MNCs in the News-2018-06-15

China

China Labor Watch, a United States (USA) labor rights group, issued a report highlighting numerous problematic working conditions in a Foxconn/Hon Hai factory in China that produces products for Amazon including Kindle e-readers and Echo speakers. Aside from long hours and low wages, these conditions include extensive required overtime, excessive use of part-time workers, and inadequate safety provisions at factory dormitories. Amazon previously found problems and asked Foxconn to take corrective action. Foxconn, which has been criticized for conditions elsewhere, said it would rectify any illegalities (Spencer Soper, “Amazon Blasted over China Echo Factory Conditions,” Bloomberg, June 10, 2018, https://www.bloomberg.com/news/articles/2018-06-10/watchdog-blasts-amazo...)

China’s Ministry of Commerce (MOFCOM) reported China’s non-financial outward foreign direct investment (FDI) for January to May 2018 grew 38.5 percent year-over-year (YOY). Investment totaled $47.89 billion and went into 149 countries and regions, mainly flowing to “business and rental services, mining, manufacturing, retail, and wholesale.” Belt and Road Initiative (BRI) investment rose 8.2 percent YOY, totaling $5.93 billion. Managing risk remains a concern for Chinese companies regardless of its end destination because of rising anxieties in countries hosting Chinese outward FDI (OFDI), political risks, and natural disasters (Zhong Nan, “Non-Financial ODI Stays Robust,” China Daily, June 15, 2018, http://www.chinadaily.com.cn/a/201806/15/WS5b2327a9a310010f8f59d2b5.html)

SF Motors, a subsidiary of China’s Chongqing Sokon Industry group, recently signed an agreement to buy AM General, an Indiana (USA)-based company that previously produced Hummers and Mercedes R-class vehicles. SF Motors said it would invest USD $160 million to “renovate and retool the factory, which will produce two electric vehicle models and serve as the company’s primary US-based manufacturing plant.” Indiana officials were ecstatic about the jobs to be created. BeijingWest Industries Co. is building an auto parts facility elsewhere in Indiana (Paul Welitzkin, “Indiana to get EV Facility as China Steps In,” China Daily, June 15, 2018, http://www.chinadaily.com.cn/a/201806/15/WS5b23da49a310010f8f59d408.html)

Fear about Chinese dominance contribute to protests in Vietnam about their government’s plans to build special economic zones (SEZs), with 99-year leases, economic incentives, and other special privileges for investors, in the country’s northeast, southeast, and southwest. Some of these protests turned violent in places like Binh Thuan. The protests assumed an anti-China character because of fears Chinese investors would dominate these SEZs and obtain lengthy rights to land that for all essential purposes would represent a “pretext for Chinese control over Vietnamese land” (“Vietnam Detains 100 after anti-China Economic Zone Protests Turn Violent,” BBC News, June 11, 2018, https://www.bbc.com/news/world-asia-44436019)

Japan

While US President Donald Trump’s trade relations with Japan are “testy,” Japanese firms are pursuing their own deals with American states that “go their own way” in pursuing FDI opportunities. According to an economic development agency representative from one state, being a small state “we are well positioned to give these types of companies the attention, direction and support they need.” In the view of various state level officials, FDI is the best route to bring jobs back to rural America (Yuri Kageyawa, “As trade fears grow, U.S. states reach out to Japanese companies,” Japan Today, June 10, 2018, https://japantoday.com/category/business/as-trade-fears-grow-us-states-r...)

Mexico’s Economy Minister is visiting Japan because the country is seeking to diversify its investment and exports amid an impasse in North American Free Trade Agreement (NAFTA) talks. Uncertainty about NAFTA’s future increased after President Trump’s recent war of words with Canadian Prime Minister Justin Trudeau following the G-7 meeting. Various Japanese carmakers have plants across Mexico and over the past two decades the latter has received over $14 billion in Japanese FDI, which makes Japan the largest Asian investor in Mexico (Eric Martin, “Mexico Turns Trade Attention to Japan With Nafta Talks at Risk,” Bloomberg, June 12, 2018, https://www.bloomberg.com/news/articles/2018-06-11/mexico-turns-attentio...)

South Korea

South Korean construction company SK E&S announced a $1.7 billion investment plan for liquefied natural gas (LNG) infrastructure in the Philippines. SK E&S’s investment proposal follows the letter of intent it gave to Philippines’ President Rodrigo Duterte during his recent state visit to Seoul. The South Korean firm plans to build a LNG terminal, related power plants, and an accompanying pipeline. SK E&S estimates the project will create 800,000 jobs per year and provide a solution to the problem of Manila’s diminishing Malampaya gas reserves (Ronnel W. Domingo, “Korean firm details $1.7-B investment proposal,” Inquirer.net, June 14, 2018, http://business.inquirer.net/252441/korean-firm-details-1-7-b-investment...)

South Korean construction companies like GS Engineering & Construction, Samsung C&T Group, Daelim, and Daewoo are forming task forces and planning investments in North Korea following the recently completed US-North Korea summit. With a background of American President Trump and North Korean leader Kim Jong-un agreeing to pursue better relations, South Korea expects to jumpstart inter-Korean projects. Smaller builders are looking to participate in transportation infrastructure and energy production projects in line with Seoul’s inter-Korean promotional plans (“S. Korean builders gear up for N.K. biz ops after Kin-Trump summit,” Yonhap News, June 12, 2018, http://english.yonhapnews.co.kr/business/2018/06/12/0501000000AEN2018061...)

Malaysia

Malaysian Prime Minister Mahathir Mohamad was set to “woo investors and offer business deals” during a visit to Japan last week. Mahathir initiative aims to cover a gaping debt hole and reduce his country’s dependence on Chinese OFDI. The policy also represents a return to Mahatir’s “Look East” policy. According to bankers, Japanese businesses may seek stakes in Malaysian state-linked firms, For its part, Malaysia could tap the country’s massive pool of low-cost capital (Praveen Menon and Anshuman Daga, “In Mahathir's Malaysia, Japan is back amid doubts over Chinese funding,” Reuters, June 10, 2018, https://www.reuters.com/article/us-malaysia-japan/in-mahathirs-malaysia-...)

The Malaysian state Perak aims to further strengthen investment cooperation with the European Union, following the latter’s recent visit to the state to explore business opportunities. According to Perak’s state chief Ahmad Faizal, 17 ambassadors and heads of diplomatic missions visited the state and he received “good feedback” from each of them “to strengthen our investment cooperation.” According to Ahmad Faizal the smooth transition of power on the federal and state level has also driven them to invest in his state (Zahratulhayat Mat Arif, “Perak to cooperate with the EU to strengthen economy,” New Straits Times, June 11, 2018, https://www.nst.com.my/news/nation/2018/06/378836/perak-cooperate-eu-str...)

*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.