Document of The World Bank FOl OFCIAL USE ONLY Ripte No. P-4010-Tm REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE CUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUINT EQUIVALENT TO $27.5 MILLION TO TEE KINGDOM OF THAILAND FOR A REGIONAL CITIES DEVELOPMENT PROJECT April 4, 1985 TIs igoc.eat ias a strctd disrtlu. a_ my be .W by recipkuts may in he peiformsm ofr thdr ofca dufits cs.ea ma ne otherwise be dscd withou Wold Dak mAtlelrhuon. CURRENCY EQUIVALENTS Currency Unit . Baht (B) $1 = B 28.0 B 1 - $0.035 B 1 million = 35,714 (The Bhat, since November 1984, has been pegged to a basket of currencies and the rate is established daily. The exchange rate used in the SAR is $1 = B 27.0 based on the rate which prevailed at the time of recalculations made in preparation for loan negotiations. The change in cost estimates since that time as a result of ezchange rate movement has been insignificant.) MEASURES AND EQUIVALENTS 1 meter (m) = 39.37 inches (in) 1 square meter (sq m) = 10.8 square feet (sq ft) 1 cubic meter (cu m) = 35.3 cubic feet (cu ft) 1 kilometer (km) = 0.62 mile 1 rai = 0.16 hectare or 0.395 acre 1 hectare (ha) = 6.25 rai or 2.471 acres ABBREVIATIONS AND ACRONYMS ADAB - Ausrralian Development Assistance Bureau BMA - Bangkok Metropolitan Administration DOLA - Department of Local Administration DTCP - Department of Town and Country Planning FMO - Fish Marketing Organization MDF - Municipal DeveLopment Fund MOF - Ministry of FinAnce MOI - Ministry of Interior MWWA - Metropolitan Water Works Authority NESDB - National Economic and Social Development Board NHA - National Housing Authority OUD - Office of Urban Development PWA - Provincial Water Works Authority PWD - Public Works Department UNDP - United Nations Development Program THAI FISCAL YEAR October 1 - September 30 FOl OMCIL USE ONLY THAILAND REGIONAL CITIES DEVELOPMENT PROJECT Loan and Project Summary Borrower: Kingdom of Thailand. Beneficiaries: Municipalities of Chiang 4ai, Khon Kaen, Nakhon Ratchasima, and Songkhla Amount: $27.5 million. Terms: 20 years, including 5 years of grace, at the standard variable interest rate. Relending Terms: Grants to the beneficiaries. Project The proposed project has been designed to support Government Description: efforts to stimulate economic development and regional growth in the three poorest of Thailand's six regions by: (a) improving selected basic infrastructure in the four project cities including: (i) road and drainage improvements, (ii) wastewater disposal, (iii) solid waste collection, (iv) flood protection, (v) new roads and bridges, and (vi) road maintenance equip- ment; (b) provision of a combined fishing port and commercial/ industrial zone in one of the cities; and (c) institutional development through policy measures and technical assistance which would strengthen municipal administration and the Ministry of Interior in carrying out development programs. Risks: The main project risks are an untested implementation capacity of the project cities for a project of this magnitude and the uncertainty of the cities' ability to collect adequate revenue to repay their share of the project loans. The principal implementation risk is related to land acquisition. Technical assistance and other measures proposed under the project to strengthen the involved institutions and to improve municipal finances are expected to minimize these risks. This document has a resticted distribution and may be used by recipients only in the performance of their official dutiesL Its contents may not otherwise be disclosed Vitbout World Bank authorizrtion. - ii - Estimated Cost: Category Local Foiei n Total (US$ mLllionT-- Drainage and sanitation 4.3 2.9 7.2 Urban transport 7.2 4.0 11.2 Revenue earning facilities 3.8 1.8 5.6 Slum improvement 0.8 0.4 1.2 Land 6.0 - 6.0 Technical assistance 2.5 4.0 6.5 Project administration 1.2 - 1.2 Base Cost 25.9 13.1 39.0 Physical contingencies 2.6 1.6 4.2 Price contingencies 4.8 2.9 7.7 Total Project Cost /a 33.3 17.6 50.9 Bank Front-End Fee /b - - - Total Financing Required 33.3 17.6 50.9 Financing Plan: IBBD 14.9 12.6 27.5 ADAB - 5.0 5.0 Government 5.6 - 5.6 Project Cities 12.8 - 12.8 Total 33.3 17.6 50.9 Estimated Disbursements: Bank FY 1985 1986 1987 1988 1989 z~~~US$ million) - - Annual 1.5 4.5 9.4 8.1 4.0 Cumulative 1.5 6.0 15.4 23.5 27.5 Rate of Return: 30% (weighted average) Staff Appraisal Report: No. 4673-TB, dated March 8, 1985 MLap: IBRD-17451 /a Including estimated taxes and duties totaling US$5.1 million. 7i Bank Front-end Fee is OZ. REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF THAILAND ;OR A REGIONAL CITIES DEVELOPMENT PROJECT 1. I submit the following report and recommendation on a proposed loan to the Kingdom of Thailand for the equivalent of US$27.5 million to heLp finance a Regional Cities Development Project. The Australian Development Assistance Bureau (ADAB) would cofinance part of the technical assistance and training costs associated with the project. The loan would have a term of 20 years, including five years of grace, at the standard variable interest rate. PART I - THE ECONOMY 2. An economic report entitled "Coping with Structural Change in a Dvnamic Economy" (Report No. 3067-TH) was issued on December 23, 1980. It proposed a medium-term strategy to deal with the adjustment problems resulting from the two oil price shocks of the 1970s. Subsequently, the Royal Thai Coveznment initiated a program of structuraL adjustment policies, which the World Bank supported wich two structural adjustment loans. An economic report entitled "Managing Public Resources for Structural Adjustment" (Report No. 4366-TH) was and issued on August 31, 1983. It reviewed progress in the implementation of structural adjustment policies and proposed directions for further action, especially in regard to the mobilization and management of public resources. Recent Political Developments 3. Since the early 1970s, the political process in Thailand has broad- ened and matured significantly. Initially, this was accompanied by frequent and sometimes abrupt changes in government leadership. Since the 1977 general elections, however, Thailand has enjoyed a period of greater political stabi- lity and continuity of policy. Cabinet shuffles have continued to take place, reflecting shifts in the makeup of the coalitions of political parties, mili- tary and business leaders, and technocrats, which have governed the country for the past five years. However, only one change in Prime Minister has occurred during this period. General Prem Tinsulanonda was appointed as Prime Minister in March 1980 and has been successful in mobilizing support for a major program of economic structural adjustment, embodied in the Fifth Five- Year Plan, 1982-86. Senior civil servants supporting this program were given key positions in the public sector. Although there are continuing internal debates on the details and speed of policy implementation, overall, a broad public consensus on national policy priorities has been maintained. 4. National elections were held again on April 18, 1983, in which can- didates from ten parties were elected to Parliament. No party secured an outright majority, but Prime Minister Prem succeeded in forming a new four- party coalition which includes two of the three leading parties and has the -2- backing of approximately two-thirds of the elected representatives. As part of a gradual constitutional reform aiming at increased representative government, transitional arrangements had been in place for a five-year period to permit serving military, civilian and other non-elected officials to con- tinue to play a stabilizing role in both the legislative and executive branches of government through their appointment to the powerful senate and to Cabinet posts. These transitional arrangements were allowed to lapse, cur- tailing the senate's powers and prohibiting military and civilian officials from participating in the Cabinet. These changes, when combined with the current coalition's diversity, and the Prime Minister's lack of an independent political power base, have made it hard to achieve a consensus on difficult economic issues since the April 1983 election. However, the Government has endorsed the Fifth Plan's objectives of improved economic management, struc- tural adjustment and poverty alleviation and has moved cautiously in continued Plan implementation. Continuation of ongoing policy and institutional reforms is therefore expected. Past Economic Trends 5. Thailarad's economy grew rapidly over the past two decades and devel- oped successfully by most standards of international comparison. Its per capita income growth of almost 5% per annum during 1960-1980 was among the highest sustained rates among developing countries. The reduction of poverty was substantial for a country still among the lowest third of middle-income developing countries, as the overall incidence of poverty dropped from about 57% in the early 1960s to about 31Z in the mid-1970s. Despite its continuing reliance on agriculture, Thailand experienced a far-reaching transformation of its economic and social structure during the past two decades, with a high growth in modern industrial and service sector activities, extension of trans- port and communications infrastructure throughout the country, rapid modern- ization, and a significant increase in the openness of the economy to trade and capital flows, tourism and international labor migration. The rapid growth in Thailand's exports played a particularly important role in stimulat- ing aggregate demand and providing the necessary means to finance imports. Moreover, because of this rapid export growth, the Thai debt service burden remained moderate. 6. However, because of its increased openness, its heavy dependence on imported oil, and an expansionary fiscal stance in the Late 1970s, the Thai economy was substantially affected by the two oil price shocks and by the ensuing international econonic upheaval. A relatively high rate of overall growth was maintained initially but this was accompanied by accelerating inflation, large fiscal and external deficits and growing dependence on foreign borrowing. Consumer prices increased by 10Z in 1979, by 20Z in 1980, and by 13% in 1981. The Central Government deficit on average exceeded 4% of GDP in the period 1979-82. Notwithstanding continued rapid export growth, the current account deficit amounted to 7.7Z of GDP in 1979, 6.2% in 1980, and 6.9% in 1981; consequently, there has been a rapid accumulation of Thailand's traditionally low external debt. - 3 - 7. Initially, the Government was slow in responding to the changing ezternal conditions, but, beginning in 1980, policy adjustments were under- taken at a gradually accelerating pace through 1982. They included sharp increases in prices for most petroleum products, electricity and other public services; measures to increase government revenues; a substantial increase in real interest rates; and the changes in regulations to increase financial stability and monetary restraint. In October 1981 the Government inaugurated its Fifth Five-Year Plan (1982-86) which made structural adjustment one of its major priorities. In March 1982, the first SAL for Thailand was approved, followed by SAL II in March 1983. Under these loans the Government committed itself to taking steps toward adjustments in the structure of the economy through reductions in domestic price controls, export taxes and controls over agricultural exports; developing a program for improved land tenure; taking steps toward rationalization of the structure of incentives for industrial production, exports, and investment; promoting energy conservation and efficient development of domestic energy resources; and improving the Govern- ment's tax structure and administration, public investment planning, and other areas of public administration. Progress under both SALs was satisfactory, although implementation of SAL II was at a somewhat slower pace than origin- ally expected, especially in the area of public resource management. 