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Formosa's land acquisition hits snag

Li Xiaowei
page03  2006-1-6

Taiwan's largest private enterprise, the Formosa Plastics Group, experienced a major setback in its investment project in Ningbo, East China's Zhejiang Province, when the land it was promised was not delivered.

The local government's bid to take back the 333 hectares of land originally appropriated to the US Concord Oil & Petrochemicals Group was unsuccessful in the latest round of negotiations, a local official told reporters.

"The Ningbo municipal government and Concord Oil have held several rounds of talks but failed to reach an agreement, mainly due to difference in pricing of the land," said the official on condition of anonymity.

Concord Oil was allotted the land in 1994 at a price of 150 million yuan (US$18.5 million) for its investment project. However, following the Asian financial crisis (1997-98), the company terminated the project and left the land unused.

Allocated land left unused for two years or more can be taken back by the government with no conditions attached, according to Chinese law.

"We consider it improper to do this because Concord Oil had made substantial
investments over the years," said the official.

The group has spent close to 600 million yuan (US$74 million) renovating the area and constructing a 50,000 ton port.

Despite the setback, it may be only a matter of time before Formosa takes over the land because the company's investment project is strongly backed by the municipal and provincial governments.

Formosa wants the land for the second phase of a project which includes a 10-million-ton oil refining facility and a 1.2-million-ton ethylene processing facility. The construction would involve more than US$8 billion.

In the first phase of its investment project, Formosa invested close to US$2 billion building several petrochemical processing facilities.

Located inside the Ningbo Economic & Technological Development Zone, one of the earliest established State-level economic and technological development zones, the bid price for the land is now 3 million yuan (US$370,000) per hectare, almost seven times that in 1994, said Ren Linmiao, a director at the Ningbo Municipal Land and Resources Bureau.

Formosa's industrial park, located in the zone, is scheduled to occupy 1,048 hectares, second only to the company's production base in the United States.

Founded in 1954, the Formosa Plastics Group is the largest private enterprise in Taiwan with assets in 2004 valued at US$60 billion. The group includes Formosa Chemicals & Fibre Corp, Formosa Petrochemical Corp, and more than 20 other investments in Chinese mainland, the United States and Indonesia, in addition
to several large educational and medical organizations.

The head of the group, Wang Yung-ching, who is in his late 80s, is a renowned Taiwan entrepreneur who openly appealed for all links between both sides of the Taiwan Straits.
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