|SK Innovation vice chairman Koo Ja-young (left), GS Caltex chairman Hur Dong-soo|
SK Group and GS Group, both of which are engaged in the refinery and petrochemical businesses, appeared to have received a leg up to push ahead with a stalled foreign-invested petrochemical facility expansion project worth 1 trillion won ($0.96 billion) each after a revised foreign investment promotion law passed the National Assembly on Wednesday.
“We welcome the long-awaited deregulation measure. We will make all-out efforts to make a contribution to the revitalization of the economy by proceeding with the 1 trillion won PX investment project by 2014 as planned,” SK Innovation, the holding company of the group’s energy-related businesses, said in a statement.
SK and GS have long awaited the revision in order to push through with joint investment projects between their daughter companies and Japanese investors to expand their lucrative Para-Xylene, or PX, production facility.
SK Global Chemical, as an SK daughter company, set up a 50-50 joint venture firm with JX Nippon Oil & Energy in 2011 to build a PX plant with an annual production capacity of 1 million tons at SK’s Ulsan chemical complex. The plant will start commercial operation in 2014.
GS Group has a similar deal with Japan’s Showa Shell and Taiyo Oil. GS Caltex had sought a 1 trillion won PX plant project in 2012 with the two firms to build a PX plant with an annual production capacity of 1 million ton PX. The project, however, had been put on hold.
The revision to the foreign investment law had been stalled for years because of vehement protest from the opposition political party, which believed the law would only give foreign investors more leeway to take advantage of Korean resources.
But keen on receiving foreign capital to help prop up the economy, the Park Geun-hye administration has strongly pushed for the revision, industry and political sources said.
The revised law will allow a daughter company ― a subsidiary of a subsidiary belonging to a conglomerate holding company ― to hold a 50 percent stake when creating a new company through a joint venture effort with a foreign investor. The revision will take effect as of March this year.
Prior to the revision, daughter companies were forced to hold a 100 percent stake, virtually making it impossible to forge a joint venture.
The main rationale behind this so-called “100-percent stake rule” was to prevent companies from engaging in “octopus-style business expansion” in the wake of the 1997 Asian financial crisis.
But at the same time, the law barred conglomerates such as SK and GS from pushing through with positive joint ventures.
By Seo Jee-yeon (firstname.lastname@example.org