8. Macroeconomic developments in Thailand during the last two years (1982-84) were strongly influenced by a number of external factors. The most important of these were the worldwide recession in 1982, gradual recovery in 1983 and 1984, with, however, continuing high interest rates and increasing strength of the dollar to which the baht was linked. The average growth rate of GDP for 1982-84 was around 5% per annum. This lower than historical growth performance was due to a combination of high interest rates at home and abroad, worldwide recession and thus weak export prices and growth. Agricul- tural production which had increased slowly in 1982 and 1983 because of poor weather and low commodity prices, rebounded somewhat in 1984 as weather improved permitting paddy rice, maize, and cassava production to reach record levels. As a result of weak domestic demand in 1982, lower international prices, and an appreciating exchange rate, domestic inflation dropped from 13% in 1981 to less than 7% in 1983 and 2% in 1984. 9. The growth of export value and volume picked up in 1984 after having dropped in 1983. In 1984, export value increased by 16%, as a result of a good 1983/84 crop year, lead by a 29.4Z volume increase in rice exports. Imports, on the other hand, which had resumed rapid growth in 1983 because of a revival in domestic demand, slowed down considerably in 1984 increasing only by 1.2% in value terms. Given these trade developments, the current account deficit, which had averaged 7Z of GDP for 1979-1981 and which reached a high of about 7.5Z of GDP in 1983, came down to about 5.3% in 1984. However, even this improvement left the current account deficit above sustainable levels and the Government decided in November 1984 to devalue the baht by 14.8% and to delink it from the US dollar. The external imbalance also reflected an exces- sive public sector investment-savings gap which averaged about 7X of GDP in FY81 and FY82 but impreved to about 5% of GDP in FY83 and FY84. Since the current accouat and fiscal deficits remain at unsustainable levels, continued implementation of the structural adjustment program remains essential and urgent. In particular, action is requi:ed to improve the international -4- competitiveness of the economy and to further reduce the public sector investment-savings gap. The Government is considering further measures to reduce the pressure on the balance of payments in the context of preparing the next phase of its structural adjustment program. Development Constraints and Prospects 10. During the 1980s, many of the positive factors which contributed to Thailand's rapid economic growth and reduction in poverty over the preceding two decades wiLl continue to do so, including the relatively equitable distri- bution of agricultural land, responsiveness of Thai farmers to improved tech- nology, a good network of public infrastructure, and a dynamic private sector in industry, agriculture and services. Substantial reductions in the rate of population growth between the mid-1960s and late 1970s and discovery of domes- tic gas and oil supplies are further positive factors which will support the continued rapid development of Thailand. 11. Against these favorable factors, however, a number of important con- straints must be recognized and addressed: (a) The rapid growth of Thailand's public sector over the last decade, particularly of major state enterprises, without commensurate growth in public resource mobilization, has posed a serious challenge to improvements in institutional and fiscaL management. (b) For the longer term, the exhaustion of agricultural land reserves could severely limit employment growth and exports of the agricultural sector, unless rapid, input-intensive agricultural development proceeds. (c) Further industrial development, exports and employment growth may similarly be limited unless the international competitiveness and diversification of Thai industry are strengthened through correct incentives and support for marketing, finance and technological developments. (d) Despite the promising outlook for domestic energy resources, their development is costly and will take time, and thus continued efforts in energy conservation are required. (e) The decline in the population growth rate appears to have slowed in recent years; further reductions will require innovative policies. (f) Continued long-term develop- ment and poverty alleviation will also depend on continued efforts in human resource development, including education, technical skill development, and improvements in health and nutrition. (g) Finally, the pace of development will increasingly be hampered by inefficient metropolitan growth in Bangkok, unless steps are taken to rationalize the city's land use and transport, water drainage and sanitation systems; Thailand's secondary cities, too, require strengthening of their infrastructure and administrative capabilities to prepare them for the expected future growth in urban population. 12. These long-term economic development concerns have been compounded by medium-term adjustment problems as a result of the two oil price shocks and the subsequent world recession accompanied by poor export prospects and high real interest rates. Economic projections carried out for the 1983 Economic Report, and subsequently, indicate that accelerated implementation of the Government's program for structural adjustment would be needed to restore external balance for the economy during the Fifth Plan period. Over the medium term, the slower growth of GDP (5.4Z per annum for the remainder of the 1980s compared with 7.4% in the late 1970s), while still better than that of most other developing countries, will make it more difficult to reduce the -5- incidence of poverty and heightens the need for policies which raise labor absorption, and for continued efforts in the areas of human capital develop- ment and rural development. 13. To help address these constraints, the Government has sought the assistance of the IMF and the Bank. During the past four years, Thailand made = purchases from the IMF under a compensatory financing facility (SDR 186 million), a buffer stock financing facility (SDR 58 million), and two standby arrangements (totalling SDR 617 million). Thailand sought assistance from the * Bank in implementing its structural adjustment program through two structural adjustment loans and sector work, and in lending to priority sectors. The Government has also expressed its interest in obtaining Bank assistance in preparing the Sixth Five Year Plan (1987-91). The country economic and sector work program for Thailand has been structured accordingly. Financing Requirements 14. While the Government is making considerable efforts to improve the efficiency and effectiveness of its spending, the implementation of policies needed for a satisfactory rate of economic and social progress will require continued growth in the absolute level of public expenditures, though they are expected to drop somewhat in relation to CDP. In order to reduce the public sector investment-savings gap from its current level of about 5% of GDP to sustainable levels, much greater efforts will be required to mobilize domestic resources than in the past. The Government's domestic revenue, as a percen- tage of GDP (about 15% in recent years), is low compared to that of other developing countries at similar levels of development and has not been increasing. While the Government has taken steps to revise the tax structure and to improve tax administration and collections, further measures are needed. In addition, the financial situation of state enterprises, which has stabilized in the wake of tariff increases since 1980 and cutbacks in overly ambitious investment programs, will need further improvement. The Government is currently reviewing appropriate policies to achieve a more efficient and financially viable state enterprise sector. 15. Despite these policy measures, the demand for external resources will increase. Macroeconomic projections indicate that the current account deficit may well remain above 3% of GDP through most of the 1980s. This will require large amounts of external borrowing, totaling about $30 billion over the period 1984-90, of which about 45Z is expected to be in the form of public and publicly guaranteed debt. Assuming a significant level of concessional assistance, total medium- and long-term debt service payments as a percentage of exports of goods and nonfactor services will rise from 15.4% in 1980 to 20.9% in 1990. The resulting debt burden, projected on the basis of measures implemented to date, confirms the need for further adjustment policies currently under consideration by the Government. 16. Official donors, particularly the Overseas Economic Cooperation Fund of Japan and the development banks, have been expanding their programs to meet a larger part of Thailand's growing public resource requirements. The rest has been financed mainly through syndicated loans and bond issues. The Government has established a National Loan Policy Committee to coordinate and - 6 - approve all borrowing by the public sector. The Bank of Thailand is improving its procedures for recording private borrowing abroad in order to keep track of total foreign debt. External agencies, including the Bank Group, have in recent years increasingly concentrated on project lending to Thailand in some sectors that have high social benefits but low foreign exchange savings or earnings. To achieve the Level of external resource transfers that is now required, it is necessary, in selected projects where the foreign exchange component is low, to finance some local currency expenditures. PART II - BANK CROUP OPERATIONS IN THAILAND 17. Thailand first borrowed from the Bank Group in 1950 for a railway project and, as of September 30, 1984, had received 78 IBRD loans (including two third-window loans) and six IDA credits, totaling (net of cancellations) $3,414 million in loans and $125 million in credits. As of that date, $1,082 million remained undisbursed on effective loans and credits. No IDA credits have been extended to Thailand since FY79. Annex II contains a summary statement of Bank loans, IDA credits, and IFC investments. Bank loans and IDA credits to Thailand, disbursed and outstanding, amounted to $1,936 million as of September 30, 1984 and accounted for 16.7% of Thailand's total debt (disbursed and outstanding/. The Bank Group's share of Thailand's total debt service payments amounted to 10.2% in 1984. As of September 30, 1984, IFC had made twenty-three commitments totalling $225.3 million in fourteen projects in Thailand. IFC's investments have been primarily in industry and in the development of financial institutions. Prospects for increased IFC operations in Thailand have been enhanced by expanding private sector investment activity and by increased potential for developing indigenous resources. 18. The sectoral distribution of Bank loans and IDA credits, in percen- tage, has been as follows: 28X for energy; 26% for agriculture and rural development; 16% for transportatic'n; 9% for telecommunications; 4% for urban development; 5Z for education; 2% 'or industry; 1% for population/health/ nutrition; and 9% for structural adjustment lending. Overall implementation of Bank projects in Thailand has improved steadily during the past five years. Thailand's disbursement ratio increased from 17.7Z in 1977 to 31.6% in 1983 which compare with 19.4% and 17.9%, respectively for Philippines and Morocco in 1983. 