uber’s messy data breach collides with launch of SoftBank deal,” Japan Times, November 23, 2017, https://www.japantimes.co.jp/news/2017/11/23/business/corporate-business...)

Japanese airbag maker Takata Corp. finalized an agreement to sell a majority of its assets to Chinese owned Key Safety Systems for USD $1.6 billion. Takata was forced to declare bankruptcy after a series of deaths, caused by its faulty airbags, brought legal action against the company. Takata will continue to change faulty airbags until all old models are replaced. Most of the money Takata will receive from its sale will be used to settle a USD $1 billion penalty imposed by courts (“Final deal reached for sale of air bag maker Takata’s assets,” Japan Today, November 22, 2017, https://japantoday.com/category/business/final-deal-reached-for-sale-of-...'s-assets)

South Korea

The US International Trade Commission (ITC) proposed implementing a steep 50 percent tariff on imports of washing machines from South Korea’s Samsung and LG after US firm Whirlpool complained of unfair competition. The Trump Administration has until February to decide if it will uphold the ITC’s recommendation. Two proposed US factories by the South Korean companies are now being reassessed due to their reliance on imported parts from Korea, which would be subject to the new tariff (Kang Seung-woo, “Safeguard feared to stop US factories of Samsung, LG,” The Korea Times, November 23, 2017, http://www.koreatimes.co.kr/www/tech/2017/11/133_239791.html)

South Korea’s SK Group sold its used car affiliate, SK Encar, to Australia’s Carsales Holdings for USD $186 million after the firm encountered government barriers to further expansion. Australia designated the used car market to only contain small to medium sized enterprises, preventing SK Encar from further acquisitions or expansionary operations. SK Group will use the revenue raised from the sale to invest into new growth areas in the auto industry such as ride-hailing and autonomous vehicles (Lee Min-hyung, “SK sells off used car affiliate to Australian firm,” The Korea Times, November 21, 2017, http://www.koreatimes.co.kr/www/tech/2017/11/133_239575.html)

Indonesia

Jakarta is seeking more than USD $800 million in private foreign investment to develop tourism near Lake Toba in North Sumatra. Indonesia’s government will provide basic infrastructure and lay the framework to facilitate future private investment. Already, Chinese and Singaporean investors have proposed plans for resorts, cable cars, and railways around the lake due to reduced restrictions on tourism investment. Jakarta has advanced a “one-door integrated business registration service” designed to streamline investments and offers a 30-year ownership plan with potential extension (“Chinese, Singaporean Businesses to Invest in Lake Toba,” Tempo, November 20, 2017, https://en.tempo.co/read/news/2017/11/20/056913387,uk.html/Chinese-Singa...)

After Japan’s Prime Minister Shinzo Abe reaffirmed his country’s commitment to increasing investment in Indonesia, Real Estate Indonesia invited Japanese developers to participate in various township and low-cost housing projects across the country. Japan’s Ministry of Land, Infrastructure, Transportation and Tourism and Japan’s Overseas Infrastructure Investment Corporation for Transport and Urban Development have both been brought into the fold to facilitate moving investment from large projects to low-cost housing and smart cities (Tabita Diela, “REI Wants Japanese Support in Township and Low-Cost Housing Development,” Jakarta Globe, November 20, 2017, http://jakartaglobe.id/business/rei-wants-japanese-support-township-low-...)

Malaysia

Germany’s DHL, a logistics company, plans to invest more than USD $350 million over the next three years to develop its information technology (IT) services in Malaysia. The chief operating officer of the Malaysia Digital Economy Corp supported the decision as it contributes to Kuala Lumpur’s national digital transformation agenda which seeks to make the digital economy a key source of economic growth. DHL will work to expand its IT coverage and quality to meet growing e-commerce demand (“DHL to invest nearly RM1.5bil on its Cyberjaya data centre,” New Straits Times, November 23, 2017, https://www.nst.com.my/business/2017/11/306651/dhl-invest-nearly-rm15bil...)

Swiss transnational food and drink company, Nestlé, has chosen Malaysia as one of three locations for investment in a global procurement hub. The procurement hub is Nestlé’s latest series of investments in Malaysia which have totaled more than USD $250 million over the last five years. Malaysia’s International Trade and Industry Minister announced Kuala Lumpur is working hard to position the country as a “preferred investment destination” and attract more foreign corporations including Nestlé, which can take advantage of Malaysia’s open economic policies (Ayisy Yusof, “Nestle opens its global procurement hub in Malaysia,” New Straits Times, November 23, 2017, https://www.nst.com.my/business/2017/11/306520/nestle-opens-its-global-p...)

Vietnam

Hong Kong’s Jardine Matheson spent USD $1.15 billion increasing its stake in Vietnam’s Vinamilk, potentially triggering a response from Vinamilk's largest foreign investor Fraser and Neave. Vietnam continues to divest in its state-owned industries, resulting in Hanoi’s State Capital Investment Corporation slowly selling out portions of its shares. However, due to the profitability and importance of Vinamilk in Vietnam, Hanoi is reluctant to reduce its stake below 36 percent so it can maintain some measure of control over Vinamilk’s operations (“Nguyen Thi Bich Ngoc, “Asian investors compete to build up stakes in Vinamilk,” Deal Street Asia, November 22, 2017, https://www.dealstreetasia.com/stories/asian-investors-race-meaningful-s...)

Vietnam’s Ministry of Planning and Investment is working with the World Bank to create new regulations to increase inward FDI as the country seeks to diversify its FDI sources. Hanoi will incorporate new measures into its 10-year-economic development strategy to make value-added jobs a priority sector and will seek to solicit US and European Union investment in infrastructure by removing entry barriers and further increasing incentives for western firms investing in difficult to reach provinces (“FDI pursuit should focus on US and EU: expert,” Vietnam News, November 17, 2017, http://bizhub.vn/news/fdi-pursuit-should-focus-on-us-and-eu-expert_29018...)