Curbing industrial growth can work for Thailand

On Tuesday, the Central Administrative Court ordered 76 industrial projects at the nation's largest industrial estate to suspend operations temporarily, pending an investigation into whether they are operating legally.

 Environmental groups and local people in Rayong have filed complaints against state agencies and several ministries for failing to properly issue operating licenses at the Map Ta Phut Industrial Estate. The value of the 76 projects is estimated at Bt330 billion.

At the Cabinet meeting, Staporn Kavitanont, an adviser to Prime Minister Abhisit Vejjajiva, expressed his reservations about the proposed industrial development in the South. He was quoted as saying, "Enough is enough."

It should be noted that Staporn was the former secretary-general of the Board of Investment, and played a key role in promoting industrialisation in Thailand during the 1990s. Now he has changed his view, coming to believe that the South, which is rich in natural resources and tourism opportunities, should be left alone rather than encroached upon by heavy industries.

Abhisit concurred, in a way. The Cabinet ended up deciding that a development plan for industrialisation in the South should be put on hold, pending a complete review.

Recently, Korbsak Sabhavasu, the deputy prime minister, has said he is not sure whether it is good for Thailand to continue to attract investment from heavy industries. But he is still half-hearted in his opinion, believing that the manufacturing sector continues to be the engine of Thai economic growth - although Thailand needs to focus more on the agricultural sector during this time of global economic turmoil.

According to SCB Securities, three companies under the PTT group will be affected by the court order - PTT's gas separation plant number 6, PTT Chemical's 50ktpa HDPE expansion, and PTT Aromatics and Refining's condensate residue splitter (CRS).

"Other projects, while not on the 76-project list, might also face risk of project delay if the court order expands beyond the initial 76. Glow Energy should not be affected directly since its project on the list does not exist, since it failed to win the bid. All three companies have projects that have already received clearance from the environmental inspection [process] but not operating licenses," the research report said.

At this point, we need a serious discussion on Thailand's industrial policy. It is time that we walked away from heavy industries and embraced light industries and agriculture instead.

Bangkok is now hosting a 12-day forum on global warming, which will lay the groundwork for a further meeting in Barcelona and a final pact in Copenhagen later this year. The global agreement on measures to arrest global warming will replace the Kyoto Protocol, which will expire in 2012.

If Thailand is to contribute to the new round of global warming talks, we should seriously review all new investment plans in heavy industries and impose stringent environmental standards on the existing industries.

Secondly, the global economic turmoil will continue for the foreseeable future. Investment in export-oriented heavy industries will turn sour if the global recovery is further stalled. There might be some nascent recovery, but we could slip back into another recession at any time. The world is now suffering from over-capacity. Factories are holding on to dead stock. It would be unwise to pursue further heavy-industry investment.

Thirdly, the course of industrialisation naturally suffers a tragic end. Look at Japan Inc as a case in point. Decades of industrialisation turned Japan into the world's second largest economy. But Japan is now a sick patient, with deficit problems, unsustainable public debt and growing public nervousness about social and health care plans. No matter how much money the Japanese make, it never seems to be enough, as costs and inflation also keep on rising in tandem.

Finally, if Thailand were to turn back to supporting agriculture - at least by setting a target to double output to 20 per cent of the gross domestic product - it would be able to balance the risk from the economic turmoil. In the worst scenario, agriculture will save Thailand - not cars and machine parts, electronic products or petrochemical products.

That being said, it's time for Thailand to embrace a shift in our policy by taming industrialisation and promoting agriculture and renewable energy instead.