19. The main objective of Bank Group activities in Thailand is to promote the country's economic growth and development through structural adjustment, productive investments in the key sectors of the economy, and targeted poverty alleviation measures. The economic and sector work program is designed to achieve this objective by assisting the Government to formulate appropriate economic policies and programs. Major macro and sectoral issues are being addressed through SALs as well as project lending. Specifically, current Bank operations are helping Thailand to improve its public resource management, enhance the efficiency and competitiveness of productive sectors, and rationalize the policies and investments for infrastructure development. The Government has valued the analytical input and technical assistance provided by the Bank in these areas, especially through our economic work and - 7 - structural adjustment Lending. However, the level of the Bank's future lending to Thailand is likeLy to continue to be affected by statutory ceilings on public foreign borrowing, reductions in public investment programs, and the country's ready access to foreign commerciaL and concessional sources of finance. The Government has also indicated its preference to seek highly concessional aid or to use its own resources for education, health and population related investments. As a resuLt, the levels of bank lending sought by the Government are likely to be cLoser to the historical average over the last ten years rather than to the peaks achieved in some years. In cofinancing, the Bank's primary concern will be to identify appropriate sources of concessional funding for technical assistance associated with Bank operations. The above factors are being taken into account in determining the level and composition of the Bank's operations program in the following areas. 20. Energy. Energy has been a significant sector for Bank assistance to Thailand. The sector's needs and investment programs are likely to remain large, and a number of planning and pricing policy issues continue to deserve Government and Bank attention. In the past, the Bank has helped finance projects for power generation and distribution, for lignite mining, and for the development and processing of hydrocarbon resources. Bank assistance through these projects has served to strengthen the institutions involved in the sector. Policy analyses and dialogue through CESW and SALs have addressed issues in energy management, planning and the incentive structure. The Bank's future assistance through energy and power projects combined with a CESW program involving sector work and public investment propramming would help ensure substantial Bank impact on policies and assist the Government to meet its resource requirements for the relatively large investments planned in the sector. 21. Agriculture/Rural Development. The importance of the agriculture sector to the economy, and the potential for intensive farming and crop diver- sification, suggest that it should normally continue to be a major focus of Bank operations. Past 3ank assistance through projects has emphasized development of the irrigation infrastructure, uplifting of backward areas, improvements in land tenure, programs for rubber replanting, and strengthening of the delivery systems for extension, research and credit. A number of policy reforms in the areas of institutional coordination, poverty allevia- tion, land reclassification, and reduced export taxation have been implemented with support from the Bank's CESW program and via SALs. Future operations are expected to continue these efforts and further concentrate on targeted poverty alleviation, agricultural marketing and pricing and maintenance of existing infrastructure. However, weaknesses in the provision of support services by Government departments and some outstanding issues in rural credit and mobilization of savings may limit future Bank assistance in these areas. 22. Urban and Water Supply. The Government intends to devote increasing attention to the continued expansion and pressures of urban areas in the country, especially Bangkok. Urban and water supplr sectors provide consider- able investment opportunities, but they also involve institutional and cost sharing issues. Ongoing sector work for Bangkok as well as the preparatory work for urban projects financed or under consideration by the Bank are pro- viding a good basis for assistance in this sector. Future Bank assistance is likely to concentrate on providing essential urban infrastructure and shelter for low-income families in Bangkok and in regional cities. 23. Transport. Thailand's transport sector, dominated by road transpor- tation, is generally well developed. The Bank has contributed to developing transport infrastruccure through project lending for roads, railways, inland waterways and ports. Future Bank role would focus on investments in infra- structure maintenance, operational efficiency, and selected construction as well as on issues in institutional development, investment planning, and state encerprise finances. 24. Education. Past Bank involvement in the education sector indicates potential for improvement in most areas of the education and training system. In view of the Government's current policy to finance social sectors from its own budget without recourse to external sources, the Bank's future role may be limited in the near term. Nonetheless we intend to keep current with sector developments to assist in strengthening higher and technical education, par- ticularly where critical for development in other sectors. Technical manpower development is a priority area for which Government may seek Bank assistance in future. 25. Industry. The Government evolving role, beyond policy setting, is likely to include investments for export promotion, energy efficiency, and technological change in engineering and agro-industrial subsectors. The Bank has so far played a limited role in industrial development, primarily through the Industrial Finance Corporation of Thailand. Major policy reforms have been supported through SALs in the areas of trade policy, investment incen- tives, and planning for large scale industrial investments. Future Bank operations are likely to focus on the rationalization of the trade regime together with additional measures for export development, and could be complemented by credit facilities should Government seek resources from the Bank for these purposes. 26. Telecommunications. The Bank has been closely associated with the development of the domestic telephone network, and the Bank's first B loan was made in connection with the third and fourth telecommunications projects. Howeve;, the Government's plan for rapid network expansion is straining the institituonal/managerial capacity and finances of the impLementing agency, the Telephone Organization of Thailand (TOT). It may thus take TOT sometime to consolidate its operations before fully launching the next phase of expan- sion. Meanwhile, Bank involvement would continue through supervision of the ongoing project and as part of our dialogue on state enterprise performance and development. PART III - THE URBAN SECTOR Urban Background 27. One out of every six of Thailand's 50 million people lives in an urban area. In relation to many other Asian countries this is a low level of urbanization. However, the annual rate of population growth in urban areas is -9- now estimated to be 5.3Z: about two and a half times faster than the national rate and reflecting, in part, increasing rural-urban migration. There are substantial gaps in economic performance and living standards motivating migration between the predominantly rural peripheral regions and the rela- tively industrialized central region, which includes the capital, Bangkok. The disparities between Bangkok and the regional urban centers are reflected most strikingly in population terms. Less than one half of Thailand's estimated urban population of 9.3 million people live in provincial cities and towns; the majority, some 5.6 million people, live in Bangkok. The next * largest city, Chiang Mai, has a municipal population of about 160,000 which is less than Bangkok's annual populati. growth. By the end of this century Thailand's urban growth is expected to have added over 10-12 million people into its cities. At least half of this increase is likely to be absorbed by provincial cities and towns, with the remainder being in Bangkok. 28. It is estimated that 12Z of the urban population, some one million people, live in househoLds which have total incomes at or below a relative poverty level of 2000 Baht/month. The incidence of urban poverty is propor- tionally greater in regional cities and towns outside the Central Region. Among the cities to be addressed by the proposed project, the poor constitute between 11 and 33% of the urban population (compared to 9% in Bangkok), total- ling an estimated 25,000 families, almost one quarter of the urban poor that live outside the capital. Incomes in the project cities have grown in recent years, and it is estimated by Thailand's National Economic and Social Development Board that the average economic growth rate over the next few years up to 1990 will be about 5Z p.a. in the urban areas compared to a pro- jected national growth rate of about 3.9Z. 29. Provision of services in regional cities lag behind national urban averages, although the cities' poor do not necessarily suffer greater service deficiencies than higher income groups since their homes are typically spread throughout the cities. In Chiang Mai, the best served of the regional cities, piped water service, was until recent improvement, accessible to only 40X of the population or little more than half the percentage of the population served in Bangkok. Health services, likewise, were available to about one third the degree possible in the capital. Social and industrial infrastruc- ture both lag in development although degrees of deficiency differ among cities. Responsibility for services in regional cities is fragmented among various ministries' agencies and state enterprises as well as the municipal- ities. Conspicuous infrastructure deficiencies within the responsibility of the municipalities are inadequate drainage and flood protection, poor sanitation and inadequate road capacity. None of the municipalities has much reserve infrastructure capacity to accommodate urban expansion nor do they possess sufficient technical and financial resources to deal with the growing backlog of remedial works. 