Government may change tune on petrochemicals

The government is ready to remove a decades-old ban on investment for some types of petrochemical plants in China, allowing projects of up to NT$100 billion (US$2.86 billion), a Chinese-language newspaper reported yesterday.

"The Ministry of Economic Affairs does not oppose Taiwanese enterprises investing in the up-stream of China's petrochemical industry, judging from market proximity considerations," Minister of Economic Affairs Lin Hsin-yi (林信義) was quoted as saying.

But in the report, Lin said the government was concerned about the alleged "spill over effect" -- fears that local petrochemical companies will have to reduce their investment here while they funnel money to the mainland.

However, "an initial agreement on the size of China-bound investment has been reached between the economic ministry and the Petrochemical Industry Association of Taiwan," said Chen Wu-hsiung (陳武雄), head of the association, adding that more discussions will be held before the economic ministry gives its final nod.

The paper said the Formosa Group (台塑集團), the state-run Chinese Petroleum Corp (中油), and a consortium to be composed of the association members had drafted China-bound investment plans.

Indeed Formosa Group's Nanya Plastic Corp (南亞塑膠), the biggest publicly traded petrochemical maker in Taiwan, said it will spend US$270 million to build chemical and electronics factories in China as it bets heavily on rising demand global demand, according to Nanya's spokesman David Tsou.

It would take five years and NT$30 billion for each of the group to build an ethylene plant in China.

The government introduced the "no haste, be patient" (戒急用忍) investment policy in 1996 to prevent democratic Taiwan from becoming overly dependent on its communist rival.

Taipei had already scrapped a policy under which local enterprises were banned from making single investments in China above US$50 million.

But in a major policy shift the Taipei government eased the restrictions dramatically late last year to prepare for WTO entry.

Over the past two months Taiwan has approved 1,814 new items for China-bound investment, officials said.

But the government has yet to give green light to seven items, including the petrochemical ethylene production and 8-inch wafer fabrication projects. Earlier this month, the ministry again delayed a decision on easing restrictions on semiconductor investments, citing national security considerations.