News Update
Thailand Tightens Environmental Regulation
Thailand Tightens Environmental Regulation
MAP TA PHUT, Thailand -- Thailand''s biggest foreign investors have learned to live with a lot in recent years, including mass protests, airport closures and persistent rumblings about military coups. But now there is another issue that has companies such as Ford Motor Co. and a host of petrochemical firms wondering if they should be putting their money somewhere else: the government''s struggle to deal with tough new environmental regulation.
In September, a Thai court sided with the country''s green movement and suspended $12 billion in investments on Thailand''s industrial eastern seaboard -- the world''s eighth-largest petrochemical hub -- until their environmental impact can be assessed. The move caught the government by surprise, and leaders worry the injunction could shave half a percentage point off Thailand''s expected 4%-5% growth rate this year.
The move also provided new evidence that environmental activists are gaining ground in parts of developing Asia after years of largely ineffective lobbying -- a development that could further ramp up regulatory hurdles for large investors. Activists have likewise stepped up their lobbying in Indonesia, Vietnam and China over the past several years, at times pressuring governments to slow or cancel environmentally sensitive projects.
Bangkok hopes to set up a new environmental-monitoring agency within five months to quickly assess and approve new projects and keep investment flowing into the country.
But a growing number of companies, including many that aren''t involved in the oil and chemical industries and have solid green credentials, now are becoming increasingly concerned about the changes and the uncertain regulatory environment they have created, and they want the investment crisis solved as soon as possible.
The Japanese Chamber of Commerce in Thailand, meanwhile, on Jan. 28 warned that some of its members were considering relocating to other countries if the problem persists.
Ford is among them. It already exports vehicles to more than 50 countries from its Thai manufacturing plants.
Last month, the company said that it wasn''t ready to commit to plans for a new passenger-car plant it is considering building, shocking Thai authorities who have counted on big investments from foreign auto makers to boost growth. Ford said there are "ongoing assessments" of its plans for the new car plant, and stressed that "a number of related factors must still come together before any decisions could be considered."
Munenori Yamada, president of Japan''s External Trade Organization for South and Southeast Asia told reporters in Bangkok last week that the latest crisis is a bigger turn-off than Thailand''s persistent political conflicts, which lead to a military coup in 2006 and a siege of Bangkok''s airports by antigovernment protesters in 2008.
Some Japanese companies are already struggling financially as they absorb costs related to the Map Ta Phut impasse, he said, and may seek financial support from the Thai government.
Thai industrial conglomerates Siam Cement PCL and PTT PLC have warned the Map Ta Phut problems will weigh on earnings, with PTT saying net could fall 5% in 2010 and more in 2011 if the suspensions remain in force.
Siam Cement and PTT have both said they comply with international standards and will work with the government to resolve the problems.
"The Thai activists are wielding an incredible hammer to effect change, and this is a real test to see whether the Thai government can put in place the right system of checks and balances," says Denny Larson, executive director of California-based Global Community Monitor, an environmental advocacy and community support group.
For decades, Thailand''s industrial zones expanded unhindered by the kind of safeguards demanded by citizens in more developed countries such as the U.S. or in Europe. Residents affected by toxic spills or contaminated groundwater rarely took their grievances to the local authorities, and if they did, they were routinely ignored, although the Thai government says it follows international standards.
In more recent years, environmental groups have forged stronger international links, emboldening local activists.
International pressure from environmentalists and some governments, meanwhile, has helped speed up some countries'' efforts to reduce carbon emissions, while some authoritarian countries are growing more nervous about nascent green movements.
In Vietnam, for instance, young activists have joined forces with aging war heroes to oppose a Chinese-backed bauxite mine, though the project appears likely to continue.
In Thailand''s Map Ta Phut region, one of the key players in the transition toward stricter environmental oversight is a mop-haired durian farmer named Suthi Atchasai.
He says he has noticed his durian orchard on the outskirts of the Map Ta Phut industrial zone deliver a smaller yield of the spiky, pungent fruit in recent years -- something he suspected was related to growth of petrochemical businesses in the area. Thailand''s National Cancer Institute in 2003 recorded bladder, breast, liver, throat and blood cancers rates in the area that were the highest in the country -- something that activists and medical experts say could be attributable to the heavy pollution levels in the area.
Then, in 2005, the government diverted water away from Mr. Suthi''s orchard toward water-hungry businesses in the industrial zone. It was the final straw. Mr. Suthi joined forces with environmental activists and a lawyer, Srisuwan Janya, to build a case forcing the government to live up to a commitment to clean air and water that it had written into its constitution.
They won. Sixty-four projects at the Map Ta Phut site valued at around $8 billion are still on hold after Thailand''s Administrative Court initially suspended 76. Last month, the same court said building work at nine more projects could go ahead. In the meantime, local activists now are looking at starting legal action to suspend 181 other projects across Thailand.