This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 04 BANGKOK 005317 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR EAP/BCLTV, EB, AND OES/PCI 
 
STATE PLEASE PASS TO USTR 
 
ENERGY FOR IN AND PI; COMMERCE FOR JKELLY 
 
E.O. 12958, AS AMENDED: N/A 
TAGS: ECIN ECON ECPS ELAB EINV ENRG EPET KCOR KPRV SENV SOCI TH EPWR
SUBJECT: EASTERN SEABOARD WATER SHORTAGE HIGHLIGHTS 
VULNERABILITY OF THAILAND'S ECONOMY 
 
REF: N/A 
 
-- SENSITIVE BUT UNCLASSIFIED - NOT FOR INTERNET DISTRIBUTION 
 
¶1.  (SBU) SUMMARY: A water shortage in the industrial areas 
along Thailand's Eastern Seaboard raises questions about the 
management of the nation's water resources with important 
implications for the further development of Thailand's most 
important industrial zone.  A concurrence of two dry years has 
led to a critical shortage of water at Map Ta Phut Industrial 
Estate in Rayong Province, the eighth largest petrochemicals 
complex in the world.  Other areas, including Pattaya City, 
one of the country's most important tourist destination, have 
also experienced water shortages.  The Royal Thai Government 
is implementing various short- and medium-term solutions to 
increase supply.  Questions raised by these measures and the 
absence of a more comprehensive effort to manage the nation's 
water resources indicate that Thailand's Eastern Seaboard will 
continue to confront the prospect of water shortages, and that 
issues concerning water supply will require more attention on 
the part industry in the region in the future. The relatively 
poor performance in meeting such a pressing problem also calls 
into question the ability of the RTG to manage the numerous 
large infrastructure projects it has planned over the next 
five years.  End Summary. 
 
THE WATER SHORTAGE IN THAILAND'S EASTERN SEABOARD 
--------------------------------------------- ---- 
 
¶2.  (U) A water shortage in the coastal plains of Chonburi, 
Rayong, Chanthaburi, and Trat provinces (collectively known as 
the Eastern Seaboard) has the potential to disrupt current 
industrial activity and long-term economic development of the 
region.  Home to the country's principal oil refineries, 
petrochemical industry, automotive industry, and various other 
major manufacturers as well as important centers of tourism, 
the Eastern Seaboard has emerged in recent years as the single- 
most important economic zone in Thailand outside of Bangkok. 
The region provides 16 percent of total manufacturing output 
and 22 percent of energy output. 
 
¶3.  (U) The coastal areas of the Eastern Seaboard, 
particularly in Rayong Province, depend heavily upon inland 
reservoirs to supply the water they need.  Historically, water 
levels in these reservoirs drop during the dry season and 
refill after the seasonal rains arrive, usually from July to 
September.  Recovery after the 2004 rainy season was far below 
the levels of previous years.   2005 has been an unusually dry 
year, a problem complicated by the fact that frequent 
downpours in the Eastern hills drains away into streams and 
rivers far from Nong Plalai and Dok Krai reservoirs, which 
together comprise the main source of water for Rayong and 
especially the Map Ta Phut Industrial Estate located there. 
 
¶4.  (U) The water shortage has also begun to affect centers of 
tourism in the region, particularly Pattaya City in Chonburi 
Province.  Mr. Charnyuth Hentrakul, a parliamentarian from 
Chonburi and member of the governing Thai Rak Thai Party, has 
publicly warned that water shortages may hit the tourism 
industry if the problem persists.  Reported tap water 
production has fallen from 120,000 cubic meters per day to 
69,000 cubic meters per day due to shortages of raw water. 
According to one estimate, hotels in Pattaya alone need 60,000 
cu/m of water per day. Short-term measures to divert water 
from area rivers to reservoirs are in progress but are not 
complete.  Hotel operators have resorted to other sources of 
supply, including buying water trucked in from other 
provinces.  There has been an increase in tourist complaints 
about poor water quality at hotels supplied from underground 
water sources, and local residents have experienced 
interruptions in water supply.  One hotel operator said that, 
as a result water costs have jumped from Baht 20,000 (USD 485) 
per month to Baht 200,000 (USD 4,850) per month. 
 
