RETURN TO REPORTS DESK r A RESTRICTED WITHIN rII L uflI Report No. PTR-46a ONE WEEK This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THIRD BANGKOK PORT PROJECT THAILAND July 13, 1970 Transportation Projects Department Currency Equivalents Currency Unit = Baht ($) US$1 = 0 20.80 0 1 = uS$o.o48 0 1 million = US$48,076 Fiscal Year October 1 - September 30 Units of Weights and Measures Metric Metric: British/US Equivalents 1 kilometer (km) = 0.62 miles (mi) 1 meter (n) = 3.28 feet (ft) 1 square kilometer = 0.368 square miles (km2) = (sq rai) 1 metric ton = 2,204 pounds (lbs) Acronyms NEDECO - Netherlands Engineering Consultants PAT - Port Authority of Thailand USAID - United States Agency for International Development Water Depths In meters and related to mean sea level T1AILAND APPRAISAL OF THIRD BANGKOK PORT PROJET Table of Contents Page No. SUMKARY AND C1NCLUSIONS 1. INTRODUCTION 1 2. BACKGROUND 2 A. General 2 B. The Transport Sector 2 3. THE FORT OF BANCGOK 5 A. Present and Future Organization and Administration 5 B. Port Facilities 5 C. Transport Connections to the Port 6 D. Operations 7 E, Future Development 8 4. EC IONOMIC EVALUATION 10 A. Introduction 10 B. Traffic 10 C. Methodology 11 D. Economic Analysis 12 B. Project Size and Timing 13 F. Conclusion 1 5. THE PROJECT 15 A. Description 15 B. Cost Estimate and Financing 15 C. Procurement 16 D. Disbursement 16 E. Engineering Consultants, Services and Assistance 16 by Experts F. Construction Schedule 17 G. Other Investments 17 6. FINANCIAL ASPECTS 18 A. Rates and Charges 18 B. Earnings 18 C. Finances 20 7. RECOMMEDATIONS 23 This report was prepared by Nessrs. T. M. Nalkani (Engineer), K. C. Rodley (Financial Analyst) and L. Y. Pouliquen (Economist). - ii - TABLE OF CCNTENTS (cont'd) ANNEXES 1. Particulars of Previous Railway and Highway Loans 2. Bangkok Port Facilities 3. Assumptions of Cost Benefit and Risk Analysis 4. Simulation Model 5. Details of Rates and Charges 6. Bases and Assumptions used in Financial Projections TABLES 1. 1967 Port Congestion Surcharge 2. Expected Commercial Traffic Forecasts 3. Expected Yearly Costs of Various Project Alternatives 4. Expected Cumulative 1969 Value of Various Project Alternatives 5. Probability Distribution of the Release Date of Sattahip as a Function of the Project Alternative 6. Payback Period 7. Estimated Cost of the Project 8. Actual and Forecast Revenue and Expense Accounts 9. Forecast of Cash Flow 10. Pro Forma Balance Sheets CHARTS 1. Thailand - Trend and Forecast of General Cargo Imports in Bangkok Port. 2. Probebility Distribution of the total 1969 Value of the Total Cost TTith Each Project Altornative. 3. Probability Distribution of the Internal Rate of Return (four deep-water and twro lighterage berths). MAPS 1. Thailand 2. Port of Bangkok - Location and Road, Rail and Water Accesses 3. Port Authority of Thailand, Existing and Planned Facilities TH4AILAND APPRAISAL OF THTRD BANGKOK PORT PROJECT SUD-§AIY AND CONCLUSIONS i. This report appraises a project which would increase capacity and efficiency at the port of Bangkok. This medium-sized, deep-water port, at the mouth of the Chao Phraya river, is the largest in Thailand and handles 95% of the country's imports and 80% of its exports; traffic at KNong Toi, the main wharves, is expected to increase from 2.3 million tons in 1969 to 3.25 million tons in 1975. About 1,900 ships now use the port each year. ii. In recent years traffic growth resulted in congestion which, in 1967, was so severe that surcharges were placed on freight rates by the shipping conference lines serving the port. For the six months they were in force they cost Thailand's economy about US$4 million in added foreign exchange costs. Through improved productivity some modest investments in mechanization and other measures, the immediate congestion problems were alleviated and the surcharges removed. However, increasing traffic is causing congestion to recur and, unless a major expansion of the port's berthing capacity takes place, not only is the re-imposition of surcharges likely but Thailand's development objectives will be jeopardized. iii. The project consists of the construction of four deep-water berths, two lighterage berths, two transit sheds and consultants' and expert assistance in various fields of port management and operations. Total costs are estimated at US$21.0 million equivalent, of which the proposed loan would cover the foreign exchange component - US$12.5 million. The project is based on a feasibility study made by the Consultants (NEDECO) for the Port Authority of Thailand (PAT). PAT will be responsible for the execution of the project. iv. Detailed economic evaluation of the proposed project (involving the use of a simulation model) shows an expected return in excess of 20% and indicates that the project is properly sized. v. Work. and procurement procedures on two previous port loans were satisfactory1' The Bank's international competitive bidding procedures would apply to this project. Work is exDected to take about four years and be completed in December 1973. vi. The port is administered by PAT under the jurisdiction of the Ministries of Finance and Communications. It is reasonably well-managed and financially viable. In order to improve productivity and to permit 1/ 37-TH, US$4.4 million equivalent in 1950. 151-7H, US$3.4 million equivalent in 1956. better use of existing and future port assets, PAT has agreed to engage management consultants to study the feasibility of adopting a multiple shift system for cargo handling and other related port operations. S.teps will be taken in agreement with the Bank to implement the consultants' recommendations not later than January 1, 1972. vii. In order to maintain a strong financial position and secure an adequate contribution towards future port development, PAT has agreed that tariffs will be reasonably related to costs, that the financial rate of return on net fixed assets in use will be not less than 8% p.a. and that long-term debt will not be incurred unless net cash revenue is and will remain at least 1 3/4 times the maximum debt service requirements. viii. The project provides a suitable basis for a loan of US$12.5 million to PAT over 20 years including a four-year grace period. Substan- tial issues on which agreement has been reached during negotiations are listed in Chapter 7. APPRAISAL OF THIRD BANGKOK PORT PROJECT 1. INTRODUCTION 1.01 The Port Authority of Thailand (PAT) has requested Bank assist- ance in financing a project to expand and improve port facilities at Bangkok. PAT had originally proposed a project comprising construction of six deep-water and two lighterage berths and ancillary facilities, equipment, and reaLignment of the bar channel. This project is part of PAT's development program estimated to cost 0 1,195 million over the next five years. As a result of the Bank's evaluation,including a simulation of expected port requirements, the project has been scaled down to consist of the construction of four deep-water berths, two lighterage berths, two transit sheds and ancillary works. It also includes consultants' and expert assistance for project engineering, construction supervision and various aspects of port management and operations. 1.02 The estimated cost of the project is about US$21.0 million and the proposed loan of US$12.5 million would meet the estimated foreign ex- change component. 1.03 The Banlk has previously made two port loans for the Port of Bangkok. The first (37-TH) in 1950, for US$4.4 million was for dredging the bar charnel and purchasing rails, equipment, cranes, a tugboat and navigation aids; it was fully disbursed by 1955. The second (l1l-TH), in 1956, for US$3.4 million was for purchasing two hopper dredgers and a clam- shell dredger, and was fully disbursed in 1958. Work and procurement under both loans was satisfactory, although dredging performance has since deteriorated. 1.04 Seven other transport loans have been made to Thailand: three railway loans and four highway loans; they are described in Annex 1. 1.05 This report is based on the findings of a Bank appraisal mission consisting of Messrs. T. M. Malkani (Engineer), L. Y. Pouliquen (Economist) and K. C. Rodley (Financial Analyst) in October 1969. Mrs. Comer (Program- mer/Analyst) prepared the simulation model used in the economic evaluation. - 2 - 2. BACKGROUND A. General 2.01 Thailand (Map 1), with an area of about 510,000 km 2, is roughly the size of France. Its main coastline is on the Gulf of Thailand to the south; however, the southern isthmus also borders on the Indian Ocean. The population of 36.5 million is increasing rapidly at about 3.3% annually; although generally well distributed there is concentration in the central lowland plains of the Chao Phraya river, especially around Bangkok, the capital. With a population of 2.8 million, Bangkok is the main comer- cial and industrial center. Other towns are relatively small. 2.02 GDP at 1969 market prices is estimated at US$6.0 billion equi- valent. During 1964-1968, both population and economic growth were rapid, the latter averaging 8% per annum. Slow agricultural development was more than compensated by the rapid expansion of industry, construotion and mining which averaged 12% annually. Both exports and imports increased about 14% per annum. Per capita GNP increased by 25%, reaching about US$145 equivalent in 1969. 2.03 Immediate future prospects are less favorablsi. There are in- dications of an economic slowdown due to the possibility of sizeable reductions in U.S. military spending. During 1971-1975 the export growth rate is expected to decline to an average of about 4% annually which, despite an average import rate of only 6% annually will result in an in- creasing trade deficit. The economy is expected to grow at a rate of about 6% to 7% annually over the next five years. B. The Transport Sector 2.04 The main transport arteries run from north to south, following the direction of most mountain ranges and rivers, with a lateral network of secondary roads, canals, waterways, etc., feeding into them.;. Most urban centers are in the lower central region while food groirLng areas are mainly along rivers and canals, usually north of this region. The Chao Phraya is the most important river; it also extends from north to south in the central plain. The headwaters from the catchment areas of its four main feeder rivers, Ping, Wang, Yom and Nan, lie in hilly north- ern Thailand. Highways 2.05 The major road network radiates from Bangkok. The Department of Highways (under the Ministry of National Development) is responsible for administration, construction and maintenance of the national highway network and main feeder roads. Although primary and secondary paved high- ways now total over 6,000 kmm, major improvements are needed to carry the - 3 - increasing traffic resulting from the country's rapid economic develop- ment. The Government's seven-year investment program (1965-1971) con- tains nearly US$400 million for the construction or reconstruction of 4,500 km of roads, including a few four-lane roads and the paving of 3,100 km of existing roads. The Bank highway loans constitute an inte- gras part of this program (Annex l). Air Transport 2.06 The Don Maung airport in Bangkok is the international airport serving Thailand, and 26 international air carriers provide service. It is a strategically located transit hub for international airlines serv- ing all Asia. Some improvements are being made to the airport but in view of the increase in traffic, further expansion of facilities is being considered. Thai Airways International provides international services to neighboring countries using medium range jets, and Thai Airways pro- vides domestic services to a network of internal airports using smaller aircraft. Railways 2.07 The State Railway controls over 3,700 km of efficient and viable railways, also radiating from Bangkok. In 1968, about 5.5 mil- lion tons were carried by rail. A five-year investment program (1967- 1971) for purchase of rolling stock, relaying of lines, etc., estimated to cost US$90 million, with a foreign exchange requirement of approximate- ly US$41 million, is being carried out. Inland Waterways 2.08 An extensive inland waterways system of 1,600 km is widely used by both cargo and passenger traffic. These rivers and canals serve a farm population of 9 to 10 million in the central plain and carry over half the 10 million ton rice crop. In 1968, over eight million tons of building sand moved over the system. Considerable quantities of teak for export are floated in rafts to Bangkok. 