UpdateBangkok protests fail to rattle Thai petchems; FDI flows at risk

15 March 2010 07:30  [Source: ICIS news]

(adds comments on current production in paragraphs 16-19)

By Nurluqman Suratman

SINGAPORE (ICIS news)--It is business as usual for the petrochemical industry in Thailand on Monday amid continuing political protests in Bangkok, after Prime Minister Abhisit Vejjajiva brushed aside demands for his resignation.

But Thailand would need to address its long-standing political instability for the country to draw in more foreign direct investments (FDI) and keep them, analysts and industry sources said on Monday.

Members of the United Front for Democracy against Dictatorship (UDD) - known supporters of deposed Prime Minister Thaksin Shinawatra - took to the streets on Sunday and gave the government an ultimatum to dissolve the parliament at noon today or face massive demonstrations.

“There has been no disruption to petrochemical production thus far,” said Naphat Chantaraserekul, an analyst at Kim Eng Institutional Research in Bangkok.

Most of Thailand’s petrochemical plants are located at Mab Ta Phut in Rayong province, which is 180km away from the capital of Bangkok – the seat of the protests.

On Sunday, UDD protestors clad in red shirts gathered as much as 150,000 members in Bangkok to push for Vejjajiva’s resignation and to call for free elections.

The protests have largely been peaceful and would not have any immediate impact on foreign investments coming into the country as long as there is no violence, said Chantaraserekul of Kim Eng Securities.

The frequency of protests in Thailand over the past years has somehow numbed the markets to some extent, analysts said.

The fresh wave of protests failed to draw much reaction from the equities market on Monday as some investors have come to terms with the fact that political instability is very much part of Thailand’s political landscape, they added.

“Protest is part of the daily lives of Thais,” said Kim Eng's Chantaraserekul.

Investors are taking in the current political instability in stride for the time being, said Vishnu Viswarathan, a Singapore-based economist at consultancy firm Forecast.

“I think this will be contained and will not be blown out of proportions,” Viswarathan said.

Petrochemical producers in the country said there was nothing unusual with the rallies of the so-called “red shirts”.

“It is normal and business as usual [for us]. We are more concerned about the traffic jam and whether taxis will be available,” said a source at a Thai synthetic rubber producer.

“However, our Chinese customers have postponed their business trip this week to Bangkok,” the source added.

Likewise, methyl methacrylate (MMA) producer Thai MMA has been operating its 90,000 tonne/year plant in Thailand’s petrochemical hub of Mab Ta Phut normally since the demonstrations began, a company source said.

“We are producing normally now. The government has been supportive of us and we do not see any major changes happening soon,” the source said.

Polyolefin production in Mab Ta Phut, in Rayong province, was also unaffected by the protests but business could be affected if the protest turns violent, a Thai plastics converter said.

“The military will be called in if violence breaks out and that could lead to a curfew which will badly affect business confidence,” he said.

While most have come to expect Thailand’s shaky politics to continue, this may have serious repercussions on FDI flows, analysts said.

Foreign investors are now adopting a “wait-and-see” attitude on how the political situation in Thailand develops, said Lertchai Kochareonrattanakul, analyst at Fitch Ratings.

“They are waiting to see a clearer picture of the political situation. If it is not clear they might just consider other options, other countries, in the region,” he added.

That a number of major projects in Thailand’s petrochemical hub of Mab Ta Phut could not proceed was not also helping project the country as the most investment-friendly destination out there, analysts said.

About 60 projects in the Rayong province, where Mab Ta Phut is located, were still under court injunction on environmental grounds since September 2009.

Investor confidence in Thailand could go down by another notch if the suspension lasted for more than a year, said Chantaraserekul of Kim Eng Securities.

“The solution to the problem in Mab Ta Phut might be delayed as the government gets busy with the protestors,” said Sutthichai Kumworachai of KGI Securities in Bangkok.

“The protests … would have an impact on projects that is scheduled to start in the next three to four years, but not now,” said  Kochareonrattanakul of Fitch Ratings.

With additional reporting by Pearl Bantillo, Chow Bee Lin and Helen Yan

Read John Richardson and Malini Hariharan’s blog – Asian Chemical Connections
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By: Nurluqman Suratman

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