THE CRISIS AT MAP TA PHUT INDUSTRIAL ESTATE 
------------------------------------------- 
 
¶5.  (U) While the shortage has affected industrial areas along 
the Eastern Seaboard, the problem is most acute at Map Ta 
Phut, which is facing its most severe water crisis in more 
than twenty years.  Owing to the extensive growth of industry 
both at the estate and in the region in the intervening years, 
the current crisis has the potential to cause much greater 
disruption to the Thai economy than previous droughts. 
 
¶6.  (U) Developed by the state-run Industrial Estate Authority 
of Thailand (IEAT) in 1982, the 7,430-rai (almost 3,000-acre) 
Map Ta Phut Industrial Estate houses 60 plants, including 32 
petrochemical factories, 10 power plants, eight iron and metal 
production plants, seven chemical fertilizer factories, two 
plants for industrial services, and one oil refinery. Map Ta 
Phut has developed into the eighth largest petrochemicals site 
in the world.  The total investment cost was Baht 549.3 
billion (USD 13.32 billion).  At present, the estate consumes 
between 400,000 and 500,000 cubic meters of water per day.  By 
the final week of July, the Dok Krai and Nong Plalai 
reservoirs held less than 30 million cubic meters, or about 
enough to feed it until mid-August in the absence of rain.  As 
of mid-August the level of the two reservoirs has reportedly 
fallen to approximately 10 million cubic meters, or enough to 
meet demand for 20 days in the absence of rain.  Rain is 
expected in August and September.  Other supplies of water in 
the province are also low, highlighting general concern among 
the population of Rayong about the water shortage.  The Prasae 
River dam about 50 kilometers east of Rayong city can hold up 
to 250 million cubic meters of water, but as of the end of 
July it held only 40 million cu/m, or 16 percent of its total 
capacity, for example. 
 
¶7.  (SBU) Companies operating in Map Ta Phut have been making 
contingency plans.  These include reducing output to curb 
usage, stockpiling reserves, and procurement from other 
sources of supply such as having water trucked in.  Reportedly 
having little confidence in the government's ability to 
relieve the water shortage, major manufacturers at Map Ta Phut 
initially made plans to cooperate in cutting output so as to 
reduce water consumption following an emergency meeting in 
June convened by Mr. Peravatana Rungraungsri, director of Map 
Ta Phut Industrial Estate.  At that meeting Mr. Peravatana 
suggested either cutting water consumption by 40 percent or 
calling an advance factory shutdown for maintenance work to 
cope with the drought.  Local residents and environmentalist 
groups have gone further, calling for long-term limits on the 
annual growth of the Eastern Seaboard industrial hub as the 
solution to the problem. 
 
¶8.  (SBU) The public warning that Map Ta Phut was running out 
of water has prompted concern in investment circles and at the 
highest levels of the Royal Thai Government (RTG).  Securities 
analysts have voiced concern not only about the water shortage 
itself, but about the government's lack of transparency with 
respect to the main facts of the problem and the 
countermeasures to be implemented.  In one analyst's worst- 
case scenario (of several scenarios outlined), Map Ta Phut 
runs out of water at the end of August. 
 
¶9.  (U) Recognizing the potential consequences of the water 
shortage for Thailand's business confidence and reputation in 
the eyes of foreign investors, Deputy Prime Ministers Phinij 
Jarusombat and Somkid Jatusipatak brushed aside calls for any 
cut in production at Map Ta Phut and pressed for alternative 
immediate solutions to get through the dry season.  Prime 
Minister Thaksin Shinawatra has publicly downplayed the 
crisis, and has pledged that the government will ensure 
sufficient supply to Map Ta Phut.  During a visit to the 
region, during which he attended ceremonies celebrating the 
expansion of PTT Plc's fifth gas separation plant and Thai 
Olefins Plc's production unit at Map Ta Phut, he announced, 
"You can use as much water as you want in order to promote the 
country's economic growth. The government will try its best to 
seek additional water for the industrial sector.  However, you 
must use the resources efficiently," he said. 
 
