Golden or not?

Gou: “The market is my country”

Wisconsin Governor Scott Walker said it was a case of “the eagle has landed” when Donald Trump and Hon Hai’s founder, Terry Gou, signed a memorandum of understanding for a $10 billion LED panel plant in Walker’s home state at the end of July. For the world’s largest electronics contract manufacturer, it marks the first in a series of US investments it has dubbed the Flying Eagle project.

Since then, the US media, not to mention the state’s non-partisan budget office, have tried to pluck more details on the bird in question – though some think a turkey would be a better analogy as far as local taxpayers are concerned.

No one doubts the potential importance of the project. On paper, it represents the largest foreign greenfield investment in US history. However, citing Hon Hai’s pledge in 2014 to spend $5 billion in India to create 50,000 jobs, the Washington Post points out that Gou’s firm has a history of announcing grandiose investments in new markets, which never come to fruition.

For most critics, the key issue is the subsidies Wisconsin could end up offering: $3 billion, or 50 times the state’s previous record according to the Milwaukee Journal Sentinel. Moreover, those estimates are based on a report funded by Hon Hai, which calculates there will be 17 supplemental jobs for every 10 the Taiwanese company creates.

“You got Foxconned,” is the conclusion of advocacy group, One Wisconsin Now (Foxconn is Hon Hai’s key manufacturing unit). “You’re willing to give the largest ever subsidy by a state to a foreign company.”

The Wisconsin Gazette also has scant confidence in the two Republican politicians negotiating the fine print: Walker and Assembly Speaker, Robin Vos. It says that, “between them they have no business experience unless you count Vos’ brief stint as owner of RoJo’s Popcorn,” which employed about 24 people.

Doubts have grown since the state budget office calculated that Wisconsin might not break even on the plant until 2043 even if Hon Hai creates all the jobs it says it will. It estimates the state is likely to pay $1 billion more in subsidies than it receives back in taxes over the next 15 years (largely because Wisconsin-based manufacturing companies are exempt from most corporate taxes).

Walker says the plant should eventually create about 13,000 direct jobs and up to 22,000 ancillary ones. Analysts also forecast it could contribute up to 1% of the state’s GDP and help Hon Hai (or more likely its TV arm Sharp) boost its US market share. Some experts say that moving closer to its end customers is a logical next step for Hon Hai. The US accounts for nearly a quarter of global TV demand and large TV panels are expensive to ship.

The plant is clearly important for Trump, whose pledge to create blue-collar jobs in mid-western states like Wisconsin helped him clinch the US presidency. At the beginning of August, he confidently predicted more plants in other states from Gou. “He may go to $30 billion in investment, but he told me that off the record so I promised I wouldn’t tell anyone,” Trump told a press conference.

The Financial Times sent a reporter to Wisconsin last week to test the mood, and quoted a volunteer in the sheriff’s department in Kenosha as saying it was “a bad deal”. Another resident of Milwaukee concluded: “If it sounds too good to be true, it probably is”. The state assembly approved the deal last month, but on September 30 it will also need to clear the state senate, where Democrats are complaining that each job could cost the government up to $1.5 million.

As for Gou, he has been billed “Taiwan’s Trump” by the island’s media, which suggests he may stand for president in the 2020 elections. The Bastille Post says a recent poll gives him a lead over sitting president Tsai Ing-wen. The online newspaper says the electorate is disillusioned with its current crop of politicians including its two most recent presidents who have been “clean” but “weak” and “incapable of the kind of out-of-the box thinking needed to lead Taiwan down a new path”.

Could Gou be the next political novice to move into mainstream politics after Trump and France’s Emmanuel Macron? Gou himself recently played down the speculation, telling a press conference that “the market is my country” and that “politics should serve the economy”.

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