2.09 Despite wide use of the waterways, the Government has made little effort to develop them and inadequate attention and poor maintenance have frequently resulted in decreasing navigational depths. The potential of the waterways has been considered in the transport coordination study mentioned below (para. 2.11). Ports 2.10 Thailand has some 22 ports. Bangkok is the largest and, ex- cluding crude oil handles about 95,) of the country's imports, about 2.6 million tons, and 80/, of its exports, about five million tons. Crude oil is imported at Srirneha, some 100 km southeast of Bangkok. I'ext is Settahip, a five-berth deep-water port with an oil jetty, built by the U.S. - 4 - in 1965-66 and located about 170 km south of Bangkok, on the east of the Gulf of Thailand. Sattahip is Thai property but presently utilized ex- clusively for discharging U.S. military cargo. It handles about one million tons annually, mostly in container form. The next three ports, in order of importance, are Songkla, on the west of the Gulf of Thailand, and Kantang and Phuket on the Andaman Sea. These ports are fairly specialized and their traffic, mostly exports, is independent of Bangkok's. Songkla, the second largest commercial port, handles about 250,000 tons of cargo annually and, together with Kantang, most of the rubber production. Phuket, the country's third deep-water port handles all refined tin production. The remaining sixteen ports are coastal with relatively shallow channels. NEDECO is presently making a feasibility study for the development of a new deep-water port at Laem Krabang on the east of the Gulf of Thailand about 120 km from Bangkok (paras. 3.16-3 .18). Transport Coordination 2.11 The recent rapid development of the transport sector prompted the Bank to advise the Government to undertake a transport coordination study. It was carried out by Wilbur Smith and Associates/Lyon Associates, with USAID financing and in close cooperation with the Bank. The study was to provide guidelines for: (i) establishing an appropriate coordinating or- ganization which would inter alia, prepare investment programs for the various transport modes; and (ii) improving regulation of transport activi- ties. The October 1969 draft final report, reviewed within the Bank and USAID, identified the following major transport coordination problems: (i) faulty pricing policy in road and rail transport; (ii) inefficiency and high costs resulting from ETO's (the Government-owned Express Transport Organization) monopoly position in the trucking industry, particularly for pick-up services from railway stations and Bangkok port; and (iii) the need to centralize transport planning services. The Bank and USAID have suggested ways of improving the report and a new draft is being prepared. However, nothing in the report affects the conclusions of this appraisal. - 5 - 3. THE PORT OF BANGKOK A. Present and Future Organization and Administration 3.01 In 1951, as a condition of Loan 37-TH, PAT was established as an autonomous organization to take over administration of the New Harbour, which consists of the Klong Toi wharves and other riparian areas of the Chao Phraya river. PAT handles all port operations; it also dredges and maintains the navigation channel of the river fram Memorial Bridge to the sea, including the bar channel (Map 2). Unless special customs exemptions are obtained, all import cargoes must, by law, be discharged at Klong Toi wharves. The Harbour Department, also under the Ministry of Communications, controls pilotage, which is compulsory for vessels of 500 tons or more, from the entrance of the bar channel. 3.02 PAT is directly responsible to the Ministries of Communications and Finance. Its annual capital budget is subject to the approval of the Council of Ministers. It is managed by a Board of Commissioners consisting of a Chairman, a Director and nine members. Of the members, seven are senior Government officials and two are Army officers. The Director, also an Armyofficer, who until recently was a part-time port off icial has now been appointed full-time and has two full-time Deputy Directors. Chiefs of various service and operational departments assist in carrying out port functions. 3.03 Port management is reasonably satisfactory. In order to give port users representation on PAT's Board of Commissioners, the Government agreed during negotiations to appoint at least one person with extensive experience in commercial management to the Board. Accounting System 3.04 PAT's general accounting system is good. However, the costing system needs updating and PAT requires assistance in establishing a modern costing section to revise rates and introduce a more effective form of budgetary cost control. During negotiations, PAT agreed to engage an accounting expert for this purpose under terms of reference satisfactory to the Bank. B. Port Facilities 3.05 The bar channel to Bangkok port is dredged to 8.5 m and to a width of 100 m. With a mean tidal range of 1.54 m the maximum draft of vessels that can cross the bar channel is limited to 8.5 m (i.e. 10,000 to 12,000 dwt vessels). The navigational channel in the river is dredged from 8.5 to U1.S m. The tortuou narrow navigational channel bars entry of ships longer than 172 m (565 ft) and draft restrictions are imposed for ships longer than 145 m (476 ft). - 6 - 3.o6 Bangkok port facilities stretch along some 47 km of the Chao Phraya river. l4ost of the facilities are between 26 and 47 km upstream from the Gulf of Thailand but somae wharves and anchorages are situated closer to the mouth of the river (Map 2). The main deep-water facilities, and the loca- tion of the proposed project, are the Klong Toi wharves, which are controlled by PAT and extend betwieen 26.5 km and 28.5 km from the mouth. These wharves consist of 10 berths of a total length of 1,660 m with a dredged depth of 11.0 m. Other port facilities, not under PAT jurisdiction, include 82 private and public wharves, landing places and finger piers along a considerable distance of the river and 33 midstream anchorages and moorings at different locations. Opposite Klong Toi wharves, PAT proposes constructing 36 mid- stream dolphins which are expected to be ccmpleted by the end of 1971. Further details of Bangkok port, facilities, floating craft, and plant are given in Annex 2. C. Transport Connections to the Port 3.07 Bangkok is located at the center of the country's various transport networks. The main networks used by the port are roads for imports and waterways for exports; use of the rail system is limited because most imports are either consumed in the Bangkok area or redistributed from there. Direct transfer of cargo from ship to rail is infrequent. Cargo landed on the Klong Toi wharves is usually brought into covered warehouses or to open storage spaces and later removed by road. A small amount of cargo for Laos is taken to the Laos transport shed from the berths for transshipment to Laos. 3.08 The port and the Chao Phraya river have good access to the inland waterway system. Much agricultural produce is brought by country craft and shipped for export. Similarly, import cargo is discharged overside into lighters or small cargo boats. This mode of transport is relatively important. 3.09 Road access to Klong Toi and other wharves is poor. The long-term aspects of urban transport are of particular importance to port development. With the centers of trade and commerce progressively moving toward the out- skirts of the city, port traffic will have to travel increasingly through the entire city mainly by truck. The main connecting road to Klong Toi is being improved and widened and construction of a second road has just started; the increased traffic handled at Klong Toi should not therefore cause congestion above tolerable limits. During negotiations Government agreement was obtained to the proper maintenance of roads outside PAT's jurisdiction necessary for the efficient operation of the port facilities and also to the ccmpletion of an additional access road to the port by not later than December 31, 1973. 3.10 However, Bangkok's urban transport problem remains of serious con- cern to the Government which created an interninisterial committee in July 1969 to study it. At the Governmentts request, a Bank mission on urban transport visited Thailand in November 1969 and recommended that a comprehen- sive urban transport study be undertaken (possibly with UNMDP financing). -7- D. Operations 3.11 Use of cargo-handling equipment is not satisfactory due to oversupply and inefficient use. Semi-portal cranes are recorded as working an average oif only six hours per day each but, in fact, they are rarely used as ship's gear is preferred; forklift trucks work eight hours each per day, but they are often idle because drivers are unavailable (para. 3.12); mobile crane opera- tional hours are also low at five hours per day; tractors and trucks are some- what better, at seven and thirteen hours respectively. Apart from the cranes, other vehicles combined carry about J tons of cargo per hour. Vehicle uti- lization is low, as indicated by the figures for September 1969 below: Type of Vehicle No. Number Utilized % of Utilization Forklift Trucks 215 166 77 Tractors 51 24 47 Trucks 115 82 71 Mobile Cranes 23 11 48 Total 404 283 70 As 332 vehicles out of the total 404 are less than four years old (most are only one or two years old), considerable improvement should be possible. Better supervision and control is necessary and this is likely to be achieved with the introduction of a two-shift, and later a limited three-shift systeya, for all categories of personnel. Labor 3.12 The wharf labor force of about 800 men works an eight-hour day shift. About 40% renains in the port throughout the night, one half working, the other half resting alternately. All night hours earn overtime pay and are followed by a 24-hour off-duty period. This is a long standing arrange- ment. The inefficiency of this system was pointed out by NEDECO in a 1965 report, by an ECAFE team in 1965 and by a Government Port Adviser in 1968. Each of these studies advocated radical changes in the organization of port labor. It is considered that introduction of a two-shift system could increase labor productivity by 25-30%. In Singapore where wharf labor worlPd a similar extended one-shift system, introduction of a two-shift system in 1964 improved gang productivity by 28%: a limited third-shift system was introduced in 1967. The present system at Bangkok is costly to the economy and should be capable of being improved. During negotiations PAT agreed to employ management consultants acceptable to the Banrk, to study the feasibili ', of adapting PAT's present cargo-handling methods to a multiple shift system. PAT further agreed to take the necessary steps to implement the consultants' recommendations in consultation with the Bank not later than January 1, 1972. 