Docrim of The World Bank FOR OMCIAL USE ONLY Report No. P-4170-TH REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$60 MILLION TO THE KINGDOM OF THAILAND FOR A THIRD RUBBER REPLANTING PROJECT April 21, 1986 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwisc be disclosed without World Bank authorization. CURRENCY EQUIVALENTS $1.00 = Baht (B) 26.00 B1.00 = $0.04 $1 million = B 26 million Bl million = $38,500 THAI FISCAL YEAR October 1 to September 30 WEIGHTS AND MEASURES 1 rai = 0.16 hectare 1 hectare (ha) = 6.25 rai PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BAAC - Bank for Agriculture and Agricultural Cooperatives BOB - Bureau of the Budget CDC - Commonwealth Development Corporation, UK DOA - Department of Agriculture, MOAC DOAE - Department of Agricultural Extension, HOAC FPO - Fiscal Policy Office, HOF ICB - International competitive bidding LCB - Local competitive bidding MOAC - Ministry of Agriculture and Cooperatives HOF - Ministry of Finance NIDA - Natioaal Institute for Development and Administration NRPC - National Rubber Policy Committee NRSDP - Needy Rubber Smallholder Development Program OAE - Office of Agricultural Economics, MOAC ORRAF - Office of the Rubber Replanting Aid Fund RFD - Royal Forestry Department, MOAC RRC - Rubber Research Center RRIT - Rubber Research Institute of Thailand, DOA FOR OMCLAL USE ONLY THAILAND - THIRD RUBBER REPLANTING PROJECT Loan and Project Sunmary Borrower: Kingdom of Thailand Beneficiaries: Office of the Rubber Replanting Aid Fund (ORRAF), Department of Agricultural Extension (DOAE), Rubber Research Institute of Thailand (RRIT) and 113,000 rubber replanting farm families. Loan Amount: US$60 million equivalent. Terms: Repayable in 17 years including a grace period of four years at the standard variable interest rate. Project Description: The project would comprise: (a) a four year time slice of ORRAF's agricultural development program, including new rubber replanting of about 50,000 ha p.a. and continuation and completion of past replantings to maturity (about 290,000 ha); (b) ORRAF's related field administration, management and training costs; (c) upgrading of RRIT research centers; Cd) DOAE group processing and marketing centers and replanter training; (e) technical assistance to improve Ci) ORRAF's organization and management structure; and (ii) RRIT's adaptive research, base line surveys and linkages between research and extension. Under the proposed project, the ORRAF program would also be modified to: ensure more cost effective use of financial and staff resources; re-orient targets, resources and procedures to reach the more needy rubber smallholders under a special Needy Rubber Smallholder Development Program; and improve coordination of technical and training support among key rubber development agencies including a clearer demarcation of their responsibil- ities. Risks: Low. Implementation capacity of ORRAF is satisfactory. Provisions have also been made to ensure that sufficient funding would be available. Thi doument ha a restricted distribution and may be used by recipients only in the performane of their official dutis Its contents may not otherwise be disclosed without World Bank authoon. Estimated Cost: ORRAF Local Foreign Total (U.S. $ million) Agricultural development 137.1 57.4 194.5 Administration and training 37.8 .9 38.7 Subtotal 174.9 58.3 233.2 RRIT Research and technical assistance 1.4 0.7 2.1 DOAE Extension, processing and marketing improvement 1.0 1.2 2.2 Base cost 177.3 60.2 237.5 Physical contingencies 0.2 n.s. 0.2 Price contingencies 14.1 11.7 25.8 Total Project Cost al 191.6 71.9 263.5 Financing plan: World Bank 2.1 57.9 60.0 Commonwealth Development Corp. 0.5 14.0 14.5 Government 189.0 - 189.0 Total 191.6 71.9 263.5 Estimated Disbursements: Bank FY 1987 1988 1989 1990 1991 1992 ===--------Ui $ million) Annual 3.3 11.7 15.6 17.1 11.0 1.3 Cumulative 3.3 15.0 30.6 47.7 58.7 60.0 Economic Rate of Return: 18Z a/ Including taxes and duties of US$7.5 million. REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF THAILAND FOR A THIRD RUBBER REPLANTING PROJECT 1. I submit the following report and recommendation on a proposed loan to the Kingdom of Thailand, for the equivalent of $60.0 million to help finance a Third Rubber Replanting Project. The loan would have a term of 17 years, including four years grace, at the standard variable interest rate. The Commonwealth Development Corporation (CDC) of the United Kingdom would make available a loan of E 10 million ($14.5 million equivalent) to the Kingdom of Thailand. PART I - THE ECONOMY 2. An economic report entitled "Managing Public Resources for Struc- tural Adjustment" (Report No. 4366-TH) was issued on August 31, 1983. It reviewed progress in the implementation of structural adjustment policies and proposed directions for further action. An economic mission visited Thailand in July 1985, and an economic report has been discussed with the Government and is being finalized. It focuses on medium-term issues of resource mobilization, institutional development and employment, as Thailand approaches its Sixth Five-Year Development Plan (October 1986-September 1991). Recent Political Developments 3. Since the early 1970s, the political process in Thailand has broad- ened and matured significantly. Initially, this was accompanied by frequent and sometimes abrupt changes in government leadership. Since the 1977 general elections, however, Thailand has enjoyed a period of greater political stabil- ity and continuity of policy. Cabinet shuffles have continued to take place, reflecting shifts in the makeup of the coalitions of political parties, mili- tary and business leaders, and technocrats, which have governed the country for the past five years. However, only one change in Prime Minister has occurred during this period. General Prem Tinsulanonda was appointed as Prime Minister in March 1980 and has been successful in mobilizing support for a major program of economic structural adjustment, embodied in the Fifth Five- Year Plan, 1982-86. Senior civil servants supporting this program were given key positions in the public sector. Although there are continuing internal debates on the details and speed of policy implementation, overall, a broad public consensus on national policy priorities has been maintained. 4. National elections were held again on April 18, 1983, in which can- didates from ten parties were elected to Parliament. No party secured an out- right majority, but Prime Minister Prem succeeded in forming a new four-party coalition which includes two of the three leading parties and has the backing of approximately two-thirds of the elected representatives. As part of a gradual constitutional reform aiming at increased representative government, transitional arrangements had been in place to permit serving military, civilian and other non-elected officials to continue to play a stabilizing role in both the legislative and executive branches of government through their appointment to the Senate and to Cabinet posts. These transitional arrangements have lapsed, curtailing the Senate's powers and prohibiting military and civilian officials from participating in the Cabinet. These changes, when combined with the current coalition's diversity and the Prime Minister's lack of an independent political power base, have made it necessary to take time to achieve and maintain consensus on difficult economic issues. This approach may in part have helped the Covernment to withstand two attempt- ed coups. The Government has recently