30. All of Thailand's municipalities are administered by municipal organizations whose staff, policies and financial resources fall chiefly under the purview of the Ministry of Interior (MOI), the largest and one of the oldest of Thailand's ministries. The decision making powers of municipalities are narrowly circumscribed by government regulations which largely determine the level of annual budgets and expenditure programs, the level of fees which - 10 - may be charged for specific services and the number and quality of staff. Revenue generation is weak and the past failure of Government to allow munici- pal taxes and fees to keep pace with growth of expenditures has not only meant an increasing drain on the central government budget but also that services and maintenance of facilities have lagged significantly behind requirements. Expenditure by provincial and local government in 1980, including Bangkok, was 24 billion Baht, which represented about 10% of total public sector expendi- ture. About three-quarters of that expenditure was financed from central government grants. Municipalities are less reliant on central grants than rural local authorities since they receive a greater proportion of centrally collected and administered surcharge and shared taxes. Municipal expenditure in 1980, excluding Bangkok, was about 2 bilLion Baht, of which about 800 mil- lion Baht or 402 was financed from central government grants. Priorities and Bank Role in the Urban Sector 31. Sector strategy. In contrast to the economic growth objectives of earlier National Economic and Social Development Plans, the Government's Fifth Plan (1982-86) places emphasis on achieving, through structural adjustment measures, greater economic efficiency and equitable distribution of services. In support of the Government's efforts to attain its dual goals, the Bank's urban sector lending strategy embodies three principal areas of emphasis: (a) strengthening of the capabilities of national agencies and local governments in planning, financing and delivering urban services; (b) enhancement of urban centers (especially in the peripheral regions) to stimulate economic development; and (c) poverty alleviation through the provision of basic needs to the urban poor. Lending in Thailand's disparate urban sector has two different emphases. In the Bangkok region, the emphasis is on the objectives of poverty alleviation and institutional development to improve urban efficiency. In regional cities, the appropriate emphasis is on the redressal of key administrative and infrastructural deficiencies-which cons.rain their role as service and market centers to the adjoining rural economy. An essential key element in a regional cities strategy for Thailand is the design of programs which enhance the attractiveness of urban centers for a vide variety of productive activities. Of particular importance in the longer term will be the strengthening of municipalities so that they will have the capacity to formulate sound development programs and the means to mobilize sufficient resources to implement them. 32. Infrastructure Investment. The development of regional cities throughout Thailand will support the Government's poverty alleviation efforts. It would help to strengthen the direct linkages between an urban and rural development strategy, and provide some of the necessary conditions for implementing the Government's emerging decentralization policy. A dynamic urban environment suggests also an ability to attract industries which support and supply the rural populace. Large industries are more likely to be attracted by Bangkok's large consumer market, skilled labor pool, better infrastructure and input supplies. It is, therefore, the development of resource-based, small-scale enterprises such as agro-processing and handi- crafts which holds the greatest promise for industrial development in the outlying regions. Attraction of such industries implies in part overcoming the infrastructure deficiencies which exist as constraints for small-scale - 11 - industrial development. Measures to deal with major constraints outside the responsibility of the municipalities, such as poor telecommunications, limited water supply, transport difficulties and Limited access to credit are listed in the Government's Fifth Plan. Several sectoral initiatives through projects are either under implementation or in preparation by various Government agencies, in many cases with Bank participation. In addition, for a number of years, the Government has, with UNDP and Bank assistance, been exploring ways and means to improve basic social services and municipal infrastructure in regional cities and address the weaknesses of local administration which has * culminated in the proposed project. 33. Institutional Developmc .. The strategy for strengthening municipal government in Thailand requires gradual inter-related changes in its institu- tional framework. These would include key measures aimed at strengthening of municipal management and technical capabilities, improving local government revenues, and strengthening the ability of MOI to provide technical assistance and to monitor performance. The most important measures in the long-term process of municipal reform are to improve municipal planning, budgeting and accounting procedures, and revenue collection efficiency and to strengthen Government's ability to assist the municipalities develop their administra- tive, fiscal and operational mechanisms. Experience in Bank-supported Urban and Water Supply Projects 34. The Bank's support of the urban and water supply sector began in the mid-70s with attention to Bangkok's water supply, shelter and traffic needs. Support has recently expanded to include regional projects in water supply and shelter. Experience with these projects, four of which are still ongoing, has been mixed. Physical achievements have generally been successful but institu- tional gains or performances have been disappointing in three cases. The first loan, to the Metropolitan Water Works Authority (Loan 1021, 1974), has been implemented and was successful in improving water supplies in Bangkok but, because of Government's inability to raise tariffs, it did not meet the objective of transforming the Authority into a financially viable entity. The subsequent Provincial Water Supply Project (Loan 1863, 1980) supports develop- ment of potable water supplies in over 120 towns but is progressing slowly due to inexperience in the newly instituted Provincial Waterworks Authority. Lastly, institutional difficulties initially beset the Bangkok Traffic Management Project (Loan 1638, 1979) but have now been largely resolved. This project has implemented several low-cost measures for traffic management and is helping to establish a capacity for urban transport planning in the Ministry of Interior. 35. The Bank's most promising contribution in the sector to date has been in shelter. Through support of the National Housing Authority (NHA) the Bank has assisted in the promotion of low-cost housing programs in Thailand. Though the first NBA project (Loan 1556, 1978) experienced initial delays, it completed during 1983 a pilot demonstration of sites and services and slum improvement approaches in Bangkok. A second NHA project (Loan 1870, 1980) reinforces the significant institution building and policy gains of the first and includes sites in eight regional cities as well as Bangkok. Although disbursements have been delayed, due initially to procurement delays and - 12 - subsequently to land acquisition difficulties, the project is now progress- ing well and has, among other things, helped initiate a dialogue with the Government on housing finance development. Future Bank lending in the sector will continue to emphasize institution building and urban management. Forthcoming projects are expected to deal with city-wide infrastructure deficiencies in Bangkok, particularly drainage, and provide further support for NHA as well as regional development. Municipal Administration 36. By law, Thailand's municipalities provide a prescribed range of services dealing mainly with public order, health, education, welfare and transportation. In addition, a number of other services may be provided at the discretion of the municipality, including municipaL enterprises, hospitals, vocational training, sports facilities and slum improvement, among others. Some services typically provided by local governments in other countries such as housing, water supply, electricity and police are mainly operated by state enterprises or government departments. Municipal expendi- ture patterns reflect local priorities as resources permit but are influenced strongly by central government funding allocations. The structure of munici- pal finance in Thailand - virtually unchanged in almost 30 years - precludes local financial autonomy. The municipal fiscal base is extremely weak with local resources being sufficient to finance only part of the recurring costs. Because of central restrictions on the rate at which local taxes, fees and charges can be levied, the proportion of local expenditure financed from local sources has been declining. In the project cities, for example, about 30Z of municipal revenues has been, on average, derived from locally collected property taxes and rentals, license fees and service charges. Improvements to local revenues will begin to redress the reliance on central sources of revenue, although these will emerge only gradually and municipalities must continue for the foreseeable future to rely for the bulk of their income on the system of national surcharge and shared taxes and various kinds of routine and special grants. Because of their reliance on annual budgetary allocations from Central Government, long and medium-term planning is currently not practiced in the municipalities. Moreover, any attempt at fiscal planning would suffer from the currently inadequate accounting procedures and weak financial management experience. 37. The evolution of a systematic program by MOI to assist development of municipalities has been weak, although technical assistance is provided routinely in local spatial planning matters and on an ad-hoc basis for engineering services by MOI's Departments of Town and Country Planning and Public Works (PWD), respectively. In addition, the Department of Local Administration (DOLA) has provided staff training for municipal personnel through its Academy of Local Government Administration. However, the tradi- tional functions of DOLA, the principal MOI department concerned with munici- pal affairs, emphasize detailed control of municipal government with the intention of preventing abuse and ensuring uniform behavior, thereby pre- venting a focus on broader issues and stultifying innovation. Despite this proscriptive environment, a strong movement has emerged during recent years aimed at municipal regulatory reforms and a gradual restructuring of relationships toward greater autonomy for the larger regional cities. - 13 - PART IV - THE PROJECT Background 38. Development nf key regional cities is a long-standing goal of the Government. Ten cities were identified for attention in the Government's Fourth Economic and Social Development Plan (1977-81), but little was accom- plished. In 1979, a Bank urban sector mission visited Thailand to review national policy issues affecting the development of regional cities. During the study, agreement was reached with Government on the scope of the proposed project and its focus on five cities located in the country's three poorest regions - Chiang Mai in the Northern Region, Khon Kaen and Korat (also known formally as Nakhon Ratchasima) in the Northeast, and Hat Yai and Songkhla in the South. The selection of the cities also took into consideration their economic diversity and growth potential, including relative administrative abilities and planned complementary major infrastructure investments. Prefeasibility studies financed by UNDP in 1980 identified major investments that would overcome infrastructure deficiencies in the five cities, and a regional cities development strategy incorporating the project was included in the Government's Fifth Plan (1982-86). During 1982, as part of the Second Shelter project, UNDP-financed feasibility studies were undertaken together with complementary studies of municipal administration and finance improvement and reform. The findings of the studies in respect of four of the cities (investments in Hat Yai were not included) were finally approved by the Government in January 1985. Ongoing detailed engineering of the project is being financed mainly by the ADAB, an agency of the Australian Government, through its Bank cofinancing facility. Appraisal of the project took place in May 1983 and negotiations were held in Washington, D.C. from February 4 - 8, 1985. The Thai delegation was led by Mr. Charn Kanchanakpan, Deputy Permanent Secretary, MOI, assisted by Mr. Nibhat Bhukkanasut, Deputy Director-General, Fiscal Policy Office, MOF. Staff Appraisal Report No. 4673-Th, dated March 8, 1985, is being distributed separately to the Executive Directors. Annex III of this report provides supplementary project data. Project Description 39. The proposed project has been designed to support Government efforts to stimulate economic development and regional growth in the three poorest of Thailand's six regions by: (a) improving basic infrastructure in the four project cities; (b) strengthening municipal administration particularly in finance and planning, and in implementation, operation and maintenance of urban services; and Cc) strengthening the capacity of the MOI, specifically its Departments of Local Administration and of Public Works, to assist municipalities in carrying out their development programs. 