STOP-GAP MEASURES 
----------------- 
 
¶10.  (SBU) The RTG's approach to obtaining alternate sources 
of supply for Map Ta Phut include digging artesian wells, 
artificial rain, diverting water from rivers in other eastern 
provinces and installation of desalination plants along the 
coast.  Firms with operations at Map Ta Phut told the Embassy 
that while they hope the government's measures will achieve 
results, the government's record to date was mixed.  They 
added that the government's initial disregard of the problem 
inhibited productive discussion of both the problem itself as 
well as potential solutions in the near-term, and raised 
questions about overall management of the region's water 
resources long-term. Companies in the affected area have 
indicated that artesian wells have had limited success, 
producing about 40,000 cu/m per day, 25 percent of the 
anticipated amount needed.  The geology of the region is 
reportedly not good for artesian wells.  Cloud-seeding has 
likewise brought unspecified but limited results.  Until early 
August, there was little concerted movement on more extensive 
projects.  Some companies have reportedly advanced their own 
funds toward the construction of pipelines, for example, on 
the understanding that government funding is forthcoming. 
 
¶11.  (U) On August 2, the Cabinet approved several ambitious 
projects for the Eastern Seaboard expected to cost 
approximately Baht 48 billion (USD 1.16 billion), with an 
additional Baht 2.7 billion (USD 65.49 million) to be spent on 
13 immediate pipeline projects to alleviate the situation. In 
all instances, there has been significant local opposition to 
plans for siphoning off water resources from predominantly 
agricultural areas to industry.  The government is also 
attempting to supply Chonburi with water from sources other 
than those in Rayong, such as the Chao Praya and Bang Pakong 
Rivers. 
 
¶12.  (U) In the short-term, maintaining sufficient supply of 
water depends upon successful completion of two pipelines from 
the Rayong River, each carrying 100,000 cu/m of water per day. 
The first pipeline was completed on August 15 and is supplying 
the 100,000 cu/m as projected.  The second is due to go live 
on August 22.  Without the construction of dykes or other 
barriers to alter the flow of the river, however, these 
pipelines afford only temporary relief from the shortage.  The 
Royal Irrigation Department plans to build a four-meter-high 
earthen dyke across the mouth of the Rayong river to retain 
water, which it envisions will be washed away once the flood 
season begins.  In the rush to implement this year's emergency 
measures, the government is allowing these and other projects 
to go forward without performing environmental impact studies, 
which has raised concern among environmentalists. 
Additionally, local villagers oppose these projects. 
 
A LONG-TERM PROBLEM 
------------------- 
 
¶13. (SBU) While the present crisis in the Eastern Seaboard was 
precipitated by two concurrent dry years, the outlook going 
forward shows that water resource management has arrived as a 
long-term problem for Thailand.  Eastern Water Resources 
Development and management Plc, the region's supplier, is 
warning that the reservoirs have enough supply for the next 
150 days only. Experts point to decreased replenishment of the 
reservoirs in recent years owing to reduced catchment areas, 
for example.  Neither the RTG nor industry regards the 
reservoirs, even if replenished, as a sufficient source of 
supply in the future.  RTG initiatives to increase water 
supply have focused mostly on using water from rivers in the 
region.  During a visit to Rayong on August 15, Industry 
Minister Suriya Jungrungreangkit also announced that the RTG 
will provide incentives for businesses that undertake 
desalinization projects. 
 
