China: shorter waiting time?

24 March 2003 00:00  [Source: ACN]

A new investment-approval process for petrochemical projects in China was put in place at the first meeting of the Tenth National People's Congress (NPC)in early March.

With immediate effect, investors in petrochemical and all other projects costing US$50m or more need only seek approval for their feasibility studies from the State Development and Reform Commission (SDRC) and then a rubber stamp from the State Council, after the initial go-ahead has been given by local governments.

The State Council never rejected projects approved by the-then State Development Planning Commission (SDPC), which has been renamed the SDRC and given additional responsibilities.

These responsibilities include most of the regulatory duties of the State Economic and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Co-operation (Moftec); both these bodies were abolished at the NPCmeeting and replaced with a Ministry of Commerce, which deals only with internal and external trade and has nothing to do with project approvals.

For any project below US$50m, only approval by the local governments is needed now.

Previously, the ceiling was US$30m above which projects needed SETC and SDPCapproval. If a foreign partner was involved, Moftec would issue a business licence.

The SDRC will be the de facto economics ministry of China, overseeing economic growth and reforms along capitalist lines.

On the surface at least, the approval process would appear to be more efficient. But there are doubters.

The manager of a South Korean-owned petrochemicals company, Liu Hui, said the changes are merely cosmetic. To him, the government is simply pouring old wine into new bottles. 'The names may have changed, but the process has not,' said Liu.

He added that the new SDRC is a much-enlarged ministry with a bureaucracy even more complex than the SETC, SDPC and Moftec combined.

He said: 'It still boils down to guanxi. If you know the right people in the ministry, your approval can be obtained very fast. Otherwise, you can wait for years and no approval would come.'

WQ Guo of Sinopec's Planning Division was less harsh. He said: 'Only time will tell whether there would be improved efficiency with this new system. Maybe it would be clearer in 6-12 months, or when a real case is put to the test.'

David Jiang of Sinodata Consulting agreed. He said: 'It is still too early to tell whether the new approval process would be faster or not. But the moves by the government do indicate there is an attempt to streamline the process.'

A spokesman for the State Council denied that the changes were only cosmetic.

Although he could not give details on how the approval process would improve, he reiterated that the State Council is 'committed to reforming the approval process and enhancing efficiency and improving public administration responsibilities'.

Yu Jing of China International Chemical Consulting Corp tended to agree with the spokesman. She said: 'An investor used to seek approval from three ministries. Now, he seeks approval from one ministry. It is definitely an improvement, in theory.'

But she also cautioned that it remained to be seen whether the speed of approval would improve dramatically.

To Yu, the NPC merely announced broad changes. Many detailed changes are still waiting to be sorted out and publicised. However, based on previous successful attempts by the government to streamline the process, Yu expressed confidence that greater efficiency would be achieved.

Shanghai Chemical Industry Park's Li Guohua expressed similar optimism. The general manager of China's leading petrochemicals park said: 'There is no clear indication yet on how exactly the changes will improve things. But it is definitely a step towards greater efficiency.'

Perhaps the most important audience the Chinese government wishes to address with the latest changes is the group of foreign companies hoping to invest in China.

Judging from the words of an official from ExxonMobil, the initial reaction seems positive. The official said: 'We're definitely excited about the changes. We hope the approval process would be shortened significantly.'

The US major, together with Fujian Petrochemical and Saudi Aramco, is building an 800 000 tonne/year cracker and downstream plants in Quanzhou, Fujian. The project was approved by the State Council in September last year, after a wait of slightly more than four years.

ExxonMobil is also looking at forming a 50:50 joint venture with Guangzhou Petrochemical in order to expand the latter's 200000 tonne/year cracker to 1m tonne/year and its 10m tonne/year refinery to 18m tonne/year in Guangzhou, Guangdong.

Guangzhou Petrochemical and ExxonMobil applied for approvals for the expansions earlier this year. But if the recent changes to the approval process do bring about greater efficiency, their wait should be shorter than four years.

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