Kochakorn Boonlai and Pisit Changplayngam, Yahoo News 3 Dec 09;
BANGKOK - A Thai court halted the bulk of new projects at the world's eighth-biggest petrochemicals hub on Wednesday over environmental concerns, rattling investors in Thailand and posing a new challenge for the government.
Thailand's Supreme Administrative Court gave the green light to just 11 of 76 new plants at Map Ta Phut, the country's largest industrial estate in eastern Rayong province.
The remaining 65 projects worth an estimated $8 billion will be halted during an investigation by a government-appointed commission, a surprise decision that triggered a 2.3 percent drop in Thai stock prices .SETI.
The ruling stoked concerns about legal certainty and government effectiveness in a country once seen as a safe haven for big business. Analysts say the credibility of Prime Minister Abhisit Vejjajiva's pro-business government is at stake if it fails to resolve the dispute.
"While we respect the court's decision, it is definitely going to erode investors' confidence in Thailand," Nandor von der Luehe, chairman of the Joint Foreign Chambers of Commerce, which represents 10,000 foreign companies in Thailand, told reporters.
The ruling "also puts the financing of these projects at risk. The cost of doing business in Thailand is definitely going up after this ruling. We definitely hope that the government will find a quick solution," he added.
A local environment group, which started lobbying governments 13 years ago to clean up Map Ta Phut, says 2,000 local people have since died of cancer as a result of pollution from the plants, although doctors have not said industry is to blame.
Some of dominant Thai energy firm PTT's (PTT.BK) projects were allowed to go ahead because they were not expected to cause serious harm to the environment, Judge Kasem Comsatyadham said, reading the verdict.
Later PTT said its sixth gas separation plant would start operations in early 2010 as planned. [ID:nBKK433280] It said the plant had been started before the constitutional changes in 2007 that altered health and environment rules.
The central bank has said the dispute could cut economic growth by 0.5 percentage point in 2010 if it dragged on. (For an analysis click: [ID:nBKK500927]).
Thailand's benchmark stock index .SETI ended down 2.3 percent after the verdict, led by a 5 percent slide in both PTT and top Thai industrial conglomerate Siam Cement SCC.BK. Although some of their projects were cleared, analysts said the verdict failed to dispel uncertainty hanging over the estate.
"It remains a sensitive issue and a key challenge for the government, which will have to carefully manage this problem, given the negative investor sentiment," said Usara Wilaipich, an economist at Standard Chartered Bank.
HEALTH CONCERNS
There are another 119 projects in Map Ta Phut and the surrounding region of Rayong unaffected by the environmental review, whose operations have not been interrupted, said Sorayud Petchtrakul, an adviser to Thailand's industry minister.
Projects deemed on Wednesday safe for the environment and allowed to operate include those of India's Aditya Birla Chemicals (ADYA.BO), PTT Aromatics and Refining PTTAR.BK, PTT Chemical PTTCH.BK and a Siam Cement project.
Another is unlisted refiner Star Petroleum Refining, a joint venture of Chevron (CVX.N) and PTT, along with Thai firm Indorama Petrochem.
The ruling had not been expected until next February or later, and the stock market jumped 3 percent on Tuesday on hopes of a business-friendly verdict.
The government recently set up a four-party commission, chaired by former Prime Minister Anand Panyarachun, to help resolve the conflict.
The court's injunction followed complaints from locals and environmental groups led by the Stop Global Warming Association that state agencies and several ministers had failed to issue proper operating licences at the estate.
Foreign companies have also been caught up in the case, including a Thai unit of Germany's Bayer (BAYGn.DE) and Australia's BlueScope Steel Ltd (BSL.AX).
Under the 2007 constitution, companies need approval for projects that might be harmful to people and the community. That entails an environmental impact assessment (EIA) and a health impact assessment (HIA) which includes public hearings.
Before 2007, industrial plants needed only EIA approval at Map Ta Phut. Most companies complied with EIA rules but failed to abide by HIA requirements because the government had not yet set up an independent organisation to oversee the health impact.
(Editing by Jason Szep)