endorsed a set of broad objectives for Thailand's Sixth Five-Year Plan (1987-91). The main themes for the plan con- cern continuation and completion of investment programs included in the Fifth Plan and measures to improve economic efficiency and institutional administration. Past Economic Trends 5. Thailand's economy grew rapidly over the past two decades and devel- oped successfully by most standards of international comparison. The 7% per annum GDP growth combined with a population growth of about 2Z per annum allowed per capita incomes to grow at almost 5% per annum during 1960-80, among the highest sustained rates for developing countries. The reduction of poverty was substantial for a country still among the lowest third of middle- income developing countries, as the overall incidence of poverty dropped from about 57% in the early 1960s to about 32% in the mid-1970s and 24% by 1981. Despite its continuing reliance on agriculture, Thailand experienced a far- reaching transformation of its economic and social structure during the past two decades, with a high growth in modern industrial and service sector activities, extension of transport and communications infrastructure throughout the country, rapid modernization, and a significant increase in the openness of the economy to trade and capital flows, tourism and international labor migration. The rapid growth in Thailand's exports played a particularly important role in stimulating aggregate demand and providing the necessary means to finance imports. Moreover, because of this rapid export growth, the Thai debt service burden remained moderate. 6. However, because of its increased openness, its heavy dependence on imported oil, and an expansionary fiscal stance in the late 1970s, the Thai economy was substantially affected by the two oil price shocks and by the ensuing international economic upheaval. A relatively high rate of overall growth was maintained initially, but this was accompanied by accelerating inflation, large fiscal and external deficits and growing dependence on for- eign borrowing. Consumer prices increased by 10% in 1979, by 20% in 1980, and by 13% in 1981. The Central Government deficit has exceeded 4% of GDP since 1979. Notwithstanding continued rapid export growth, the current account deficit amounted to about 7% of CDP from 1979 to 1983; consequently, there has been a rapid accumulation of Thailand's traditionally low external debt. 7. Initially, the Government was slow in responding to the changing external conditions, but, beginning in 1980, policy adjustments were under- taken at a gradually accelerating pace through 1982. They included sharp increases in prices for most petroleum products, electricity and other public services, measures to increase government revenues, a substantial increase in real interest rates, and the changes in regulations to increase financial stability and monetary restraint. In October 1981, the Government inaugurated its Fifth Five-Year Plan (1982-36) which made structural adjustment one of its major priorities. In March 1982, the first SAL for Thailand was approved, followed by SAL II in March 1983. Under these loans the Government committed itself to taking steps toward adjustments in the structure of the economy through reductions in domestic price controls, export taxes and controls over agricultural exports, developing a program for improved land tenure, taking steps toward rationalization of the structure of incentives for industrial production, exports, and investment, promoting energy conservation and efficient development of domestic energy resources, and improving the Govern- ment's tax structure and administration, pubLic investment planning, and other areas of public administration. Progress under both SALs was satisfactory, although implementation of SAL II was at a somewhat slower pace than original- ly expected, especially in the area of public resource management and institu- tional development. 8. Macroeconomic developments in Thailand during the last three years (1982-85) have been strongly influenced by a number of external factors. The most important of these were the worldwide recession in 1982, gradual recovery in 1983 and 1984, continuing high interest rates and increasing strength of the dollar to which the baht was linked until November 1984, and increasing protectionism in OECD countries. The average growth rate of GDP for 1982-84 was about 52 per annum, and for 1985, only 4%. This lower-than-historical growth performance has been due to the external factors cited above. Agricul- tural preduction which had increased slowly in 1982 and 1983 because of poor weather and low commiodity prices, rebounded in 1984 and 1985 as weather improved permitting paddy rice, maize, and cassava production to reach record levels. As a result of weak domestic demand, lower international prices, and an appreciating exchange rate, domestic inflation dropped from 13Z in 1981 to less than 7% in 1983 and 1Z in 1984. Following devaluation, it has risen modestly to 3% in 1985. 9. Thailand's current account deficit has remained stubbornly high throughout the early 1980s reaching a high of 7.5% in 1983, and falling to 5.OZ in 1984 and with a slowdown of the economy, to about 4% in 1985. These persistent and unsustainable deficits have had two primary causes. First, between 1981 and 1984, Thailand's exports lost competitiveness as the baht appreciated in relation to the currencies of most of its trading partners. By mid-1984, it was clear that the real appreciation of the baht which was pegged to the US dollar was undermining the stabilization and restructuring mea- sures. In November 1984, therefore, the baht was devalued by 14.8% and de- linked from the dollar. This has already had a beneficial impact oni manufac- tured exports, which are expected to rise by 13% in real terms in 1985, and in curbing consumer imports. The devaluation has had relatively little impact on inflation. Second, the external imbaLance has been also due to an excessive public sector investment savings-gap, which averaged about 5% of GDP since 1980. Reducing this deficit through taxation and cost recovery measures and through careful expenditure management is a high priority for the Government. This priority is being supported by an IMF standby (signed in May 1985). Development Constraints and Prospects 10. During the 1980s, many of the positive factors which contributed to Thailand's rapid economic growth and reduction in poverty over the preceding two decades will continue to do so, including the relatively equitable distri- bution of agricultural land, responsiveness of Thai farmers to improved tech- nology, a good network of public infrastructure, and a dynamic private sector in industry, agriculture and services. Substantial reductions in the rate of population growth between the mid-1960s and late 1970s and discovery of domes- tic gas and oil supplies are further positive factors which will support the continued rapid development of Thailand. 