Thailand’s exit from gold to worsen regional underperformance
Thailand, which ordered the shutdown of all gold mining and exploration activities in 2016, will have to deal with the fact the country will continue to be a regional mining underperformer, as it will lose both tax revenue and investors, a new report says.
Thailand's military regime’s decision to halt gold mining indefinitely followed a long-standing conflict between Akara Resources and villagers who accused the company's mine of polluting and causing diseases among locals.
According to Fitch Solutions Macro Research, a unit of Fitch Group, while the halt is likely to resolve certain social conflicts, abandoning mining companies that had been operating for years is a strong sign of policy discontinuation, which will be detrimental to foreign investment into the nation.
Thailand's decision to halt gold mining indefinitely followed a long-standing conflict between Akara Resources and villagers who complained of elevated levels of arsenic and manganese in their blood and crops coming from the Chatree mine, the nation’s only active gold mine at the time.
Government agency tests revealed that about 100 people living around the operation had high levels of these toxic substances in their bodies. While that was never proven the government shuttered the operation to avoid further protests.
Thailand’s resolution also sought to bring peace to the Loei province, where deadly protests by villagers have continued to date against gold producer Tungkum Mining Company. The military government was initially supportive of Tungkum's gold mining operations, which enabled the company to operate as per normal despite numerous protests.
The gold sector accounted for 21.2% of Thailand's total mining industry value in 2015, and the industry as a whole contributed to 2.2% of GDP that year. “At a time when gold prices are edging higher, the loss of the gold mining industry will prevent Thailand from benefiting from the increased taxes that would come from gold miners' increased profitability,” Fitch’s analysts say.
Rampant corruption, risk of political uprising and delays and cancellations of infrastructure projects, will also affect the country’s economy, which it will remain below its long-term potential, the experts warn.
“Political stability has returned to Thailand over the past year, with the government successfully keeping a lid on protest activity,” they say. “However, none of the underlying divides between the Red Shirts (supporters of deposed former Prime Minister Thaksin Shinawatra, who was ousted by a military coup in 2006) and Yellow Shirts (those against Thaksin, who were the force behind the street protests that led to the coup) have been resolved,” they conclude.