Cablegate: Court Decides Shut-Down of Map Ta Phut Industrial Projects

DE RUEHBK #3068/01 3380846
P 040846Z DEC 09



E.O. 12958: N/A
SUBJECT: Court Decides Shut-Down of Map Ta Phut Industrial Projects
Will Stand


BANGKOK 00003068 001.2 OF 002

Sensitive But Unclassified. For Official Use Only.

1. (SBU) Summary: The Supreme Administrative Court of Thailand ruled
on December 2 to maintain a suspension order for 65 new or expansion
projects in Thailand's largest and premier Map Ta Phut Industrial
Estate. Only 11 of the 76 projects suspended in the September 29
decision by a lower court are allowed to proceed, as it was
determined that they would not have a significant impact on the
local environment. Environmentalists applaud the decision as a
victory for civil society, while the business community is very
disappointed and concerned over the possible financial repercussions
and the long term effect on the investment climate. End Summary.

2. (SBU) Comment: Both the foreign and Thai companies affected,
including Dow Chemical, which has a multi-billion dollar joint
venture petrochemical project on the list of suspended projects, are
particularly frustrated because the guidelines do not yet exist that
would enable them to comply with the constitutional mandates for
environmental and health impact assessments. The Ambassador has
weighed in with the Prime Minister and other top leaders to urge
quick remedy. Editorial reaction to the court's judgment has been
diverse, highlighting its importance to communities,
environmentalists, investors, and the government. As the court's
ruling goes against some of the largest and most powerful business
interests in the country, the most important development may be the
strengthening of the independence of the judiciary. End Comment.

3. (U) On December 2, the Supreme Administrative Court of Thailand
upheld, for the most part, the September 29 injunction issued by the
Central Administrative Court (Ref C). The September 29 injunction
suspended 76 projects in the Map Ta Phut industrial area. The
December 2 Supreme Administrative Court ruling removed 11 of the
projects from the list of suspended projects. The court found that
the eleven projects would not have a substantial impact on the
environment and quality of life of the local people. The other 65
projects must suspend construction pending a full hearing into
whether they comply with the requirements in the constitution.
(Note: As a technical matter, the court ruling cannot directly halt
the projects. The Ministry of Industry must issue that order, which
is expected within a week.)

Ruling Shakes Business Confidence
4. (U) In an erroneous anticipation of a positive ruling for
industrial firms, stocks rose 3 percent on December 1. Following
the ruling in the afternoon of December 2, the SET index fell 2.32
percent. Companies with suspended projects took a hit; shares of
Siam Cement, a joint venture partner of Dow Chemical, were down more
than five percent. Shares of PTT Group companies, a major investor
in the Map Ta Phut area, were down at the close of day on December
2: PTT Plc. down 5.06 percent, PTT Exploration and Production down
4.69 percent, PTT Aromatics and Refining down 3.77 percent, and PTT
Chemicals down 5 percent. While three projects of the group of
companies were among the eleven allowed to continue (one each from
PTT Aromatics and Refining, PTT Plc., and PTT Chemical), 22 other
projects must halt work.

5. (U) Analysts warn that the ruling could dampen Thailand's
investment climate. The Joint Foreign Chambers of Commerce in
Thailand have long expressed their concern that the suspension of
the projects will have significant implications for foreign and Thai
investor confidence in Thailand's investment regime and will alter
the perception of the investment environment. Working with the
American Chamber, the Joint Chamber is preparing to issue a new
statement to urge quick remedial action. In addition, economists
warn that long delays for Map Ta Phut projects could reduce the GDP
growth by as much as a half of a percent from the forecasted 3
percent growth in 2010.

Environmentalists Praise Verdict
6. (SBU) Environmental activists applauded the court ruling, saying
that it was a message that the law must be followed. Srisuwan
Janya, president of the Stop Global Warming Association, which filed
lawsuits against eight government agencies that lead to the
injunction against the 76 projects, publicly stated that this
verdict has encouraged his organization to pursue more battles
against the government's negligence - he plans to make a move
against 181 industrial projects located in other parts of the
country. Sutthi Atchasai, a coordinator of the Eastern Peoples'
Network, told us that he is quite happy with the ruling and that he
will continue to monitor the situation to ensure that the
Constitution is followed.

BANGKOK 00003068 002.2 OF 002

Concerns of Major Investors
7. (SBU) Dow Chemical's multi-billion dollar petrochemical expansion
was among the 65 which were affected - even though the company's
environmental standards exceed those required under the law. On
December 3, the company told the Commercial Counselor that if they
must suspend their expansion plans now well underway, 6000 workers
will be let go and 4000 new workers would not be offered employment.
Given the potential losses it faces, Dow may be forced to file a
claim against the government for damages. (Note: Two environmental
upgrade projects of Star Petroleum and Refinery Company, a Chevron
subsidiary, were among those allowed to proceed. End Note.)

8. (U) The Federation of Thai industries led a large delegation to
meet with the Prime Minister on December 3. The group expressed
concern that billions of baht in potential investment could now move
outside of Thailand given the uncertainties that remain for new
investment in Thailand. The business representatives also asked for
clarification on procedures that would bring projects into
compliance with the Constitution, allowing the projects to proceed.

9. (SBU) The Ambassador has already raised concern about the Map Ta
Put dilemma in meetings with Prime Minister Abhisit, Deputy Minister
Kobsak, the Transport Minister and the Thailand Trade
Representative, stressing the need to protect the large U.S.
investments by putting in place the procedures for companies to
establish compliance with environmental and health standards.

10. (SBU) In a December 3 discussion with the Econ Counselor, the
Japanese Economic Counselor expressed concern that this decision
could badly affect several Japanese companies. He said that his
embassy is seeking a meeting with Deputy Prime Minister Korbsak to
discuss the situation and he hopes that the Thai government will
work quickly to mitigate the damage resulting from the court ruling.
Given the role of Solvay as one of the joint venture partners for
Dow, the Belgian Ambassador has raised concerns about the situation
to the Thailand Trade Representative, the Ministry of Finance and
the Ministry of Foreign Affairs. The EU has also been actively
lobbying on behalf of other European firms.

RTG Reactions Mixed
11. (U) Immediately following the court's ruling, the government
pledged to do what it can to allow stalled projects to move forward
as soon as possible. Prime Minister Abhisit instructed cabinet
ministers to assess the potential damage and to find ways to ease
the impact of the decision. Abhisit has also urged those working to
solve problems at the industrial estate to speed up their efforts.
In a press event late December 3, however, Abhisit stressed that the
ruling represents an important lesson in the role of the courts in
society, and that industrial development cannot continue without
taking into account environmental and social sustainability.

12. (SBU) Prior to the court decision, the Government established a
four-party panel to seek a compromise on how to balance industrial
development with local community interests. On November 19, the
committee, chaired by former Prime Minister Anand Panyarachun, held
its first meeting. Since the ruling, Anand announced that he would
speed up the work of the committee. Membership of the committee
includes environmentalists, community activists, representatives
from the business sector, and government officials. Sutthi
Atchasai, coordinator of the Eastern Peoples' Network and a member
of the committee, is very pleased with the set-up of the committee
and told us that he is confident that the committee will be


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