11. Against these favorable factors, however, a number of important con- straints must be recognized and addressed: (a) the rapid growth of Thailand's public sector over the last decade, particularly of major state enterprises, without commensurate growth in public resource mobilization, has posed a serious challenge to improvements in institutional and fiscal management; (b) for the longer term, the exhaustion of agricultural land reserves could severely limit employment growth and exports of the agricultural sector, unless input-intensive agricultural development proceeds; (c) further indus- trial development, exports and employment growth may similarly be limited unless the international competitiveness and diversification of Thai industry are strengthened through correct incentives and support for marketing, finance and technological developments; (d) despite the promising outlook for domestic energy resources, their development is costly and will take time, and thus continued efforts in energy conservation are required; (e) the decline in the population growth rate appears to have slowed in recent years; further reduc- tions will require innovative policies; (f) continued long-term development and poverty alleviation will also depend on continued efforts in human resource development, including education, technical skill development, and improvements in health and nutrition; and (g) finally, the pace of development will increasingly be hampered by inefficient metropolitan growth in Bangkok unless steps are taken to rationalize the city's land use and transport, water drainage and sanitation systems; Thailand's secondary cities, too, require strengthening of their infrastructure and administrative capabilities to prepare them for the expected future growth in urban population. 12. These long-term economic development concerns have been compounded by medium-term adjustment problems as a result of the two oil price shocks and the subsequent world recession accompanied by poor export prospects, high real interest rates and increasing barriers in OECD countries to Thailand exports. While lower oil prices will help, economic projections indicate that even if appropriate policies were fully implemented, economic growth for the remainder of the decade will be lower than Thailand has enjoyed in the past (6.0% per annum for the remainder of the 1980s compared with 7.4% in the late 1970s). Although this growth is better than that of most other developing countries, this will make it more difficult to reduce the incidence of poverty and -5- heightens the need for policies which raise labor absorption and for continued efforts in the areas of human capital development and rural development. 13. To help address these constraints, the Government has sought the assistance of the IMF and the Bank. During the past four years, Thailand made purchases from the IMF under two compensatory financing facilities (SDR 186 million), a buffer stock financing facility (SDR 58 million), and three stand- by arrangements (totalling SDR 667 million). The Third Standby became effec- tive in June 1985 and will run for two and-a-half years during which Thailand will be eligible to purchase SDR 400 million. Thailand sought assistance from the Bank in implementing its structural adjustment program through two struc- tural adjustment loans and sector work, and loans to priority sectors. The Bank is also helping the Government with the development of selected parts of the Sixth Five-Year Plan. Financing Requirements 14. While the Government is making considerable efforts to improve the efficiency and effectiveness of its spending, the implementation of policies needed for a satisfactory rate of economic and social progress will require continued growth in the absolute level of public-expenditures, though they will need to decline somewhat in relation to GDP because of fiscal con- straints. The Government has reduced expenditures as a short-term step and has increased taxes as the basis for longer term increases in revenue gen- eration. While the Government has taken steps to revise the tax structure and to improve tax administration and collections, further measures are needed. In addition, the financial situation of state enterprises, which has improved following tariff increases over the last four years, and cutbacks in overly ambitious investment programs, will need further improvement. The Government is currently reviewing appropriate policies to achieve a more efficient and financially viable state enterprise sector. 15. Despite these policy measures, the demand for external resources will remain substantial. Macroeconomic projections indicate that, even with structural adjustment policies in place, the current account deficit may amount to about 2Z of GDP through the remainder of the 1980s. This will require large amounts of external borrowing, with new commitments totalling about $16 billion over the Sixth Plan period 1987-91, of which more than half is expected to be in the form of public and publicly guaranteed debt. Total debt service payments (including interest on short-term debt) as a percentage of exports of goods and nonfactor services rose from 19% in 1981 to 27% in 1985 and is not expected to fall to below 20% until 1990 even with continued availability of significant levels of concessional assistance and continued improvements in Thailand's debt management strategy. 16. However, because the level of public debt continues to concern Government, it has established the National Debt Policy Committee to coordi- nate and approve all borrowing by the public sector. External borrowing ceilings of $2.1 billion in FY84, $1.6 billion in FY85, and $1.0 billion in FY86 have been set. In addition, the Bank of Thailand is improving its proce- dures for recording private borrowing abroad to keep track of total foreign debt. In this constrained environment, official donors, particularly the -6- Overseas Economic Cooperation Fund of Japan, meet a significant part of Thailand's public external resource requirements, and the balance is being financed mainly through syndicated loan and bond issues that have been competitively priced. In recent years, external agencies, including the Bank, have supported project lending in some sectors that have high social benefit but low foreign exchange savings or earnings. To continue participating in these sectors in Thailand, it is necessary to finance some local currency expenditures in selected projects with low foreign exchange component. PART II - BANK GROUP OPERATIONS IN THAILAND 17. Thailand first borrowed from the Bank Group in 1950 for a railway project and as of March 31, 1986, had received 83 IBRD loans (including 2 third-window loans) and 6 IDA credits, totaling (net of cancellations) $3,446 million in loans and $119 million in credits. As of that date, $807 million remained undisbursed on effective loans and credits. No IDA credits have been extended to Thailand since FY79. Annex II contains a summary statement of Bank Loans, IDA credits and IFC investments. Bank Loans and IDA credits to Thailand, disbursed and outstanding, amounted to $2,294 million as of March 31, 1986 and accounted for 17.6Z of Thailand's total debt (disbursed and outstanding). The Bank Group's share of Thailand's total debt service payments amounted to 11.7Z in 1985. As of March 31, 1986, IFC had made 24 commitments totalling $229 miLlion in 15 projects in Thailand. IFC's investments have been primarily in industry and in the development of financial institutions. Prospects for increased IFC operations in Thailand have been enhanced by expanding private sector investment activity and by increased potential for developing indigenous resources. 18. The sectoral distribution of Bank loans and IDA credits, in percent- age, has been as follows: 30% for energy; 25% for agriculture and ruraL devel- opment; 16Z for transportation; 8Z for telecommunications; 4% for urban devel- opment; 5% for education; 2% for industry; 1Z for population/health/nutrition; and 9% for structural adjustment lending. Overall implementacion of Bank projects in Thailand has improved steadily during the past five years. Thailand's disbursement ratio increased from 17.7% in 1977 to 27.1% in 1985. 