3.13 Ship labor is obtained through private stevedoring companies anad the shipowners' agents consider that the present level of competition results in satisfactory cargo-handling at reasonable cost. 3. 4 Relations between employers and enployees in the port are generpl-j good. There are no labor unions in Thailendd. Dredging 3.15 Due to inefficient dredging operations and poor dredger mainte- nance by PAT's Marine Department, the bar channel has not been maintained to proper depths, width and alignment. Until a few years ago, dredging was done by the existing port dredgers under a contract and the channel was maintained to designed dimensions. Dredging output over the bar channel decreased steadily since dredging reverted to a departmental responsibility. It is essential that dredging operations be more effec- tively carried out with the existing dredgers by adopting modern techniques and increasing the dredgers' operational availability by improved maintenance. PAT agreed during negotiations to employ a qualified and experienced dredg- ing expert for this purpose under terms and conditions satisfactory to the Bank. E. Future Development 3.16 Both long and short-term goals should be considered when planning future port development. In the long term, the entrance channel to the Bangkok port is a serious limitation to port growth, as it can only accommo- date ships of 8.5 m maximum draft (10,000 to 12,000 tons) and vessels cannot pass each other. It takes about four hours to negotiate the channel to the Klong Toi wharves and, depending on the tide, waiting periods can be sub- stantial. The number and size of ships calling at Bangkok is therefore limited. In view of the excessive investment as well as maintenance costs involved no appreciable improvement of depths in the channel is practical. As the country's economy grows, a new port with access to deeper water wil be required on the Gulf of Thailand to obtain the beneZits of using larger ships. However, such a port would not replace but supplement Bangkok, which is expected to continue as the country's main port and commercial center for at least another two decades. Medium-sized ships will continue in service for many years and it will take time for the pattern of trade to shift to a port such as Sattahip which is presently used only for military traffic or a new port at Laem Krabang which is now being studied. In the short term, an immediate need to increase port capacity at Bangkok exists, as shown by the economic analysis in Chapter 4. 3.17 The Government, in November 1968, appointed NEDECO to study long term port development requirements in Thailand. In an interim report of May 1969, NEDECO compared the following three alternatives: (a) all future expansion and construction of berths to be at Bangkok; (b) extension of berths at Bangkok in combination with ccnstruction of a new deep-water port at Laem Krabang; and (c) extension of berths at Bangkok in combination with the existing deep-water port at Sattahip. - 9 - 3.18 NEDECO's economic analysis indicates the need for serious consider- ation of the development of a second deep-water port in Thailand, and favors Laem Krabang over Sattahip. This choice seems to undervalue the potential of the existing facilities at Sattahip and underestimates the total invest- ment required for development at Laem Krabang. In addition, the traffic growth projected by NEDECO appears too optimistic and the level of port congestion resulting from each alternative is based on over-simplified assumptions. The analysis leading to NEDECO's choice should therefore be reviewed. During negotiations the Government agreed to consult with the Bank before proceeding with any further major port development and to review all reports prepared by consultants on the location and construction of port facilities in consultation with the Bank. - 10 - 4. ECoNoCmc EVALUATION A. Introduction 4.01 Expansion of Bangkok port is urgent. Surcharges from 10% to 15% were imposed by the maritime conference in 1967 because of congestion at the port. These surcharges (Table 1) cost Thailand almost $4 million during the six peak months of 1967. Various short-term measures were taken to ease congestion: more use was made of private facilities, more cargo was handled in the stream, more handling equipment was purchased and quay maintenance was deferred. By early 1968, congestion was reduced and the surcharges had gradually been removed. 4.02 The measures taken had added no actual physical capacitv and, although most military traffic is now handled away from Bangkok, the total traffic has reached the 1967 level. The traffic growth expected, or even a change in shipst arrival patterns, could easily recreate the 1967 congestion levels. The ever-present threat of congestion and of surcharges remains and port expansion is urgently required to reduce congestion and cargo-handling costs to reasonable limits. B. Traffic 4.03 In 1969- , approximately 1,900 general cargo vessels called at Bangkok. Of the 2.6 million tons of general import cargo, largely high- value machinery and equipment, 2,260,000 tons were handled at the Klong Toi wharves. About 150,000 tons were diverted to private wharves and 190,000 tons were unloaded at midstream anchorages because of congestion. Import traffic growth at Bangkok port is shown in Chart 1. To remove the distortion in traffic growth patterns caused by the buildup of U.S. military activities in Southeast Asia in 1965, a growth trend was arrived at, based on imports from 1951 to 1965. Statistical analysis indicates that over the 1951-1965 period, import tonnages grew steadily at about 6% per annum. 4.04 After a rapid increase in 1965 and 1966, import traffic tonnage remained almost constant from 1967 to 1969. In view of the scaling down of U.S. military activity in Southeast Asia and Thailand's increasing trade deficit and resulting balance of payments problem, the present import trade slowdown is expected to last until 1973, with traffic ex- pected to grow at only about 2.5% per annum. After 1973, traffic is assumed to attain its pre-1965 growth rate of 6%. W4hile these forecast growth rates are based on past and present trends, they are tentative. For the economic evaluation, an analysis was carried out utilizing traffic growth rates ranging between 1% and 5% for the slowdown period which, it was assumed, may end as early as 1971 or as late as 1975. After the levelling off, a growth rate ranging between 5% and 8% was used. The probability of various import traffic patterns within this range is given in Annex 3. l/Unless otherwise stated, years used in the economic evaluation and in the related annexes, tables and charts are fiscal years (Oct. 1 - Sept. 30). - 11 - 4.05 Transit traffic to Laos, which amounted to 52,000 tons in 1969, is of minor importance and has been assumed to continue growing at its past trend of 8% per annum, to a maximum of 80,000 tons. 4.06 Exports from Bangkok amounted to five million tons in 1969. The bllk of this cargo consisted of rice and tapioca, exported ex-lighter in the stream, and maize, exported from silos. Because most exports are well adaptei to lighterage operations their bulk will probably continue to be handled in the stream or from privately-owned silos. The export cargo loaded at the Klong Toi wharves, for the most part livestock, wood and general cargo, amounted to only 33,000 tons. However, in view of the effort to diversify exports, the volume to be handled at Klong Toi will probably increase rapidly. For this evaluation, exports have been assumed to grow at a yearly rate of l!. No attempt has been made to refine this estimate because of its low sensitivi:Jy# C. Methodology 4.07 Although the urgency of expanding Bangkok port or the necessity no; diverting traffic is clear, the size, timing and choice among expansion alter- natives is less straightforward. This evaluation considered four alternati.v3t I - A minimum investment which would provide additional lighterage to meet traffic growth. II - A project which would provide two deep-water berths and two lighterage berths. III - A project which would provide four deep-water berths and two lighterage berths. IV - A project which would provide six deep-water berths and two lighterage berths. A choice among these alternatives requires an accurate evaluation of the con- gestion costs associated with each of them. At Bangkok, evaluation of this cost was complicated by the possibility of traffic diversion from the deep- water berths at Klong Toi to the midstream lighterage facilities and/or private wharves. This complication necessitated the use of a simulation model. The model used is similar to that developed for the East African Port Project appraisal (Report PTR 8a, June 9, 1969). 4,o8 The analysis was further complicated by the uncertainty of some of the elements of the problem, such as the growth rate of imports mentioned above and the proposed two-shift system for labor. The time required to introduce the shift system, as well as the impact it will have on labor productivity, is difficult to determine. These uncertainties will greatly affect port capacity. 4.09 There are a number of sources of uncertainty on other parameters (kAiex 3). The most important is the possibility that the military port of Sattahip, now used by the U.S. military, will be turned over to the Tha. - 12 - Government and possibly transferred to commercial use. This possibility has been ruled out in the immediate future since the U.S. is still using the port and a Thai Cabinet decision provides that, should the port be released, it would be transferred to the Thai military and not be available for com- mercial use. This decision, however, may be reviewed within the Govern- ment. Should congestion increase again at Bangkok, the military would certainly be under pressure to transfer Sattahip to commercial use since military usage cannot justify the need for a port of this size. Should the transfer to commercial use occur, traffic patterns would be considerably changed and a sizeable amount of traff_.c would be diverted to Sattahip. 1.10 In view of these uncertainties, the economic evaluation has been made within a probability framework. In practice, the cost/benefit probability analysis and the port operations have been carried out simultaneously in a combined simulation. The model is described in some detail in Annex 4. D. Economic Analysis 4.11 The traffic projections discussed in paras. 4.03-4.05 qpply to the port of Bangkok as a whole. The amount of import traffic which will actually use Klong Toi wharves is a function of port investments, improve- ment in port operations, and the availability of Sattahip port. The simulation takes these factors into account and the results show the traffic which will utilize Klong Toi wharves under varying circumstances (Table 2). 4.12 Briefly, the model selects random values for each of the varia- bles which have been assigned a probability distribution, then proceeds with a detailed analysis of port events and operations, such as ship arrivals, ship assignment to berths, and cargo-handling. The resulting data, such as ship-waiting time or tonnage handled, are consolidated on a yearly basis and the cost of each year of port operation is computed. This cost includes ship time cost and cargo-handling cost as well as the port investment. In cases where the port of Sattahip has been used, the cost of transporting the cargo to Bangkok is included. Each year from 1.973 through 1980, the simulation is repeated for each one of the four investment alternatives. 