Last week the Bank of Thailand cut its 2005 growth forecast to 3.5-4.5 percent from April's estimate of 4.5-5.5 percent, citing the damage done by the drought and the Dec. 26 tsunami, as well as high oil prices. In 2004 GDP grew 6.1 percent.

As a result of the drought the region's reservoirs, which can hold up to 640 million cubic metres of water, have only been able to provide one-tenth of that amount to industrial users in the area, according to Eastern Water Resources Development

But a rash of water supply projects due to come on stream in the coming months, coupled with the arrival at last of the rainy season, should ease worries, said East Water, the sole industrial water supplier on the eastern seaboard.

"We can say that we have no problem up until the end of this year," East Water chief Wanchai Lawatanatrakul told Reuters in an interview. "The next question we have to answer is, how about for the next year?"

East Water supplies 45 industrial estates on the eastern seaboard, a triangular swathe of land that traces the coastline east of Bangkok toward Cambodia, each demanding an average of 500,000 cubic metres of water a day.

But drought concerns led the Federation of Thai Industries (FTI) to say last month water that water supplies in the region would last only a month and spurred plants there to draft contingency plans to avoid output cuts.

FARMERS AGITATE

It also sparked a raid on an East Water construction site and a flurry of protests from farmers fearing the government favoured industrial users over agriculture.

East Water estimates the growing industrial demand in the area from firms such as top industrial conglomerate Siam Cement PCL and National Petrochemical Industry at around 200 million cubic metres a year.

To help meet it, an additional 150,000 cubic metres a day will come from a pipeline due to become operational by mid-August, Wanchai said. The long-hoped for rains have also arrived, providing another 200,000 cubic metres a day.

The company has several more projects in development that it hopes will head off any potential drought problems next year. Another pipeline and a system of irrigation canals are expected to come into operation in January.

"That way we can ensure that next year we will not face this crisis again," said Wanchai, a 49-year-old engineer.

Although Wanchai said industrial users have had all the water they needed, worries the rains would not fall prompted many to curtail consumption.

East Water now sees revenues and profits growing 9-10 percent this year from a previously targeted 15 percent, Wanchai said. Rising costs and investment estimated at 3 billion baht ($72 million) this year had also taken their toll, he added.

"We are still happy with 9-10 percent growth," he said, noting East Water may pass on increased costs to customers, who pay the firm 8 baht for every cubic metre. "Next year, or in the next two years, we may have to think about raising the price."

Controversy remains over how best to allocate water between the competing demands of the area's burgeoning industry and its farmers, known for their pineapple, durian and rambutan fruits.

East Water may pay compensation to farmers willing to part with some water and the money could be used to develop their villages, but the two sides have yet to meet, Wanchai said.

"That's a conflict we still have to solve and agreeing is very important," he said. "It's very difficult for the government right now to balance both sides."