19. The main objective of Bank Group activities in Thailand is to pro- mote the country's economic growth and development through structural adjust- ment, productive investments in the key sectors of the economy, and poverty alleviation measures. The economic and sector work program is designed to achieve this objective by assisting the Government to improve its public resource management, enhance the efficiency and competitiveness of productive sectors, and rationalize the policies and investments for infrastructure development. The Government has valued the analytical input and technical assistance provided by the Bank in these areas, and this is reflected in the work done on structural adjustment, including the preparation for SAL III. However, the level of the Bank's future lending to Thailand is likely to continue to be affected by ceilings on public foreign borrowing, reductions in public investment programs, and the availability of foreign commercial and concessional sources of finance. The Government has also indicated its preference to seek highly concassional aid or to use its own resources for education-, health- and population-related investments. As a result, the levels of Bank lending are likely to be at or even below the historical average of the last ten years. In cofinancing, the Bank's primary concern will be to identify appropriate sources of concessional funding for technical assistance associated with Bank operations. The above factors are being taken into account in determining the level and composition of the Bank's operations program in the following areas. 20. Energy. Enerly has been a significant sector for Bank assistance to Thailand. The Bank has helped finance projects for power generation and distribution, for lignite mining, and for the development and processing of hydrocarbon resources. Bank assistance through these projects has served to strengthen the institutions involved in the sector. Policy analyses and dia- logue through CESW and SALs have addressed issues in energy management, plan- ning and the incentive structure. More recently, the Bank collaborated with NESDB through the Energy Assessment Program to help prepare energy policies for the Sixth Plan. The sector's needs and investment programs are likely to remain large, and a number of planning and pricing issues continue to deserve government attention. The Bank's future assistance through energy and power projects combined with a CESW program involving sector work and public invest- ment programming would help the Government to address these issues and to meet the resource requirements for the relatively large investments planned in the sector. 21. Agriculture/Rural Development. The importance of the agriculture sector to the economy and the potential for intensive farming and crop diver- sification suggest that it should normally continue to be a major focus of Bank operations. Past Bank assistance through projects has emphasized devel- opment of the irrigation infrastructure, poverty alleviation, improvements in land tenure, programs for rubber replanting, and strengthening of the delivery systems for extension, research and credit. A number of policy reforms in the areas of institutional coordination, poverty alleviation, land reclas- sification, and reduced export taxation have been implemented with support from the Bank's CESW program and via SALs. Future operations are expected to continue these efforts. However, weaknesses in the provision of support services by Government departments and some outstanding issues in rural credit and mobilization of savings may limit future Bank assistance in these areas. 22. Urban and Water Supply. The Government intends to devote increasing attention to the continued expansion and pressures of urban areas in the country, especially Bangkok. Urban and water supply sectors provide consider- able investment opportunities, but they also involve institutional and cost sharing issues. Ongoing sector work for Bangkok, as well as the preparatory work for urban projects financed or under conside:ation by the Bank, are pro- viding a good basis for assistance in this sector. Future Bank assistance is likely to concentrate on providing essential urban infrastructure and shelter for low-income families in Bangkok and in regional cities. - 8 - 23. Transport. Thailand's transport sector, dominated by road trans- portation, is generally well developed. The Bank has contributed to develop- ing transport infrastructure through project lending for roads, railways, inland waterways and ports. Future Bank role would focus on investments in infrastructure maintenance, operational efficiency, and selected construction, as well as on issues in institutional development, investment planning, and state enterprise finances. 24. Telecommunications. The Bank has been closely associated with the development of the domestic telephone network, and the Bank's first B loan was made in connection with the third and fourth telecomnunications projects. However, the Government's plan for rapid network expansion is straining the institutional/managerial capacity and finances of the implementing agency, the Telephone Organization of Thailand (TOT). It will be necessary for TOT to consolidate its operations before the Bank would be able to participate in the next phase of system expansion. Meanwhile, Bank involvement would continue through supervision of the ongoing project and as part of our economic dialogue. PART III - SECTORAL CONTEXT Background 25. Thailand's agricultural sector accounts for 25Z of CDP, 60X of exports and 70% of employment. During 1960-75, the sector performed excep- tionally well and was able to achieve annual growth rates exceeding 5%; since 1975, however, this has slowed to about 3.5%. Earlier growth was achieved mostly through expansion of cultivated area, but in future crop production must be intensified through increased inputs and diversified into higher value products. 26. With about 4.5 million farm families occupying about 24 million ha, farm sizes are necessarily small, but the size distribution is not particu- larly skewed. Ninety percent of the cultivated area is rainfed. In irrigated areas, intensification of land use has taken place principally through the use of higher yielding varieties of crops, complemented with higher use of technical inputs such as fertilizer and pesticides. In the 1983/84 season, rice was planted on over 60% of the cultivated area; the major tree crops (rubber, coconut and oil palm) on 15Z; maize and cassava each on about 8%, and sugarcane on 5%. In parts of the rainfed areas, the poor natural resource base and the lack of an appropriate teclnology seriously constrain increased agricultural production and continued improvement in incomes. Rubber, because it can grow on poorer soils better than many cash crops like maize and sugar cane, has been less constrained by soil suitability. In the more humid areas, especially in Southern Thailand, it has been the main source of agricultural diversification and poverty alleviation. 