Far Eastern Group (遠東集團), which operates Pacific Sogo Department Stores (太平洋崇光百貨) in Taiwan and China, yesterday urged the semi-government Straits Exchange Foundation (SEF) to quicken its pace in signing an investment protection agreement with its Chinese counterpart to safeguard the rights of local firms with Chinese operations.
The group said it failed to get legal protection from Chinese authorities when facing unreasonable rent hikes or other breaches of contract at two of its Chinese department stores.
The group currently operates 11 department stores in China, but two of them have had difficulty in their operations because the landlords had broken their contracts by increasing rents to a stunningly high rate, the group said.
The landlord for the group’s store in Dalian, Liaoning Province, has raised the rent several times, breaking contract terms, and then forced the group to vacate some of the rented floors so the landlord could rent them out in smaller units to make more money, Tai Yin-pen (戴蔭本), operation general manger of the group’s retail division in China, said at a media briefing yesterday.
“This is a common problem faced by all Taiwanese companies with operations in China. Far Eastern Group, which is a big group, faces blatant breaches of contract by landlords. Imagine the situation of small and medium enterprises,” Pacific Sogo chairperson Sophia Huang (黃晴雯) said.
The SEF should include immediate protection to Taiwanese companies operating in China, especially immediate protection against breach of contract, when it returns to the negotiating table to sign an investment protection agreement with its Chinese counterpart, Huang said.
Huang did not insist that disputes be arbitrated in a third area, as some of her peers had proposed.
Recently the group’s Dalian landlord, which is a mall operator, tried to raise the department store’s yearly rent from 15.8 million Chinese yuan (US$2.48 million) to 39 million yuan and demanded that the group pay a lump sum for the remaining nine years at once, a total of 350 million yuan, Pacific Sogo president Tu Chin-sen (杜金森) told reporters.
Moreover, the landlord occasionally switches off electricity to the Pacific Sogo department store without notice, disturbing operations and causing losses estimated at more than NT$10 million (US$334,000) over the years, Tai said.
The group said it sought help from the local government, but local authorities gave it the cold shoulder because they said it was a business dispute and they could not interfere with the landlord’s right to switch off electricity.
Another Pacific Sogo store in Chengdu, Sichuan Province, faces a similar situation where the landlord, which is also a mall operator, is trying to quintuple the rent, Tu said.
The Chengdu City Government has stepped in to try and settle the dispute, he said.