INSIGHT: Mab Ta Phut crisis raises questions about its future

16 October 2009 15:54  [Source: ICIS news]

By Malini Hariharan

The prospects of Mab Ta Phut continuing as Thailand’s largest and Southeast Asia’s leading chemical hub appear bleak.

Environmental activists, who have been lobbying aggressively since 2007 against new projects at the site, have made significant progress. Mab Ta Phut was identified as a pollution control zone in March and more recently the Thai Administrative Court ordered a temporary halt to 76 projects at the site.

The list includes PTT Chemical’s 1m tonnes/year ethane cracker and derivatives project and Siam Cement’s joint venture with Dow Chemical for a 900,000 tonnes/year cracker and a number of downstream plants.

The government has already filed an appeal with the Supreme Court and it is likely that projects which have received environmental clearance and are at an advanced stage of construction will proceed.

But the reputation of Mab Ta Phut, home to more than 50 companies with a total investment of around $13bn, has been severely dented and the government’s ability to draw new investments to the site appears doubtful.

While construction activity has not stopped despite the court ruling, it may be difficult for companies to obtain permission to commission their plants if the government does not quickly convince the Supreme Court that delaying projects will be detrimental to the economic health of the country.

The government is certainly under pressure trying to balance the demands of investors with those of the local people.

“I do not envy the government,” said one Bangkok-based analyst. You are caught: if you allow the projects to go ahead then the constituents will not be pleased; if you hold the projects then foreign direct investment (FDI) will be affected. In the end some compromise will be reached.”

But the government is also responsible for the current crisis as it delayed implementing Section 67 of Thailand’s 2007 constitution.

This constitution guarantees Thai people the right to participate with the state in preserving the environment and also the power to stop any project or activity which may damage the environment unless it has been evaluated and approved by an independent body made up of representatives from private environmental and health organisations.

An independent body to evaluate projects has yet to be set up and a law that guarantees Thai people their constitutional right to a clean environment has not been framed. However, this is not surprising given the political turmoil Thailand has experienced in the last two years.

The government is busy trying to make up for lost time.

Naphat Chantaraserekul of Kin Eng Securities says two options are being considered -to amend an existing law or introduce a new law. “The first option is the short way out and could take about three weeks while the second could take at least three months,” he adds.

Activists want health impact assessments (HIAs) to be mandatory for all projects. This is likely to be a tougher hurdle to clear than the conventional environmental impact assessment (EIA).

“For an EIA, companies spent 90% of their time getting the paper work done with government departments and 10% of their time in public hearings. With the HIA, companies will have to spend 50% of their time with the government and the rest with independent health experts and village representatives. There will be more people to deal with; it is going to take longer and it will be tougher. That is a victory for the people,” points out the first analyst.

Non governmental organisations (NGOs) fighting to protect the Mab Ta Phut environment are firm that the site should not see any more new investments.

“The environment capacity of Mab Ta Phut has been reached; it cannot bear any more [pollution]. The area should have no more investment,” stresses Penchom Saetang of the Ecological Alert Recovery of Thailand (EARTH). She points out that water is also a problem and cites the 2005 drought when supply to factories was prioritised.

“The Board of Investment has been saying that they have other sites in the South. But will this repeat the Mab Ta Phut experience? The NGOs in the south are quite cohesive in putting up resistance. It is going to take years for the government to identify a new site and put up infrastructure,” points out the first analyst.

With no clear alternative in sight Thai companies face a major challenge in drawing up future expansion plans. But the crisis at home gives them one more reason to scout for opportunities elsewhere in the region.

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By: Malini Hariharan
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