27. The benefits of past economic growth have been relatively well dis- tributed chroughout the country. Since most agricultural production is by smallholders, most of the income growth in the sector has accrued to them. -9 - The overall incidence of poverty has been reduced from about 57% of the total population in the early 1960s to about 32Z by the mid-l970s and 24Z by 1981; and from about 61Z to 35Z to 27Z through the same period in the rural areas. In the Lower South region, a major rubber growing area, poverty incidence declined from 55Z in 1975/76 to 19Z in 1981. Since 1981, with a general decline in Thailand's export commodity prices, the incidence of rural poverty may well have worsened. Government Agricultural Policies and Bank Support 28. The main objectives of the Government's agricultural policy are: (a) to increase agricultural efficiency and production as rapidly as possible (particularly where market prospects are favorable); (b) to alleviate rural poverty and to redress interregional income disparities; and (c) to expand agricultural exports rapidly to improve the balance of payments. The Govern- ment's principal strategies are: creation of an environment in which the pri- vate sector has the incentives to increase production, marketing and exports; improved technical packages and support services for intensification and diversification; demarcation of poverty areas for government support programs; and establishment of land use policy for better utilization of land suitable for agriculture, including land titling for individual farmers. 29. The Bank has supported these objectives and strategies through a lending program to strengthen the technical and infrastructural base for improving agricultural production and expanding project planning and imple- menting capacity. Structural adjustment lending has supported improved agricultural pricing policies, especially for rice and rubber. Past Bank financed projects have supported: irrigation, tree crop development, credit, research and extension services of the Ministry of Agriculture and Cooperatives (HOAC), rural/area development (primarily Northeast and North) and land reform and land titling. To date, the Bank has made 24 agricultural loans amounting to $924 million, abouc 25% of total lending to Thailand. The Tree Crop Subsector and the Role of Rubber 30. Tree crops account for about 15% of the planted area in Thailand and a similar proportion of the total value of agricultural production. With the exception of oil palm, tree crop farmers in Thailand are predominantly small- holders. Generally, tree crops have long immature periods with high esta- blishment costs, making it difficult for smallholders to establish the trees initially and then replant at the optimum time. Rubber and coconuts, which dominate the treecrop smallholder subsector, are normally grown on soils not suitable for annual crops and play an important role in poverty alleviation. 31. Rubber is the most important tree crop in Thailand. Although some 530,000 farm families are directly engaged in rubber growing, about 5 million people are estimated to be directly linked to rubber as planters, tappers, traders and processors. Ninety percent of rubber is grown in the Southern Region but it has been expanded to the East, and recently the Northeast, as an alternative to cassava. The statistics are not very accurate but the total rubber area is estimated to be about 1.6 million ha (1984), of which 20-30% is low productivity, old rubber. About 480,000 ha (of which about 200,000 ha are - 10 - in production) have been replanted to high yielding rubber under the Govern- ment-assisted replanting program of the Office of the Rubber Replanting Aid Fund (ORRAF). Rubber production and exports have been increasing at about 5% p.a. over the last decade. In 1983 net exports were about 550,000 tons (92% of production) valued at US$520 million contributing about 12Z to Thailand's foreign exchange earnings. Coconut and oil palm, grown commercially on about 390,000 ha and 54,000 ha respectively, are also mainly confined to the South. Government recently reaffirmed the importance of ORRAF's 50,000 ha/year replanting program, singling out its important contribution to the Sixth Five Year Development Plan (1987-91) notably in export revenue genera- tion and development of the Southern Region. Institutional Arrangements 32. Research and Government plancing material production for all tree crops is the responsibility of the Department of Agriculture (DOA). The DOA's rubber-related activities are handled by the Rubber Research Institute of Thailand (RRIT) while other tree crops fall under DOA's Horticulture Research Institute. Except for immature rubber replanted by ORRAF, extension services are provided by the Department of Agricultural Extension (DOAE). Credit is supplied either by the Bank for Agriculture and Agricultural Cooperatives (BAAC) or private banks. Inputs, except for immature replanted rubber, are provided through commercial channels. Marketing and processing of rubber are carried out efficiently by the private sector. Among the agencies involved in rubber development, ORRAF, RRIT and DOAE are the most important for rubber replanting. Rubber support services are presently coordinated through d Tech- nical Assistance Coordinating Committee and a Planting Materials Committee comprising ORRAF, RRIT and DOAE. Rubber policy is primarily determined through a National Rubber Policy Committee (NRPC) chaired by the Minister of Agriculture and through the ORRAF Board. Replanting Program 33. ORRAF was established in 1960, under the ORRAF Act, to assist farmers in replanting senile low yielding or abandoned rubber with high yield- ing varieties. ORRAF administers the Replanting Fund which receives its income from a general cess levied on rubber exports, supplemented when neces- sary by government subventions (budgetary funds) and, since 1976, jointly by World Bank and Commonwealth Development Corporation (CDC) loans. Under the rubber replanting scheme, ORRAF provides technical and financial support to smallholders. Replanting assistance is provided in kind (high-yielding clonal plant material, fertilizers and agro-chemicals) and in cash (payment for smallholders' labor after completion of specified tasks) over a five and a half year period. 34. The ORRAF replanting program is a highly effective means of trans- ferring new technology to smallholders because it enforces an important measure of discipline that is unlikely to take place through regular extension services. Improper husbandry (timing, amounts and types of fertilizer and chemicals, etc.) during the immature period can jeopardize future yields; and smallholders, with their lack of capital and high sense of risk aversion, tend to use lower than optimal inputs without the program. To date the ORRAF pro- - 11 - gram has enabled about 350,000 families to improve the quality of their rubber (on average, more than quadrupling their rubber yieLds). During the Second Rubber Replanting Project (Loan 2078-TH, 1982-86) about 192,000 ha (averaging 48,000 ha/year) is being replanted and would provide an additional 250,000 tons of rubber exports worth about US$187.5 million (in 1986 prices) per year at full-maturity (i.e. by the year 2000). This compares very favorably with the results of tree crop replanting agencies in other countries. Thailand still has a high proportion of senile rubber (about 25Z of the rubber area) and has a comparative advantage for growing rubber as a smallholder crop (low wage rates, suitable growing conditions, effective private sector), especially in the Southern Region. The proposed Sixth Five Year Development Plan (1987-91) provides for ORRAF to continue rubber replanting at the rate of 50,000 ha per annum and the proposed Project would assist ORRAF to meet these targets. Lessons from Past Bank Tree Crop Lending 