economic impact study · 2014. 10. 9. · ban the import of chrysotile and the production of...
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Economic Impact Study Proposed ban of Chrysotile in Thailand
Dr. Ingwei Huang, Ph.D.
Department of Business Economics
Assumption University
Case of Chrysotile
Roofing Tiles
Outline
• Background
• Research Objective
• Characteristics of Chrysotile
• Economic Impact Analysis
• Recommendations
2
Background
3
Proposed ban on chrysotile
On April 12, 2011, the government adopted a proposal to
ban the import of chrysotile and the production of chrysotile
containing products in Thailand substituted with non-
chrysotile based alternatives.
However:
• No evidence of scientific or medical studies conducted on
the topic to date in Thailand.
• No identified record of health impacts among laborers or
users in Thailand.
4
Objective of the Study
• To study the social and economic impact from the banning
of chrysotile in high density cement roof tiles
• To evaluate the overall economic impact and cost,
focusing on the post ban environment for chrysotile
products
• To provide recommendations in order to assist in
implementing effective policies with respect to the use of
chrysotile in Thailand.
5
Chrysotile
• Chrysotile is a form of asbestos that is widely utilized as an input in the production of various industrial products.
• It belongs to the serpentine family of asbestos, which is currently not banned for use in the United States, Canada, Brazil, Russia, India, and many other countries.
6
Chrysotile in Thailand
• Utilized in the production of industrial products:
• 90% of chrysotile imports are used in the construction
industry as an ingredient in high density cement products
• 6-8% of chrysotile imports is used in the automotive
industry as ingredients for producing brakes and clutches
• 2% of chrysotile imports is used in the production of
gasket, heat insulation materials and fire protective
clothing
Chrysotile roofing has existed in Thailand for more than 50
years with a total market value in 2010 of over 10.4 billion Bht
or around 0.2% of GDP.
7
Chrysotile-containing roofing tiles in
Thailand • Chrysotile-containing roofing tiles are
widely used in Thailand, especially in
rural and provincial areas, where the
product is viewed as a cheap, durable,
and suitable solution given the country’s
specific climatic conditions.
8
• Some Thai commercial industries like swine farming relies on
chrysotile-containing roofing products to build pig pens.
• Chrysotile does not react to methane gases, which are
unavoidable by-products of animal waste.
• Considering the total market size, the amount of the chrysotile imported to Thailand over the past 25 years is over 3.2 million tons, covering the period from 1985 to 2010.
• From this, 90% of the chrysotile imported has been used in the production of chrysotile containing high density cement in the roof tile industry. This amount represents the production of over 2.3 billion square meters of chrysotile roofing tiles.
9
0
20000
40000
60000
80000
100000
120000
140000
160000
180000
200000
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Amount of Chrysotile Imported to Thailand
Chrysotile Import in Tons
Source: Thai Customs Departments, Import and Export Statistics; Virta (2006)
Characteristics of
Chrysotile-
containing
construction
materials
10
Durability and quality
• Concerns regarding durability and quality are important in
Thailand.
• Chrysotile-containing roof products are produced from Portland
cement combined with chrysotile fiber known to withstand heat and
exhibit great strength, light in weight but large in size, rendering the
product attractive to middle to low income consumers.
• Non-chrysotile roofing tiles are made from cellulose fibre which
have the added quality of absorbing and withholding water leading
to questions about product durability when faced with heavy rain.
• Replacement of non-chrysotile roofing tiles is also difficult as worn-out
tiles make re-construction work complicated and dangerous.
11
Non-chrysotile roofing materials and chrysotile-
containing materials: A comparison
According to quality test conducted by the Department of
Civil Engineering, Faculty of Engineering, KU found that:
• Non-chrysotile roofing materials have lower breakage resistance by
a factor of three times.
• Non-chrysotile roofing tiles, over time showed leakage at the
bottom surface.
• The durability to heat and rain of non-chrysotile containing roofing
tiles is lower.
• When exposed to heat and rain at the same time, non-chrysotile
roofing tiles generate several cracks at random points.
12
Presence of Non-chrysotile roofing materials
• From interviews, non-chrysotile roofing materials tend to only last approximately 2 – 8 years.
• Non-chrysotile roofing materials uses PVA instead of chrysotile. • The price of PVA is dependent on the price of petroluem, which can
fluctuate greatly, thereby making PVA and Non-chrysotile roofing materials costly.
• With differing qualities between chrysotile and non-chrysotile materials, there is a need for the government and the private sector to develop a comparable substitute that has equivalent quality and price characteristics before product is ban.
13
Economic Impact
on Stakeholders
14
Impact on Ban of Chrysotile
• Direct Impact
• the impact on manufacturers in the roofing tile industry, the impact on
employees in the roofing tile industry, and the impact on consumers
including households, business sectors, and government sectors
• Indirect impact
• impact on suppliers, wholesalers, and retailers of chrysotile containing
products
• Induced impact
• the government’s action in taking responsibility for the replacement of
chrysotile containing roofing tiles with non-chrysotile roofing tiles, the
provision of public announcements and services on information and
knowledge provision to people on the banned products, possible costs
of litigation in the event of damage and claims from consumers who might be affected by the use of chrysotile containing products
15
Who will be affected?
