Introduction

Thailand’s industrial sector has long been a vital driver of the country’s economic growth, contributing significantly to its GDP and employment. However, alongside these economic benefits, industrial activities have also raised concerns regarding the environmental pollution, public health risks, and safety issues in communities residing in close proximity to factories. In an effort to manage these risks, the government implemented the Factory Act B.E. 2535 (1992), a critical piece of legislation aimed at regulating factory operations, ensuring safety standards, and minimizing the environmental impact.

The law was amended twice in 2019, having introduced the Factory Act (No. 2) and (No. 3) B.E. 2562. These amendments sought to address emerging issues in waste management and environmental compliance. However, despite these efforts, challenges such as illegal waste dumping, unchecked pollution, and insufficient accountability among factory operators persist. Public outcry over environmental degradation caused by factories, combined with growing global attention to issues of sustainability and climate change, has highlighted the urgent need for further reforms.

Recognizing these challenges, the Department of Industrial Works (DIW) is now drafting a new amendment to the Factory Act, which is designed to tighten regulatory control over industrial pollution and enhance the mechanisms for holding factory operators accountable for their environmental impact. To ensure transparency and inclusiveness, the department is conducting a series of public hearings, inviting stakeholders from across the industry, environmental advocacy groups, and affected communities to share their perspectives.

These hearings held from August to September 2024 are a critical moment for shaping the future of Thailand’s industrial regulation, providing an opportunity for all voices to be heard before the law is finalized. The new draft will not only strengthen the country’s environmental protections but also redefine the relationship between Thailand’s industrial growth and its commitment to sustainable development.

 

Background

The Factory Act of B.E. 2535 (1992) has been the central legal framework governing factory operations in Thailand for over three decades. Initially introduced to regulate the rapidly expanding industrial sector, the Act covers a wide range of aspects, from safety and health regulations to environmental management and pollution control. The law primarily aims to balance the growth of industrial activities with the need to protect public health and the environment against potential hazards presented by factory operations.

 

The Factory Act B.E. 2535 outlines detailed regulations that all factories must comply with, including:

Environmental Compliance

Factories are required to manage their solid waste, ambient emissions, and wastewater in a manner that complies with national environmental standards. This includes treating industrial wastewater before discharging it into water bodies, controlling air pollution, and managing industrial by-products and hazardous waste.

Safety Standards

The law mandates strict safety protocols to protect factory workers, requiring regular inspections, safety equipment, and adherence to occupational safety laws.

Licensing and Monitoring

Factories are subject to licensing requirements that vary based on their type, size, and risk level. Larger factories must undergo more rigorous monitoring, while smaller, less hazardous factories face fewer regulatory burdens.

 

In response to evolving industrial practices and increasing public concern on environmental degradation, the government introduced two significant amendments to the Factory Act in B.E. 2562 (2019):

Factory Act (No. 2) B.E. 2562

This amendment aimed to simplify the process of starting and expanding factory operations by streamlining the licensing process. It introduced a classification system that reduces regulatory burdens on smaller and less polluting factories, while increasing scrutiny for larger and more hazardous ones.

Factory Act (No. 3) B.E. 2562

This amendment focused on strengthening environmental protections. It has introduced stricter penalties for illegal pollution, improved waste management standards, and mandated greater transparency in environmental reporting by factory operators.

 

While these amendments were a step towards the right direction, they do not fully address the core challenges: illegal dumping of hazardous waste, unlawful pollution releases, and weak enforcement mechanisms have continued to be prevalent issues. Factories have found ways to circumvent regulations, often taking advantage of the lenient penalties, which are perceived as less costly than proper waste management.

 

Key Provisions of the New Draft

The draft amendment to the Factory Act proposed by DIW represents a significant evolution in Thailand’s approach to regulating industrial activities, with the goal of addressing environmental concerns and improving accountability. The four key provisions of the draft amendment are summarized as follows.

Illegal dumping

The problem of illegal industrial waste dumping, which the Ministry of Industry (MOI) is responsible for oversight according to the law, must be urgently addressed to prevent or halt further damage and to stop the spread of pollution. To carry out these actions, funding is necessary. Therefore, it is advisable to establish a fund to allow MOI to provide financial support in resolving this problem. Details of  “Fund for resolving problems caused by impacts of factory operations” are in stipulated in section 1/2 of the draft Factory Act B.E. … This fund is intended for:

  • Providing financial assistance or funding to factory operators or those operating in industrial zones for activities related to pollution control or improving the efficiency of pollution control. This may involve the purchase or upgrade of machinery for better control of pollution or reduction of its impacts to the environment. The funding may cover partial or full costs.
  • Promoting, supporting, and/or assisting factory operators or those in industrial zones in complying with environmental laws or other related laws/regulations by providing financial assistance to cover related expenses.
  • Taking actions or for enforcing administrative or legal measures, including court orders.
  • Supporting the promotion of legal knowledge on the environmental protection, safety, and accident prevention among factory operators and/or the public. This includes controlling, supervising, and monitoring factory operations to prevent any environmental damage or to address existing environmental issues.
  • Supporting compensation payments to officials in the event of legal claims or disputes in accordance with this Act.
  • Compensating for damages incurred by affected parties as a result of factory operations, particularly in cases of accidents.
  • Managing expenses according to the criteria set forth by the Committee, as outlined in the ministerial regulations.

The fund will be managed by committee, for which Permanent Secretary of Industry is assigned as Chairman.