35. The Bank has provided two loans to the tree crops subsector: the First Rubber Replanting Project (Loan 1243-TH) for US$50 million, 1977-82; and the Second Rubber Replanting Project (Loan 2078-TH) for US$142 million, 1982-86. Both loans were primarily to finance ORRAF's Rubber Replanting Pro- gram, expanding it from nearly 23,000 ha p.a. in 1976 to the present rate of nearly 50,000 ha per year. The project performance audit report for Loan 1243-TH reaffirmed the project's expected economic rate of return of 20X but drew attention to the need to: evaluate whether ORRAF involvement with rubber smallholders should be extended beyond the present (5-1/2 years) period; imprnve inter-agency coordination between ORRAF, RRIT and DOAE; reevaluate rubber replanting financing and cost recovery arrangements; and assess econo- mic efficiency losses which might arise from the present cess/grant system. During project supervision of the Second Project and preparation of this pro- ject, the need to modify ORRAF's organization and management structure became apparent, especially the need to (a) improve the cost effectiveness of its operations, (b) improve rubber growing technology for different rubber growing zones, (c) increase the period of ORRAF assistance from 5½ to 7½ years to reduce the incidence of premature tapping and (d) revise the replanting pro- gram to reach a larger number of needy rubber farmers instead of just expan- ding replanted area. These findings reflect the fact that, while ORRAF is a well managed, efficient agency, the changing needs of the rubber subsector require policy and institutional changes to accommodate them. This project specifically addresses: (a) the difficulties faced by ORRAF in obtaining a stable and sufficient source of income for its replanting target of 50,000 ha; and (b) the need to more fully exploit further opportunities for (i) improving rubber holders' productivity and income, (ii) reducing the cost of its opera- tions, and (iii) reaching a larger number of smaller/needy rubber growers. 36. ORRAF'S Finances. ORRAF's overall financial position, which is largely dependent on the rubber cess, poses a continuing problem. Cess revenues, which are based on an export price formula, and rubber export tax collections have always exceeded the cost of support to rubber replanters. However, rubber export taxes go directly to general government revenues, and ORRAF has to depend on the cess as the primary source of funds for its operations. Cess income exceeded total ORRAF costs until 1974, averaged about 722 of costs in 1975-79, and dropped to 50X in 1980-84. The reduction was - 12 - primarily due to unexpectedly low rubber prices and consequent shortfalls in cess revenues. In addition to the financial problems affecting the replanting program, funding shortfalls for ORRAF administration have been more acute. By law, 90Z of cess revenue is aLlocated for the ORRAF Replanting Program, 5% for ORRAF Administration costs and 5Z for rubber research (through RRIT). The 5% allocation for administration has covered on average only about one fifth of total ORRAF requirements. While administration costs can be reduced through more cost effective operations, a more realistic allocation of cess revenues for ORRAF administration needs to be introduced. 37. The uncertainty surrounding cess income during the Second Project forced ORRAF to cut back its replanting program in 1984 from the planned 50,000 ha to only 36,700 ha. As a result annual production of 30,000 tons of rubber valued at US$22.5 million at full maturity will be foregone. If interim funding, particularly for administration, had not been obtained from CDC in late 1984, the 1985 program would have suffered also. Effective long term planning and implementation and financial stability and control can only be achieved by changing the cess formula and cess allocations for ORRAF. Some steps, which have already been taken, will be consolidated under the proposed project. 38. Productivity Improvement. Because of the long gestation period of rubber, and the fact that improper husbandry in the early years could under- mine yields much later, the transfer of improved technology to smallholders requires particularly intensive husbandry and input support during the imma- ture period (up to 7-1/2 years). At present, ORRAF's assistance to rubber smallholders is restricted to the first 5-1/2 years of replanting, after which DOAE is responsible for technical advice. With handover before full maturity, a high incidence of early tapping and improper tapping practices occurs with adverse results on yields. One way to reduce this would be for ORRAF (with its enforced discipline) to extend its jurisdiction over replanters from 5-1/2 to 7-1/2 years. This initiative, to be introduced under the proposed project, would also permit one more round of fertilizer to accelerate tree maturity. It would also enable DOAE to more productively assist smallholders "gradu- ating" from the replanting program with proper panel opening and adoption of tapping systems most appropriate for maximizing production and incomes under farm conditions. In tandem with this initiative is the need for RRIT to develop technology packages and practices that are more adapted to the various rubber zones in Thailand. The project would also improve RRIT's Research Centers and provide technical assistance to assess the relevance of research. 39. Assisting the More Needy Growers. The focus on the more needy rubber growers is required because, while the repLanting program has been very effective in reaching the average sized rubber holding, large numbers of small/needy farmers (especially those who cannot afford even to take advantage of the "grant") have been left out. In addition to assisting such farmers financially, many can benefit from government assistance in helping them extend and develop their small rubber plots with adjacent plots presently not eligible for "grant" financed replanting assistance. Similarly greater support through group processing and marketing would enable them to improve the quality and price of their unsmoked sheets. Since ORRAF's replanting tar- get has stabilized, it can devote greater attention to the more needy rubber growers *i collaboration with other government agencies, especially DOAE. -13 - PART IV - THE PROJECT Project Rationale and Objectives 40. The proposed project would be the third in support of the ORRAF pro- gram. Continued Bank lending is justified by the need to assist Government in effecting the difficult policy and institutional changes needed to cater for the evolving needs of the rubber subsector. Of particular importance is the need to (a) change the rubber cess formula and the cess allocation to stabi- lize ORRAF's financial position; (b) improve ORRAF's organization and manage- ment structure; (c) strengthen the replanting program for the more needy smallholders; and (d) strengthen technology transfer jointly with RRIT and DOAE. 41. The proposed project was prepared by ORRAF with assistance from the Bank and CDC in 1984/85. Appraisal took place in May/June 1985. Negotiations were held in March 1986. The Thai delegation was led by Mr. Pong Sono, Deputy Permanent Secretary, Ministry of Agriculture and Cooperatives. 