¶14. (U) Given the priority the RTG has placed on developing 
the industry of the Eastern Seaboard region for over two 
decades, the question of how the crisis came to happen has 
been the subject of much discussion and recrimination.  Deputy 
Prime Minister Somkid put the question directly, "We attracted 
billions in investment to these areas and then we 
irresponsibly allowed the water level to fall to the lowest 
level. Who would be responsible for this?" The Deputy Prime 
Minister is reportedly considering setting up an inquiry into 
the water crisis.  This question is of particular concern at 
present in view of the government's plan for massive 
investment in the so-called third phase of development of the 
local petrochemical industry over the next ten years. 
 
¶15.  (U) The absence of a clear government policy on water 
management has flowed in part from the division of 
responsibility among at least eight different entities.  IEAT 
is the state enterprise under the jurisdiction of the Ministry 
of Industry responsible for administering Map Ta Phut, among 
other industrial estates.  The Royal Irrigation Department has 
responsibility for management of the water resources of the 
region.  East Water Resources Development and Management Plc 
(East Water), a private company, is the sole supplier of water 
for industrial use in the Eastern Seaboard area.  The company 
pumps 500,000 cubic meters of raw water to Map Ta Phut through 
a pipeline connecting Rayong's two major reservoirs, Nong Pla 
Lai and Dok Krai each day.  Within Map Ta Phut, each company 
has its own plan for managing water usage. 
 
¶16.  (SBU) Academic and policy think tanks have emphasized the 
failure of successive governments to adopt comprehensive 
measures for water management on a regional basis. They argue 
that the RTG has not incorporated consumption data from 
agricultural, industrial, and urban sectors, or considered 
bringing market mechanisms to bear on the problem.  Policy to 
the extent is has been coordinated has focused almost wholly 
on increasing supply (but without taking into account the 
increasing demand).  Thailand was, until recently, a nation 
with a water surplus, with only a small areas affected by 
drought.  In recent years, water shortages have affected ever- 
widening areas in various parts of the country.  Thailand's 
abundant average annual rainfall of 1,700 millimeters, 
suggests that the root cause of the problem is a failure on 
the part of the government to efficiently manage water 
resources and to educate the public about the need to conserve 
water. 
 
¶17. (SBU) COMMENT:  The current government's ambitious plans 
to fix the problem show its willingness to bring significant 
resources to bear in devising a solution, but serious 
questions about the management of water resources generally in 
Thailand's most important industrial area going forward 
remain.  Embassy business contacts tell us the most pressing 
immediate-term issue is the absence of cooperation between 
industry, government, and local communities.  At Map Ta Phut 
specifically, no authority exists to coordinate any decision 
to shut down or to restart operations if a shutdown is 
implemented.  Companies have also voiced concern about the 
absence of transparency in the approval of the projects to 
increase supply, and decisions regarding awarding of 
government contracts in particular.  The lack of clarity from 
the government on the facts of the problem, for example, has 
led some observers to ask who stands to gain from the crisis. 
Longer-term, although PTT and other firms such as Siam Cement 
have plans to apply state-of-the-art technology to reduce 
water usage in newly built plants, neither the government's 
plans for the current year's shortage, nor its longer-term 
plans for managing water resources demonstrate a willingness 
to introduce market mechanisms such as progressive pricing to 
encourage conservation.  The government's expediting certain 
projects without performing feasibility and environmental 
impact studies and indications that proposed projects may be 
less successful than expected or lead to unintended 
consequences are likely to bring criticism of the projects on 
the basis of effectiveness and transparency.  Without 
solutions to current and forthcoming problems concerning water 
supply, the future economic development of Thailand's Eastern 
Seaboard will be at risk with potential consequences for the 
country as a regional industrial center. This problem is 
indicative of the lack of investment in infrastructure since 
the 1997 economic crisis, a problem Prime Minister Thaksin is 
now attempting to address with a multi-billion dollar 
`megaprojects' program expected to begin next year. The 
questionable performance in resolving the Eastern Seaboard 
water issue forces us to question the RTG's ability to 
properly manage a series of enormous projects simultaneously. 
End comment. 
 
Boyce