FDI (not in Japan), Part II

In past posts I’ve been critical of the Japanese government and various forces inside Japan for their sometimes anti-foreign capital mentality. Given a recent spate of similar behavior spanning three regions of the globe, I thought it would be a good opportunity to turn the focus away from Japan momentarily just to show that there is nothing uniquely Japanese about the fear of foreign capital.

As most everyone reading this is aware, Congress is currently outraged over the decision by the Committee on Foreign Investment in the United States (CFIUS) to approve the sale of terminals at six ports to Dubai Ports World. The ostensible reason is, of course, national security. Speculation as to alternative motives (political and otherwise) is rampant, and coming on the heels of CNOOC’s failed bid for the California energy firm Unocal, it is only natural that parallels will be drawn.

Receiving slightly less attention is the French government’s decision to allow Gaz de France, in which the government holds an 80 percent stake, to merge with a privately held energy and water company, Suez. The deal itself would likely not have raised any eyebrows (or tempers) had the announcement not come just days after Italian energy company, Enel, had made a bid for Suez. The government was not at all coy about its intention and much like Congress was quick to play the national security card. According to the NYT:

Speaking at his central Paris office in the presence of his finance minister and the chief executives of the two companies, Prime Minister Dominique de Villepin said the merger was important to protect France’s energy supplies.

“The independence of our country for energy supplies is of strategic importance for France,” Mr. Villepin said. “The merger of Gaz de France and Suez seems the most appropriate solution.”

Last up, we have South Korea, where the government has announced it is considering strengthening measures to protect domestic firms from foreign takeover. The announcement follows a rejected bid for the country’s largest tobacco company, KT&G, by American investors Carl Icahn and Warren Lichtenstein.

These three cases touch upon a fundamentally important question that governments, corporations and private citizens all must consider in a world so intricately interconnected by trade and capital flows.

The global nature of corporate ownership and free flow of capital across borders has made it possible to invest in foreign assets ranging from real estate, to government debt to private equity, the latter of which can result in foreign ownership of domestic firms. Yet, the change in attitudes has failed to keep pace with economic globalization and such investments often incite fierce opposition in countries where it takes place. Sometimes this opposition is motivated largely by xenophobia or ignorance, but one must ask if there are cases where such caution is warranted and indeed necessary.

In some instances the distinction is obvious. There is a clear difference between foreign ownership of a cannery verses foreign ownership of a firm that produces ballistic missile components or some kind of sensitive dual-use technology.

But tobacco? From the scant statements coming out of Seoul, I am inclined to write this one off as a combination of anti-foreign sentiment and a clash of capitalisms, possibly amplified by still smarting wounds from the 1997 financial crisis, which was in part caused by (some would say) hasty removal of capital controls in order to join the OECD.

According to one Song In Ho at Kyobo Investment Trust Management in Seoul:

“It’s still unclear whether Icahn and Lichtenstein are here for a quick profit or are really serious about the takeover.”

I’d say a little bit of both. People out to make a profit are generally pretty serious about it. But few people in Korea would be happy to see these guys come in, hack up the company, drive up the share price and dividends, and then make out like bandits at the expense of the employees — especially since this baby used to be state-owned. On the other hand, and I really hate to sound like Thomas Friedman here, FDI is really a double-edged sword. It can bring with it new and more productive technologies, better management techniques and fresh capital that can really benefit a company (But that still leaves the question of whether the company = shareholders or employees. Let’s save that nasty debate for another post.)

So, how about something like energy?

This one is a much tougher question. For starters, energy is a fungible commodity. Under normal circumstances (by this I mean the moron from whom you import hasn’t cut off the supply, or your country has no outstanding UN embargoes, etc…) as long as the market is functioning properly it is reasonable to expect that as long as one is willing to pay the price the market bears, actually purchasing it should present no problem.

Of course, this might one day change if the world nears the end of its finite supply, no suitable alternative energy technologies have been developed, and governments decide it is to be a game of every man for himself. But for now, even if China buys up oil fields somewhere, should it really matter in the long run? If they don’t get it one place, they can always buy it elsewhere. (The real problem is the growth in Chinese demand, their inefficient usage of energy, and the effect these have on global prices. But let’s save that too for another post.)

As for the French, I think I’ll hold off on judgment until we know a little more. While the Italians have already been throwing around the p-word, there is some evidence that the deal could cut French dependence on Russian gas imports (which recently falls under one of those abnormal circumstances I mentioned above.)

One final and very important consideration to which the above indirectly points is how worrisome are such attitudes? Blocking sales of sensitive assets to foreigners in the interest of national security is an understandable and necessary measure that must sometimes be taken and isolated incidences of such behavior are no real cause for concern. But in the absence of a genuine threat, governments in this day and age should not use national security as a fig leaf to cover protectionist sentiment motivated by xenophobia or a desire to protect inefficient or well-connected domestic industries. In theory, such desires may sound reasonable (especially in election years), but in practice they send the wrong message to would-be investors and that message is: don’t bring your money here. Openness is the very foundation upon which is founded the prosperity of the United States and other developed countries. And it is one potential tool for this prosperity to spread to less-developed economies. Where would Japan or China be today without access to U.S. markets? And for that matter, where would the U.S. be today if it weren’t for Japanese and Chinese access to our government financial markets?

