S Wales pounds 60m aid package under scrutiny

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The Government, which yesterday announced a pounds 230m investment in a South Wales electronics plant that will create 770 jobs, is believed to be giving almost pounds 60m in grants towards the project.

European Commission officials are expected to study whether the grant package breaks its competition rules, in a move that has echoes of the current dispute over state aid for Jaguar Cars.

QPL International, a Hong Kong-based manufacturer of microchips, is expanding its Newport Wafter-Fab division, which it bought in 1992. The existing operation employs 500 people, turning out micro-chips for personal computers and other electronic goods.

William Hague, the Welsh Secretary, said the investment had been won against stiff competition from France, Italy, and the US. As part of the aid package, the Welsh Development Agency is to design and build a new factory for QPL, and lease the property to the company. David Rowe-Beddoe, chairman of the WDA, said the lease would be fixed at commercial rates. QPL is also getting regional selective assistance and training grants from the local Training and Enterprise Council.

The Welsh Office refused to disclose the value of the grants, but other sources confirmed that reports in the Hong Kong press that the aid was HK$700 (pounds 58m) were correct.

Last year an pounds 80m aid package towards Jaguar's pounds 400m investment in a new plant in Birmingham caused concern in Brussels, and about pounds 12m of the grants have still to be approved.

It is claimed that the EC's competition office became increasingly frustrated because the Department of Trade and Industry was dragging its feet over providing full details of the grants.

Mr Hague and Mr Rowe-Beddoe toured Japan, South Korea and Hong Kong in September banging the drum for investment in Wales. QPL is said to have indicated its intention to reinvest in Wales during a meeting with a WDA team in Hong Kong in January.

QPL's decision follows the announcement last month of an investment by the South Korean Halla Business Group creating 300 jobs in Merthyr Tydfil and an expansion by Japan's Sumitomo Precision Products creating 100 jobs in Newport.

Mr Rowe-Beddoe said: "It is a major investment for Wales, creating the type of highly skilled and well-paid jobs that we want; and this expansion also brings the possibility of even wider and longer economic benefits."

Work is planned to start on the new plant later this year and it is due to begin production early in 1997. The WDA said all the job vacancies should have been filled by mid-1998. Some of the grant money will be phased in as and when QPL meets the job creation target.

The Newport factory will produce eight-inch micron silicon wafer chips and have a peak production capacity of 10,000 wafers per month. The existing factory produces 4in and 6in wafers used in semi-conductors.