Shut down order and responsibility of factory operators

Under the current law, officials are unable to order factory operators who have been ordered to shut down under paragraph 3 of Section 39 to take any legal actions as required by the Factory Act. This is because the order as per paragraph 3 of  Section 39 results in the revocation of the operating license. Therefore, an amendment is necessary to ensure that those subject to orders under paragraph 3 of Section 39 are still regarded as “factory operators” until the officials’ orders are fully observed.

Criteria and procedure for industrial zone operation license

To ensure proper oversight of industrial zones, which must accommodate factory operations in compliance with the Factory Act B.E. 2535 (1992), and to prevent any nuisances from industrial zones that could affect the environment and safety, it is necessary to amend Section 30 of the Factory Act B.E. 2535. These amendments are focusing on setting criteria and procedure for obtaining industrial zone operation license. In case of a factory decides to move into industrial zone, such a factory can get a 10-year exemption from payable fee under the Factory Act.

Private inspectors

In reviewing obligations of factory operators, who must request private inspectors to certify their operations as appropriate and necessary, it is essential to review the provisions regarding private inspectors under Section 9. This will require an amendment to Section 9 of the Factory Act B.E. 2535, as revised by the Factory Act (No. 2) B.E. 2562 (2019). Part 1/1 of Draft Factory Act B.E. … stipulates that private inspectors have duties of factory inspection, machine inspection or certification of report that are mandated to be submitted to officials. This section also specified qualification of those who can register as private inspectors, registration process which effective for 3 years, and registration extension.

 

Challenges and concerns

While the new amendment to the Factory Act introduces much-needed reforms, it also brings with it several challenges and concerns that must be addressed to ensure its effectiveness. As Thailand strives to modernize its industrial regulations, balancing environmental protection with economic growth remains a complex issue. Additionally, questions surrounding the enforcement, compliance costs, and potential resistance from stakeholders are likely to play the critical role in determining the success of the new legislation.

One of the primary concerns raised by industry leaders is the potential impact of the new regulations on Thailand’s economy, particularly its manufacturing and export sectors. The country’s industrial base is a significant contributor to GDP, employment, and foreign investment, and a lot of fear that stricter environmental regulations could drive up operational costs and discourage investment in the industrial sector.

Increased compliance costs

The new provisions, particularly those related to pollution control and waste management, will likely require factories to invest in new technologies and processes to meet higher environmental standards. For smaller factories or those operating on thin margins, these costs could be substantial. “Smaller factories may struggle to afford the upgrades necessary to comply with the stricter waste and air quality regulations, potentially leading to closure or reduced profitability.”

Competitiveness in global markets

The potential increase in operational costs may also affect the competitiveness of Thai products in global markets. Industries that rely on cost-efficient production, such as textiles, electronics, and automotive parts, could face pressure from competitors in countries with less stringent environmental regulations. “There is a concern that industries may relocate to neighboring countries with looser environmental laws, where production costs remain lower, potentially leading to job losses and reduced economic activity in Thailand.”

Limited regulatory capacity

The Ministry of Industry and other relevant agencies may face challenges in scaling up enforcement efforts to meet the demands of the new law. The need for real-time monitoring of pollution, increased factory inspections, and the management of the Industrial Pollution Fund will require significant administrative and technical resources.”Without sufficient investment in regulatory capacity, there is a risk that the new provisions may not be implemented effectively, leading to continued non-compliance among factories.”

Corruption and bribery

Corruption has long been an obstacle to effective environmental regulation in Thailand, with reports of factory operators bribing officials to overlook violations. The new draft does not include specific anti-corruption measures, raising concerns that corrupt practices could continue to undermine the law’s enforcement. “If corruption within regulatory bodies is not addressed, even the most stringent law would fail to bring about meaningful change.”

Lobbying against stricter controls

Factory operators, especially those in industries that generate large volumes of waste or emissions, may lobby for more lenient regulations or longer timelines for compliance. They may argue that the costs associated with implementing stricter pollution control technologies will make it difficult to remain competitive. “There is a risk that industry pressure could lead to the watering down of key provisions in the draft, particularly those related to financial penalties and mandatory contributions to the Industrial Pollution Fund.”

Disruption to existing operations

Some factory owners have expressed concerns that retrofitting existing facilities to meet the new standards could be highly disruptive, requiring significant downtime and leading to production losses.”The draft will likely face pushback from factory owners who argue that the costs and logistical challenges of upgrading existing facilities are too high, particularly for older factories that were not designed with modern environmental standards in mind.”

Financial burden

The costs of installing advanced wastewater treatment systems, air pollution control technologies, and waste management facilities may be beyond the reach of smaller factories, forcing some to either close down or operate under the constant threat of non-compliance penalties.”SMEs may be forced to shut down or relocate to less regulated sectors or regions, which could have negative implications for local economies and employment.”

Unequal enforcement

There is also concern that enforcement may disproportionately target smaller factories, as they lack the financial and political clout of larger corporations to challenge regulatory actions or lobby for exemptions. “Smaller factories may face stricter scrutiny and heavier penalties, while larger players could find ways to evade enforcement, leading to an uneven playing field.”

The Fund for resolving issues caused by factory operations and the private inspectors, which are mechanisms proposed in the draft amendment to the Factory Act, are to be established based on industrial pollution problems that DIW is currently facing. Should this draft amendment become effective, will surely help overcome such obstacles.