4.13 The output of the model for each simulation is therefore four streams of total yearly costs, one for each alternative. On the basis of these streams of undiscounted yearly costs, it is possible, given an opportunity cost of capital which is also selected randomly, to compute a cumulative present cost up to any given year. Table 3 gives the average values of the yearly undiscounted costs obtained in the 75 simulations carried out and Table 4 gives the average value of the corres- ponding cumulative present cost up to any given year. The stream of net benefits corresponding to each of the project alternatives have been expressed as the difference between the cost stream of the minimum in- vestment alternative, and the cost stream of the project alternative under consideration. - 13 - 4 -14 As noted earlier, the simulation horizon in the economic analysis has been limited to 1980. After 1980 the benefits resulting from the project have been assumed to remain constant. There are at least to reasons for doing this. ti) By 1980, new investconta mill be required to accommodate the additional traffic. Because the simulation does not include these investments or the savings to be derived from them (not yet fully analyzed), the "with" and "withouttt costs to the econoVy would then be unrealistically high. The benefits resulting from such an exercise would be inaccurate and, in addition, would not reflect the actual economic justification of the project. (ii) By 1980, the bar channel may well become a bottleneck in further port expansion at Bangkok. Thus, there is the possibility that after this date, any additional traffic will be diverted to a second port. 4.15 The cost/benefit analysis considers fully the possibility of Sattahip's availability as a function of the level of port congestion. The final result is a weighted combination of cases in which the port becomes available and cases in which it does not. Clearly, the probability of the port's availability varies with the alternative tested. In the case of two berths, congestion rises rapidly and the probability assigned to a transfer to coimnercial use by 1980 is about 70%. In the case of six berths, congestion remains low and the probability of a transfer by 1980 is found to be less than 15% (Table 5). E. Project Size and Timing 14.16 In carrying out a comparison between alternatives, the total costs to the economy (investment cost and handling cost and ship time in port cost) of each alternative were used rather than computing rates of return on incremental investment costs. 4.17 Tab'e 4 indicates that over the coming 25 years, the expected present value of the costs to the economy of Alternative III is about $15 million lower than Alternative II. Chart 2 indicates that in the center part of the range of possible outcomes, the four-berth alternative (III) considerably reduces the probability that a given total present value cost will be exceeded. In addition, the two deep-water berth alternative (II) yields a fairly large probability that total port costs will reach a level greatly exceeding the expected value. The four-berth alternative (III) therefore, is preferable to the two-berth alternative (II). 4.18 Table 4 and Chart 2 also indicate that over the next 25-year period, six berths (IV) would cost less than four berths (III). However, proceeding immediately with the construction of six deep-water berths would be premature. As Table 3 shows, the expected additional investment of $5.9 million necessary to go from four to six berths would yield an expected first year saving of only US$0.37 million or about 6% of the investment cost. Since the opportunity cost of capital is assumed to be about 12%, these US$5.9 million invested elsewhere in the Thai economy would yiold about - 14 - US$0.70 million return. In effect, it appears that given the present level of information, the two additional berths would not be justified, on the average, before 1977. The savings resulting from this two-year postpone- ment would more than offset the additional cost incurred in project con- struction in two phases and considerably reduce its uncertainty. 4.19 Using the same argument, the US$5.5 million expected additional investment required to go from two to four deep-water berths yields an expected first year saving of US$0.61 millicn, which for an cppo;tunity cost of capital of 12g is about equivalent to what the US$5.5 million would yield if invested elsewhere in the economy. It is therefore justified to proceed immediately with construction of four deep-wxater berths (Alternative III). 4.20 Construction of four deep-water and two lighterage berths (Alternative III) therefore appears to be the optimum investment size at this time and forms the basis of the proposed project. This alternative has a high rate of return averaging about 20%. As Chart 3 shows, the rate of return varies within a wide range but there is an 80% probability that it will remain between 14% and 28%. F. Conclusion 4.21 Construction of four deep-water berths and two lighterage berths is found to be the best port investment to solve Thailand's immediate port expansion requirements, yielding a rate of return of about 20% over 20 years. Further expansion may, however, be required in the late seventies. 4.22 An additional conclusion of the cost/benefit analysis is the rapid payback period of the project. Table 6 shows that, on the average (which in this particular case is the same as the best estimate), for an opportunity cost of capital between 10% and 14%, according to the probability distribution of Annex 3, the investment cost would be paid back in eight years, i.e., in 1981. Even under the extreme assumption that the investment is not used after 1981, it would therefore still, on the average, be economically justified. This constitutes a further justification for limiting the simulation to 1980, and, more important, confirms that the project is acceptable as a short-term investment (para 3.16). The economic justification is therefore quite independent of the possibility of a second deep-water port being made available or constructed since, by the time this port is ready for use (say in 1979), the project would, on the average, be almost fully paid back (Table 4). - 15 - 5. THO PROJECT A. Description (Map 3) 5.01 As a result of the preceeding evaluation, the project should con- sist of four deep-water and two lighterage berths to be located downstream of the existing Klong Toi wharves. The deep-water berths would each be about 18 m long with a depth alongside of 8.5 m; the lighterage berths would each be about 100 m long with a depth alongside of 3 m. The berths would be equipped with two transit sheds and ancillary facilities. The project also includes (i) consultants, services for detailed engineering and supervision of construction; (ii) expert assistance for dredging operations and cost accounting; and (iii) the services of management consultants for the improve- ment of cargo-handling operations. The project is part of PAT's five-year development program (l970-1975). B. Cost Estimate and Financing 5.02 The total estimated cost of the project is 0 436.8 million (US$21 million equivalent) with a foreign exchange component of US$12.5 million equivalent. A summary of the estimate follows and details are given in Table 7. Baht Million US$ Million Item Local Foreign Total Local Foreign Total 1. Construction of four deep- water and two lighterage berths, two transit sheds and ancillary works 150.0 205.0 360.0 7.21 10.09 17.30 2. Consultant's fees for engi- neering and supervision during construction 4.16 18.72 22.88 0.20 0.90 1.10 3. Assistance of experts in dredging, and cost accounting and of management consultants for cargo-handling operations 0.84 7.48 8.32 0.04 0.36 o.4o 4. Contingencies of about 12% (6% for quantities and 6% for prices) 21.8 23.80 45.8 1.05 1.15 2.20 TOTAL 176.80 260.00 436.80 8.50 12.50 21.Co The cost of the engineering work proposed is based on known costs of labor and materials in Thailand and includes approximately 12% for contingerxAies. about 6% for quantities, and 6,% for prices. The foreign exchange required is about 60% of the total estimated cost. PAT will provide local currency co3ts of the project. - 16 - 5.03 In addition to expenditures on the proposed project, PAT plans an expenditure of I 479 million on Capital works such as offices, staff quarters, sheds, extension and improvement of port roads, cargo-handling equipment and harbor craft as part of its five-year (1970-1975) development program. PAT will meet these expenditures from its own resources. C. Procurement 5.04 Tender documents for engineering work have been prepared and bids will shortly be invited from prequalified bidders. Contracts for construc- tion and supply will be awarded on the basis of international competitive bidding in accordance with Bank guidelines. PAT will be responsible for execution of the project. D. Disbursement 5.05 Construction is expected to start by October 1970, the beginning of PAT's fiscal year, and the project should be comapleted by December 1973. However, two deep-water berths and two lighterage berths should be ready for use by January-February 1973. Disbursements will be made on the basis of actual payments made to contractors, consultants and experts. Assuming loan effectiveness at the end of August 1970, estimated expenditures are: Foreign (B Million) Exchange Foreign US$ million Fiscal Year Total Local Exchange Equivalent 1969 0.30 0.30 - - 1970 3.50 0.30 3.20 0.15 1971 120.00 45.00 75.00 3.60 1972 173.00 70.00 103.00 4.95 1973 112.00 50.00 62.00 3.00 1974 28.00 11.20 16.8o 0.80 No retroactive financing will be necessary. Any surplus funds available on completion of the project will be cancelled. h, Engineering Consultants' Services and Assistance by Experts 5.o6 During negotiations PAT agreed to retain engineering consultants acceptable to the Bank for detailed project engineering and work supervision during construction. 5.07 The services of a dredging expert are required to help PAT apply modern dredging techniques. The expert will also make recommendations for an improved system of dredger maintenance in order to keep the equipment in an efficient state of repair (para. 3.15). - 17 - 5.o8 An accounting expert is required to assist PAT's Accounts Depart- ment in improving its costing system, introducing adequate budgetary control and revising the tariff structure and rates so as to base them reasonably on the cost of services rendered (para. 3.04). 5.09 Management consultants are required to study the feasibility of adopting a multi-shift labor system so as to improve efficiency and pro- ductivity of cargo-handling and related port operations. F. Construction Schedule 5.10 NEDECO has recommended extension of the Klong Toi wharves in three stages of two deep-water berths each so that the facilities can be used as soon as they are constructed. The tender documents were prepared accordingly. Completion of the first two stages of the work, which forms the project, is expected some three years from the date of commencement. G. Other Investments 5.11 In addition to the investment programs described in paras. 5.02 aind 5.03 PAT's development program over the next five years includes further capital expenditures amounting to over X 264 million for items such as re- aligment of the bar channel, construction of a further two berths at Klong Toi and the procurement of a floating crane and a dredger. These items are premature and not presently justified. During negotiations assurances were obtained from PAT that no expenditure wiUl be incurred on such large capital works, or procurement, without Bank agreement. - 18 - 6. FINANCIAL ASPECTS A. Rates and Charges 6.01 PAT's rates (Annex 5) have remained virtually unaltered during the past 10 years. Compared with the port of Singapore, these rates are generallY high, particularly as basic labor rates of pay are lower in Thailand. Vir- tually all exports leave Bangkok via private wharvesg or river anchorages. 'io choice is given for imports as, with few exceptions, unloading at PAT's wharves is mandatory. 