Goro Miyazaki’s Blog 2-24-06: The Only Way for Me to Know My Father was Through His Works

UPDATE: The official site has posted an interview with producer Toshio Suzuki that once and for all lays out why Goro Miyazaki was chosen to direct AND why his father Hayao Miyazaki was against it. In short, Hayao Miyazaki is one of those guys who has to be in control at all times. He was OK with Goro working on the film but was dead set against letting him direct until he saw that Goro could draw just as well as his father… stay tuned for a translation!

In celebration of the best comment I have yet received on this site, I bring you another exciting installment of Goro Miyazaki’s blog!

I don’t know what things were like before, but ever since I can remember my father was often not around. That said, just as I loved my mother, I loved my father, and when I was small I wanted him to pay attention to me and play with me. However, there were almost no chances for that.
Continue reading Goro Miyazaki’s Blog 2-24-06: The Only Way for Me to Know My Father was Through His Works

Ms. Smith Goes To Washington

While I’m on a US news binge, this has to be one of the most parody-worthy legal stories of the last year. Here’s the bland version:

Former Playmate of the Year Anna Nicole Smith got her U.S. Supreme Court hearing on Tuesday, when her lawyer argued she should collect millions of dollars she claims her late Texas oil tycoon husband had promised her.

At one point during the hour-long arguments, the 38-year old blond widow, dressed in black and sitting in the spectator section, became emotional and started crying, a witness and her lawyer said…

The issue before the justices in the long-running legal battle is to review when federal courts can hear claims that are also involved in state probate hearings. The justices seemed receptive to arguments by Smith’s lawyer that federal courts have jurisdiction to consider her claims.

In Wonkette’s spicier alternate reality version (warning: link not recommended for young viewers or people with high blood pressure), she goes forward pro se:

On the conservative side, Justice Clarence Thomas — known for his inattentiveness during oral argument — was clearly riveted by Smith’s remarks. Sitting on the edge of his chair, he appeared to be engaged in vigorous note-taking underneath his robe.

But Smith reached out to the Court’s liberals as well. When she argued that she worked hard for every last cent of her late husband’s fortune, asking the justices, “Do you have any idea how hard it is to blow a guy in a wheelchair?”, Justice David Souter nodded sympathetically.

God bless America.

GOJ Awesomeness

podcastThe GOJ has really been on the ball lately about updating agency websites and I must admit, they have been surprisingly savvy about the whole business. I wish I had time to do an entire post introducing each site, but being pressed for time I must limit this to an announcement of the latest bit of GOJ awesomeness, the Council on Economic and Fiscal Policy’s press conference podcast!

From the site:


Okay, so it’s the same thing as the press conference streaming video that has been on the site for months. But it’s still cool.

Dodging China as a business plan

Interesting story on the AP wire about Dynamic Internet Technology, a company run by Falun Gong practitioner Bill Xia. Take a look at what it does:

In February 2002, the company started a pilot project with the U.S. government not described on its Web site. The following month, it unveiled a tool that disguises Web sites so they can slip past China’s firewall filters.

Each day, the company sends out e-mail to millions of Chinese Internet users with links to the Web pages of Human Rights in China and the United States-sponsored Voice of America and Radio Free Asia. Visits to the sites jump whenever Chinese citizens perceive a government cover-up, as during the initial outbreak of a deadly respiratory virus in 2003 or the reported shooting of protesting villagers in December.

Over the past three years, the U.S. Broadcasting Board of Governors, which oversees Voice of America and Radio Free Asia, has directed about $2 million to Xia’s company for the e-mail service. The spending also supports technology that continuously changes Web addresses to escape Chinese government shutdowns.

Your tax dollars at work? Well, it looks like the company is driven more by falun than by money.

Xia said despite the government revenue, he depends on his wife’s salary and a team of about 10 core volunteers to maintain a company constantly on the brink of bankruptcy. He also acknowledges his company limits DynaWeb, his company’s main tool, to Chinese-only versions. The company hides it from English-language users for fear they might use it to skirt corporate firewalls at their workplaces.

Wonder if protestors will be firebombing the U.S. Embassy over this. Somehow, I doubt it.

Asahi Irresponsible on Iran? Not really.

Commenter Jim Moore of the blog “Moore Than This” suggested that Japan is taking an extremely irresponsible stance on Iran’s nuclear ambitions based on an editorial he picked up from the Asahi Shimbun’s English edition:

Iran’s publicly stated intention to advance its nuclear technology threatens a key element of Japan’s energy strategy–development of the Azadegan oil field … If Tehran does not alter its position, Japan could lose its rights to the field.