42. The project would consist of: a four year time slice of ORRAF's agricultural development program and related field administration, management and training costs; upgrading of research centers for the Rubber Research Institute of Thailand (RRIT); Department of Agricultural Extension (DOAE) support of group processing and marketing centers and replanter training; and technical assistance to improve ORRAF's organization and management structure and RRIT's adaptive research, base line surveys and linkages between research and extension. Under the proposed project the ORRAF program would be modified to (a) ensure more cost effective use of financial and staff resources and (b) re-orient targets, resources and procedures to reach more needy rubber smallholders under a special Needy Rubber Smallholder Development Program. Furthermore, arrangements for better coordination of farmer support among key rubber development agencies and a clearer demarcation of their responsibilities would be instituted. A Staff Appraisal Report (No. 5894-TH, dated April 23, 1986) is being distributed separately. Supplementary Project information is provided in Annex III. Project Description 43. ORRAF's program from FY 1987-1991 includes: (a) the continuation of its successful replanting program (para. 34) at a rate of 50,000 ha of new replanting p.a.; (b) the continuation and completion of 290,000 ha of replant- ing already starred; (c) the strengthening of training (including upgrading of equipment and fellowship assistance for management training of middle-level manager); and (d) support for ORRAF's field administration and operations. Assurances were obtained from ORRAF that the training would be carried out and fellowships administered under a program acceptable to the Bank. 44. Agricultural support will be improved with extension of ORRAF support for the replanter from 5½ years to 7½ years, thus permitting an extra round of fertilizer application and better control of premature initial tap- ping. Responsibilities for extension and training for various stages of the - 14 - replanting of beneficiaries has also been agreed among ORRAF, RRIT and DOAE. Assurances were obtained from Government that (i) the agreed extension of ORRAF support and (ii) the agreed demarcation of extension/training responsi- bilities among ORRAF, RRIT and DOAE, would be confirmed through MOAC issuance of a ministerial order by December 31, 1986. 45. The project would also support DOAE's important complementary support to the replanting program through timely and focussed training (prima- rily initial tapping and proper tapping systems) of replanters graduating from the program. 46. Coordination of support services for rubber would be improved through the three technical subcommittees under the interministerial National Rubber Policy Committee (chaired by the Minister of Agriculture). These subcomittees would include private sector representatives and would be responsible for resolving issues, and improving and monitoring the services for: (a) planting materials; (b) extension, training and demonstration; and (c) rubber statistics. Assurances were obtained that these subcommittees would be established by December 31, 1986 and maintained thereafter. 47. To assist the more needy rubber farmers, a program (Needy Rubber Smallholder Development Program) would be established by December 31, 1986 and a task force would be set up by NRPC to select target districts on the basis of farm size and income. The task force would ensure that the following arrangements would be introduced: (a) ORRAF would modify its application questionnaires and revise field staff performance targets and incentives to permit better target farmer selection. It would also change replanting assistance criteria to permit limited consolidation of rubber plots. These changes will not compromise the technical standards of the project. (b) ORRAF would introduce potential creditworthy clients to BAAC to determine their eligility for subsistence and supplementary replant- ing credit. (c) DOAE would establish and promote group processing/marketing centers (GPMCs) and set up demonstrations on high level tapping with yield stimulation in the selected districts. (d) MOAC would reorient its supplementary assistance fund (from the Farmers Aid Fund) to irmit the poorer farmers served by the GPMCs to hold back their ruLaer sheets from daily sale and take advantage of higher prices from marketing centers in the selected districts. (e) The Royal Forestry Department (RFD) would issue lease agreements for replanters in gazetted forest areas if ORRAF un'.ertakes the needed surveys on their behalf. Since ORRAF has limited capacity to under- take such surveys extensively, RFD would give top priority to issuing the "right to farm" (Sor Tor Kor) certificates in the identified target districts. ORRAF would, under a pilot program in forest reserves not due for Sor Tor Kor issuance, assist replanters for a nominal fee to obtain the lease agreements. - 15 - This task force would also monitor the progress of the Needy Rubber Smallholder Development Program. Assurances were obtained that the above task force would be established by December 31, 1986. 48. To strengthen RRIT's adaptive research objective to provide recom- mendations which are more relevant to each rubber growing region, the project would support the upgrading and expansion of Surat Thani Rubber Research Center and the Chachoengsao Rubber Research Center through expenditures on civil works (offices, laboratories and staff housing) and vehicle and equipment purchase. 49. To improve the emphasis of adaptive research and RRIT's recommenda- tions for rubber farmers, technical assistance would be provided to: (a) review the conduct of adaptive research, its recommendations and usefulness for extension to RRIT's rubber zones; (b) recommend measures to strengthen the link between research and extension; and (c) assist RRIT in undertaking and evaluating base line (aerial photography/satellite imagery) area and yield surveys. Assurances were obtained that: (a) not later than May 31, 1987, RRIT would have empLoyed these consultants under terms of reference acceptable to the Bank; and (b) that the consultants reports would be sent to the Bank for comnent together with an action plan for implementation. Project Cost and Financing 50. Total project cost is estimated at about US$263 million of which about US$72 million (27%) is foreign exchange. Price contingencies amount to 11 of total base costs, at the following percentage rates of price increase per annum: for local costs -- 3.5% (1986), 5% (1987), 6.8Z (1988), 7% (1989) and 7.1% (1990); and for foreign costs -- 7.22 (1986), 6.8% (1987-88), 7% (1989), and 7.1% for (1990). Physical contingencies of 10% have been included for civil works only; no provision has been made for physical contingencies on other items because the project supports a time slice of an ongoing investment program where a large proportion of the operating expenses are known, and the major sources of uncertainty are not related to physical implementation. 51. The proposed Bank loan of US$60 million and the CDC financing of 10 million (US$14.5 million) would cover 29% of project costs net of taxes and duties. The CDC loan and the Bank loan will be passed on by Government to ORRAF as a grant. The remaining local costs of ORRAF would be covered by allocation from the Bureau of the Budget (BOB) (US$8.8 million) and ORRAF's own resources (US$175.3 million), primarily from the cess. The Bank loan would contain cross default provisions with the CDC loan, including the provision that the CDC loan become effective by March 31, 1987. The Government proposes to finance the RRTT and DOAE components (paras. 