6.02 There is no statutory requirement as to adequacy of the rates and charges. PAT is empowered to fix rates provided they are between the maxi- mum and minimum determined by the Council of Ministers. The Council's directive, now in force, permits variance of up to 25% from the existing level. 6.03 Because of PATts inadequate costing system (para. 3.04) some rateF are unrealistic. During negotiations PAT gave an undertaking that its tariff structure and rates would be revised to be reasonably based on costs. B. E arnings 6.04 Details of revenue and expenses for fiscal 1965 to 1969 inclusive are shown in Table 8. Although traffic remained static during the last three years of this period, expenses increased and revenue declined. A 15% pay rise in 1968 for wharf labor and substantial increases in personnel raised labor costs. Additional transit sheds and open storage areas were constructed and mechanical equipment purchased; consequently depreciation and operating costs rose. This improvement of port facilities increased the speed of cargo handling and reduced overtime and certain revenues decreased because of the shorter time spent by vessels alongside wharves. 6.05 PAT's operating revenues for fiscal 1969 totalled % 248 million and operating expenses including depreciation were $ 165 million, giving a net operating revenue of $ 83 million and an operating ratio of 67% which is satisfactory. Interest expense was negligible at 0 0.8 million. Total debt service amounting to 0 6.8 million was covered 18 times. The return of net operating revenue to net fixed assets in use was high at 18.5%. 6.o6 Financial forecasts of earnings are based upon traffic projections contained in Table 2 and on PAT's current rates and charges. Detailed forc- casts to 1975 are given in Table 8 (Revenue and Expense Accounts), Table 9 (Cash Flow) and Table 10 (Pro Forma Balance Sheets). The bases and assump- tions used in the financial projections are given in Annex 6. Operational results are summarized below: - 19 - (O Million) Actual 1T96 1970 1971 1972 1973 1974 1975 Operating Revenue 248.3 262.9 273.7 285.5 307.6 337.8 362.5 Operating Expenses excluding Depre- ciation 139.4 151.5 158.7 166.5 183.8 205.9 220.2 Depreciation 26.2 28.3 31.4 33.4 37.4 44.4 48.4 Total Operating Expenses 165.6 179.8 190.1 199.9 221.2 250.3 268.6 Net Operating Revenue 82.7 83.1 83.6 85.6 86.4 87.5 93.9 Interest Income 17.8 10.5 6.5 4.8 4.3 5.0 7.2 Net Revenue 1(005 93.6 90.1 9O0. 90.7 92.5 101.1 Interest Expense o.8 2.6 4.8 9.7 15.2 17.9 18.1 Net Income 99.7 91.0 65.3 oO7 75.5 74.6 63f0 Times Interest Covered 125X 36X 18X 9X 6X 5X 5.6X Total Debt Service 6.8 9.0 8.5 9.7 15.2 17.9 27.3 Times Debt Service 18X 13X 14X 12X 8X 7.6X 5.5X Financial Rates of Return on Net Fixed Assets in Use 18.5% 15.8% 12.8% 11.7% 9.5% 7.6% 7.6% Debt/Equity Ratio 3/97 2/98 8/92 15/85 18/82 18/82 17/83 Operating Ratios 67% 68% 70% 70% 72% 74% 74% 6.07 Between fiscal 1969 and 1975 operating revenues and expenses are expected to increase by about 46% and 62% respectively, the steeper rise of the latter being largely due to anticipated increases in wages; also the heavy capital investment program will cause depreciation expense to rise by 84%. Consequently, although net operating revenue is expected to increase slightly each year from 82.7 million in 1969 to 0 93.9 million in 1975 the operating ratio will increase from 67% to 74% and the rate of return on net fixed assets decrease to about 7.6%. A great deal will depend upon the results of introducing two and limited three-shift working on the wharves. To handle the increased cargo up to 1975 and adequately man the increases in shifts, some labor recruitment will be necessary. This, coupled with increases in rates of pay during the period is expected to raise labor costs by 43/a. The increased shift, however, together with improved methods and supervision of working, should raise labor productivity by some 30% and this benefit has been taken into account in estimating the extent of increases in the labor force. If present working methods, low mobile equipment utiliza- tion and labor productivity levels continue, by 1975 the cost of wharfinger operations per ton of cargo could be expected to rise by over 40% whereas the rise should not exceed 19% if the improvements suggested in paras. 3.11 and 3.12 are carried out. It is also important that a sound costin7g system be installed as soon as possible to provide adequate control over costs and a reliable basis for the continuing review of port rates (para. 3.04). - 20 - C. Finances 6.08 The current financial position of PAT is sound (Tables 9 and 10). At September 30, 1969, fixed assets, after providing for adequate depre-ia- tion, totalled 0 663 million and cash in hand, at banks and with the Govern- ment amounted to 0 304 million. Long-term debts were low at 0 30.3 million of which $ 10.1 million is outstanding from two previous IERD loans. The remainder is Development Loan Fund finance. The debt/equity ratio was 3/9?. Fixed Assets values are reasonab3y realistic. 6.o9 During the fiscal period 1970 to 1975, interest and debt service coverage will be ample. The debt/equity ratios are good, the highest being 18/82 in 1973 and 1974 thereafter improving to 16/84 in 1975 when repayment of the proposed loan comaences. A sumnary of PAT's pro forma balance sheets during the period is given below: As of September 30 (O million) 1970 1971 1972 1973 1974 77 ASSETS Current Assets Cash in Hand., at Bank 168.8 125.1 106.5 106.7 132.0 192.7 and Government Miscellaneous 21.0 22.5 25.0 28.0 29.5 31.0 18 T 1476 131e5 134.7 161.5 2237 Fixed Assets Total Fixed Assets 855.0 1,022.5 1,194.5 1,305.5 13347.5 13337 5 after depreciation Suspense Item Technical Assistance 0.3 1.1 5.2 8,3 - - TOTAL ASSETS 1,045.1 1,171.2 1,331.2 11448.5 1,509.0 1l56ae2 LIABILITIES Current Liabilities 14.0 14.5 16.o 17.5 18.0 19e Long-Term Debts 24.5 93.1 193.3 252.3 266.0 253.5 Equity 1,006.6 1,063.6 1,121.9 1117807 1,225.0 l12683.i TOTAL LIABILITIES 1,045.1 1,171.2 11331.2 1,448.5 1,509.0 1,561. Debt/Equity Ratio 2/98 8/92 15/85 18/82 18/82 15/81. - 21 - 6.1C Projected cash requirements and sourees of funds for fiscal years 1970 to 1975 are given in Table 9 and summarized below, distinguishing between years prior to, during and after the period of the IBRD Project acii- structions Fiscal 1970-1975 (% million) Pre-IBRD During IBRD Post-IBRD Project Project Project Cash Reqaired 1970 1971-1974 % _1975 Capital Investments-IBRD Project 2.2 426.0 53 - Other 219.5 219.5 27 40.( 221.7 645.5 80 0.. Technical Assistance Under IBRD Loan 1.3 7.0 1 - Debt Service 9.0 51.3 6 27.3 Changes in Working Capital 0.2 4.5 1 o.5 Appropriation to Government and Staff Bonuses 28.7 95.6 12 2L.:0 260.9 803.9 100 0M.3 Cash Available Cash Available at Start of Period 304.6 168.8 132.0 Less Cash Available at end of Period 168.8 132.0 192.7 135.8 36.8 5 (60.7) Net Operating Revenues and Depreciation 111.4 489.7 61 ' - 3 Investment Income 10.5 20.6 3 7-2 Total Own Resources 237.7 547.1 IBRD Loan 3.2 256.8 31 - 260.9 803.9 100 88.6 6.11 During this period the total cash available is not expected to fall below 0 106 million, which is adequate. 6.12 The PAT Act, 1951, as amended, provides the Thai Government con- siderable latitude in determining the extent to which PAT surplus funds are to be paid over to the Thai Treasury. Current practice is for PAT to transfer tc the Government 25% of its annual net revenue, after allowing for loan interest; assuming this continues during the period 1970 to 1975 such payments will range between 0 24.9 million and g 18.7 million annually. PAT's annual capital expenditure and its power to borrow money are subject to Council of Mirnisters' approval. Annual operating budgets are submitted for the Council's inforzniaion only. Should PAT's revenue be insufficient to meet operating expenses, depre- ciation and bonus, and should PAT be unable to obtain funds from other sowrces, the deficiency shall be met by the State. Contingency and expansion reserve requirements are however, expressly excluded from this State commitmeiit in tha Act. - 22 - 6.13 During negotiations PAT undertook to achieve a financial rate of return on net fixed assets in use equal to not less than 8% p.a. and not to incur long-term debt unless net cash revenue is and will remain at least 1 3/4 times the maximum debt service requirements. 6.14 It was also agreed during negotiations that PAT will continue to maintain adequate insurance cover on its assets for such risks and amounts as are consistent with good commercial practice. - 23 - 7. RECOMEfDATTONS 7.01 During loan negotiations agreement was reached on the following principal points: The Ooven2ment agreed (a) to appoint at least one person with experience in a commercial management capacity to PAT's Board (para. 3.03); (b) to maintain the access roads to the port and to constn-uct an additional access road not later than December 31, 1973 (para. 3.09); (c) to consult with the Bank before undertaking further major port development and to review all consultants' reports on the location and construction of port facilities in ccnsultation with the Bank (para. 3.18); PAT Agreed (d) to appoint an accounting expert (paras. 3.04 and 5.08); management consultants (paras. 3.12 and 5.09); and a dredging expert (paras. 3.15 and 5.07); (e) to retain consultants for engineering and supervision of ccnstruction (para. 5.06); (f) not to incur capital expenditure on large capital works or procurement without Bank agreement (para. 5.11); (g) to establish new rates and charges based upon costs (para. 6.03); and (h) to achieve an adequate financial rate of return and to limit debt service comnitments.(para. 6.13). 7.02 The proposed project cnstitutes a suitable basis for a Bank Loan of US$12.5 million equivalent to PAT for a period of 20 years, including a four-year grace period. July 13, 1970 ANNEX 1 TIHAILAND APPRAISAL OF THIRD BANGKOK PCRT PROJECT Particulars of Previous Railway and Highway Loans Three railway loans were made to Thailand: (a) 35-TH for US$3.0 million, October 1950; (b) 128-TH for US$12.0 million, August 1955; (c) 280-TH for US$14.6 million, April 1961; and four highway loans: (a) 341-TH for US$35.0 million, June 1963, but reduced to US$25.0 million in July 1964 and to US$22.5 million in July 1968 at the Gov- ernment's request; (b) 455-TH for US$36 million, June 1966; (c) 535-TH for US$29 million, P4ay 1968; (d) 626-TH for US$23 million, June 1969. The three railway loans and the first highway loan have been fully dis- bursed and work was satisfactory. The second, third and fourth highway loans are in progress and the quality of the work is good. rebruary 24, 1970 ANMIEX 2 Page 1 THAIL1ND APPRAISAL OF TUIRD BANGKOK PCRT PROJECT Bangkok Port Facilities Bangkok port facilities consist of 92 wharves, landing places, and finger piers, extending over a considerable distance along the river. In addition, there are 33 midstream anchorages and mooring buoys at different locations in the river (Mlap 2). The most important facilities are the Klong Toi wharves, com- prising ten berths of a total length of 1,660 m and related water areas in front of these wharves are under the control of and operated by PAT. The limits of the port are from Memorial Bridge to the pilot vessel at the entrance of the Bangkok bar, a distance of 66 km. During recent years PAT has considerably increased its cargo storage capacity and improved roads inside and leading to the port area. The present covered and open storage areas are: Open Storage Areas 91,900 m2 Nine Transit sheds 37,300 m2 Three Back-up transit sheds 47,400 m2 One Three-story warehouse 7,400 m2 Ten Single-story warehouse 12,700 m 2 One In-transit warehouse 4,000 m2 One Military warehouse 4,000 m2 One Dangerous cargo shed 800 m2 Total 205,500 m2 This provides 66 m of shed and open storage per linear meter of wharf- age which is considered more than adequate for present traffic. The roads within the port area are in good condition and are spacious enough to provide good traffic access in the future. July 13, 2970 ANNEX 2 Page 2 PAT owns and operates 12 semi-portal cranes, 23 mobile cranes, some 215 forklift trucks, 37 towing tractors, 14 tractor trucks, 10 vans and 115 trucks. It also has 12 tugboats with static pulling capacity varying from 1.5 tons to 23 tons, four survey boats, two water and oil barges, three mud barges, four hopper-suction dredgers, one clarmhell dredger, one bucket dredger and seven river launches. Two floating cranes, each of 125 tons lifting capacity, owned by private companies are available in Bangkok. There are 526 lighters with cargo carrying capacity ranging from 20 to 370 tons, owned and operated by 58 private companies in Bangkok. There are four dry docks in Bangkok, two cwned by the Bangkok Dock Company. One is capable of accommodating ships up to 110 m long and the other, ships of up to 100 m. The other two, owned by the Bang Thai Company are capable of accommodating ships up to 50 m and 38 m in length, respectively. February 24, 1970 '-hAI±.N.IJ APPRAISAL OF THIRD BANGKOK PORT PROJECT Assumptions of- Cost Benefit and Risk Analysis ITE'.I BEST ESTII4ATE NATIURE OF UNChERTAINTY PROBABILITY DISTRIBUTION A. Construction cost - Stage construction uncertainty 1. 