40. The proposed project, which would be the first Bank supported project of its kind in Thailand includes: (a) municipal infrastructure improvements ($18.4 million base cost, January 1985 prices) including exten- sive road and drainage improvements in all cities; wastewater collection and treatment facilities in Korat and Khon Kaen; solid waste dump sites, workshops and equipment in Khon Kaen, Korat and Songkhla; new roads and bridges in - 14 - Chiang Mai and road maintenance equipment in Khon Kaen; Cb) provision of revenue earning facilities, ($5.6 million) incLuding a combined fishing port and commercial industrial zone in Songkhla; (c) slum improvement, ($1.2 million) concentrating primarily on access and environmental sanitation in Chiang Mai, Korat and Songhkla; and (d) insticutional development, ($6.5 mil- Lion) incLuding policy measures and technical assistance and training to the municipalities, and the MOI to (i) strengthen municipal administration in the areas of planning, programming, budgeting, accounting, financial management and revenue improvement, (ii) assist in project implementation, operation and q maintenance, and (iii) prepare a future project and undertake associated studies. Implementation Arrangements 41. The project will follow existing Government functional responsi- bility lines whereby the municipalities will execute the project under the overall guidance of the MOI, which will provide the necessary administrative and technical support to the cities through DOLA and PWD respectively. The project is expected to be implemented over a five-year period, October 1985 to April, 1991. Detailed engineering and land acquisition is proceeding with the aid of technical assistance funded by ADAB. Land acquisition will be facilitated by a planned program of private property acquisition, including, if necessary, expropriation and intergovernmental property transfers. A satisfactory land acquisition plan was provided by DOLA. Overall project supervision is the responsibility of the Project Steering Committee which, through a Project Director, will direct and coordinate the work of various subcommittees and the project management and implementation teams in DOLA, PWD and the cities. DOLA will provide an overall project management unit which will: (a) monitor overall project progress; (b) supervise and monitor the program to strengthen municipal planning and financial management, including the administration of related technical assistance; (c) coordinate with the World Bank, including processing loan withdrawal applications; and (d) plan for future regional cities deveLopment. In PWD, a technical assistance and coordination unit will be established to fill the key role of providing the necessary engineering and technical support to the cities for implementation of project works. It will, with the assistance of consultants: (a) initiate, supervise and monitor the acquisition of land required for the project; (b) complete detailed engineering and procurement documentation; (c) supervise procurement for and construction of all large and/or complex project works; (d) provide technical assistance to municipalities for works to be handled by them; (e) monitor and advise the cities in the operation and maintenance of the project facilities; and (f) assist in the preparation of future regional cities infrastructure improvement. Project implementation units will also be established in each of the four cities (Section 3.01(c) of the draft Loan Agreement). These units will be responsible for: (a) acquiring land needed for the project; (b) tendering and supervising small-scale project works; (c) monitoring project implementation and maintaining project accounts; (d) super- vising operation and maintenance of project facilities; and (e) implementing measures to improve municipal planning and financial management. Staffing requirements for the new offices and implementation units will be met mainly through transfers of suitably experienced staff from elsewhere in the agencies and municipalities concerned. Consultants to assist with implementation have - 15 - been appointed. The large investments through the project will increase operations and maintenace demands. By October 1, 1987, each city will prepare an action program satisfactory to the Bank for the improvement of their respective operations and maintenance functions for roads, drainage and sanitation works (Section 3.06 of the draft Loan Agreement). The munici- palities will operate and maintain the project facilities except in the case of the Songkhla Fishport. The new fishport will be operated and maintained by the Government's Fish Marketing Organization or other appropriate operator under a leasing arrangement, to be entered into by June 30, 1986, satisfactory to the Bank (Section 3.07(b) of the draft Loan Agreement). Project Costs 42. The total project cost is estimated to be $50.9 million equivalent of which the Eoreign exchange element (both direct and indirect) is estimated at 35% or about $17.6 million. The taxes and duties element of total project cost is estimated at $5.1 million. Project costs were estimated on the basis of advanced preliminary engineering designs and include land acquisition, con- struction works, technical assistance and physical and price contingencies. All base cost estimates are expressed in January 1985 prices. In the absence of completed detailed engineering designs, a physical contingency allowance of 15% has been made for all components except land acquisition (no allowance provided) and technical assistance (5Z allowance provided), and amounts to about 11% of base cost. Price contingencies for Local currency costs are based on expected increases in construction costs of 8% in 1985, 7% in 1986, and 6% per annum thereafter. The corresponding rates for foreign costs are 8Z in 1985, 9% in 1986 to 1988, 7.5% in 1989 and 6.5% per annum thereafter. Costs of consulting services total $7.6 million. Financial Arrangements 43. The proposed Bank loan would finance 60% of total project cost net of taxes and duties. The cities would be responsible for about 25% of total project cost; and the Central Government for about 11%, the latter being granted to the cities. The remaining 10% of total project cost would be provided as a grant from ADAB for part of the technical assistance program. The Bank loan of $27.5 million would cover the total foreign exchange requirements (including the front-end fee) and local costs of about $9.8 million equivalent, or about 54% of total project cost. The loan will be made to the Kingdom of Thailand for a period of 20 years including five years of grace at the standard variable interest rate. The loan proceeds would be passed to the four municipalities on a grant basis. The Government would bear the full cost of the loan, including foreign exchange risk and interest and principal payments. It is expected that the cities would borrow about 60% of their contributions from sources arranged by the Ministry of Finance and from development funds managed by MOI, and provide about 40% from their respective development budgets. The conclusion of project financing and implementation arrangements, satisfactory to the Bank, between the Government and the project municipalities is a condition of loan effectiveness (Sections 3.01(b) and 6.01 -of the draft Loan Agreement). - 16 - MunicipaL Finances 44. The need to strengthen the administration and financial capacity of the project cities was recognized by the Government at the onset as part of a meaningful regional cities deveLopment program. To this end, two complemen- tary studies, identified during the urban sector study (para. 38), were com- missioned by MOI to develop a scrategy to increase revenues at the local leveL and to design and assist in implementing improved planning, programming and budgeting practices and accounting systems to provide a basis for improved financiaL management. The revenue strategy concentrated on measures within the jurisdiction of local governments. The recommendations emphasized the importance of improving the municipalities' efficiency in assessing and collecting the main sources of local taxation. A coordinated program is now being undertaken by MOI, the Ministry of Finance (MOF) and the Bangkok Metropolitan Administration (BMA), with financial support from the Bank's first structural adjustment loan to Thailand (Ln. 2097-TH) to prepare work manuals and provide a task force to assist in the development/updating of tax maps and tax rolls as well as updating assessments for all of Thailand's 122 municipalities as well as for the BMA. This work has nearly been completed and agreement was obtained at negotiations that the program would continue to be carried out in consultation with the Bank (Section 4.04 of the draft Loan Agreement). Concurrently, legislation was passed which substantially increased the ceilings for solid waste collection fees levied by municipali- ties. In addition, the Government hag caused each project municipality to implement improved planning, budgeting and accounting systems which are now essentially complete. 45. Long-term strategy for local revenue improvement. The measures initiated and supported by the project and the structural adjustment loans are a significant beginning to the long-term process of legislative and admini- strative reform necessary for strengthening local government finances. An appropriate strategy for the Bank's future involvement in this process would be to continue to work with Government to develop initiatives and measures for improvement in the administration and collection of local revenues. The broad goals for further work in this area include: (a) continued rationalization and reform of property taxation; (b) continued support for the improvement of local financial management; (c) improved cost recovery for municipal services; (d) a shift in emphasis from centrally administered to local sources of finance, with grants based on relative local needs and tax collection effort; and (e) a greater use of loan financing for capital works. The Bank's role in supporting and encouraging the study and strengthening of the Municipal Devel- opment Fund and the establishment of a National Valuation Authority, which would be a focus for further improvement in the field of property taxation, is expected to contribute in a positive way to these goals. Also, a proposed future project with the SMA is expected to build upon the momentum gained in this project in Thailand's largest urban area. In addition, further work is currently being undertaken by government and its consultants to consider the present system of distributing shared and surcharge taxes and grants to local governments. A concomitant goal of Government is to support reform in all ,municipalities as well as other tiers of local government, which is an impor- tant step toward increasing the share of urban development expenditures funded from local sources. The financing plans of any subsequent regional cities project are envisaged to reflect improvement aLong these lines. - 17 - Cost Recovery 46. Currently, investment costs incurred by municipalities are primarily financed from Central