Wednesday, December 2, 2009

Thai Court Upholds Suspension of Industrial Projects (Update1)

By Daniel Ten Kate and Suttinee Yuvejwattana

Dec. 2 (Bloomberg) -- Thailand’s Supreme Administrative Court upheld the suspension of 65 industrial projects halted in September because of pollution concerns, a ruling that may sour investor sentiment and hurt the economy.

Construction on 11 projects may go forward as planned during the trial because they don’t have an environmental impact, Judge Kasem Comsatyatham said today. A lower court on Sept. 29 issued an injunction to stop work on 76 projects with a combined value of 400 billion baht ($12 billion). The court didn’t state the value of the 11 projects approved.

The ruling further delays investments by Siam Cement Pcl and PTT Pcl, which together account for 17 percent of the SET index’s market capitalization. The central bank previously said a one-year delay of the investments may shave next year’s gross domestic product growth by as much as 0.5 percentage point.

“It is a compromise result that is presumably intended to give something to both sides, but it’s not a result that helps the economy,” said Andrew Matthews, Bangkok-based partner of U.K. law firm Clifford Chance LLP. “The immediate task for the government is damage limitation and to broadcast this in the most positive way they can to investors who are holding back.”

Projects that will remain suspended include PTT’s $780 million gas separation plant, PTT Chemical Pcl’s polyethylene expansion project and the expansion of an olefins plant by a unit of Siam Cement, according to a list provided by the court. PTT Aromatics & Refining Pcl’s aromatics expansion project also remains suspended, the court said.

PTT Shares Slump

PTT fell 5.1 percent to 225 baht after the ruling, PTT Chemical dropped 5.3 percent to 71.5 baht, PTT Aromatics lost 3.8 percent to 23 baht and Siam Cement dropped 5.1 percent to 223 baht, the most in more than a month. The SET index fell 2.3 percent to 693.51, the biggest drop since Nov. 12.

Officials from PTT and Siam Cement declined to immediately comment on the ruling.

Prime Minister Abhisit Vejjajiva said yesterday his government, which was surprised by the decision in September and immediately appealed, would keep “fighting” if the decision went against him. The petrochemical, refinery and electricity projects in Map Ta Phut, Thailand’s largest industrial port, buoy the country’s manufacturing and exports, which amount to about 60 percent of Southeast Asia’s second-biggest economy.

“We are a one-strategy economy, and that is industrialization using Map Ta Phut,” Supavud Saicheua, managing director of Phatra Securities Pcl, Thailand’s third- biggest brokerage, said before the ruling. “Growth could drop quite precipitously” without the investments, he said.

Constitutional Test

The case brought by environmental groups is the first to test Article 67 of the 2007 constitution drafted by a military- appointed committee a year after it ousted Prime Minister Thaksin Shinawatra in a coup. The clause bans all projects that don’t have environment and health studies, public consultations and opinions from independent experts.

“We hope to reach a conclusion on the new criteria soon, to prevent any impact on other new projects,” Abhisit said today. “The joint committee is working on it now. The legal process will continue as the case is still at the court. When all the projects follow the constitution, the case shouldn’t be a problem.”

Environmental groups claim the investments would generate pollution that would hurt the public. Last month, the Cabinet approved changes to environmental legislation that would create an organization to oversee such projects and require assessments on the environmental and health impact to be concluded before construction can begin.

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