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Court Ruling on Map Ta Phud will affect confidence in Thailand manufacturing

By on Oct 17, 2009 in Industrial

The global recession has meant that there has been a dramatic fall in investment in manufacturing plant around the world.

In Thailand this has resulted in industrial land sales on estates and parks falling from 3484 Rai (1393 acres) in the first three quarters of last year to 432 Rai (172 acres) in the first three quarters of this year.

We have not seen manufacturers closing existing factories and leaving Thailand and the number of factories being offered for sale due to closure of operations have not risen significantly.

We are starting to see a recovery in both exports and manufacturing capacity utilisation. Thai Industrial Estate and Park operators have told us that they are seeing resumption in enquiries from companies looking to set up plant in Thailand.

Thailand has not only suffered from the effects of the global recession but manufacturers’ confidence in Thailand has been damaged by political events since 2006. Just as we see the first signs of recovery, recent events concerning Map Ta Phud in the Eastern Seaboard have again damaged investors’ confidence.

Map Ta Phud is Thailand’s main bulk chemical deep sea port and a cluster of both government run and private industrial estates make it Thailand’s main petrochemical hub. Map Ta Phud has been critical to the growth of manufacturing in Thailand and the development of the Eastern Seaboard and to date has been a great success story.

Srisuwan Janya president of the stop global warming association and 43 Rayong villagers won an Administrative Court case on Sept 29, 2009 when the court ordered the suspension of 76 industrial projects valued at THB 400 billion ($11.9 billion), in the Map Ta Phut area. The plaintiffs accused agencies involved of malpractice for allowing the projects to go ahead without seeking opinions from locals and the independent organisation on environment as required by Article 67 of the constitution.

David Nardone ,President and CEO of Hemaraj Land And Development Plc., Thailand’s largest Industrial Estate developer commented in Hemaraj’s July 2009 newsletter:
“Investors in Map Ta Phud, Rayong, who have secured their BOI investment privileges or IEAT right to own land, all necessary permits to conduct their business, EIA environmental approvals (if required) from ONEP, construction permits, and financing, are looking to operate their business smoothly, particularly with trillions not just billions of baht invested. Yet, a declaration of a Pollution Control Zone initiated by a few dozen persons with no real rules in place and, remarkably, no government objection, has put these investments at heightened risk.

Continued investment in petrochemicals will be very limited until the rules are clear on how to invest and there are assurances regarding the protection afforded to investors. Recent petitions to the Administration Court from limited NGO protestors have created further uncertainty in an area even beyond Map Ta Phut, Rayong.

The Petrochemical cluster is one success story of Thailand’s few strategic industries. Thai and foreign investors complying with the rules of law and international standards of environmental protection are rightfully demanding the government resolve to protect their capital investments and continuity of business.”

The Bangkok Post on October 13th 2009 quoted Yo Jitsukata the President of the Japanese Chamber of Commerce (J.C.C.) as saying:
“If this problem is not solved soon, there will be an impact on the investment in Thailand including that from Japan, which may be an obstacle to the economic recovery in Thailand,” “We are afraid that this may affect widely companies in this area, where many of the companies are related closely to one another through the supply chains of materials and utilities. We hope that this problem will be solved in the earliest time so that we can continue our suspended projects.”

Japan is Thailand’s largest overseas investor in manufacturing, it is rare for the J.C.C. to make public concerns about Thailand to the press and this highlights the seriousness of the situation.
It is not just multi national companies that are being affected but also two of Thailand’s industrial giants, the Siam Cement Group and PTT. Investors in manufacturing need confidence and certainty, their projects are long term, require substantial investment and loans.

We agree that protection of the environment should be a priority but suspension of these projects took place after the investors had received all the necessary approvals. We hope that a resolution can be found that satisfies the concerns of environmentalists, local residents and the investors in these projects.

Aliwassa has been the Managing Director οf CBRE Thailand for a number of years. As a Thai national, Aliwassa is extremely knowledgeable about the sale of property in Thailand, specifically large scale high value condominium developments largely in Bangkok.

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