Covernment transfers (shares and surcharge taxes and grants) and are not seen to be recovered from beneficiaries since overall local tax and nontax revenues are insufficient to meet even normal recurring expenditures, although varying degrees of cost recovery exist for some individual municipal services. In this project, many components are unsuitable for direct cost recovery because beneficiaries and the value of individual benefits are, in general, impossible to identify; the imposition and collection of benefit charges would not be a cost-effective way of raising revenues; or because services are traditionally and appropriately provided by the cities and funded from general revenues. This applies to drainage and sanitation, roads and bridges, and maintenance equipment included in the project, which together amount to about 68% of total investment costs. Revenue-earning facilities in the project include a fishport and adjacent commercial/industrial zone in Songkhla. For the Songkhla fishport and adjacent commercial/industrial zone, which represents about 27% of total investment cost, the full cost of the development would be recovered through various lease payments to the municipality. Cost recovery for the slum improvement components, which represent about 5% of total investment cost, will be appropriately pursued on an indirect basis through improvement in general revenues at the local level. Utility charges would provide for cost recovery of water supply and electricity improvements in the slums in line with levels elsewhere in the communities. The accounting improvements to be undertaken through the project are expected to demonstrate to the cities the level of cost recovery currently employed for all services and would provide the basis for setting the various fees and user charges more in line with actual costs incurred. Procurement and Disbursement 47. Two large civil works contracts for the construction of a fishport and industrial zone in Songkhla costing $8.1 million and $2.7 million respec- tively, would be procured on the basis of ICB in accordance with Bank guide- lines. The balance of civil works construction, totalling about $23 million would consist of about 40 minor works contracts of estimated size ranging from 2-50 million Baht ($70,000 to 1.9 million equivalent) each that are unlikely to be of interest to foreign bidders and, would be procured following local competitve bidding procedures (LCB) satisfactory to the Bank. Equipment, including vehicles and furnishings, totalling about $0.8 million equivalent would be grouped in about 15 bidding packages valued less than 4 million Baht ($150,000 equivalent) each and would be procured under LCB procedures satis- factory to the Bank. Miscellaneous items of equipment, and materials under contracts valued at 400,000 Baht ($14,800) or less and up to an aggregate of 10 million B ; ($370,000) would be procured following prudent shopping procedures satisfactory to the Borrower and the Bank. The proceeds of the loan would be disbursed against: (a) 75% of expenditures for civil works; (b) 100% of the foreign cost of directly imported equipment; 100% of ex-factory costs of locally manufactured equipment; and 65% for other locally procured equipment; and (c) 100% of expenditures for technical assistance (not financed from grant sources). In order to better ensure the timely provision of funds - 18 - to finance the capital costs of the project, the Government will establish a special account (revolving fund) under the proposed project. This would allow advance payments from the proposed Bank loan for that portion of the project expenditures which would otherwise be financed directly by Government and subsequently reimbursed by the Bank. In addition, disbursements against all contracts valued less than $100,000 equivalent will be by statement of expenditure (SOE) procedure. It is expected that loan disbursements will be completed by March 31, 1991, about six months after completion of civil works. The disbursement period of six years is somewhat less than the country performance of seven and a half years due to the advanced stage of the project preparations and the experience expected to be gained in the early years by the project organization. ESTIMATED VALUE OF PROJECT PROCUREMENT AND DISBURSEMENTS BY EXPENDITURE CATEGORY AND PROCUREMENT PROCEDURE /a (S million) Procurement procedures LCB Not Expenditure Open Prudent appli- Total category ICB bidding shopping Other/b cable value Civil works 10.8 22.7 0.5 34.0 (7.8)/c (16.3) (0.4) (24.5) Equipment 0.8 0.8 (0.7) (0.7) Land and project 8.4 8.4 administration (-) (-) Technical assistance: Engineering services 5.8 5.8 (1.2)/d (1.2) Institutional development 1.8 1.8 (l.l)/d (1.1) Totals 10.8 22.7 o.5 7.6 8.4 50.9 7.8 16.3 (0.4) (2.3) (:T (27.5) /a Amounts shown include base costs (January 1985) and physical and price contingencies. /b "Other" procurement procedures would apply to recruitment of consultants in accordance with Bank Guidelines. /c Amounts in parentheses are estimated disbursements from loan proceeds. 7- Loan proceeds to be reallocated for civil works component purposes in the event that grant finance is obtained by RTG from external sources. - 19 - Accounts and Audits 48. Separate project accounts would be produced by DOLA for each of the project cities from information supplied by the cities. The project accounts and the accounts of the four project cities would be audited by an independent auditor acceptable to the Bank, with the audit reports submitted to the Bank no later than six months after the end of each fiscal year. The audits will be carried out by the National Audit Council in cooperation with DOLA's Division of Local Finance, as part of their normal audit procedures. Benefits and Risks 49. The project would support the Government's regional development strategy by providing an improved infrastructural base and strengthening muni- cipal administration to support growing economic opportunities in four import- ant regional cities. The project would provide improvements to infrastructure and better environmental conditions affecting 450,000 people in the four cities' municipal areas. The main benefits included in the economic analysis are derived from: (a) drainage and waste disposal improvements which would relieve severe seasonal flooding and local flash flooding and alleviate pollution; (b) road and bridge improvements designed to improve traffic flows on heavily travelled routes and which would reduce congestion and improve access in the cities' central business districts, and to newly developed areas; (c) a riverfront development component in Chiang Mai would integrate much needed road, market, parking and recreation space improvements which would reduce road congestion and improve environmental conditions in an important commercial and tourism area of the city; (d) a combined fishport and commercial/industrial zone development in Songkhla which would include: (i) about 16 ha of commercial and industrial development, (ii) improved fish land- ing and handling operations, and (iii) land released for redevelopment of potentially valuable commercial and tourism areas of the city presently con- strained by the existing, noisome fish landing facilities; and (f) slum improvements which would improve walkways, drainage, solid waste collection and water supply benefitting about 1750 households in relatively low-income areas. The economic rate of return is estimated to be 25Z for drainage and flood control components, 14X for solid waste disposal, 45% for roads, 33Z for bridges, 182 for the Songkhla fishport and commercial/industrial zone, and 13% for slum improvement. The weighted average economic rate of return for all components is 30%. Principal quantifiable benefits were avoidance of property damage and disruption to transportation, reduced vehicle operating costs and travel time saved, new market and parking area values, and increased land and rental values. The needs of the urban poor are addressed in part by all pro- ject components, the poverty content of individual components ranging from 24- 66Z. The poverty impact of this project is considered to be significant based upon both the relatively high incidence of poverty in the project cities and the overall high poverty content of the respective project components. The project would be expected to create approximately 8,000 man years of employ- ment during the six year construction period. In addition, it is estimated that up to 800 new, permanent jobs could be created through the operation and maintenance of various components concerned. - 20 - 50. The main risks in the project lie in: (a) an untested implementa- tion capacity of the project cities in relation to the magnitude of the project; and (b) the uncertainty of the cities' ability to achieve adequate revenue improvements in order to repay project loans and provide for increased recurrent expenditure budgets. In order to minimize the risk of inadequate revenue improvements in the project cities, the MOI and MOF have established a permanent unit to assist with implementation and monitoring of improvement measures. In addition, preparations to address revenue improvements are well advanced, and funding to undertake the necessary steps has already been obtained. The principal implementation risk is related to land acquisition which has delayed progress and increased costs in several previous Thailand projects. To reduce this risk, substantial completion of negotiations for land needed for commencing construction during the first year of the implemen- tation program and initiation of expropriation proceedings has been achieved. A further implementation risk is the managerial capability of the project organization units to carry out a project larger and more complex (from a logistical standpoint) than any undertaken by them previously. This risk is considerably reduced in view of the specific organization and staffing arrangements established by the MOI and the technical assistance already obtained. Environmental Impact 51. The project is expected to have a substantial net positive environ- mental impact. The municipal infrastructure and the municipal revenue-earning services are designed specifically to improve environmental conditions, espe- ciafly improved water quality and reduced disease risks in the project cities. PART V - LEGAL INSTRUMENTS AND AUTHORITY 52. The draft Loan Agreement between the Kingdom of Thailand and the Bank, and the Report of the Committee provided for in Article III, Section 4 (iii) of the Articles of Agreement are being distributed separately. In addi- tion to the special conditions listed in Section III of Annex III, the conclusion of project financing and implementation arrangements, satisfactory to the Bank, between the Government and the municipalities of Chiang Mai, Khon Kaen, Nakhon Ratchasima and Songkhla (para. 42) would be additional conditions of loan effectiveness (Section 6.01 of the draft Loan Agreement). 53. I am satisfied that the proposed loan complies with the Articles of Agreement of the Bank. - 21 - PART VI - RECOMMENDATION 54. 1 recommend that the Executive Directors approve the proposed loan. A.W. Clausen President Attachments April 4, 1985 Washington, D.C. ANNEX I -22 - x Page 1 of 5 ma (EDT361 NUNAI) lb ipod 1g7ct uunuL Al&cnc s-sc&u ARBA (miniM ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ MMR. U)VAU TOTAL 514.0 514.0 314.0 AIClAULTWAL 121.1 141.2 128.1 ap U WMvC (S) 100.0 2O30.0 790.0 1091.2 2106.6 rNNO muONOSIuI "a cairm mtlcmItS Or OIL . l IIIRUI) 44.0 150.0 264.0 567.3 95.5 1ooLAnI An iTZAL sTAIIUC POiULATIlO.KID.uAR (TWOUSANDS) 2467.0 36370.0 41331.0 UU.3 VOP.UTIOM (Z OF TOTAL) IZ-5 13.2 16.4 34.7 44.5 POPULATION iRBCTIONI iOPULATIOIe fI VW 2000 (XeLL) 47.9 STATIONARY POPUIATAON tNlL) 111.3 FOPULATION NONIZN 1.. POPULATION D11SITT PM sq. IN. 52.3 70.1 92.4 241.9 35.7 MR sQ. 1l. Aai. A bUD 209.6 257.7 255.2 1735.1 92.4 POMATIOII ACe SUbCE CZ) 0-14 IRS ".7 44.2 40.4 39.0 39.9 15-64 13. 