The article is indeed impactful, but the Asahi English edition seems to have taken it out of context a bit. The original Japanese piece was a part of the regular column “Reading the Economy” which focuses on economic aspects of current events. It runs in the back pages and is not intended to serve as the crux of the newspaper’s editorial position.

One advantage that newspapers have over online news sources is their effective allocation of space to individual news stories/editorials. For people like me who only have occasionaly access to Japanese newspaper, this can be a problem. Asahi’s English site, for example, gives the paper’s editorials equal space next to background pieces like the one described. The Japanese site separates the op-ed section by column. Note to Asahi: PLEASE edit your English Op-ed section to make it less confusing!

For a better idea of what the Asahi really thinks of the Iran crisis, check this Asahi editorial, which puts them much closer to mainstream opinion:

That means Tehran should stop enriching uranium on its soil. It should allow the process to be done in Russia. That will provide the much-needed proof that it does indeed seek to build nuclear power plants as it claims. Once it becomes clear that Iran has no intention of developing nuclear weapons, Tehran will receive international support for its nuclear program.

While denouncing the IAEA resolution, Iran has shown a willingness to accept routine inspections by the IAEA. That seems to be a ploy to shake international unity on the issue through a combination of hard-line and soft-line tactics. It may also be aimed at prodding China and Russia, which have taken a more conciliatory stance toward Iran, into avoiding any sanctions against Iran. For that, the roles of China and Russia in persuading Iran to abandon its nuclear ambitions are very important. Time is limited. The international community should work out a formula to ensure a diplomatic solution to the crisis before resorting to forceful means, such as sanctions.

And indeed, MOFA’s official position on the issue is even clearer:
Continue reading Asahi Irresponsible on Iran? Not really.

10,000 yen curry – If I eat it all within 30 minutes can I have it free?


Signs of a Fancy Curry Boom Emerging – High-Class Traditional Japanese Gourmet Restaurants Also Getting Involved, One Place Even Offers 10,000 yen Curry

Recently, curry rice, loved by children and easily made with stock bought at supermarkets, has been undergoing a transformation in Japan. Long-standing ryotei (high-class Japanese restaurants) and French restaurants are entering the market one after the other. Even a 10,000 yen premium curry with carefully selected ingredients has come on the scene. Perhaps the next star after the ramen boom will be fancy curry?

“The Flavor of the Old Ryotei

Funaba Kitcho Shinsaibashi in Osaka’s Chuo Ward started selling curry for lunch limiting their offering to 20 meals (per day) in September 2005 for customers “to casually enjoy the taste of a ryotei.”

Famous Hyogo Prefecture beef brand “Sanda Beef” sirloin and more than 10 types of vegetables, including sweet potatoes from Kagoshima Prefecture, are cooked in a Japanese-style curry stock that uses a dashi broth of skipjack tuna and kombu seaweed for a touch of flavor.

Though somewhat expensive at 2100 yen, the meals are almost sold out every day since they have gained popularity since diners can enjoy a ryotei’s “curveball.” Manager Noriyoshi Kawaura (43) explains, “We have a good reputation from a wide demographic including women eating together and (male-female) couples.”

Selling 10,000 yen curry is the “Yokohama Curry Museum” in Yokohama City. The dish is full of top-class ingredients such as top-grade Yonezawa beef, 40 types of spices, and a gold-medal winning wine for a touch of flavor.

The Museum began offering the high-class curry last September on a limited basis, but changed its plans and continues to sell it due to unexpected popularity. The Museum’s analysis: “Curry’s base has spread even to those with deep pockets.”
Continue reading 10,000 yen curry – If I eat it all within 30 minutes can I have it free?

Japan and Iran: Good vs. Evil?

Saw a great headline this morning:

Monday, February 27, 2006

Aso Urges Iran To Halt Uranium Enrichment, Iran Says No

TOKYO (Kyodo)–Iranian Foreign Minister Manouchehr Mottaki on Monday said his country will not suspend its uranium enrichment, rejecting a request from his Japanese counterpart Taro Aso at their meeting in Tokyo, a Japanese Foreign Ministry official said.

Mottaki was quoted by the official as telling Aso that Iran is currently engaged in ”research activities” and that halting such resumption of uranium enrichment operations is ”impossible.”

Nice try, Japan! It’s unlikely that the international community will hold this diplomatic exercise in futility against you, so no worries! Aso gets an “A” for effort:

[February 04, 2006]

Japan viewed most positively in world poll, Iran most negatively

(Japan Economic Newswire Via Thomson Dialog NewsEdge)WASHINGTON, Feb. 4_(Kyodo) _ Japan was most widely viewed as having a positive influence in the world, while Iran displaced the United States as the nation with the most negative rating, according to a BBC World Service survey released Friday.
Continue reading Japan and Iran: Good vs. Evil?