INSIGHT: Mab Ta Phut crisis will force Thai companies to look overseas

19 March 2010 14:55  [Source: ICIS news]

By Malini Hariharan

Thailand calls for halt to Mab Ta Phut projectsA solution to the Mab Ta Phut mess is slowly emerging but the issue, which resulted in the suspension of 65 projects by the Thai Supreme Court last December, is likely to force Thai chemical companies to invest overseas for future growth.

The government has put in place a committee that is working on setting up an independent agency to assess environmental and health impact of all industrial projects as required by the country’s 2007 constitution.

A few of the stalled projects have also received court permission to resume construction and carry out testing though they will have to wait for clearance of health impact assessment (HIA) studies before they start commercial operations.

A one-year delay to projects looks very likely, says a Bangkok-based analyst.

But even if the suspended projects are completed, chemical companies, Thai or foreign, will not find it easy to expand further at Mab Ta Phut.

Activists also claim that Mab Ta Phut has reached the limits of its environmental carrying capacity.

“In my opinion Mab Ta Phut needs a big clean up. The government should focus on this rather than further expansions. But there is no government policy on this,” says Penchom Saetang of Ecological Alert and Recovery Thailand (Earth).

And even if pollution at the site can be reduced, the local population is unlikely to welcome any large investments. “It is now almost impossible,” she adds.

The government’s long overdue plan of developing an alternate petrochemical hub on the southern seaboard may also not materialise. So far there has been little progress on the ground and the environmental lobby is now likely to block development.

“Non governmental organisations (NGOs) have already moved there activating public opinion against chemical investments. So it will be very difficult,” the analyst points out.

Mab Ta Phut has set a precedent for others to follow.

“In every province [in southern Thailand] the local population has networked to resist investment. The anti industrialisation feeling goes deep; it is a consequence of malpractices by industries and ignorance of the government to do something once local people voice concerns [related to pollution]. Now it is almost too late to recover,” warns Penchom.

And if the environmental issue is not enough, politics is also denting Thailand’s investment climate. This week’s rally by supporters of the country’s former Prime Minister Thaksin Shinawatra, the latest in a series of protests over the past few years, further clouds the country’s prospects for attracting foreign investments.

Multinationals are increasingly likely to look at other countries in the region for future investment.

“Even Thai companies will have to move out. The Siam Cement Group (SCG) is already doing this and it will be easy for them as they are focused on naphtha crackers,” says the analyst.

SCG, which has a number of investments in Mab Ta Phut, is now working on a cracker and derivatives project in Vietnam.

But the road overseas might not be easy for PTT Chem, the country’s largest petrochemicals player, as it is likely to be guided by its parent PTT which has focused overseas investments in upstream oil, gas and coal.

But PTT’s strike rate in exploration and production outside the country is not good, points out the analyst.

It could be a long wait if PTT Chem has to rely on the parent to be successful in the upstream business to provide the feedstocks for petrochemicals.

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