52.6 50.3 56.3 57.4 54.0 65 AID ARVe 2.7 3.0 3.1 3.3 4.1 POPULAflON cavm lRaY (1) TOtLL 2.8 3.0 2.4 Z.3 Z.4 URBAN 4.6 3.6 4.3 4.3 3.4 CRUDE SIXTH RAe (PM TX) 43.9 3B.5 26.0 30.1 31.3 CRIUID DEAtI RITE (PER 1BO0) 14.7 10.4 7.6 9.5 8.1 CRSS REPRODUCTION 14T 3.2 2.7 1.9 2.0 2.0 PAN!Y PLrING ACCETOS. ANNUL au3s) . * 202.9 /e 1063.3 USERS (t 2 MARRIELD VU@) .. 13.0 39.0 52.7 40.; FWOD AM WMXTru 10 OF POOD Pne. PU CAPrrA (1969-71-100) 92.0 100.0 133.0 123.0 114.3 FEZ CAPITA SUMY o CALORES (Z0O 0E lrs) 100.0 103.0 105.0 114.4 110.6 WOTEZIS (031 PEt DU) 45.0 50.0 47.0 57.0 67.3 OF WHICKI A*MNL AMD PULSE 11.0 15.0 15.0 /d 14.1 34.1 CHILD (AGES 1-4) DATH RATe 13.3 7.9 4.0 7.2 5.7 MtALItE LIMe ExECT. AT BUM ZEARS) 52.3 58.2 62.7 60.4 64.7 IFANTr 211!T. RITZ (PM TI0IS) 103.0 74.6 51.4 66.3 60.6 ACCESS TO SAFE WAUR (lie?) TOAL .. 17.0 22.0 37.0 65.4 mm"3I .. 60.0 49.0 0 54.8 78.1 IL3 . 10.0 12.0 7e' 26.4 44.2 ACC5SS TO MERETA DISPOSAL (t OF POPULATION) TOTAL .. 17.0 40.0 /1f 41.3 52.9 UR1A .. 65.0 58.0 IE 47.4 67.0 RUAL .. 8.0 36.0 7! 33.3 24.5 POPMAIXEOI PER PUICIA 7900.0 8430.0 7100.0/ 7749.4 1917.7 POP. PrR NURsxNG PzRs 4830-0 /h 7030.0 2400.0 240.4 815.8 POP. PER NOSPrAL BED TOrAL 1380.0 890.0 820.0 I 1044.2 367.2 UIUAl 260.0 lh 180.0 530.0 76 451.2 411.5 RURAL 21420.0 71 3 1360.0 1.230.0 594.6 2636.3 ASUHSSIONS PER 3 A BED .. 31.0 44.8 Ia 27.0 27.3 AVERACK SIZE 07 BDUSEOWD rTa 5.5 /b 5.8 5.5 /a UREAN 5.3 7W 5.8 5.5 s7e RUA 5.67 5.8 5.5 .. AVERAGE 30. Of NBSONS/R0ou TOTAL .. .. 2.4/. URN .. .. 2.27.. RURAL .. .. 2.47.. ACCESS TO ELECT. (Z OF VAEMLIC) TOTL 15.9 *.. URBl .. 85.. ,- ~ ~ RRL .. 9.0 . .. ANNEX I -23- Page 2 of 5 1-6dk 197? 38!DSAU n a, LALAn IIKCA & CIA IrN.Ma TL 6.0 63.0 p6.0 102.0 105.4 WE "s0 66.0 M0 101.9 101.3 nm 79.0 79.0 93.0 96.2 106.3 UECOUUTI TOML 13.0 17.0 29.0 46.0 43.2 NMIl 1.0 20.0 a0.0 4B.7 42.3 1 1 ]LO:10.0 13.0 27.0 43.1 44.5 VOCATOUL CZ OF IEOUMX) 19.1 22.3 13.5 17.5 33.0 1PL-TEum U"Tio FIliAr 36.0 35.0 24.0 31.S 30.1 iscKolt 20.0 10.0 23.0 2d 23.5 10.0 DLT LIAC LAT CI) 67.7 76.6 6.o 72.9 79.3 ?AS16U10u CMIIOANP 1.8 5.1 6.35 IJ.I 40.0 3*3100 NWRES/U 3 Ml 6.1 76.3 127.2 113.6 225.6 TV WR O nD MI 2.2 6.6 17.4 30.1 OT.2 =RM(-M Comm NU3PI c.M! A 3 13D00*1 3O!UTIh 10.6 23.3 42.8 5 33.9 63.5 CINDU AUYL A! A T .. 0.4 1 *. 3.4 2.6 TOAL L0 Vo 0) 13772.0 16956.0 23356.0 PSSA ('UNC ) 4.4 44.8 43.8 33.5 23.2 AMMT=g CICUU!) 64.0 60.0 76.0 52.2 31.5 110061! (UNCU) 4.0 6.0 9.0 17.9 23.9 PAOTIZPDZIO NAM (fluUT)44 6. TOTAL 31.3 3.6 ".I 3B.7 32.2 ASZ 32.7 49.3 31.9 50.9 49.3 FUIMIS 4.6 43.9 44.3 26.6 15.2 coom= D 3 0_ 0.9 1.1 0.9 1.1 1.4 ror fuTn rllco 93303610 ITIAT NICUIT 5S30 OfNouZUOI3 21.8 l 23.0 23.0 A 22.2 SCUll 200 o O UO-I 50.9 7 49.7 49. 7; 48.0 I.33ST 201 of u S. Z 6.2 60.1 5.6 7 6.4. U016 403 OF 900. 14.9 7 13.3 15.2 a7; 15.5 NSTDIATA AISOLDI WOWS!! INC011 LEVEL (US$ 131 CAPIT) USNAN .. .. 159.0 h U8.6 2U.2 RAL .. .. 106.0 7 1.0 164.0 ESTDIA?I 331*219 IOURM! 1300 Ua .. .. 115.0 /k 177.9 522.8 3.03*1. .. .. 110.0 7 164.6 372.4 3511*11 90. 1.0 AM I-Hox PO91 INCaS LVEN (CE 0 .. .. 15.0 /k 23.4 " .. .. 34.0 7W[ 37.7 MT AVAZIANL -O AP.UC*31 M O T E S /a Te grosp *eraps for eakh ldIcator are PMpolatae-aeLjghtid ae tb.tic 21a,.. Courage of countries awns the irACadtor deend Da _ velleblUty of data and IS nt unifox. lb Unlea otberule eted. 'Data for 9' refec to any year bet_ee 1959 and 1961; 'Data for 1970' between 1969 and 1971; an data for 'Mot lacet btlate' between 1960 ad 1962. /c CGovernmt plr_ onl: /d 1977; 1 1974; If 1975; LL 1979; Ih 1962: A 1972; /i 1968; k 1978. . 1984 4M 1 4331 1- 4 je -% 333 - 344 l 43ec .14.3 BP -nccIapd 3911 3e433p iSdi p 'i43*3344 ..cAtdne *eWe "-ps .cbceee..43 a- 3cPa1 elcla PS Ce P3*1 13333 I" %9e O453 44--P 3336Pi (318 41-443 ioa3ee4 A 35= 3435 133313ON 94 *4taPa, ci 443 ..3w Ogg -da3 ow .fta 43W. P.....3*ep44 .cte e.3*4*4i cd i.e .4 J 13- 3e.Se..- eqt*-~ WO&I -W so.~~~~~~~~~~33334 415 4433 31 P4 -34.343i 33431 -_ (fmes' PPI-W-111 --a r- PT= -1- il_=84 a eq as.p4.s4e4.. mes eq4 .n . -4 *..eIng44 a.;e3441 *44 c.O.cs-33 .4 18e14 W on-n j- .- _411ol -0W 354 j .1.P e431 seel 4- c3-p; ic ccp .1 I-M -W -4.aw fta j. --R 1-alaw --s 1161 p- PdG 10161 '-339 3633 p43 0101. 35" IlillS e3366c. .13 ~9u1.. 0 e~3) eiecj.44 Ic 4 .4e - e.143,te nsa elI e l. P-,,PaWZ3jDi_ l35IlE e;dc e4Sce. 9-lu-e -.1 8..aco l xu.q_oP -.P3e5p ea sn I a. 33613 se n vhl ecdg 'eAce r'P c-es a - 5331" e410 -(41.a 348335)50 343134- 31rt cc 343313odosi P45443 4 P%3.1~ era in 34 3eodd" - (p "I44 3.- 03 434 (93"" t) s" P_5533 A. Pfl' P9olc4 c136 3 33 e gg.lcic4Spe p- £4..a ec1- 1- - vK pee " ".n 34 *5`scI 43 *.I 3. - (311 53 e.,c - 3c3..- eni3)3c cemel *ecce 4c5c4A.304344 iof P ,33 Ap3 016 SSd-391 3*44 -v4 p414 -P11 'nn~ cqe.4cp.4ca I,. pccadeoe 41 pv4 411.,. -4 peceid V 'pA% 4ol14 as. -Ii3aaioaW.i .msu mo-o 5 P 3.-a eV a-lad p- gz Pd oz 31441p4 3.e- 'cicisi 3440 p 41 3P_41d UN 'AM p34 Pc'e e S %Mpli -t P-3-ft - fM% 1- N Z-A M ., P. --413 (443 5308 3-3P 413*3 - cice-eld 34444 53T-31535 m -.ece3 *s33eqee.41 f-leec_P *31 91*314 . pt 94113533 nud en j. -,P c,jp .- peec 35 ReeS 43 acel pe__.4 13 d.3 e..,e. *cecsd ce4cl 'iecs A13 ..c ._ 3 ..4 "33 Pe4m1sIid.2 len 'lpi %atsoq wa c .n 5 i Pwi At 30444, (p4 0sn 34.3804 ie 3. c.i441 c :.-14 jc4444 33 - jee au444 do 44.3-c 4434 - .34(3 - _ I-T.- -3 lWi-T.. PJ le% flat 34ep1 -P33 poc 3115-3531 E p- -1c343g 3, * '(fl.41 ~ godtrsP ,n, -pch d -" ",P I3",,3 5445tq99was*'0. dPM mi'Seeedeo 33,p n54.d -elipdc- Il 34- 41353333 14-3 13-da so3 1pc* j. *39 a .ciefi P3314 -t-IinA 5314ZSi ia41300f "Id. *5*3. m;itsqScp33 ved .epecae 43 43135 14141 n 5e4 IMP Ps ae ee-J .443 nm l4ic** 44,5- .p*4e3 - j.1mos, .1441 . e-n....) eee.-ft . P .---. ft"n to P31.- D45434 933 -30 (4 v- J.3*34 4333.-d3 333-13 Pa'3339.PPMl.ga-34 - - 'A"" ,3 " (33P43*ss = 61 -lu, 3.4331*1451 334 eeai 44 Poll*s s 3eeee 3133 30l3 -W Scecp meg- noo. - m33u In..-. gld *- eo"ncw4 ce331i3 *leee 1.e ~e fewi Sleqeem u.sc 1 305e3*c ITO- 33341334 - i 3344483 Ml 3d33 - I333-1 d..-13I -ol3c .. .3s. h.l4_,jppjj p0 0. .3**4m- cjle. 43 35341 31=133 t-- Is 0. PPs124o jAtcs AS -was alve mu IPot 3.-oadds,31 As ve. .Pc - 3134 3P 3.414e3, -WOW 4 3*ne 4.c. 13 is ~ 43 4~~3.441 31-3'P 53 s-I '4*.4a1 'i-M~* 33.fJ4d ____________________ S133 Meit MS03 stpoen 3 .4--"-3 .4piJ*-1 jd '.eP 4 ie 33 34p014 143 l3.4c334 36 -310544 4 4&43d,p334 =1139I e-5cU en nel. cI3qds. q S. Lee cacin Wce "a1 eve ticcue SI 3-a -VP l 44p03a P444311 3443 3443-133W3F14II5 .1aaJ. 3l.331344 poi ".qi; eec Masq44. 3se14 .4 .sen t0e .3. el.q4ai3439- eIt-(36c c34.* . 3 da33e " 34333, IeeciLe P~ -Pnt(c 031 -lq.*f4P3-l419. *13413 p43- 9(33-449 3 43330 M.33*P p0 4443141 '.44433p0 444t80 3.444 3 443.4A-3114-4tMPPa"q ,1 '1gP Z. 30I '33 ' Ot 3; OS s O, ifto-od - 1-3.9 APPA~~~~~433143334143 P(13 33.33 hP344 - 313.14-,5411p393 om4 P313 313334 -a 33 -at-" -Ln 4 - 3331I =*143..v3IVal33ee4G 'M3I 504 p433 .en;4e;43 Cep0ee 1~ 33.43444 ecn Ttpa- ~ P 1348.313 MI 301.3-3n1131 43b Bad. s3111313d 4333340. 1 -33314 -41-4 __________:______-_____34eA 14 434 c33444 c 35433(4444 *=ieecee Asees 3)3334444334333433 - 4*-33 3 1 53)1 3peacT*3443 e 3i3 vc 5u 33.334. 1,valsoss "wa P - '-mro1o d - 13543d.i T 44 T *1." 9333331333 3343 -453p1i33. URI 414341ft-s '43 1 0 se11n3e 1 443ml434 383sie.4 p334144333,334444 e wa"l. .si 033341.344 BP1 -II-e. P.ec3.e cne 3)44m4 4.3c.3 143 4 343*e33339 3e44.3444 4430333 0 3313_ 03 3 133*a 3.43 ls ee 33 I3la "3 .e334 t4431 p 14333 3.144 j3e *14433PM sa -33 3si 3 3133 *343445a 3131a- aw . 3334 3014 h 331-343 .%43-od 3!*qa-1 Ismi"' ml some 9 v-sivolOa unp-w z- woi- Paus4-33 eceq Iona . t.Ile 0.3-3 43 sea34 .. 4*419*casj44 .3 B.." PO MaPoo. ;Polo-Po - .4e443 0134 431p 43 34333 44. *411 .41413d_ 33 3313. p.141313311 333.31433-411 q-j 1-411~~~~~~~'31342 p334318 nIqi 3 3.4.3e1* llAN W.5 31ce ew 434(l4*c3 413pe143i44 333314.33 p0344303334 '*34;43331 0.5343 1333. a "133314 A33 ".4441 P- S11u J.433333 34313e3e.304aseII 0 4.p ¶3 3 013c 3443fin Z.-3 Ld v43 * eipc.c 393043313 len .331en 33131 ~~~~~'341l3 3333e - 0.4.44.4431Jcc 34 13was3433BS-o4,431317 44 3.433533443 a~~~~~~ p341e30P"3to413 '333SIPA36 A943 1PA. 3I33 034 343.03 043 P- U.Mm.L~~~*"3333.3 3349". 43 4433. 41333 4911414 w3 3.,13A4.3 1344A14330 333 -ml 3 q.3333i333 .3413 p0 31i493e4 iq4..ei 3 -.435 . 4 I.4 . - csiod395 4433 d4. A3.4 olees.. - W.14." amsm 5134 %e5f44.e.menl-me c S43e s 4343usIaie t4433*3.3d,n303 43.33103 *33134343331 310efp a '33c3e3 33434c - 4. -4 -14 so *344. (4es I.musA m.le,s.I... .eip 3m3 P ped313 p0 .35.33 *ie *eeeas '44au" P1*i39 Su ti-aw -ml S1-133 313 03133345 1. 3 dslii 3 -3. 0 31e'.c*e3_ " P 33333443*4 p '3~~~~4~~~.ri C3 3j44 ~13434330.4* d1*10e --o -."i1 3.3 -P4m lase 54PM 34 434 31 ,3e as elf aiN 133*5414 436333916 3w MOM-3 1m0304 334foW .n1et Joe6 343 4n0 lsa we 3 POI.I*-4 431343e l I . 4 ....4w43440 1343 5 m ihe .qe43p ed ... 333333 --w fi P"i 03,1368 1 c3 1480 443411S '31 339 cM '*eneqs0333334 l 3ow j .3333313p pcme cuSp "I.s .4M43c ""A 3333ft e SO 363smil - 8"0344 314d1. 40 A3enie me 6o3ur3 43341 eao 4 41 93603 44331,1 34311". 3333413 946l933 mo p43.33 33163333* en-4-11 334 41-31 433.4 03P lmilimm P&Dqvin ~ ~ ~ 141333113383UhISi £ jo £ sSuj -.s ..Ilp 01 "M 011 PM PI1104t mumO=ayPsaumww ANNEX I Page 4 of 5 -25- Popuaatlon I *49,00 (old-lo. tmemmnda) G- per cPitaZI Ulqlo (1tu2) TNAte - zswmwC tDtCcaeU Seuat (mus mLult at nags of G current Prtce) rcee_ nu tncre tO (et cmsef flqereo at e: :rteeot at ear te IldIaeroer peI-i1 11970-7, 197 ne , 1 1Wo la Iss wo 1ss nniLACCOUWNT Groan doeatic product 36.71? 3.4 0.3 7.0 5.7 5.4 200.2 100.0 100.0 1920.0 100.0 3trtculturu 3.204 5.5 5.i 1.2 1.0 2.9 Me zaa. 31.3 26.2 20.3 trAfetl 10.303 1 1.1 7.3 12. 5.4 0.1 13.7 25.3 24.3 27.5 23.0 geruica 13.230 9.0 7.1 7.9 6.9 4.0 42.5 ". 43.? 40.3 51.7 Cona ti@n 23.439 7.3 7.n 7.1 4.1 5.3 35.7 73.7 79.3 73.3 73.1 Gross inweenut .7 25 15.3 3.3 4.2 2.1 1.3 13.7 26.2 25.4 27.9 22.9 nperte .t Golla 9.104 10.5 3.0 13.4 10.2 5.1 17.4 10.7 19.1 25.0 24.2 Ipoert of GtPS 9.20 13.9 3.7 10.3 1.3 4.7 10.9 21.3 23.7 31.1 27.2 Gron national mleula 6.723 13.7 4.1 1.5 2.9 7.4 14.1 21.5 20.7 20.7 12.1 lpoe ttlee ot _rheab iem tred ) c t currn t prtea l 1900 1970 1975 1§8 29031W mori, annuaL teat~~~~~~~~~~~~~~~~~~~~~~~~~i t m cmTWA TLO rhaedtea experts 0.335 5.3 9.0 14.4 4.4 0.2 100.0 1oo.0 200.0 100.0 200.0 100.0 Prtirm 4.049 4.2 0.6 10.0 0.2 3.7 97.3 5 0.5 77.3 60.2 50.9 50.3 tate cturee 2.186 29.2 20.9 25.1 3.4 9.2 2.2 19.5 22.7 29.8 3 4.1 49.7 Eurchemdiue Laorta 5.406 11.5 1.3 10.3 1.2 4.6 100.0 I10.0 100.0 200.0 1IW.o. 1OO.0 Peed 24S 4.3 -2.7 11.9 5.'s ..5. 9.0 SO4 4.* 3.4 . 3.2 3.4 Parol,e_: 2.042 12.3 s:o 3.7 -4.7 1.6 10.9 3.3 .22.1 31.4 21.3 19.4 tchieery 4 equlpent 2.41Z 16.1 5.9 7.4 3.5 5.3 25.3 36.1 35.8 23.5 35.2 35.3 Other 1.101 10.1 1.0 9.3 4.7 4.9 54.2 09.7 37.7 41.7 40.3 42.2 195 19763 197? 1973 197w 1q30 IMt 1"2 1,Ulu iw--efftetr 100.0 103.3 122.1 121.3 136.9 19.3 172.1 177.9 134.3 "chamge rate 20.4 20.4 20.4 20.3 20.3 20.5 21.12 22.0 23.0 zPort prIce tia 100.0 97.3 99.4 107.4 123.3 151.7 256.2 145.2 147.3 tmert prtce tisa 100.0 105.5 113.4 122.3 11.4 271.0 207.5 212.7 200.3 Toerm of tra ade 100.0 92.2 37.6 37.3 90.8 30.4 75.3 43.1 73.4 _ 190 970 1975 1960 I9331 tCEPc n!AmI /cc Current rafenu 13.4 13.3 12.2 14.0 16.9 Current *eendLturs 10.6 12.6 I.6 23.S 15.0 Surplu (*) or 4a tcit (-I 43.0 .1.2 4S1.6 M3. -0.1 Captcal ewentturm 4.3 5.3 3S 1 39 3.9 Foreign fItnacing 0.2 0.1 D.1 0. Z r 18tO-70 19?0-75 1975-30 1980-85b 19"5-0Tb 0113R INfDICATORS CNP growth rate (2R) 6 .2 6.9 5.4 5.1 CW per capita grait, rate (Z) 5.2 1.4 4.4 3.5 0.2 icon 2.3 4.0 1.4 4.2 4.1 brsginei eowiog rate 0.29 0.23 0.21 0.10 0.29 tuport elasticlty 1.7 0.6 1.3 . 2 0.9 /a Preilatmery. lb Projected. Ie antrel goverment only. ebtuary 28. 