By Martin Petty

BANGKOK, Feb 17 (Reuters) – While the threat of political unrest has put Thailand’s markets on edge, a costly environmental row threatening to paralyse the country’s industrial heart is already squeezing investment and could inflict greater damage.

A court-ordered suspension of 64 projects worth an estimated $9 billion to $12 billion at the world’s eighth-biggest petrochemicals hub in eastern Thailand is in its fifth month, raising questions about whether a country with a government fighting fires on multiple fronts is a safe bet for investment.

Analysts say the freeze at the Map Ta Phut industrial estate is the last thing the embattled coalition government needs right now and many investors fear resolution of the problem will take a back seat while the country remains locked in a political crisis.

As a sign of growing concern about the outlook for Southeast Asia’s second-biggest economy, the cost of insuring Thai sovereign debt has risen in tandem with an increase in political tensions, with 5-year credit default swaps recently hitting a nine-month high.

Steve Vickers, president and CEO of FTI-International Risk, said that while protests and talk of coups, assassination threats and even civil war grab the headlines, a protracted standoff at Map Ta Phut may have a bigger impact on investor confidence.