Taiwan's petro firms can gain
from US$20 bn 'green' u-turn
By Jou Ying-cheng
TAIPEI - A US$20 billion petrochemical project has been turned down in Taiwan,
setting a landmark in the country's environmental movement and perhaps in its
industry policy. The government is now facing growing pressure to allow
upstream petrochemical industries to go to mainland China. Alternative
destinations in Southeast Asia are also speculated.
When Taiwan's Minister of Economic Affairs Shih Yen-shiang visited the National
Federation of Industries on April 27, he found
himself greeted by banners and signs that read "Grief" and "Industries
shattered by policy u-turn".
He was not surprised. He was there to listen to complaints by industry leaders
frustrated over the demise of the Kuokuang petrochemical plant project off the
shore of Dacheng Township, Changhua County, on the island's west coast.
On April 22, President Ma Ying-jeou said he had prioritized environmental
protection and "doesn't support that Kuokuang petrochemical plant be built in
Changhua". The announcement came after two days of intense confrontation at a
crucial environmental impact assessment (EIA) meeting that concluded
with dual recommendations as "disapproval" and "conditional approval" for a
final EIA conference to choose. The result pleased neither developers nor
opponents.
Founded in 2006, the Kuokuang Petrochemical Technology Company is a
public-private joint enterprise, with the state-run CPC Corporation holding 43%
of shares. The Changhua plant would annually produce 1.2 million tons of
ethylene, an upstream material widely utilized in petrochemical industry.
Environmental concerns surrounding the plant were plenty. Opponents said it
would consume huge amounts of water in a dry area, emit more than 7 million
tonnes of carbon dioxide a year, pollute the air and cause harm to local
residents' health, disrupt habitat of the critically endangered Chinese white
dolphin subpopulation, destroy an ecologically important wetland and wipe out
the oyster farms on which local communities traditionally base their lives.
The opposing campaign has in the last two years gradually gathered momentum as
local residents were joined by environmental activists, university students,
scholars and artists in a series of protests. It finally reached a point where
Ma considered that a neglect of the pro-environment public opinion would likely
to hamper his re-election in spring 2012.
After Ma revealed his position, Kuokuang's board members met on April 27 and
decided to withdraw the plant application.
Later that day, when Preston Chen, chairman of the National Federation of
Industries, presided over the industrialists' meeting with economic affairs
minister Shih, he, like his fellows, voiced discontent with the government,
questioning "are we [the country] giving up industries just for the sake of
environmental protection?"
Chen, being also chairman of the Petrochemical Industry Association of Taiwan
and the leader of Kuokuang's private-sector shareholders, particularly had
reasons to be angry - although through the meeting he was smiling and making
jokes with the minister. That may be attributed to his cheerful and worldly
personality. But there can be other interpretations, too.
In a brief interview with the Asia Times Online afterwards, Chen said the
government "absolutely has to open up" for upstream petrochemical industry to
go to mainland China.
"What else?" He said, "if it can't get things done here and doesn't let people
go there, it's an irresponsible government".
He confirmed a media report in March that he has filed an application with the
mainland Chinese authorities to building an oil refinery and an ethylene plant
in Fujian province, across the strait from Taiwan.
According to "Munch", a senior environmental journalist and blogger, the
cancellation of Kuokuang's Changhua project was not unwanted for the company's
private-sector investors. Briefly, Taiwan is not their priority. "They eagerly
want to go to China, eyeing the huge market there," Munch said.
The Taiwanese government still prohibits domestic enterprises from establishing
upstream petrochemical plants in the PRC. On the other hand, in order to
compete with the private Formosa Petrochemical Corporation, the state-run CPC
had invited its midstream and downstream partners to jointly form Kuokuang. The
design of CPC's less-than-half holdings conveniently allows the new company to
act as a private enterprise.
Like many industries in Taiwan, the petrochemical sector has in the past two
decades found mainland China attractive.
"Taiwan's petrochemical industrialists implicitly hoped Kuokuang case would
fail environmental procedures, so they can tell the government 'we've done our
best and it's your responsibility and now you have to let us to go to China',"
Munch said.
Based on such observation, Munch one year ago predicted failure of Kuokuang, at
a time when the opposing campaign was in obscurity and few environmentalists
optimistic. He said the government was the only enthusiast, and eventually it
would not be able to turn the tide in the cross-strait economic situation.
Now he said the industry will definitely push the government even harder to
lift the ban.
Chen carefully separated the issue of overseas investment from that of
Kuokuang. "With or without Kuokuang in Taiwan, we are going abroad," he said,
"and nowhere is competitive enough but mainland (China)".
He clarified that it's not Kuokuang that will reach out but certain investors
in a new combination or combinations.
Recent reports said Kuokuang's private-sector investors are seeking
opportunities in Malaysia and Indonesia and that authorities of the two
countries have given a positive response.
Chen said some of his business partners are looking for alternative
destinations because they think mainland China may not approve his application.
Beijing has not allowed upstream petrochemical plants to be set up solely upon
Taiwanese capital. Chen wants Taipei to talk with Beijing to solve the problem.
He predicted that "a new policy will soon come out" but declined to explain
further.
As for Taiwan's petrochemical industry policy, Shih has revealed strategies in
place of the aborted Kuokuang project. Envisaged solutions include improving
efficiency of the existing CPC plants to increase ethylene production and
developing high-valued midstream and downstream products.
Such strategies, which Shih recently said his ministry has been studying for
seven or eight months, are actually very similar to what opponents of the
Kuokuang project have recommended. Anti-Kuokuang commentators therefore
criticized the ministry of knowingly exaggerating the importance of the
Changhua project when it tried to sell the polluter to the people.
Science professor Perng Ming-hwei, for example, argued in a blog article that
scrapping the Kuokuang project can help force the petrochemical industry to
upgrade. "Taiwan definitely has the talent and technologies" required by an
upgrade, he wrote, "and we had better do it quickly before China, India and
Southeast Asia overtake us".
Jou Ying-cheng is a Taipei-based freelance journalist.
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