2 Berths $15.2 11illion Quantities Uniform on range $11,900,000 - $15,450,00t 2. 4 Berths $20. 6 ' Prices Uniform on range $20,450,000 - $20,750,000 3. 6 Berths $26.358 t Additional cost of stage construction - Price and quantity uncertainty The variations around the above estimates have been assumed to be normal witi a r,an of 0 and a standard deviation of 7.8%. The price and quantity uncertainty have been assumed correlated for all 3 projects alter- native. 4. Distribution of 40% lst year construction cost 60% 2nd year not taken into of 2 berths over cons ideration construction period B. Traffic 5. 1969 General Cargo 2,576,ooo t None | Traffic 6. Estimated Laos transit 46,ooo t it traffic in 1969 7. 1969 Export traffic 33,000 t it 8. Grcwth rate of general 2.5% Economic developm3nt - Stepwise rectangular: cargo traffic during trend Probability Growth Range recession pericd 20% 1% - 2% 501 2,6 - t CO/9 3% - % ITE!A BEST ESTIMATE NATURE OF UNCERTAINTY PROBABILITY DISTRIBUTION Traffic (cont.) 10% 4% - 5% 9. Growth rate of General 6% Economic development - Trapezoidal on rarge 5% to 8% with uniform cargo traffic after trend probability between 5.5% and 7% recession period 10. Last Year of recession 1973 - Discrete period Probability Year 5% 1971 20% 1972 4o% 1973 25% 1974 10% 1975 11. Growth of Laos transit 8% not considered traffic 12. Growth of Export traffic 15% AvailabilLty of Sattahip 13. Release by U.S. Army before 1973 Political Situation - Discrete: 8O% chance that Sattahip will be in Southeast Asia released by the U.S. by 1st October, 1972. 20% that it will never be released. 14. Transfer of the port not estimated, Political Situation - Stepwise rectangular, function of the con- to commercial use given Built in in Thailand gestion in Bangkok: that it has been re- simulation Probabil ty Range of Average leased by the U.S. Ship Waiting Time D 0% 0 - 1hour 5% 1 - 3hours 25% 3 - 9hours 50% 9 -15 hours 75% 15 -21 hours 90% over 21 hours ITEM BEST ESTIMATE NATILE OF UICERTAINTY PROBABILITY DISTRIBUTION 15. MIilitary cargo still. . 150,000 tons Lack of information - Uniform between 100,000 t and 200,000 t going through Sattahip per year per year. after its release D. Shiz 16. Number of ships in 1300 1969 17. Growth rate of the Half of the size of ships - Not considered nuaTier of ships Growth rate of tonnage 18. Value of a ship dqy $2100 - Size of ships - Tranezoidal on range $2000 - $2500 witth - Ship operating costs uniform distribution between $2050 and $2200 Productivity of Labor 19. Gross tons per gang 5.7 hours in 1969 at Klong Toi 20. % improvement in 30% Efficiency of a - Stepwise rectangular productivity as a result shift system Range of productivity of introducing a shift Probability increase system in Klong Toi 5% 0-10% 20% 10% - 20% 45% 20% - 30% 20% 30%- 40% 10% 140% - 6o% I R 21. Daration of the transitional Labor problems Discrete three Years stage for the Duration introduction of a shift system 0% 1 year 30% 2 years 50% 3 years 15% h years 5% 5 years ITFM B3ST ESTI9AT7 NA2'CRE Or UN'CERTA-BITY 'BTTBAYT3T1 DTSMIB7.UTION ,2. Gang prodluctivity in 5.2 t/hour not considered 1) During the transitory stage the productivit3 private wharves is assumed to grow linearly from 5.7 tons tc the value defined in 20. 23. Gang productivity in 5.2 t/hour l the stream 24. Gang prodt tivity at attahip 7.5 t/hour 25. Average number of 5.5 gangs per ship in Bangkok 26. Average number of 4 gangs ner ship at nrivate wharves 27. Average number of gangs per ship in the stream 5 28. Average number of gangs per ship at Sattahip 3.7 F.Others 29. Transport cost from $2.5 per ton Type of vehicle to be - Triangular on range $2 - $3 Sattahip to Bangkok used and vehicle operating cost D 30. Cargo handlirg cost $1.55 per ton Uncertainty on operatirg - Trapezoidal on range $1.30 to $2.15 - w in the strean cost of lighters Uniform distribution between $1.50 and $1.65 31. Cargo handlirg cost $;50 per ton Not considered because at dle ep water berth only relevant variable is the differenee between ITEM BEST ESTIMATE NATIRE OF UNCERTAINTY PROBABILITY DISTRIBUTION Productivity of Labor (cont'd) handling cost in the streami ard on the quay. 32. Opocrtunity cost of 11.5% Economic statistics - Trapezoidal on range 10% - 14% capital - Unifcarrm distribution on range 11% - 12% July 13, 1970 vi}7,iNEx 4L Page 1 TqA{DLA:D APPRAISAL OF TT-URD BATTGKOK PORT PROJECT Simulation Model 1. The simulation model comprises two parts: the port simulation proper and the cost analysis. The former simulates the berthing of ships and their unloading at nlong Toi wharves as well as imports at private wharves or in the stream. It indicates ship waiting time, berthing time and place. These indications are then fed into the cost analysis part of the model. The simu- lation is repeated for the first 8 years of the project life and for the four alternatives studied. In the following, "simulation'? will mean a complete set of simulations for the eight years and the four project alternatives. This simulation is repeated many times to yield an estimate of probability distribution of the internal rate of return, payback period and present value cost of the project. Following are details on the model, the data and the operation of the modele The Model 2. The port simulation proper is divided into three steps. The genera- tion of ship arrivals, the assignments of ships to a berthing place, and the loading and unloading of ships. 3. The generation of ship arrivals is at random according to a pattern of arrivals derived from a statistical analysis of the port's data. The ship arrival calendar is generated yearly; the same arrivals are used for all four alternatives. The ships are then assigned tonnages, again at random, according to observed distributions. Because of the low volume of exports, no distinc- tion has been made between imports and exports. The total tonnages handled annually are determined at random according to the probability distribution of the growth rate described in Annex 3. Finally the ships' draft is selected also according to a probability distribution function of the total yearly tonnage and the total number of ships. 4. The next step consists of looking for an empty berth. If there is no berth at Knong Toi, the model is programmed to look for a private berth compatible with the ship's size or, if none is available, for a mooring point where the ship could be discharged by lighter. If there is no berth or moor- ing point available, the ship must take its turn on a waiting list, which may or may not have other ships already waiting. The next event may be either a new ship arrival or a ship departure. In the case of a ship departure, a berth (or lighterage point) becomes available and, in due course, is ready to receive a new ship from the waiting list. In the cases where Sattahip is available, ships are preassigned to either Bangkok or Sattahip. In addition in this case, when waiting time at Bangkok exceeds a maximum admissable level, ships are diverted to Sat'ahip. AINNEX 4 Page 2 5. Ship unloading is a function only of berth characteristics (sur- prisingly, port statistics show no correlation between weather and unloading rates). Each berth and lighterage point is assigned a certain productivity of labor for loading and unloading, representing the number of tons of cargo that a gang can handle in one hour. Multiplied by the average number of gangs working simultaneously on a ship, labor productivity gives the handling rate or the average number of tons of cargo which can be loaded or unloaded in one hour. Given the cargo tonnage to be unloaded, the handling rate leads to the time necessary to unload each ship and, therefore, the time at which the ship will be able to depart. 6. A critical element of the above computation is labor productivity. It is assumed that introducing a shift system at the Nlong Toi wharves would result in improved productivity within a few years. At the beginning of each simulation we therefore drew a random figure for productivity increase and one for the number of years required to reach this productivity increase according to the distribution of Annex 3. We then make a linear extrapola- tion of the value of productivity during the transitory period corresponding to the introduction of the shift system. 7. Another critical element is whether or not Sattahip will be released for commercial use. This will depend mainly on the congestion level at Bangkok. At the end of each year, average ship waiting time at Bangkok is computed and the release of Sattahip during the following year is determined on a random basis according to a probability which is a function of current average waiting time. Once Sattahip has been released it remains available from then on. The release date of the port varies with average waiting time and therefore, with the alternative under consideration. If Sattahip is released, the model evaluates the percentage of the traffic it can absorb. Since the port is simple this is done in an approximative manner by assuming an acceptable berth occupancy factor corresponding to the number of berths at the port. Finally, in order to avoid infinite waiting time in the event the port is not expanded, it is assumed that, if berth occupancy of the facilities existing at Bangkok exceeds 95%, and lighterage berth occupancy exceeds 75%, and, if relevant, berth occupancy at Sattahip exceeds 65%,d sufficient additional lighterage facilities would be provided to insure that the above berth occupancy is not exceeded. These berth occupancy factors have been derived by trial and error in such a manner as to keep waiting time within reasonable limits. 