MNCs in the News-2018-03-23

China

Members of the United States (US) Congress have been pushing legislative bills that would require the Committee on Foreign Investment in the United States (CFIUS) to review technology sales to China, which does not fall within its current ambit. Lobbying by Google, Facebook, IBM, Intel, and Qualcomm, among others, succeeded in modifying proposed legislation such that CFIUS, under the legislation, would not have the responsibility for reviewing technology sales widely, but only sales to joint ventures involving ““critical technology’ transfer” (Diane Bartz, “U.S. Tech Companies win Changes in Bill to Limit China Access to Technology,” Reuters, March 16, 2018, https://www.reuters.com/article/us-usa-china-cfius/u-s-tech-companies-wi...)

The 2018 China Enterprise Cross-Border M&A Special Report shows Chinese companies undertook 400 overseas merger and acquisition (M&A) deals in 2017 with reported deal volume reaching USD $152 billion, a drop of 28 percent over the prior year. The largest M&A deal was an investment in Singapore’s GLP group. The bulk of M&A went into manufacturing with technology ranking second and the US and Hong Kong represented Chinese M&A’s favored investment destinations. Of the total, Belt and Road Initiative (BRI) M&A was roughly $38 billion (Shi Jing, “Chinese Companies Invested Less Overseas in 2017,” China Daily, March 22, 2018, http://www.chinadaily.com.cn/a/201803/22/WS5ab36dd9a3105cdcf65139f2.html)

China’s crackdown on CEFC China Energy has thrown into limbo the latter’s USD $9.1 billion investment in Russia’s state-owned enterprise (SOE) Rosneft. One of the reasons for the crackdown on CEFC China Energy supposedly was the firm’s overextended finances coupled with China’s larger crackdown on problematic overseas investments. Given China’s warm relations with Russia, many are wondering if China will permit the deal or terminate it. The crackdown on CEFC already has caused problems for the firm’s investments in the Czech Republic (Lucy Hornby and Henry Foy, “Chinese Group’s Bid for Rosneft Stake Muddies Kremlin-Beijing Ties,” Financial Times, March 21, 2018)

In tandem with his imposition of tariffs on Chinese “strategic” imports (largely technology goods), US President Donald Trump’s tariff order also gave the US Treasury Department sixty days to come up with a plan to “limit Chinese investment in key sectors.” This new investment regime will co-exist with the CFIUS foreign direct investment (FDI) review process and likely consider additional criteria such as whether or not a Chinese outward FDI (COFDI) involved a Chinese SOE or whether or not there is sectoral reciprocity on the Chinese side (Shawn Donnan, “Trump Tariffs Target Strategic Chinese Sectors,” Financial Times, March 23, 2018)

Japan

Japan’s Prime Minister Shinzo Abe is weighing the possibility of waving regulations on foreign equity shares in broadcasting entities. Currently no foreign firm or entity is allowed to own more than 20 percent of a Japanese broadcasting company or exercise voting rights exceeding the ownership share. Some fret reduced investment limits will expand FDI in the industry and pollute Japanese news with propaganda from other foreign countries such as China. These observers fear that such propaganda, in turn, will raise diverse national security challenges for Japan (“Abe considers eliminating restrictions on foreign entities,” News On Japan.com, March 22, 2018, http://newsonjapan.com/html/newsdesk/article/122505.php)

Toshiba Corp’s bid to sell its USD $18 billion memory ship business still faces a final hurdle as the Japanese company must obtain Chinese antitrust approval before the end of March. Toshiba secured a consortium of buyers, led by American private equity firm Bain Capital, for its chip businesses, but Toshiba still can walk away from the deal if Beijing rejects the sale. Activist investors are suggesting Toshiba should drop the deal and court public investment if possible (Makiki Yamazaki and Taro Fuse, “As Toshiba’s $18 billion chip unit sale faces tight deadline, IPO looms,” Reuters, March 23, 2018, https://www.reuters.com/article/us-toshiba-chips/as-toshibas-18-billion-...)

South Korea

South Korea’s SK Engineering and Construction and Daelim Industrial finalized a contract with a consortium of private and public lenders to build the world’s longest suspension bridge in Turkey. The USD $3.82 billion bridge will be built on a build-operate-transfer basis with the Turkish government and pull capital from 21 public and private institutions. The involvement of Korean financial institutions like the Korea Eximbank and K-sure prompted Ankara to assume creditors’ risks by taking on debts for unpaid principal and interest (Lee Song-hoon, “SK E&C, Daelim Make Financial Contract for World’s Longest Suspension Bridge Construction,” BusinessKorea, March 19, 2018, http://www.businesskorea.co.kr/english/news/industry/21103-23-billion-eu...)

In a ceremony attended by corporate and government officials, South Korea’s CJ Logistics and Russia’s FRESCO signed a memorandum of understanding laying a foundation for cooperation on numerous projects throughout Eurasia. Specifically, the two firms will focus on northern economic cooperation activities as part of efforts to develop the Korean peninsula. CJ Logistics and FRESCO will also engage in large plant construction projects across the Commonwealth of Independent States and build upon the Trans-Siberian Railroad, a key piece of regional transportation infrastructure (Jung Suk-yee, “CJ Logistics to Go Ahead with ‘Northern Logistics’ with Russian Company,” BusinessKorea, March 19, 2018, http://www.businesskorea.co.kr/english/news/industry/21112-part-northern...)

