Report on Thailand’s Foreign Direct Investment: Impacts on Communities, Environment and Human Rights Violation

The Mekong Butterfly

June 15, 2018, during the event “Mekong’s People and Resources under Uncertainty: Change? Adaptation? and Leaving No One Behind?” which was the 1st National Conference on Border Study and International Development held by Area-based-Social Innovation Research Center (Ab-SIRC), School of Social Innovation, Mae Fah Luang University, the ETO Watch Coalition had a chance to present the book “Report on Thailand’s Foreign Direct Investment: Impacts on Communities, Environment and Human Rights Violation”. Mr. Teerachai Sanjaroenkijthaworn, Coalition’s representative, said that the purpose of this book’s publication with contents reflecting the investment behavior and governance of Thai investors is to raise society’s awareness on human rights abuses caused by large-scale investment project. The ultimate goal is to make Thai investors who invest outside be regulated, controlled and supervised by government sectors with concrete measures taken to oversee both in forms of laws and mechanisms. He also summarized the overall and interesting points of this book divided into 6 main sections: 1) Overview of Thailand’s foreign investment, factors supporting oversea investment from Thai state and attractive factors causing FDI, particularly in CLMV countries 2) Patterns of Thailand’s foreign investment 3) 12 case studies followed by the coalition 4) National Human Rights Commission’s Investigation of human abuses caused by Thai capital in foreign countries 5) Overview of social, environmental and human rights impacts and 6) Legal solutions, policies and responsibilities of corporate governance.

In relation to the overall growth of Thailand’s FDI, it started to increase during the end of B.E. 2520s and expanded more during General Chatchai Chunhawan’s Government under the policy “From War Zone to Trade Zone”. The information of Thailand’s cumulative FDI from 2005 to 2016 showed that the investment value was THB 2,652,775.95 with the largest amount in ASEAN countries, then Hong Kong, Cayman Islands, Mauritius, United State of America and British Virgin respectively.

As to the pattern of Thailand’s FDI, it was found that each company did not invest directly through their parent company, but registering their subsidiary company beforehand in such country. Most of the country have laws that help those registered companies with tax incentives leading the beneficial entities to invest in host country or country where the development project is located. In several cases, companies take advantage of host country’s legal gap in possessing the concession more than prescribed by law of that country using different subsidiaries to get each concession for their business operation less than legally stated. They have however networking relationships in terms of industry-related patterns.

Causes or factors which lead to a huge abroad investment can be defined as ‘Market Seeking’ in order to maintain market shares in the countries where the market is large or tends to grow; ‘Resource and Labor Seeking’ meaning that the natural resources and raw material as well as cheaper labor are more accessible; ‘Efficiency Seeking’ in order to have an efficient production, new technologies as well as to diversify business risks. Apart from those factors, in consideration of Thailand’s context, there are also many factors pushing Thai capital to be invested oversea: we have laws relating to human rights, community rights and environmental protection; a comprehensive access to justice (more than other countries in the Mekong Basin); strong people and civil society movement towards an intensive and long-term audit over capital groups; high wages as a result of civil society movement and we have less natural resources using as a raw material for domestic industry. Besides, Thailand has various agencies and mechanisms that promote and support capital groups both as a source of funding and information to facilitate them as well as state enterprises to invest in foreign countries such as Neighboring Countries Economic Development Corporation Agency (NEDA); Bank of Thailand; Export-Import Bank of Thailand (EXIM BANK); Ministry of Foreign Affairs; Revenue Department; other commercial banks including guiding policies or agreements: MoU for Electricity dealing with neighboring countries or Ayeyawady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS) between Cambodia, Lao PDR, Myanmar, Thailand and Vietnam.

Not only the factors in the context of Thailand that push forward an outstanding outward investment, supporting and attractive factors and policies of CLMV countries also play an important role. Cambodia has several policies and laws that greatly benefit foreign investors:  the Socio-Economic Development Plan; National Poverty Reduction Strategy; Free Trade Policy with market mechanism allowing free competition; the EU Investment and Development Supporting Scheme ‘Everything But Arms’ helping Least Developed Countries (LDCs) by purchasing all kinds of goods produced in such country except weapons, for example. And the most critically factors are the Sub-decree on Economic Land Concession 2005 along with Cambodian Land Law 2001. As to Lao PDR, there are policies such as National Growth and Poverty Eradication Strategy (NGPES) aiming to get out of the LDCs by 2020; ‘Battery of Asia’ Strategy aiming to earn income from energy industry. It is obvious that there are many large hydropower and power plant project in Lao PDR in order to generate electricity and make a trade throughout Asia. In addition, there is Law on the Promotion of Foreign Investment which supports and provides many privileges for foreign investors to come into the country. With respect to Myanmar, since the political atmosphere in the country had started to relax especially in 2010 before the general election, Government of Myanmar had also released policies and laws providing opportunities and benefits to investors, for instant, the National Comprehensive Development Plan-NCDP (2011-2031) which focuses on trade and investment sectors including international investment mobilization with people-centered approach; Foreign Investment Law 2012 opened up for foreign investors to hold 100% of share, extended corporate’s tax exemption period for the first 5 years, more relaxed on the requirements of machinery and raw material used in construction importation. Moreover, there is Myanmar Special Economic Zone Law aiming to determine industrial areas such as Dawei Special Economic Zone which was determined as the area for goods transportation, logistics and heavy industry. As to Vietnam, they also have policies and laws attracting foreign investors and establishing special economic and industrial zones.

