Mon, Oct 25, 2010 - Page 8 News List

Policy must be future-oriented

By Chou Kuei-tien 周桂田

There has been something of a misconception floating around of late, that opposition to the expansion of the Kuokuang Petrochemical Technology Co (KPTC) plant is tantamount to hobbling Taiwan’s petrochemical industry. People are saying that every major country in the world has the means to produce a certain amount of ethylene and that anyone opposed to the KPTC project is failing to take into account the fact that the textile, automobile parts and information technology (IT) industries, not to mention the green energy industry — that the people opposing the KPTC project are always going on about — all need petrochemicals as raw materials. It’s not that simple. Somebody is being economical with the truth and I think the Ministry of Economic Affairs deserves most of the blame.

Where the ministry went wrong was in overselling the case for the KPTC project during its environmental impact assessment (EIA). What it did was announce that if the KPTC plant wasn’t built, it would only be a few years before Taiwan was unable to produce enough ethylene to satisfy demand.

This situation can be viewed from a number of different perspectives.

First, the ministry’s EIA report was based on projected estimates for ethylene demand that assume Taiwan will continue to have an economic model that relies heavily on manufacturing over the next two decades. This basic premise is questionable.

Second, research clearly shows that a conspicuously large percentage of ethylene produced in Taiwan goes to low value-added, heavily polluting mid-stream plastics, predominantly for export.

Third, if we look at Taiwan’s manufacturing structure, then it is clear that manufacturing has already largely given way to knowledge-based service industries. Statistics from the Directorate General of Budget, Accounting and Statistics show that service industries accounted for 73 percent of GDP in 2008, compared with 25 percent for manufacturing. It consequently makes little sense to consider the future direction of Taiwan’s economy in terms of an economic model based on traditional manufacturing.

Other than promoting the arts, innovative, green energy and cloud computing technologies, we need to comprehensively assess whether or not we really need to produce such large amounts of ethylene to support our textiles, components, IT and green energy industries.

Fourth, the ministry’s preoccupation with getting the KPTC plant built has led it to ignore any possible Plan B.

When industrial policy is drafted in any developed country, various alternatives are usually considered.

In Taiwan, that might involve adjusting the industrial policy that existed before the KPTC plant was proposed, and the Third Naphtha Cracker Renovation and Expansion Project, for example, in which existing plants at the current location are being upgraded in response to the planned 2015 dismantling of the Houjin Fifth Naphtha Cracker Plant. This already has the capacity to meet demand for ethylene from manufacturing or emerging industries. Moreover, since the upgrade was designed to reduce pollution and enhance productive capacity at the site, it also addresses international pressure to reduce carbon emissions.

State-run CPC Corp, Taiwan, has already started the process of decommissioning its refinery in Kaohsiung and relocating operations to a new industrial complex in Changhua. There are concerns about the possible impact this is going to have on the integration of up, mid and downstream petrochemical industries, not to mention jobs, in the south, as well as national pollution levels.

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