1985 ANNEX I -26 - Page 5 of 5 coital mmao (tw4ae) TULAS - L1A3 of RR EMA 639M CAPTM. AL 6 OM in r p at cer t rices) Inicator 2970 1676 1977 1976 294 79f I912 TM 293 ll f9iU i nir'b 'nu- 6*.40 OF Pawmn . Af e off ued. sed eefactoer services 1.0 2,690 4.029 6.076 6.45 6.19 6,971 9,167 9.0e 10.221 11.162 1 2.39 12.646 * 2.1579 Of AIthl: trchalee f.o.b. u66 2i,ii 3,63* 4.035 53234 6.419 G.=& 6.635 6.30a 7.320 7.967 9.064 20.762 24.637 I rte f Steed andS mafacter services -3.430 -32.92 -5,0611 -3.694 -0,123 -9.490 -LO.713 -9,126 -11.11? -11.271 -12.SU -12.676 -14.80L -21 622 Of hlkk irch.diee fo.b. -3.L46 -3.245 -4,247 -4,913 -6.787 -9,352 8.930 -9,406 -L0.167 -10.308 -30.510 -11.733 -31.192 -19, 701 , et fEter teem from abred 23 -62 -" -266 .45 -410 49 -*1,d7 -1.033 -1.234 -1.533 -1.717 -1,.90 -2,168 Nt transfer. 49 23 40 40 50 116 122 163 27 17l t 170 170 370 Ila Currun acnemt b*Lame -250 -440 -1.097 -1.133 -2.086 -2.222 -2.106 -1.006 -2,973 -2.132 -t.909 -L.653 -19,96 -2.442 Ptivate dircat i^emtment 43 79 106 S5 161 292 169 346. 407 296 104 i1] 3l2 1LT Leas (net) 32 4m Ia 670 .416 3I,6"s 1,*63 .3227 1.236 1.642 1.922 1.572 2,211 2,51s Official 23 109 161 290 46 569 621 "60 861 123 777 76 732 377 privae /a 30 139 163 360 930 3.096 1.010 647 411 91 1,169 I.O4 1.639 1.696 Oter pttSl /b 219 740 F62 1.160 -s 1.ni no 448 35 -307 -30? -369 -'2 Chamg In re - (- Indicac Increasea I2 -96 -93 -349 -343 36 -601 -130 61l -331 -102 -216 -169 -_34 nteratiel rer0g t.590 1.817 2.333 1.t34 3.063 2.874 2.652 2.33S 2.846 2.968 1.206 1.533 4,714 aer_e ase ,the ofe fort 6 5 4 s 3 4 1 2 I 3 1 3 2 numia CWtTaL AD DIT Gers Disbaereemen Coceelesl Loas 11 52 76 121 242 230 221 216 250 144 423 511 321 673 DAC 11 43 30 46 176 176 369 132 206 267 372 All *u t67 i*SI - 7 9 3 6 5 22l 39 3 12 9 6 4 I Other O- - 1 62 h0 69 13 46 27 65 61 41 L6 I oencoeaemioLt" oe s 161 *67 36S 133 12 1.16 2.13 2.026 1.910 2.031 2.390 2."7 2.60 3.401 3.593 Otit cial aespt cedIts I - 12 - - 3 s0 95 226 l37 I35 362 174 Z25 tE 19 43 63 102 329 163 269 370 621 267 218 245 364 24 Otchr wattilatereL 2 4 33 46 I 63 64 302 ltoo 93 '11- 16 L2 20z ' . Private publicly garanteed 17 101 106 411 342 s66 805 653 322 U39 527 133 393 711 Ivuce 'neguerateed 143 277 349 372 79 1.027 790 Ge6 966 1.395 1.751 1.99 2119 3,60 TotaL green dlnberess*ta 299 319 662 1.6 2.036 2,3U4 2.251 2.123 2,23 7.S6 3.40 323 3,912 3,671 nterual tebt Cf dad term) PIcebt eutatnelde and dtalree 326 623 11139 1.620 2.6Z2 4, 26 3,149 6.126 7,003 6,044 ,9*77 9.915 10,592 13.069 ifiecla 291 672 693 L1234 1.671 2.315 2,43 3,43so 4,236 4."3 3.770 6.356 7,310 9,134 Private 37 LS1 224 566 1.161 13,13 2.126 2,687 2,733 3.031 3,207 3.393 2.362 4,762 Private .eA_ar en d debt eetetsdti and dlbaurned 182 765 860 931 1,243 13703 2,09 2,296 2,645 3.234 4.243 53.41 .411 1O0,I Total debt ou tetnedig ed dLsbaresd 710 3.6W 2,999 2.711 4,073 1,831 7.266 6,434 9.637 32. 2 13.220 13.092 IZ32n3 24.367 -ldtabersed debt 16 U40 1.364 I.m99 2.361 3,006 3.091 3.S92 36438 3.123 1.144 3.037 2.966 1.36 Det Servien S-c-ST -sarvi-s,paetc 162 376 642 632 62 2.224 3.323 12,493 ,768 2.,62 2,443 2.43 3.049 S3,41 cateceve 26 107 126 396 222 301 686 697 .41 369 3,023 1.192 3.349 1,9 4 Paimosen an 2 experts of goods 55d oemfactor servtees 14.4 10.0 11.0 6.3 16.9 1133. 15.6 13.9 39.2 2e. 7 23.1 2n,A 20.4 23.1 Avrage tetaret Fate on Ik Les (II /eA8 6 7.9 '.0r 6 .9 7.6 , 30. 12 . 2 4n 1LI.] 1.0 1q.0 9.6 In.2 otfeliai InS 7. 4. 3, 56 3,6 .5. 7. 6,^7 9,3 - - _ _ - _ wtv c 5~~~~~~~~~~~~~~.0 7. . . I O.S 1111 11 .0 I.w S Priv"at 60 73 6., 8.9 30.5 3.8. 31.9 3.4 9nh 1.6 - A"ve Imturity an Nw lAsna (yeare) IC 136. 17.1 16.5 17.1 17.0 163. 16.7 19.1 2n.1 11.9 12.4 12.4 12.1 11.2 Offt&T MA,19. 20.6 29.6 23.1 22.6 21.1 22.6 21.6 22.3 - - - - - Privet1 22.2 7,3 7.9 9.6 In31 6.6 6.1 11.4 3n.7 - - - - - NalWage ore (Z) IRa W1:7toolOOD 22.ft 5 4 37.1 35.9 11. 11 3.4 22.n 1.9 17.1 3, 7 l.0n 15.4 96,7 39.9 IUID dlebureemts/total groem dLebureents 9.S 6.1 ji*n 4, .. 1 I1.n 1 .s 16. 4* n .i I ., R.m &.n D26D debt aervte-ltotal debt service 11. 1 .A. I11 ^4 4.6 ..S 4,9 3,1 e.9 I-1.l I' i 31.9 2M.' IDA DO/total DOD - 0.7 1.0 l.9 n.07 ^.4 0.7 nD. . n. 0,6 .. n.. '.1 n S ID5 dlebureesteltocal groam disbursmnts - 1.2 1.1 0.4 0.2 0.2 0.9 0.9 0.6 0.6 n.3 11.2 0.9 0.0 IDA debt ervice/total debt service - 0.0 0.0 0.0 0.0 0.0 0.2 0.0 0.0 0.n 0.0 o.n 0.0 0.0 Sn of debt outatandtna at end f 1961 Iturity atructura of debt ontstandig Principal due witli.s 5 yeere 60.7 Principal tdn. tthtn 10 ye"ar 96.2 Interat etrture of debt outetanidg intcrne de vitfhin tirnt year *e Ie to chnge La clasifiatlo. pro"jected data for "privaste 1LT leant ioCldi u_ of tbh Cetepry "ocber capltet." 0ther capital elsces _et s-ea of tfuaja ad not floe of et onft-te capital. 7 fliatarical data do not Include 0guagntoe private debt. Peborcy 25. 1963 ANNEX II Page 1 of 3 - 27 - THE STATUS OF BANK GROUP OPERATIONS IN THAILAND A. STATEMENT OF BANK LOANS AND IDA CREDITS /a (As of September 30, 1984) Amount ($ million) Loan or less cancellations credit Bank IDA Undis- number Year Borrower Purpose bursed Forty-six loans and three credits fully disbursed 1,425.35 31.74 1149 1975 Kingdom of Thailand Irrigation 95.00 - 13.84 1468 1977 Kingdom of Thailand Irrigation 55.00 - 8.26 767 1978 Kingdom of Thailand Population 33.10 /h 5.18 1620 1978 Telephone Organization Telecom. 90.00 - 13.48 of Thailand 1630 1978 Kingdom of Thailand Irrigation 17.50 - 6.29 1638 1979 Kingdom of ThaiLand Urban Trans. 16.00 - 10.27 1690 1979 Electricity Generating Power 69.00 - 18.39 Authority of Thailand 913 1979 Kingdom of Thailand Education - 35.00 8.74 929 1979 Kingdom of Thailand Agriculture - 25.00 13.98 1752 1979 Kingdom of Thailand Ag. Extension 40.00 - 17.46 1770 1980 Electricity Generating Power 80.00 - 0.18 Authority of Thailand 1787 1980 Kingdom of Thailand Irrigation 80.00 - 57.30 1816 1980 Kingdom of Thailand Ag. Credit 19.00 - 1.25 1852 1980 Electricity Generating Power 72.00 - 14.93 Authority of Thailand 1863 1980 Provincial Waterworks Water Supply 40.00 - 33.02 Authority 1870 1980 Kingdom of Thailand Housing 29.00 - 18.02 1871 1980 Provincial Electricity Rural Electri- 75.00 - 39.87 Authority fication 1889 1980 Kingdom of Thailand Inland Waterways 53.00 - 42.44 1918 1980 Kingdom of Thailand Ports 47.00 - 45.51 1922 1980 Kingdom of Thailand Ag. Research 30.00 - 28.97 1947 1981 Kingdom of Thailand Potash 8.90 - 2.15 Engineering 1956 1981 Industrial Finance Corp. Industry 30.00 - 0.20 of Thailand ANNEX II Page 2 of 3 - 28 - Amount ($ milLion) Loan or less cancellations credit Bank IDA Undis- number Year Borrower Purpose bursed 2000 1981 Electricity Generating Power 100.00 - 74.02 Authority of Thailand 2022 1981 Kingdom of Thailand Irrigation 57.00 - 48.98 2035 1981 Kingdom of Thailand Provincial Roads 35.00 - 12.29 2078 1982 Kingdom of Thailand Tree Crops 142.00 - 76.99 2143 1982 Telephone Organization Telecommnuini- 142.10 - 106.01 of Thailand catiaos 2178 1982 Kingdom of Thailand Education 75.00 - 67.00 2184 1982 Petroleum Authority of Liquified Petro- 90.00 - 69.84 Thailand leum Gas 2198 1982 Kingdom of Thailand Agriculture 17.00 - 16.59 2310 1983 Bank for Agricllture & Agriculture 70.00 - 28.67 Cooperatives 2311 1983 Kingdom of Thailand Prov. Roads 100.00 - 98.64 2312 1983 Provincial Electricity Rural Elec- 30.60 - 30.52 Authority trification B-001 1983 Telephone Organization of Thailand Telecom. 8.50 - 3.05 2402 1984 Kingdom of Thailand Rural Dev. 50.00 - 49.88 Total 3,288.95 124.84 1,082.39 of which has been repaid 391.34 3.26 Total Now Outstanding 2,897.61 121.58 Amount sold /c 68.63 of which has been repaid 58.69 9.94 Total Now Held by Bank and IDA 2,887.67 121.58 Total Undisbursed 1,054.49 27.90 1,082.39 /a The status of the projects listed in Part A is described in a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and cir- culated to the Executive Directors on April 30 and October 31. /b Of which $3.1 million is Norwegian grant participation. T7 Of which $43.3 million sold to the Bank of Thailand. ANNEX II -29 - Page 3 of 3 B. STATEMENT OF IFC INVESTMENT (As of September 30, 1984) Amounts (S million) Year Company Type of business Loan Equity Total 1959 Concrete Products and Cement and Construc- Aggregate Co., Ltd. tion Materials 0.3 - 0.3 1964/1971 Industrial Development Finance Finance Corporation of Company - 0.4 0.4 Thailand (IFCT) 1969/1976 Siam Cement Group Cement and Construc- 1978/1980 tion Materials 28.3 4.5 32.8 ;977 Mutual Fund Company Limited Money and Capital Market - 0.3 0.3 1977 United Sugar Terminal Limited Food and Food Processing 2.5 0.2 2.7 1978 Siam Commercial Bank Small and Medium Scale Industries 2.0 - 2.0 1979/1983 Bangkok Glass Industry Co. Ltd. Glass Containers 9.9 0.4 10.3 1979/1981 Siam City Cement Co. Ltd. Cement and Construc- tion materials 109.7 4.8 114.5 1979 Thai Orient Leasing Co. Ltd. Capital Market - 0.1 0.1 1983 Sea Minerals Limited Mining - 0.3 0.3 1983 National Petrochemical Corp. Chemicals & petro- chemical - 0.3 0.3 1983 Thailand Tantalum Mining 53.5 3.9 57.4 -X1984 World Aquaculture Food and Food Processing 2.3 0.6 2.9 1984 Southeast Asia Venture Venture Capital - 1.0 1.0 Investment Total Gross Commitments 208.5 16.8 225.3 Less cancellations, termi- nations, repayments and sales 147.1 3.5 150.6 Net held by the corporation 61.4 13.3 74.7 Total Undisbursed 72.5 6.3 78.8 ANNEX III -30 - THAILAND REGIONAL CITIES DEVELOPMENT PROJECT Supplementary Data Sheet Section I - Timetable of Key Events (a) Time taken by country to prepare project: August 1980 to April 1983 (33 months) (b) Agency which prepared project: Ministry of Interior with assistance from ADAB and UNDP (c) First mission to consider project: November 1980 (d) Departure of appraisal mission: May 1983 (e) Completion of negotiations: February 8, 1985 (f) Planned date of effectiveness: July 31, 1985 Section II - Special Bank Implementation Action None. Section III - Special Conditions Agreements were reached with the Borrower: (a) on providing adequate staffing for project units in DOLA, PWD, and the municipalities be provided in accordance with an agreed timetable (para. 41). (b) on preparing an action program by October 1, 1987 for improving the operation and maintenance functions of the project cities (para. 41). (c) on concluding an agreement by June 30,1986 between the City of Songkhla and FMO for operating the new fishport (para. 41). (d) on carrying out the remaining tasks of the action program Eor fiscal improvement and municipal finance reform (para. 44). h - q o00'. THAI LAND I REGIONAL CITIES DEVELOPMENT PROJECT URBAN GROWTH CENTERS B U R M A 7 > rj PROJECT CITIES -20° tt- >t } s / C^|.B|l 4**|g} t3/OTHER FIFTH PLAN DESIGNATED URBAN GROWTH CENTERS f'% ~~~~~~~~~~ ¶ I ~~~~~~~~ROADS g1 ) I /-,t I \-.---.--- _>t RAILWAYS '' 5 ~~ ~~~~~~~~0 PROVINCIAL CAPITALS 0 P - - - \ j rROVINCIALICHANGWAT) BOUNDARIES . l _ J ( yJ t f-# ) REGIONAL BOUNDARIES Rr( O* I INTERNATIONAL BOUNDARIES , d t 0 /. LAO PEOPLE'S '1 \, ' *, ,_j /= (t t545r- K t L- I DEMOCRATIC ( \ \ ( tJ ( / \ i ;* ,l 7 REPUBLIC J -~~~~~~ / I ~~~~~Kh~ol Kie'K b 160 160 L o/J / Jr iKrh^,,,CNa2 S ) tX-_No%r Sar, Than, a chamana~ro' Rtdasa 1 ,a B SsLtair r r ur-' \$ t--'-1~~~~~~~No . . . .KO % \ % Phlet Blrin } ) i S| Srr stI i go _N c '_ _ Phet gi. >j wjos NW do U VW r40N Lot Of TW no aw W iw JWtUw -12° Fa CbPt p Khiri LAW ) 'e o 12 - t - : 4 .< ~ ~ ~~~~~i DEMOCRATIC ' 3 S ; A* / KAMPUCHEA | Ch\ /humphon n. 11 7. 1u ei ,, R, J I~~~~~~~~~~~ m - c Khiri Khan 120104 ' .c.~ / 7U\>, \s '7 * * DMO RTC , ^ t t v-\} \ \ < ;KAMP>UCHEA) ,'9pho Tag h An/mnik } ', Thmaa 20,0 S00 > . . ( >\BURMA * LAO..), S.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P D FRI Philmets lung ) \ X > > EM THAILAND Y ~,DEMAOCRATIC KAMPUCH4EAJ ' Andaman fa ~~~~~~~~~~c A Sea 0 ~~100 200 300Se Kilomaetfa MA AY I 0 ~~~100 200 0 Mliii a . ~~~~~~~~~~ ~~~~~~~~~~SINGAPhE 1000 MALAYSIA I DN E Sl