Plastic Fantastic: A Potted History of Taiwan's Plastics Industry

Plastic Fantastic: A Potted History of Taiwan's Plastics Industry
Credit: Reuters / TPG
What you need to know

Taiwan's petrochemical boom was born of economic necessity in the postwar era.

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It was a transformation forged out of economic need. Mid-20th century Taiwan was dominated by agriculture; the work long, grueling, and hard. On an island with limited natural resources, its people used (and reused) whatever they had to carry out the daily functions of life.

Until that point, rattan-woven baskets dominated street markets, old calendar pages were stripped off walls to wrap raw meat, and if you were lucky, newspapers left just a few ink stains on the on the warm, white exterior of morning baozi (包子, steamed bun).

Taiwan’s genesis as a “petrochemical kingdom (石化王國)” followed a similar pattern of re-use. Take the recommissioning of the Japanese colonial government’s Sixth Navy Fuel Plant, established in the southern city of Kaohsiung in 1941, and reopened as the state-owned China Petroleum Corporation’s Kaohsiung Refinery.

Then, under the leadership of Chiang Kai-Shek (蔣中正) and the influence of U.S. advisors, Taiwan’s government found the answer for economic development in petrochemical plastics.

An industry requiring steep initial investment, petrochemicals guaranteed positive economic returns for a society in need of and willing to work for paying jobs.

With the help of U.S. aid agency loans, Formosa Plastics Group was established in 1954 and with it, Taiwan’s first polyvinyl chloride (better known as PVC) manufacturing facility.

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Credit: Reuters / TPG
A photo showing Formosa Plastics Group's US$9.7-billion petrochemical complex during its construction in southern Yunlin county in Taiwan.

“The government at that time invested in a few mega-factories to take crude oil and turn them into plastic pellets,” says Dasdy Lin (林佳蓓), Sustainability Consultant at the Plastics Industry Development Center, an initiative of Taiwan’s Industrial Development Bureau under the Ministry of Economic Affairs.

“The entry requirement for pellets to be made into [plastic] containers, pipes or bags is not that high, so it’s easy for small and medium-sized enterprises to adopt [and carry out] production plans.”

Taiwan made the transition from an agricultural society to an industrial one, choosing to invest in its people and infrastructure.

Technical schools popped up across the north and south, large towering factories were built in the island's interior, and research-driven missions led cohorts of scholars and practitioners abroad to learn best practices from Japan, Germany, Netherlands, Saudi Arabia, and the United States.

Within a short period of time, the investment paid off. Plastics surged in the market and small and medium-sized enterprises (SMEs) took off, specializing in steel molds, making everything from high-value aerospace parts to low-value melamine (美耐皿) bowls.

"Skill, cheap labor, high-quality product, and customized service are the reasons why Taiwan became a plastics production hot spot," explains Scott Weng (翁炳勳), CEO of Great Team, Inc., a Taiwan-based manufacturing consultancy.

"Taiwan has a well-educated, hard-working, cheap labor force with a lot of spirit and energy,” he continues. “Government invested in the plastics industry about 60 years ago, because many people were poor.”

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Credit: Weng Jun-fa via Taiwan National Science and Technology Museum
The First Naphtha Cracker, seen here, was constructed by the government in 1968 in Kaohsiung, followed by the Second Naphtha Cracker in 1975.

Napatha is a primarily crude oil-based feedstock used in the process of steam cracking, which results in production of ethylene, which is in turn combined with other monomers to form chains of molecules called polymers – or plastics as they are more commonly known.

The island's small size and comprehensive plastic supply chain makes it an ideal place for producers. Any missing piece needed in the upstream or downstream value chain can be procured within one-four hours. This is practically impossible, and far more costly, in the United States.

People realized that plastic was not only cheap to make, but durable, heat-resistant, and convenient.

“At first, people found it convenient because it wouldn't break," says Zack Hsieh (謝政璋), engineer at Chunghua Plastics Ltd. Co., "so people started to use it. And it is easy to produce-- small and medium-sized enterprises or domestic shops could produce it with a machine. And they sold it in alleys and streets. So the market bloomed, because it's cheap and not easily broken."

The benefits were unequivocal. Taiwan rose to prominence as one of the great Asian Tigers -- its economy suddenly brandishing great promise in the international arena. Today, petrochemicals account for approximately 30 percent of Taiwan’s manufacturing sector with 2016 revenues reaching over NT$1.8 trillion (US$60 billion).

“My father worked in the top three plastic companies in Taiwan, including Formosa Plastic, NAN YA (南亞), and China Petrochemical Development Corporation (中國石油化學工廠)," continues Hsieh. "They received pretty substantial salaries at that time because a lot of countries bought plastic products from Taiwan. My father told me they sold much more than they could produce; each of the employees received big bonuses because the company earned so much money."