In relation to the 12 case studies that the ETO Watch is tracking, they are separately located in different number in CLMV countries. They are comprised of energy development sector, particularly hydropower and coal power projects; manufacturing industry sector and economic land concession projects and mining sector. In Myanmar, there are 6 projects: Hat Gyi Dam Project on Salween River in Karen State; Mawlamyine Cement and Coal-fired Power Plant Projects in Mon State; Dawei Deep-sea Port and Special Economic Zone Project in Tanintharyi Region; Heinda Mine Project in Myitta, Tanintharyi Region and Ban Chaung Coal Mine Project in Dawei, Tanintharyi Region. In Lao PDR, there are 3 projects: Pak Beng Hydropower Project in Pak Beng District, Oudomxay Province; Xayaburi Hydropower Project in Xayaburi Province and Hongsa Power Plant and Lignite Coal Mine Project in Hongsa District, Xayaburi Province. In Cambodia, there are 2 projects: Economic Land Concession for Sugarcane Plantation and Sugar Factory Projects, one in Koh Kong and the other in Oddar Meanchey Province. And finally in Vietnam, there is 1 projects which is Quang Tri Coal-fired Power Plant Project located in Quang Tri Special Economic Zone.

There are 6 projects out of 12 which were investigated by Thailand’s National Human Rights Commission as follow: Hat Gyi Dam Project; Economic Land Concession for Sugarcane Plantation and Sugar Factory Project in Oddar Meanchay; Dawei Deep-sea Port and Special Economic Zone Project; Xayaburi Hydropower Project; Hongsa Power Plant and Lignite Coal Mine Project and Economic Land Concession for Sugarcane Plantation and Sugar Factory Project in Koh Kong, their final audit report and recommendations were already submitted to the Cabinet for consideration. Among the 6 projects, 2 of them had received the Cabinet Resolution in writing: the Cabinet Resolution of May 16, 2016 on Dawei Deep-sea Port and Special Economic Zone Project and the Cabinet Resolution of May 2, 2017 on Oddar Meanchay Economic Land Concession for Sugarcane Plantation and Sugar Factory Project. Both cabinet resolutions could be essentially summarized as follow: there should be an establishment of a mechanism or supervising mission on Thailand’s FDI to make them respect the fundamental human rights principles in line with the UNGP on Business and Human Rights and take the ‘Protect, Respect and Remedy’ framework into account. Despite the cabinet resolutions, it was found that the relevant agencies make no progress at all. Except for the Rights and Liberties Protection Department, Ministry of Justice which is now conducting a National Action Plan (NAP) on Business and Human Rights. The first draft will be done in late June and the final will be completed in September this year. The issue concerning Thailand’s cross-border investment is one of the key issues which will be included in the NAP.

The analysis of the 12 case studies indicated that almost all the projects had similar social and environmental impacts in common, some can openly be defined in project’s documents and others are disclosed. For example, the Feasibility Study and the EIA Report usually show only the impacts that would happen within the project area without specifying the impacts outside or around the project. And most of the time, cross-border damages have not been calculated. Furthermore, there is no mention about serial social impacts such as loss of career and income caused by losing of resources and arable land; forced relocation to nearby places or countries and unfair compensation.

In terms of overall human rights impacts, it was found that in many projects there was no opportunity for people living in or nearby project area who will more or less be effected by such project to express their opinions or participate in project’s decision making. Additionally, published documents or information regarding the project were not comprehensive and translated into local languages so that effected people could access. It was also found that government officials in many cases helped making way for company to enter concession areas that community has been using long before. The violence evoked by state officials against their own people could be seen as burning houses; threatening; military’s forced eviction; arrest and prosecution.

In conclusion, the reason why companies are able to get into and operate their projects with social responsibility leading human rights abuses is because of the host country’s legal gap and promoting policies. One of the problems is that normally domestic laws can only be applied within state’s sovereignty or territory, meaning that they do not cover cross-border projects having transboundary impacts. In addition, the government do not have any mechanisms to closely investigate and monitor human rights violation situation or even one that monitors relevant agencies’ conflict of interest. The supervision of listed companies in the Stock Exchange of Thailand (SET) is still passive, there is no setup of department or mechanism for directly checking each project. Moreover, several commercial banks proving loans for companies to serve their projects do not care much about social and environmental responsibility. Another problem is the lack of a risk assessment process that financial institution can use to assess and manage environmental and social risks of the project before deciding to approve loans in accordance with Equator Principles. Despite the existence of regional mechanism like the Mekong River Commission (MRC), it could not solve the problem or have any authority to suspend large hydropower projects on Mekong mainstream, although there was a research saying that they have potential to impact other countries in the region. This is because ASEAN has its own rule not to intervene each country’s internal affairs. Yet, the head of the working group from each country under the PNPCA process is the Permanent Secretary (senior official) who has to make a decision on large-scale construction project on the Mekong River, this authority should actually belong to ministers. Therefore, it can be assumed that member states accept to reduce their executive power in this regard.

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