Indonesia

Indonesia’s Environment and Forestry Ministry announced that it would sue American mining company Freeport McMoRan for environmental damages. The ministry is in the process of having environmental experts calculate the damage from Freeport’s pollution in violation of Jakarta’s No 31/2009 environmental management and protection law. Indonesia’s Supreme Audit Agency already estimates it exceeds USD $12.9 billion. Officials attribute the heavy damage to Freeport’s inattentiveness to government management and environment monitoring plans which were designed to mitigate Freeport’s mining waste (Robby Irfany, “Govt Set to Sue Freeport Indonesia for Environmental Woes,” Tempo.co, March 19, 2018, https://en.tempo.co/read/news/2018/03/19/056916782,uk.html/Govt-Set-to-S...)

The Indonesian government is looking to secure private FDI for its infrastructure development programs, with officials touring developed economies like the US to pitch various projects. Indonesia’s National Development Planning Minister Bambang Brodjonegoro has targeted USD $3 billion in investment and is focusing on educating investors about Indonesia’ risks and potential to facilitate their decision making. Jakarta wants to build infrastructure facilities worth USD $341.59 billion, but can fund only 40 percent of projects, meaning it is placing major hopes on private sector FDI (Marchio Irfan Gorbiano, “Indonesia looks abroad to lure investment,” The Jakarta Post, March 21, 2018, http://www.thejakartapost.com/news/2018/03/21/indonesia-looks-abroad-to-...)

Thailand

The ruling Thai military government announced its intention to change the country’s Foreign Business Act which limits foreign ownership in a wide range of business activities. Bangkok is cracking down on Thailand’s “nominees” which are powerless Thai shareholders brought on by foreign businesses to operate inside the confines of the Foreign Business Act. Changes to the system which allow 49 percent foreign owned companies to operate as if they were 100 percent foreign owned may drive investment out of the country (Peter Janssen, “Foreign investors on edge in junta ruled Thailand,” Asia Times, March 22, 2018, http://www.atimes.com/article/foreign-investors-edge-junta-ruled-thailand)

Malaysia

Malaysia’s government finalized a USD $7 billion investment arrangement from Saudi Arabian Oil Co., an SOE, for a refinery and petrochemical integrated development facility, the so-called Pengerang Integrated Complex, in the Malaysian state of Johor. The basis for the deal relates to Saudi Arabia’s desire to solidify its market position in Asia and Malaysia’s desire to expand its downstream energy businesses such as carbon-based composite materials. Both parties are optimistic about the direction of oil prices, but remain cost conscious (Ng Min Shen “M’sia, Aramco conclude talks for RM 27b stake in Rapid project,” Malaysian Reserve, March 21, 2018, https://themalaysianreserve.com/2018/03/21/msia-aramco-conclude-talks-fo...)

The United Arab Emirates’ (UAE) Mubadala Petroleum plans to invest over USD $1 billion to develop an offshore gas site in Malaysia. The Pegaga gas project, done with the help of Malaysia’s SOE Petronas, is Mubadala Petroleum’s first foray into the Malaysian market. The government affiliated UAE firm also contracted Malaysian construction and engineering firm Sapura Energy Berhad to build the facility which will be located in Malaysia’s Central Luconia province and produce 550 million cubic feet of gas per day (“Mubadala Petroleum to invest in Malaysia project,” Gulf News Energy, March 21, 2018, http://gulfnews.com/business/sectors/energy/mubadala-petroleum-to-invest...)

Vietnam

Vietnam’s State Audit Office declared formerly state-owned beverage company Sabeco owed the government nearly USD $109 million in tax arrears relating to undeclared profits and asked Sabeco to explain some of the investment losses it booked. Foreign investors in Vietnam’s divested companies are now worried they may be liable for unknown financial responsibilities and foreign investment managers are questioning the attractiveness of future divestment offerings. Thailand’s Thai Bev, now the majority owner of Sabeco, has yet to release a statement about the tax charge (“Foreign investors alarmed after Sabeco was hit by tax arrears,” Vietnamnet Bridge, March 23, 2018, http://english.vietnamnet.vn/fms/business/197729/foreign-investors-alarm...)

Vietnam wants to reduce its ownership of PetroVietnam Gas, as well as PetroVietnam Fertilizer and Chemicals Corporation, and PetroVietnam Ca Mau Fertilizer, to a minimum of 51 percent by 2020. PetroVietnam Gas chairman believes the privatization will bring his company advanced technology and raise massive funds for the government. Hanoi wants PetroVietnam to entirely divest its stake in Phuoc An Port Investment and Exploitation Oil and Gas JSC, PetroVietnam Trade Union Finance JSC, and numerous other entities by 2019 (“Government focuses on divestment in oil and gas sector,” Vietnam Economic News, March 21, 2018, http://ven.vn/government-focuses-on-divestment-in-oil-and-gas-sector-315...)

*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.