8. The costing part of the model is simple. First, all the costs to which a probability distribution is attached are selected randomly (Annex 3). The investment costs are introduced in the cost streams in the appropriate investment year. Total cargo-handling cost is then camputed, for each year, on the basis of cargo tonnage handled at each location (a by-product of the ship assignment explained in paragraph 4). Ship waiting-time cost is also computed and introduced in the cost streams. Since the time the ship spends in the berth is a function of the berthing place, the corresponding ship cost is also computed and introduced in the cost streams. Finally, in the event Sattahip becomes available, the cost of transporting cargo to Bangkok is also taken into consideration. ANNEX h Page 3 Outputs 9. The outputs of each simulation are therefore a stream of costs for each project alternative. Each of these sets of cost streams is the result of a particular hypothesis as to the release of Sattahip, a particular invest- ment cost, a particular traffic growth pattern, a particular ship day cost, and a particular cargo-handling cost; the present value computation is done using a particular opportunity cost capital. Finally, the pattern of arrival and the ship load distribution is a particular one for each year of the simulation. In addition, the model provides other information, in particular on ship waiting time, which is useful in following port behavior under any particular sets of circumstances. 10. The consolidated output of each simulation yields the probability distribution of each of the decision variables. The means of some of these variables are given in Table 2 through Table 6. The standard error as well as full probability distribution of each one of them is not given in this report but is also available. Basic Data 11. Most of the basic data used in the simulation has been derived from analysis of detailed port statistics. The principal elements of the simulation, the pattern of arrivals and the tonnages carried by each ship, have been analyzed by classic statistical analysis using the chi-square test, It was found statistically acceptable to assume that arrivals were following a Poisson distribution and that both tonnages followed a third order Erlang distributionY17 These hypotheses have, therefore, been adopted throughout the simulation, The distribution of maximum ship draft was found norrmial with a mean closely related to the total number of ships and the total tonnage handled. 12, The hypothesis concerning gang productivity and the gang application factor were derived by analyzing detailed port records of ship movements and labor deployment during 1969. The time between a ship's departure and the beginning of work on the next ship has been set at two hours, in accordance with information provided by the port authority. The number of ships serviced in any year which, under normal circumstances would be assumed at random about constant, has been kept growing at half the rate of the tonnage growth to account for the draft limitation in the bar channel. Traffic growth has been determined according to the forecast in Chapter 4 which is based partly on statistical analysis of the historical traffic trend. 1/ Confirming an analysis carried out in 1965 by the Asian Institute of Technology and published in the Journal of the Waterways and Harbors Division: Jones and W.R. Blumden. Ship turnaround time at the Port of Bangkok - Journal of the Waterways and Harbors Division, American Society of Civil Engineers, Vol. 94 - WW 2, May, 1968. AMNEX 4 Page 4 Operation of the MTodel 13. The first step in operating the model was its adjustment.. 1967 and 1968 data were used for this purpose and the model was calibrated to agree with the historical results. The major element of comparison was ship waiting time which, because of its high sensitivity, constitutes an excellent check point; another element was the ratio between the total tonnage handled at the Klong Toi berths, the private berths and that handled by lighterage. This calibration is somewhat complicated because, with the same data and the same probability distribution of arrival and ship loads, the total yearly waiting time produced by the simulation varied over a very wide range; this reflects different patterns of arrivals and ship loads within the distribution. In practice, the expected waiting time obtained at the end of the calibration was somewhat lower than that observed in 1967 and 1968 but well within the range of what can be expected. Since most data was derived from port stati- stics, the calibration involved slight variations in labor productivity, the gang application factor at private wharves and in the stream and limita- tion of the use of private wharves. 14. Once the model was calibrated it was used for the simulation proper. As a compromise between computer time requirements and the need to obtain statistically meaningful results, the analysis was carried out on a sample consisting of 75 simulations. This should be sufficient to insure reasonable accuracy if the expected costs and an acceptable accuracy of the standard deviation. It is too small a sample to insure good accuracy on the entire probability distributions of Charts 2 and 3. However, the accuracy of Chart 3 is sufficient to support our conclusions and should the curves of Chart 2 vary with a larger sample they would all vary in the same direction and, as our conclusions are based on the distance between them, they would not be affected. 15. In order to limit the amount of computer time, the simulation was run only for five months each year. As a result, the waiting time statistics for each year correspond to about 31 years of simulation. February 24, 1970 ANNEX 5 Page 1 THAILAND APPRAISAL OF THIRD BANTGKOK PORT PROJECT PAT's Principal Rates and Charges as of Sept. 30, 1969 As Charges against Shipowners or Shipst Agents 1. Channel Dues (inward passage only) Vessels of less than 500 net reg. tons Nil Vessels of 500 to 1500 net reg. tons g 1 per ton Vessels exceeding 1500 net reg. tons g 2 per ton 2. Wharf Rates 0 1 per vessel net reg. ton for each call not exceeding 72 hours, plus 25% for every subsequent 24 hours or fraction thereof. $ 500 per lighter per call. 3. Buoyage M 100 per buoy per 24 hours or fraction thereof. 0 200 service charge per mooring, unmooring of a ship. B. Charges against Consignees 4. Inward Cargo Landing Charges Class 1 0 14 per metric ton - most general cargo Class 2 0 18 per metric ton - beer, wines, spirits, tobacco, oils, dyes, china, textiles, etc. Class 3 g 22 per metric ton - dangerous and poisonous goods, chemicals, furniture, cement, ores and metals, etc. Class a4 30 per metric ton - vehicles, etc. 5. Inward Cargo Handling Charges Class 1 $ 30 per metric ton - most general cargo Class 2 0 40 per metric ton - machinery, cement, chemicals, etc. 6. Outward Cargo Quay Dues Class 1 0 1 per metric ton - most general cargo Class 2 % 1.25 per metric ton - timber, gold and silver AN1JEX 5 Page 2 7. Outward Cargo Handling Charges Half rate of charges listed in 5 above. 8. Storage Charges Holding of cargo in transit sheds is free for the first 72 hours after completing a vessel's discharge. Thereafter charges range from g 4 per ton per day during the first week to 0 12 per ton per day during the ninth and subsequent weeks. February 26, 1970 A-NEX 6 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT Bases and Assumptions Used in Financial Projections 1. That the military port of Sattahip will not be used for commercial (non-military) cargo before September 30, 1975. 2. That the following major items, currently included in PAT's capital expenditure program, will not be undertaken during fiscal years 1970 to 1975: ITEM Amount Provides in PAT's Estimates (Baht millions) a) Realignment of Bar Channel 99.0 b) Floating Crane 4 .0 c) Dredger 10.0 3. That no expenditure will occur before September 30, 1975 on the construction of berths for PAT other than the four deep water and two lighterage berths provided for in the project. 4. That PAT will continue to appropriate to the Government of Thailand 25% of its revenue surplus after payment of loan interest. 5. That interest will be earned on cash surpluses at 5% per annum. 6. That a Bank loan will be made to PAT of US$12.5 million equivalent at 7% per annum for a period of 20 years including four years' grace. 7. That introducing two and limited three-shift working and improving super- vision and operational methods on the wharves will raise labor productivity by 30% between fiscal 1970 and 1975 and this benefit has been taken into account in estimating the extent of increases in the labor force. 8. Provision has been made for a possible 10% wage and salary increase for clerical and administrative staff during 1970 and a further general increase of 10% to all PAT employees in 1974. S. Financial forecasts of earnings are based upon PAT's current rates and charges and it is assumed that during fiscal 1970 to 1975 any rate adjustments consequent upon a review and relation to costs will not reduce the overall level of the rate structure. IMarch 18, 1970 TABLE 1 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT 1967 Port Congestion Surcharge Country Approximative of Average freight rate % total Cost for 6 months Origin $ per B/L ton Surcharge imports (000) US $ Japan 15 15% 36 1,013 Europe 36 15% 20 1,350 USA n/a $h.5/B/L Ton 16 900 Australia 27.5 10% 3 206 Taiwan 8 n/a 3 n/a Hong Kong 8 15% 2 60 Others n/a 20 n/a 100 3,733 Source: Bangkok Shipowner's and Agent's Association 1968 Custom Statistics Mission Estimate FebruarY 26, 1970 lMATLAND APPRAISAL OF THIRD BANGKOK POST PROJECT Expected ^onmer - a Traffic 00recas: . *. .(Fiscal Years Ending Sept. 30) (in 000 tons) ACTUAL FFORECAST 1968 1969 1972 2/ 7973 197k 1975 1976 1977 1978 197) 1980 I.Total Traffic 31 6 332 369 382 h-4 L 'L General Cargo Imports 2,504 2,575 2,769 2,904 3,032 3,206 3,3932 3,618 38 3° h,308 Laos transit traffic k3~~~~~~4 93 67 72 78 80 83 8o 80 08 Laos transit traffic 0 66 76 88 101 116 1 5 II. Distribution of traffic per location A. Assuming Sattahip may be released, Al - Alternative I 2,21 2 321 2,405 2,450 2,499 2,569 2,635 2,707 2,797 2,850 2,894 Private Wharf 208 190 196 188 195 210 3282k 441 599 737 In the Stream 126 190 289 274 275 302 334 372 274 91 737 Sattahip4/ , _ - 82 199 270 350 459 513 563 591 A2 - Alternative II 2,405 2,709 2,821 2,924 3,o4k 3,178 3,241 3,279 3,363 Private TWharf 196 115 137 155 176 199 222 234 263 Pinathe Starea 285 177 207 239 263 300 327 341 374 In the Stream 2 - 13 50 80 117 243 402 h68 Klong Toit Wharf 2,405 2,709 2,994 3,125 3,272 3,135 3,575 3,698 3,814 Private Wharf 196 115 67 89 119 131 163 183 210 In the Strear 285 177 120 71? 173 211 217 287 319 In the Stream 1 ~~~ ~~ ~ ~~~~~~~~~~~19 32 73 137 224 Sattahip4/ AL-AloengTotv Whar 2,405 2,709 2,99k 3,293 3,k22 3,611 3, 77) 3.962 k,11 5 PrivagTe Wharf 196 119 67 k2 51 73 116 126 190 Pinathe Starea z65 177 120 71 93 127 172 238 2k1 SInthe Strea -- - 23 80 B. Assuming Sattsh2ip is not releaaed for commcial purposes- B3 - Alternative III Xlong Toi Wbirr 2,241 2,321 2,405 2,709 2,994 3,132 3,2895 3,50 3,60k 3,769 3,913 Private Wharf 208 190 196 119 67 89 107 132 169 190 220 In the Stream 126 190 289 177 120 143 1 76 213 257 29k 326 1/ Excluding export traffic handled in tls stream of coastal trapfic. 2/ The simulation was not undertaken for 1970 or 1971. 3/ Discrepancies between this total ami the total aer alternative result from the smell size of the sample used in the simulation. 