economics

March 18, 2010

Thailand Tightens Environmental Regulation After Years of Unhindered Industrial Expansion, Major Investors Are Increasingly Concerned About Bureaucratic Hurdles

Filed under: Uncategorized — ktetaichinh @ 6:07 pm
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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 growing 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 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% growth rate this year.

Bloomberg NewsA Siam Cement worker at a factory in Saraburi province. Siam Cement has said an impasse at an industrial site will weigh on its earnings.

THAISMOG

THAISMOG

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 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.

“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. 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. 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.

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