Kuokuang Petrochemical agrees to swap shares for land

This article was written by Susan Yu and published by the Taiwan Journal on May 19, 2006. It reports that Kuokuang Petrochemical Technology Co., Ltd. in west-central Taiwan's Yunlin County recently announced its decision to make local residents its shareholders. The company was established with the aim of building a new petrochemical complex in Yunlin County's Taihsi Township. The purpose of this recent move was to win support from local residents.

The Kuokuang project, also known as the Yunlin petrochemical science park, is one of the key economic construction projects supported by the government in recent years. The project is supposed to be the largest petrochemical investment project. It is a joint venture between Taiwan's eight petrochemical companies and the Fubon Financial Holding Co., which is partly owned by the state-run China Petroleum Corp.

Specifically, the new petrochemical complex will feature oil refineries, petrochemical plants, co-generation plants and an industrial harbor, which will become fully operational in 2015. By then, the complex is expected to have an annual production value of US$11 billion, provide more than 25,000 jobs locally, and account for about 0.9 percent of Taiwan's gross domestic product (GDP).

Some of the land owned by residents in Taihsi County would be expropriated for the new petrochemical project. Indeed, the town's social and natural environments will be greatly altered once the petrochemical complex is built. Therefore, many local residents have expressed the view that they would be more supportive of the project if they were granted a significant share in the future business as a reward for their cooperation.

At present, there are more than 2,000 households in Taihsi Township. Some are landowners, while others are tenant farmers. Many of them are engaged in aquaculture. In order to launch the construction of the new petrochemical complex, some 800 hectares of privately owned land in the town would have to be purchased at an approximately cost of US$633 million.

So far, details of the shares-for-land deal have not yet been worked out. Because the financial situations of local residents vary, the company plans to survey and meet with these residents and offer a variety of packages to meet their needs.

The Kuokuang project is currently undergoing environmental-impact reviews. In addition to possible opposition from local residents, environmentalists have also raised concerns about the large volume of carbon dioxide emissions that are likely to be produced by the new petrochemical complex. These environmentalists recently urged the government to delay the project until it has established definite goals and a timetable for cutting carbon dioxide emissions. They also urged the government to evaluate the project in the context of national commitments to environmental responsibility. Indeed, similar demands have been made about the construction of a steel plant proposed by the Formosa Plastics Group, right next door to the Kuokuang project.

The aforementioned Kuokuang Petrochemical Technology hopes that the first phase of the project's environmental-impact review can be passed by January 2007, so that the company can begin the land acquisition process on schedule and come up with suitable compensation packages for local residents. If the shares-for-land deal is eventually materialized, then it will become a new approach for companies in Taiwan and overseas to launch industrial ventures. The deal is likely to serve as a model for future large-scale industrial projects that are in need of minimizing the resistance from local interests.