After protest stalls giant petrochemical in Taiwan, plans are to build
it in Malaysia
A long-running saga has come to
the end for a US$12.8 billion attempt by the Kuokuang petrochemical company ,
which is owned by Taiwan's 43 oercebt state-controlled CPC Group, to build a
refinery for the production of petrochemical products such as ethylene,
benzene, toluene and xylene. It is the victim of environmental protest. The
government instead is now seeking to export its environmental problem to
Malaysia.
In early July, the state-run oil
refiner CPC Corp, without fanfare, signed an investment agreement with
Malaysia's Johor state government to build the integrated refinery and
petrochemical plant in the village of Pengerang, Johor. Preceding the move was
close to a decade of fierce environmental protest in Taiwan, forcing the
island's government to choose between major business interests on the one side
and nature and health on the other.
In April 2011, Taiwanese
President Ma Ying-jeou opted for the latter, and last month an obviously upbeat
Malaysian Prime Minister Najib Tun Razak announced that an undisclosed
Taiwan-based petrochemicals firm had agreed to invest in a new integrated
complex in the south of the country.
But for Taiwan's manufacturing
industries, which need the plant to ensure smooth supply for the production
chain, the Malaysia twist augurs the emergence of an acceptable solution. But
it may be another case for Malaysia, where equally fierce environmental protest
has stalled a US$850 million rare earth processing plant being built by
Australia’s Lynas Corp. near the east coast city of Kuantan and made the plant
a potent political issue.
There is little doubt that
Kuokuang's implementation would help drive the Malaysian economy and aid in
Najib’s effort to build a regional petrochemical hub in its quest to compete
with Singapore. However, the Taiwanese
must ask themselves whether their economy can cope with the precedent of
environmentalists driving out a major infrastructure operation that is clearly
needed by the rest of the island’s business community.
According to interviews with
analysts in Taipei, confidence is the prevailing mood, along with a certain
amount of satisfaction at having cleaned up what was previously one of Asia’s
most polluted environments.Ta
“It won't hurt. Taiwan is now
still a developing country but is well on its way to becoming like a member
state of the EU,” said Winston Dang, former minister of the Environmental
Protection Administration (EPA). “Taiwan must invest in the people's brains in
this transitional period, not in high-polluting industries.”
And Hu Sheng-Cheng, an economist
and former minister of the Council for Economic Planning and Development,
predicted that if Kuokuang's Johor plant does materialize, the Taiwanese
government will demand that a certain share of the products be shipped back to
Taiwan, thereby ensuring that raw materials will make it to the island's
downstream manufacturers. The government would furthermore speed up the
upgrading of Taiwan’s own petrochemical industry, he said.
A weak point in the outsourcing
scheme is the loss of jobs, however, Hu said, adding that “Taiwan's
petrochemical industry is a major employer. The government better come up with
subsidies to make up for the jobs leaving.”
He then pointed out that if the
Johor plant doesn't come into being, Taiwan may well find itself in a dilemma,
as even China has lost its enthusiasm for accepting Taiwan's polluters.
During his ministerial stint from
2007 to 2008, it was the EPA's Dang who killed Kuokuang's initial plans to
build its refinery and naphtha cracker in Mailiao in Taiwan’s Yunlin County.
His veto led the company to propose building it in Changhua County's Dacheng,
which later became the scene of intense protests that eventually drove the
project off the island all together.
The 2,000 hectares of Changhua's
rare and pristine wetlands, the natural habitat of the endangered Indo-Pacific
humpback dolphin near them and last but not least the predicted significant
increase of air pollution, which environmentalists say would produce particles
fine enough to invade even the smallest airways, led to the emergence of a
powerful civic movement that decisively frustrated Kuokuang's plans.
Students and locals teamed up
with academics, the media and opposition lawmakers, turning the white dolphin
into the alliance's icon. After a health risk assessment report came up with
the bizarre finding that the plant if built would shorten life expectancy
island-wide by 23 days, about the entire Taiwanese public was in.
That then-Premier Wu Den-yih of
the ruling Kuomintang was caught on record stating that the “dolphins should be
smart enough to swim elsewhere” obviously did the investors no good. With
presidential and legislative elections then looming, President Ma eventually
withdrew support from the project.
“That was good news for the local
communities – they would have got many more cancer cases but only 2 percent of
the taxes Kuokuang would have paid,” said Dang.
The story, Dang said, shows that
major development projects that come along with heavy pollution and high energy
consumption are no longer feasible on the island.
But are they welcome in Malaysia?
While Malaysia’s Najib was obviously
encouraged by winning the plant, there already have been indicators that in
Pengerang an environmental storm has begun brewing. Last month saw hundreds of
residents rallying against the Kuokuang project, claiming that it would bring
severe pollution of air, land and sea, along with land seizures from reluctant
villagers and would require relocation of residents, the town's Mandarin school
as well as a graveyard containing nearly 3,000 tombs. Also the recent
developments surrounding the Lynas case inevitably comes to mind.
In addition an enthusiastic group
of Taiwanese environmentalists, who last year fought it out to the end for the
Changhua dolphins, has since been spotted at Pengerang beach, fraternizing with
their local counterparts.
But Yang Yungnane, director of
Taiwan's National Cheng Kung University's Research Center for Science &
Technology Governance, is cautiously optimistic that the case is about to be
settled to the liking of the government of Malaysia and Taiwan as well as the
business world.
“There might be a risk if local
environmental groups are strong enough to make the protest getting recognition
from the Malaysian public,” Yang said. “But the likelihood that the project
passes is higher than it being rejected.”
Jens Kastners
Business & Investment Opportunities
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