Xinzhuang (新莊) and Shulin (樹林) Districts in New Taipei City emerged as the plastics production zones for products made in northern Taiwan. Everything “[f]rom domestic furniture like fans and air-conditioners to recent 3C [computer, communication and consumer electronics] products" emerged from those centers making "plastic products a part of our lives," Hsieh concludes.

Plastics
Credit: Lillygol Sedaghat
A recycling facility in the New Taipei City plastics production zone.
The cost of success

But economic success was not without severe environmental cost.

To transform crude oil into pellets, and to melt pellets into products, a lot of energy was needed. Burning coal was (and still is) the solution, resulting in air pollution you could not only see, but taste.

“At that time, factories were everywhere," explains Hsieh. "There were mine pits in Kaohsiung and many pipelines. My dad always said that the pipelines would be dangerous without proper planning and maintenance, so my family did not buy a house near that area. My dad knew about the pending dangers, but [many] people in Taiwan did not know anything about it." People's health and safety were jeopardized at the expense of the economic boom.

The trade-offs became apparent in a debate between a Mr. Wang (王永慶), former CEO of Formosa Plastics Corporation, and a Mr. Chen Ding-nan (陳定南), former Magistrate of Yilan.

According to Weng's account, Wang tried to convince Chen to open a sixth naphtha cracker plant (六輕石化) in Yilan (宜蘭), a county on the northeastern coast of Taiwan. Wang argued that he had developed a successful business within the petrochemical industry, making it beneficial for Yilan's future economic development to host his factory. Chen responded that he would never let his hometown (Yilan) become polluted.

Losing the bid in Yilan, Wang ultimately built his factory in Mailiao (麥寮), a small rural township in Yunlin County (雲林). It is now considered Taiwan’s largest petrochemical complex with “more than 2,000 hectares and complete with a port, oil refinery, naphtha cracker, and 61 mid- and downstream plants,” according to Timothy Ferry in his April 2017 article on Taiwan’s Petrochemical Industry. The factory later caused a lot of problems, including air pollution and increased health incidents for local residents.

"When I look back to that event," Weng reflects, "I realized that Chen was doing the right thing. Yilan now attracts tourists because of its eco-tourism plan, while Mailiao now has to contend with a lot of pollution."

For many in late 20th-century Taiwan, choosing economy over environment was a matter of necessity. "We had no choice," Hsieh says, "when you need to survive, there is no time for you to care about protecting the environment.”

Judy_Dad
Photo Credit: Lillygol Sedaghat
Mr. Weng was part of the first generation of graduates from National Kaohsiung University of Applied Sciences (高雄應用科技大學), a technical university specifically created to train professionals in the industrial industry.
The modern debate

Today, Taiwan continues to grapple between balancing economic progress and environmental protection. Minister Lee Ying-yuan (李應元) of the Environmental Protection Administration recognized this challenge in the example of Taiwan's push to become nuclear-free.

"Our people want to become a non-nuclear state by 2025," he shared in a November 2017 interview with me. “But in the process of becoming a non-nuclear state, we have to use energy from coal and biogas, and it will cause some problem to the air quality. So this will cause some conflict with people’s need for high-quality air.

Economic and environmental protection will have competing interests, but they can compromise if the situation hasn’t reached maximum capacity. We can adjust, step by step."

Some Taiwanese do not view the two as mutually exclusive. A surging group of green entrepreneurs are designing zero-waste products to convince Taiwanese that they can live green lives.

President Tsai Ing-wen (蔡英文), in her 5+2 Industrial Innovation Plan, supports innovation in circular economy initiatives. Eco-industrial parks, areas specifically designated for companies spearheading circular industrial research, are being built in the south. Even Formosa Plastic is moving its expanding operations off island to Vietnam and the United States.

While the balancing act continues, so too does the use of plastic in everyday life. However, there are signs of progress.

As of Jan. 1, 2018, a ban on the provision of free plastic bags in Taiwan has had a marked impact – reducing the use of the formerly ubiquitous pink-striped plastic receptacles by an estimated 1.5 billion bags per year, according to the EPA’s Department of Waste Management.

But problems remain. Plastic bags remains commonplace in local markets; bakers place steaming buns and thick noodle soups in translucent plastic bags; bubble milk tea is notorious for its use of plastic cups and straws.

And yet, the tension to move forward from industrial roots to a new era of environmentalism persists. "From my point of view, we can't go back to an agricultural society because we want to protect the environment," shares Mr. Weng, in a final thought.

"Everyone has a right to live a better life. At that agricultural time, people were poor though there was no pollution. When people are poor, there might be more problem in the society. Only when you make enough money, can you start to think about how to fix the environment. There are things to be compromised."

Read Next: Taiwan’s Waste Reduction Miracle

Editor: David Green (@DavidPeterGreen)

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