Legal limbo stalls Thailand industry

Thailand's economic prospects could be put in jeopardy because of a continuing dispute at a huge industrial complex.

Recent figures on GDP and exports have been encouraging for the Thai government.

But economists and investors are warning that two major factors have the potential to derail Thailand's nascent recovery.

One is political instability. The other is the legal morass at Map Ta Phut.

Map Ta Phut is one of the biggest petro-chemical hubs in the world.

It is the size of a small town built of gleaming steel pipes, storage tanks and chimney stacks, jutting out into the sea; an industrial peninsula clearly visible from the white sand beaches and fishing villages on either side.

Map Ta Phut has been driving Thailand's industrial growth for decades.

But last September the Constitutional Court put the brakes on.

Local environmentalists successfully argued that several new projects were in breach of pollution laws.

The laws were part of the 2007 constitution, but because there have been so many changes of government in Thailand in recent years, the regulations were never properly established.

Companies could not possibly comply.

Thailand's political turbulence left a legal loophole which was successfully exploited by the environmentalists.

The court ruled that more than 70 projects should be suspended.

A handful have since been allowed to continue, but more than 60 projects remain stalled - 25 of those, some $4bn-worth (£2.6bn) of investment, belong to the Petroleum Authority of Thailand, PTT.

"It's not that we tried to evade or tried not to follow the new requirements," said Chainoi Puankosoom, the CEO of PTT Aromatics and Refining.

"It's just that we don't know how to follow it."

Mr Chainoi says his company has gone out of its way to ensure that all environmental and health impact assessments are completed properly.

But according to the law, those assessments should go before an independent panel of experts to be signed off. The panel has never been established.

Local complaints

The legal limbo has made investors, domestic and foreign, increasingly nervous.

Lenders and contractors are seeking reassurance that contracts will be honoured.

Japanese firms are involved in several joint ventures in Map Ta Phut.

Jo Jitsukata, president of the Japanese chamber of commerce in Thailand, warned that although current agreements were probably safe, if the dispute drags on, future investors might be deterred.

"From the investor's view, what's the rule?" he asked.

Already we are committed to the projects and borrowed the money from the bank. That's a big problem for investors.

"Not only for the Japanese, but also Thai investors and other foreign investors."

The legal dispute may be recent, but the complaints of local villagers are long standing.

Juan, 67, and Noi, 71 have been living in the shadow of Map Ta Phut for 16 years.

Juan expertly wielded a well-worn hoe to remove weeds growing around her fruit trees as she talked.

As the industrial plant has grown, she told me, the air quality has got progressively worse.

"The mangoes are much smaller than they used to be," she said.

"The tree has flowers, but there is not so much fruit. And look at the dark dust on the banana leaves."

Juan's husband Noi sat quietly in the shade. Six of the elderly couple's relatives have died of cancer.

"Whenever I think about it I feel very bitter inside," Noi said, his voice cracking with emotion as tears rolled down his cheeks.

Noi said he doesn't know if pollution is to blame for his loss.

"I'm not a clever man," he said, but he wants his concerns taken seriously.

"I want the government to know that we are suffering mentally as well as physically."

Precedent set

The government is listening. It is now providing peripatetic clinics providing free health checks for local people.

Samples of blood and urine are taken; eyes and skin are checked for any ailments.

There is even a mobile X-ray machine, mounted inside a shiny new bus.

The clinics fulfil two functions - providing basic care and reassurance for the local population while at the same time gathering potentially valuable data.

The government is also trying to sort out the legal limbo over Map Ta Phut.

A special committee, including representatives from all sides of the argument, has been set up to resolve outstanding differences.

Eventually, most, if not all, of the suspended projects will be allowed to continue. Thailand simply cannot afford its industrial heart to stop pumping.

Whatever the outcome, Suthi Achasai, one of the environmentalists who brought the legal case to court, believes the Map Ta Phut dispute has set an important precedent.

"People in other areas will now be more aware and more careful of any kind of development that's similar to this," he told me, as we stood next to the beach, with Map Ta Phut's distinctive skyline dominating the horizon.

"Lessons have been learned here. The private sector can't take things for granted anymore and the government knows it has to enforce the law."

Environmentalists like Suthi are demanding accountability. Investors want legal clarity.

Thailand's economic future depends on them learning to live together.