A proposed ban of chrysotile generates :
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Consumers
Large direct
impact
Minimal direct
impact
Large Unexpected
induced impact
Manufacturers
Employees
Producers
Retailers
Government
Related industries
Impact on consumers
The impact on different groups of consumers include households, the business sector (as represented solely by the swine industry), and the government sector (as represented solely by the impact on the schools and hospitals)
The cost of replacing of existing chrysotile roofing tiles would be approximately 365 billion baht
17
Cost Scenarios for Replacement of non-chrysotile versus chrysotile containing Roof tiles
Chrysotile
roofing cost
Non-Chrysotile Roofing Cost of Different Years of Durability
2 years 3 years 4 years 5 years 6 years 7 years 8 years
Chrysotile
Roofing
Cost of
Different
Years of
Durability
15 365.59 2741.95 1827.96 1370.97 1096.78 913.98 783.41 685.49
20 365.59 3655.93 2437.29 1827.96 1462.37 1218.64 1044.55 913.98
25 365.59 4569.91 3046.61 2284.95 1827.96 1523.30 1305.69 1142.48
30 365.59 5483.89 3655.93 2741.95 2193.56 1827.96 1566.83 1370.97
Impact on household & swine industry
18
The estimated cost of removal and replacement of existing chrysotile
containing roofing tiles for the swine industry in 2012 would total
approximately 2.6 billion baht.
Number of Swine Houses Area (sq. m.) Removal and Replacement Cost
10,185 10,185,000 2,648,100,000
No. of Area Cost of Substitute
Households (Million sq. m.) (Million Baht)
17,345,308 1,734.53 450,978.01
The estimated cost of removal and replacement cost of substitute
products on household to be approximately 450 billion baht.
Impact on public schools
19
No. of
Students
No. of Schools Total buildings No. of
Buildings
Roofing Area
(sq m.) Central BKK (Units) (Classroom: Area)
1-120 12,600 12,600 8 : 669 1 8,429,400
121 – 200 7,397 7,397 8 : 669 1 4,948,593
201 – 300 4,600 4,600 8 : 669 1 3,077,400
301 – 499 3,959 109 4,068 16/18: 703 1 2,859,804
500 – 1,499 2,755 151 2,906 16/18: 703 2 6,128,754
1,500 – 2,499 441 173 614 16/18: 703 5 2,158,210
2,500 –
15,000 255 255 16/18: 703 8 1,434,120
Total roofing area 29,036,281
Replacement cost (260 baht/m2) 7,549,433,060
The estimated cost of changing chrysotile containing roofing tiles into
non-chrysotile roofing tiles in public schools would be a total of more
than 7.5 billion baht.
Impact on hospitals
20
Type of Hospital Number Approximated area (sq m.) Replacement cost
(Baht) Per hospital Total
Regional Hospital 25 100,000 2,500,000 650,000,000
General Hospital 70 50,000 3,500,000 910,000,000
Community Hospital 723 5,266 3,807,318 989,902,680
Health Center 9,758 150 1,463,700 380,562,000
Community Health Center 105 150 15,750 4,095,000
Total 2,934,559,680
The estimated Replacement Cost of Roofing Tiles of different sizes for
Hospitals in Thailand is expected to be more than 2.9 billion baht.
Impact on manufacturers
0
2000
4000
6000
8000
10000
12000
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Mil
lio
n B
ah
t
Year
Chrysotile and Non-Chysotile Roofing Production in Thailand 2001-2010
Chrysotile Non Chrysotile
21
• For manufacturers, conversion to non-chrysotile production would require an
additional investment of 30 million baht per line of newly installed
production.
• Approximately 4,000-5,000 jobs lost
Direct impact of a ban on chrysotile
Summary of cost estimation on different
stakeholders 464.8 billion Baht
22
Costs estimates on: Amount in Baht
Manufactures: 750,000,000
Consumers: 464,110,102,740
- Household 450,978,010,000
- Swine Industry 2,648,100,000
- Schools 7,549,433,060
- Hospitals 2,934,559,680
Minimal Indirect impact
23
• Minimal impact on producers of
cement that supply inputs to
chrysotile containing roof tile
industries
• Minimal impact on retailers of
construction materials
Minimal Indirect
impact
Producers
Retailers
Large Unexpected induced impact
24
Claims Litigation
Expenses
Expected Future Litigation
Cost*
United States
(2002) 730,000 $54 billion $200-265 billion
Japan (2004) 44,198 $12.6 billion 2.8 trillion yen
United Kingdom
(2002) n.a. $7.57 billion $17.7 billion
Litigation Expenses in US, Japan, and UK
Large induced
impact
Government
Related industries
• Source: US - Carroll, et al. (2002); Japan - Ikeya (2005); UK -
Saiontz & Kirk, P.A. (2010)
• Note: In US, a total of 8400 companies had become defendants
leading to 73 bankruptcies by 2002.
• * For US, this is the estimates of the expected total costs of all
claims to date. For Japan and UK, this is the estimates of total
cost expected by 2050.
Recommendations
25
Recommendations
• It is important to consider the economic impact from the
proposed ban of chrysotile carefully. The ban could lead
to large costs to the economy both in the short run and
long run.
• Additional research should be conducted to estimate the
economic impact on affected industries and how long term
management of product substitution could be done.
• There is a need for the government to support the
development of substitute products that are more
comparable in quality and durability
26
Recommendations (cont.)
• The material utilized in the production of non-chrysotile
roofing tiles needs to be further studied and clarified.
• There has not been any testing or research that confirms the safety
in consumption and utilization of these products in the short run
and long run.
• In light of the large economic impact of the proposed ban,
the lack of substitutability, and the uncertainty surrounding
chrysotile substitutes, a more practical solution could be
the modification for a safe utilization of chrysotile.
27
THANK YOU FOR YOUR ATTENTION
Your understanding of this problem would
be highly appreciated.
28
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