Thailand tightens environmental regulation

Thailand tightens environmental regulation
05 March 2010

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 left 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 growing green movement and suspended US$12bn in investments on Thailand’s industrial eastern seaboard—the world’s eighth-largest petrochemical hub—until their environmental impact can be properly 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 per cent 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 in various industries, including cement. Activists have likewise stepped up their lobbying in Indonesia, Vietnam and China over the past several years, at times pressuring their 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.

Thai industrial conglomerates Siam Cement PCL and PTT PLC have warned the Map Ta Phut problems will weigh on earnings, with PTT saying its net profit could fall five per cent 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 at Map Ta Phut.

"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 US 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. It was the same in many of the developing world’s high-growth zones.

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.

Sixty-four projects at the Map Ta Phut site valued at around US$8bn 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.

"The Map Ta Phut case is a small step forward to ensuring that there are real community rights in Thailand. Not just lip service, but something real and concrete," says Mr Suthi, 33 years old.

However, taking a stand against some of Thailand’s most powerful business interests and the politicians who protect them was—and still is—a potentially dangerous course of action, activists say.

Published under Cement News