4/ These figures represent average tonnages between cases in which Sattahip is released for commercial use and cases in which it is not with diverted traffic at 0. The level of commercial traffic in Sattahip with port used for comerial nec-poses may be obtained by reading tLhis table ini conjunction wilth Table 5; February 10, 1970 TABLE 3 THA !LAND APPRAISAL OF THIRD BANGKOK PORT PROJECT Expected Yearly Costs of Various Project Alternatives (000 US$) Alternative II-2 deep water III-4 deep water IV-6 deep water berths and 2 berths and 2 berths and 2 Year I-No Project lighterage berths lighterage berths lighterage berths 1971 _6,155 / 6,155-/ 6,1551/ 1972 - 9,233-/ 9,233_1 9,23311 1973 11,209 9,376 14,8442/ 14,8442/ 1974 12,045 10,069 9,458 15,3223/ 1975 13,520 10,949 10,109 9,737 1976 14,601 11,945 10,848 10,380 1977 16,332 13,598 11,965 11,246 1978 19,404 16,589 11,965 12,249 1979 21,748 19,418 14,972 13,457 1980 - 1993 24,454 23,986 17,602 15,058 1/ Construction cost only. 2/ Including US$5,468 million construction cost. 3/ Including US$5,864 million construction cost. February 26, 1970 TABLE 4 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT Expected Cumulative 1969 Value of Various Project Alternatives (000 US$) Alternative I II III IV 2 deep water 4 deep water 6 deep water Minimum berths + 2 berths + 2 berths + 2 Investment lighterage lighterage lighterage Year Alternative berths berths berths 1971 4,930 4,930 4,930 1972 11,548 11,548 11,548 1973 7,187 17,561 21,169 21,169 1974 14,103 23,345 26,501 29,917 1975 21,063 28,978 31,701 34,925 1976 27,767 34,473 36,692 39,699 1977 34,484 40,o74 41,623 44,333 1978 41,642 46,182 46,530 48,851 1979 48,833 52,593 51,484 53,302 1980 56,069 59,685 56,676 57,753 1981 62,548 66,035 61,345 61,737 1982 68,350 71,721 65,516 65,305 1983 73,546 76,812 69,251 68,500 1984 78,199 81,371 72,595 71,361 1985 83,367 85,454 75,590 73,923 1986 86,100 89,110 78,273 76,218 1987 89,444 92,385 80,675 78,273 1988 92,439 95,318 82,826 80,113 1989 95,123 97,945 84,753 81,762 1990 97,526 100,297 86,480 83,239 1991 99,680 102,405 88,026 84,562 1992 101,609 104,293 89,411 85,746 1993 103,338 105,984 90,651 86,808 February 26, 1970 TABLE 5 THA ILAIID APPRAISAIJ OF THIRD BANGKOK PORT PROJECT Probability Distribtution of the Release Date of Sattahip as a function of the Project Alternative o, I II III IV Date Ivfinimum 2 lighterage & 2 lighterage & 2 lighterage & Investment 2 deepwater h deepwater 6 deepwater Date berths berths berths 1973 14.5 - 1974 i8.5* 2.5 - 1975 13.5 5.5 1.5 6 1976 13.5 6.5 1.5 6 1977 14.5 5.5 2.5 - 1978 2.5 20.0 6.5 - 1979 2.5 25.5* 10.5 .0 1980 _ 6.5 14.5 9.5 Not before 20.0 28.0 62.5 86.5 1980 February 26, 1970 * Best Estimate TABLE 6 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT Payback Period'" Payback Period Probability Less than 3 years 7% From 4 to 6 years 14.5% 7 years 16.0% 8 years 18.5% (Best Estimate) 9 years 10.5% 10 years 10.5% From 11 to 13 years 9.5% Over 14 years 13.5% 100.0% February 26, 1970 1/ Number of years after which the cumulative present value of the costs with the project is equal to the cumulative present value of the costs without the project. TABLE 7 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT Cost Estimates of the Project Thai Baht million US$ million Local Foreign Total Local Foreign Total 1. Construction of four deep-water and two lighter berths, two tran- sit sheds, and ancillary works (a) Prelimina'y o.6o - o.60 0.03 - 0.03 (b) Dredging 5.30 7.80 13.10 0.26 0.37 o.63 (c) Deep-water berths 36.00 72.00 108.00 1.73 3.46 5.19 (d) Lighterage berths 10.80 23.00 33.80 0.52 1.11 1.63 (e) Transit Sheds 28.10 42.20 70.30 1.32 2.04 3236 (f) Klong Bridge 7.10 12.00 19.10 0.35 0.57 0.92 (g) Roads, open areas and railways 44.90 38.00 82.90 2.15 1.83 3.98 (h) Ancillary works including electricity, water supply, drainage, etc. 17.20 15.00 32.20 o.85 0.71 1.56 Subtotall 150.0 210.0 360.0 7.21 10.09 17.30 2. Consultants' Fees for Engi- neering and Supervision during construction 4.16 18.72 22.88 0.20 0.90 1.10 3. Expert Assistance for dredging, cost accounting and management consultants for cargo-handling labor operations 0.84 7.48 8.32 0.04 0.36 0.40 4. Contingencies approximately 12% (6% for quantities and 6% for prices) 21.80 23.80 45.60 1.05 1.15 2.20 Total 176.80 260.00 436.80 8.50 12.50 21.00 July 13, 1970 THAILAND APPRAISAL OF THIRD BAIGIK0K PtRT FROJECT PORT OF TMAILAND AUTHORITY Actual and Forecast Revenue and Exoense Accounts (Years ending September 30) Thai Baht Million A C T U A L F O R E C A S T 1965 1 966 T9* t 197t 1971 7 1977 Operating Revenues Wharf Rate 4.9 5.6 6.1 4.7 4.8 4.9 5.1 5.3 5.7 6.3 6.8 Channel Dues 11.8 14.8 14.1 14.5 15.4 16.1 16.9 17.7 18.6 19.5 20.5 Handling Charges 41.9 52.3 53.5 48.2 47.6 49.5 51.4 53.4 57.7 63.5 68.3 Landing, Storage and Overside Charges 96.5 122.9 173.4 176.0 159.7 170.2 177.1 184.4 199.0 218.8 235.2 Rentals 4.2 5.2 8.9 8.2 9.7 10.1 10.5 10.9 11.7 12.8 13.8 Miscellaneous 8.2 9.5 10.9 11.7 11.1 12.1 12.7 13.8 14.9 16.9 17.9 Y675 210.3 26 9 . 248.3 262.9 2 73 . 307.6 337. 36 .5 Operating Expenses Operating Expenses 49.4 51.6 60.6 68.2 78.3 84.7 88.5 92.0 102.9 114.3 124.8 Administrative Expenses 33.1 36.6 40.7 46.5 46.3 51.8 54.2 56.5 61.9 1.6 75-4 82.5 7 0M .3 7124.5 Bar Channel Maintenance Expenses# - - 13.9 15.3 14.8 15.0 16.0 18.0 19.0 20.0 20.0 Depreciation 13.2 14.3 16.9 22.2 26.2 28.3 31.4 33.4 37.4 44.4 48.4 95.7 102.5 132.1 ____ T __ 190.1 199.9 221.2 Net Operating Revenue 71.8 107.8 134.8 111.1 82.7 83.1 83.6 85.6 86.4 87.5 93.9 Interest Incone 39 5.8 10.2 10.8 17.8 10.5 6.5 4.8 4.3 S.o 72 Net Revenue 5i.7 113.6 93 . 90. 90.7 Interes,t &ense 1.9 1.6 1.3 0.t o.8 2.6 4.8 9.7 1.12 17o1 Net Incom 73.8 112.0 143.7 120.8 99.7 91.0 85.3 80.7 75.5 74.6 83.0 Times Interest Covered 39x 711 111x liOx 125x 36x 18x 91 6x 5 5. 6x Total Debt Service 8.8 9.2 11.3 7.1 6.8 9.0 8.5 9.7 15.2 17.9 27.3 Times Debt Service Covered lOx 13x 11x 20x 18x 13x 14x 12x 8x 7.6x 5.52 Operating Ratio 43% 51% 50% 57% 67% 68% 70% 70% 72% 74% 74% Return of Net Operating Revenue to Net Fixed Assets in Use 20% 29% 35% 27% 18.5% 15.8% 12.8S 11.7% 9.5% 7.6% 7.6% * Subject to audit # Expense not borne by PAT prior to 1967 Source: Port of Thailand Authority (Modified by Bank Staff) February 10, 1970 THAILAND APPRAISAL OY THIRD BANGKOK PORT PROJECT PORT OE' THAILAND AUTHORIT1Y Foreca. t of Cash Flow -Teors endinE Serteiber 35) T"at B.ht Million Total 196a 1970 1971 1972 1973 1074 1075 197n-1Q75 Percentage A. CASH REQUAIED Capital Inveetneflte IBHD Project 0.3 2.2 116.0 170.0 112.0 28.4 - 628.2 Other 155.3 219.5 S4.5 37.0 8 60.o 4o.o 479.0 Tatal Capital Imvest.etts 7ru 221.7 207. S 7i757i r07.2 78.6 Technical Assistan-e Dredging and Accounting Ad&isors provided in IBRD Loan 1.3 4.0 3.0 - _ - 8.3 0.7 Debt Service - ID Interest 0.8 2.6 4.8 9.7 15.2 17.9 18.1 68.3 do,ortioatian 6.0 6.4 3.7 - -- - 1 Total L'ebt Service .9.7 -15. 777 7 T 37 .6 7.6 Changes in Wwking Capital - 0.2 1.0 1.0 1.5 1.1 0.5 5.1 0.5 Appr-priatian to Gqoernsnt 32.9 26.2 21.8 2n.h 17.0 17.6 17.2 120.2 10.4 Board YsShr- end Staff Bonus 5.9 4,5 6.4 4.3 .4L2 3.9 3 M 25.1 .2.2 Totel Cash Required 201.2 260.9 240.2 245.4 19.0 128.4 88.8 lUSL 6M.0 B. CASH AVAILABLE Net Operating Re.enues 82.7 83.1 83.6 85.6 86.4 87.5 93.9 520.1 45.2 Depreciation 26.2 28.3 31.6 33.4 37.4 46.4 48.4 223.3 19.4 Investmnt Inocue 17.8 10.5 6.5 h.8 4.3 5.0 7.2 38.3 3.3 Change in Wrking Capital 26.0 - - - - - - - Proposed IbRD Loan - 3.2 75.0 13.0 62.') 16.8 - 260.0 22.5 Cash Available at Beginning of Teer Cash on Hand and at Banks and Ministry of Finance 344.2 295.7 159.9 116.2 97.6 97.8 123.1 Thai Oovernrent Bonds 8.9 8.9 8.9 8.9 8.9 8.9 8 Total Cash at Beginning o Year 3 Total Cash Available 505.0 429.7 7 35Y2= 2 . . i;u1.5 7 Cumulative Cash Position 306.6 168.8 125.1 106.5 106.7 132.' 192.7 Deorease in Cash Position IL.9 9.7 Foors Bok Staff Feb-ray 10, 1970 THAILAND APPRAISAL OF THIRD BANGKOK PORT PROJECT FORT OF THAILAND AUTHORITY Pro Forma Balance Sheets (As at September 30) Thai Baht Million 1969 1970 1971 1972 1973 1974 1975 (Subject to Audit) ASSETS Current Assets Cash in Hand, Bank and Ministry of Finance 295.7 159.9 116.2 97.6 97.8 123.1 183.8 Thai Government Bonds 8.9 8.9 8.9 8.9 8.9 8.9 8.9 Accounts Receivable, Stores and Advances to Staff 20.7 21.0 22.5 25.0 28.0 29 5 1 Total Current Assets T53 T177 T T1 T71 Fixed Assets Total Fixed Assets 626.8 796.5 945.7 1,017.6 1,350.5 1,582.5 1,652.5 Less Accumalated Depreciation 169.9 199.8 232.8 267.8 306.8 352 8 128 Net Fixed Assets in Use 4 57 7 I 7T" i7T IImT 1,2297 1 47 Works and Equipment in Progress 206.3 258.3 309.6 444.7 261.8 117.8 8 8 Total Fixed Assets 3 5 1 3 1,79 5 Prolect Item in Sunoe - Less tsWtten Off7 (Cst of Dredging and Accounting Advisors) -_ s3 1.1 5.2 8.3 Total Assets 1.t 1 7 .2 13 i5 61 LIABILITIES Current Liabilities Accounts Payable and Deposits from Port Users 13.9 14.0 14.5 16.0 17.5 18.0 19.0 Long Term Debts Development Loan Fund 20.2 17.6 14.9 12.1 9.1 6.o 2.7 IBRD Loans 10.1 6.9 78.2 181.2 243.2 260.0 250.8 Total Long Term Debts 30.3 2 4 593 1 266 0 21 Equity Asset Appreciation 120.9 119.2 117.6 116.0 114.3 112.7 111.1 Contributions from Government 323.0 125.3 127.8 130'4 133.2 136.1 139.2 Reserve for Expansion 00 7 671 6 732.6 7916 8 855.7 901.6 955.4 Unaroriated Revenue esere 99.7 91.5 85.6 80.7 75.5 74.6 83.0. Equity TI, r 1 , 03 6 T T Tr.9 77 T Total Liabilities _i_ L5 1,509.0 1,561.2 Debt/Equity Ratio 3/97 2/98 8/92 15/85 18/82 18/82 16/8h Source: Bank Staff February 10, 1970 THAILAND: APPRAISAL OF THIRD BANGKOK PORT PROJECT GENERAL CARGO IMPORTS IN BANGKOK PORT TREND AND FORECAST (THOUSANDS OF TONS) 10,000 ~~~~~~~ ~~~ ~TT~10,000 8,000 ~~~~~~~~~~~~~~~~~~~~~~~~~~8,000 6,000_ ___ ___ _ _ _ __ _ __ _ -6,000 BEST ESTIMATE 4,000 -__ __ _ 4,000 3,000 3___000_ 2,000 __-_ ----___ 2,000 LONG TERM TREND BASED - - - ~~ON REGRESSION ANALYSIS OVER THE 1951-1965 PERIOD 1,000 ~~~ ~ ~_______ ___ - -1,000 800 ~~~~~~~~~~~~~~~~~~~~~~~800 300 -300 SEMI-LOGARITHMIC SCALE 1951 '52 '53 '54 '55 '56 '57 '58 '59 '60 '61 '62 '63 '64 '65 '66 '67 '68 '69 '70 '71 '72 '73 '74 '75 '76 '77 '78 '79 '80 '81 0 ACTUAL TRAFFIC GROW'TH NOTE: CALENDAR YEAR FROM 1951 THROUGH 1960.> - FORECASTED TREND PAST TREND ~~~~~~FISCAL YEAR THEREAFTER ( OCT, I - SEPT. 30) IBRD - 4797 (R) THAILAND: APPRAISAL OF THIRD BANGKOK PORT PROJECT PROBABILITY DISTRIBUTION OF THE TOTAL* 1969 VALUE OF THE w TOTAL COST WITH EACH PROJECT ALTERNATIVE ClI80% X __ v __ z > ALTERTNE A X z 80% /, / -_ J8O% ALTERNATIVVE \ III / 0 I I- 0 ' 60% 70 80 so loo ___ ____ lm ALTERNATIVE IV ATNIALTERNATIVE I I 40% Of u 20% o 0 iL 60 70 80 90 100 110 120 130 140 I50 160 U.S. MILLION DOLLARS ALTERNATIVE I - NO PROJECT* FRom 1970 THRU 1993 C) ALTERNATIVE II - 2 LIGHTERAGE' BERTHS AND 2 DEEPWATER BERTHS. ALTERNATIVE 1II- 2 LIGHTERAGE BERTHS AND 4 DEEPWATER BERTHS. ALTERNATIVE iv - 2 LIGHTERAGE BERTHS AND 6 DEEPWATER BERTHS. IBRD - 4799(R) CHART 3 THAILAND: APPRAISAL OF THIRD BANGKOK PORT PROJECT PROBABILITY DISTRIBUTION OF THE INTERNAL RATE OF RETURN (TWO LIGHTERAGE BERTHS FOUR DEEP-WATER BERTHS) 100% 90% > 80% U 0 x U 0 z -I60% z a: U 0~ 50% 0 U 40 3 0% Io- RATE OF RETURN IBRD 4798(2R) ¢ J r __e , , -r NOR~~~N0 RT H ./| i gajQ~~~~~o f2< V I E T N A M * hiengm°i iNgao r3.~~ ( YJ toLmpoofn J 1> l tTHot/1td Larn ang * * Pool~~~~~~~ ~~ Psoi 0 }<*-~ ~ ~ - * -ouso- o- n kol Si tiKorpoengphe> 4 aangchompu \ j f t ong ~~~~~~~~~~~~~~~~~~~~~Mek Cha 0 0 0 0 0 0 0 0 0 - Pr in ror ogs oo ' r r.t ..nidALASI MAY 1970 18W 2789R~~~~~~~~~~~~~~~~~ca MAP 2 BANG SUE STATION Southern Ralway GRAND MAKKASAN STATION STATIONB PALACE so OS/ * STATION = M EMORIAL BRIDGE|| BANGK K THONBURI .47X T AN KO Anchorage northo Krungthep BrideANM STATI Pot Authority of Thailand KRUNGT / \ ~~~~~~~~~~~~~~~~~~~~~~~~~~~(P. A. T.) KRUNGTHEP s TRIDGE (harf Ahr ) o o A PhrS'ASSI / c9 Bus whan 0 PORT OF BANGKOK /, Location, Road, Rail and Water Accesses /f - Main rodds //w,fy~~~~4p ner TMAncho rages -.=Bar channel Iv\ e Light beacons 5 §9L \ ^ Light buoys ~~~~~FORT \\ ' To Checheeng Sree 0 l 2 3 4 5 o amKarn --S h Phra~~~~~~~~~~~ Proopse KILOMETFRS ~~~// Regd ,,~~~~\ / 1,~~\ JANUARYS1970i .leoPilot vessei ; PORT OF BALNG0FKOK/A LA Anchorages a~~~~~~~~hone A Light buoys ~ ~ ~ ~ ~ ~ ~ Piotvese JANUARY 190 IBR34O Le -2791n THAILAND 0~~~~~~0i0a ~~~~~~~~~~~~PORT OF BANGKOK // R E0S E R | E D A 0 R E A / 1 Extension of Berths at tKlong Toi in Thr ee Stages L0o~ -1-... L=W. 4 \ ~ ~~~~~~~~~ 12 bi , E ~ ~ P d~ 29HI ri d 00d 5 ac0oo > J 2 buildmg 9 b9E9EdEd EW9 ;n \Chechl se \ \~~~~~~~~~~~~~~~~~~~~~~~~~~ 0 N#Xi i *S~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~hi ULY~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~ ~0 197 19D270