45, 47(c), 48, and 49) with US$1.8 million from the ongoing National Agricultural Research Project (Loan 1922-TH), US$550,000 from the ongoing National Agricultural Extension Project (Loan 1752-TH), and US$2.5 million from local resources. The Government is seeking external grant financing for US$180,000 in technical assistance for RRIT and ORRAF and US$47,000 for RRIT vehicles at Chachoengsao, which would reduce the local government contribution or Bank financing accordingly. - 16 - Procurement 52. Procurement arrangements are summarized in the table below: PROCUREMENT ARRANGEMENTS /a Procurement Method Total Project Cost Item ICB LCB Other cost --- (US$ million) -------- OBRAE Fertilizer and chemicals 74.0 9.8 3.0 86.8 (35.9) (4.7) (1.4) (42.0) Vehicles, equipment and materials 0.8 0.4 1.2 (0.4) (0.2) (0.6) Administrative expenses - - 47.1 (17.0) Consultancies and training - 0.4 0.4 (0.4) (0.4) Other development expenditures /b - - - 123.2 -) Subtotal 74.0 10.6 3.8 258.7 (35.9) (5.1) (2.0) (60.0) RRIT /c 2.4 DOAE /d 2.5 C-) Total 74.0 10.6 3.8 263.6 (35.9) (5.1) (2.0) (60.0) /a Figures in parenthesis refer to amount of Bank financing. 7i Primarily cash "grant" payment, planting material and miscellaneous costs. /c Procurement arrangements specified in Loan 1922-TH. 7T Procurement arrangements specified in Loan 1752-TH. 53. Of total compound fertilizer contracts costing US$77.0 million, about 95% (US$74.0 million) would be procured in bulk by ORRAF through inter- national competitive bidding (ICB) in accordance with Bank Group guidelines. A preference equal to 15% of the c.i.f. cost or the customs duty, whichever is lower, would be extended to local manufacturers in the evaluation of bids. The following contracts would be awarded on the basis of local competitive bidding (LCB) in accordance with procurement procedures acceptable to the Bank: (a) rock phosphate fertilizers and agro-chemicals (up to US$9.8 mil- - 17 - lion); (b) vehicles and equipment; and (c) civil works. Other contracts for vehicles, equipment and materials (including supplies, fuel and spare parts) costing less than US$30,000 each, up to an aggregate amount of US$400,000, would be purchased by prudent shopping on the basis of at least three price quotations. Urgently needed compound fertilizer (up to US$3 million limit) could also be purchased by prudent shopping. Consultancies would be selected in accordance with Bank guidelines. Administrative expenditures (ORRAF field development staff salaries) are not subject to procurement. For all contracts estimated to exceed $500,000, prior review by the Bank wouLd be required. Disbursement 54. The proposed Bank loan of $60 million would be disbursed to ORRAF as follows: (a) equipment, vehicles, fertilizers and chemicals -- 1002 of foreign expenditures, 100Z of local expenditures (ex-factory), and 50X of local expenditures for items procured locally; (b) Consultants' services and training -- 100%; and (c) ORRAF's field staff salaries -- 65%. Bank disburse- ments for salaries of ORRAF field offices and disbursements for vehicles, equipment and materials with contracto of less than US$20,000 each would be made against statements of expenditure. The statements of expenditure would be certified by ORRAF. Supporting documentation will be retained by ORRAF and made available for review by supervision missions. These statements would be audited by the Office of the Auditor General. 55. In order to provide for efficient disbursement of Bank loan pro- ceeds, a Special Account for the ORRAF component would be opened in dollars in e bank on terms and conditions satisfactory to the Bank, with an initial deposit of US$3.0 million. Applications for replenishment of this account would be submitted quarterly or whenever the Special Account is drawn down to '0% of its initial deposit whichever is earlier. Organization, Management and Finances 56. Steps to improve the predictability and adequacy of ORRAF's funding have been initiated with approval of the draft amendment of the ORRAF Act by the ORRAF Board, NRPC and, in July 1985, by Cabinet. This amendment (a) changes the price dependent cess formula to a flat (baht/kg) rate, and (b) increases the proportion of cess revenue allocated for ORRAF adminis- tration costs from 5% to 10%. However, since the parliamentary approval process could take years, the proposed project has been based on the existing cess formula and allocation system. During the interim period, assurances were obtained from Government and ORRAF that annual reviews, commencing not later than October 1, 1987, would be held among the Bank, ORRAF and Government to ensure and agree on adequate funding. A task force of the ORRAF Board, comprising representatives from ORRAF, MOAC, Fiscal Policy Office, NESDB, DOAE and RRIT and farmers representatives, would analyze the problem and make recommendations for this tripartite review. Government intends, in any case, to press for the passage of the ORRAF Act amendments during the project period as a matter of priority and an assurance was obtained from Government that it would take the necessary steps, by September 30, 1990, to introduce a flat rate (baht/kg) cess and increase the proportion of cess revenues for ORRAF administration costs to at least 10%. - 13 - 57. To minimize disruption in funding (see para 37) a conservative assessment of cess revenues has been made, based on projected rubber prices and historical forecasting experience, and Government has agreed that ORRAF would continue to be permitted to draw on the interest payments from surpluses in the replanting account towards administration costs. It is estimated that at completion of the proposed project (September 30, 1990) ORRAF would require about $91 million (1986 constant dollars) to maintain and complete immature rubber replantings underway. Assurances were obtained that, after project completion, Government would provide ORRAF with the necessary funds to bring into production ongoing rubber replantings initiated under the project. 58. The success of the replanting program has been helped by the schedu- ling of "grant" replanting payments to effect timely input use and yet provide sufficient incentives for critical husbandry. Assurances were obtained that, during the project period, Government, ORRAF and the Bank will hold joint reviews annually, commencing by October 1, 1987, to determine the adequacy of the "grant" taking into account: (a) the cost of providing fertilizer and other material inputs in adequate quantities; and (b) the sufficiency of cash payments for farmers' labor. This review would be undertaken by the proposed task force of the ORRAF Board for reviewing the adequacy of ORRAF financing (para. 55). 59. To improve cost effectiveness, ORRAF has initiated the following main measures: (a) reduction in ORRAF planting material nurseries (especially those experiencing large losses and those located in areas where private nur- series are readily available); (b) elimination of subsidies to defray part of farmers' cost in transporting fertilizer from ORRAF stockists to the farm; and (c) improvement of staff productivity through (i) streamlining the applica- tions and approval process and (ii) increased computerization of replanting records. Technical assistance to effect (a) and (c) is being financed under the Second Project (Loan 2078-TH). Assurances were obtained that ORRAF would complete, under the proposed project, the relevant cost reduction measures recently initiated through the Second Rubber Replanting Project, as agreed with the Bank. 60. To further improve the organizational and management structure of ORRAF, technical assistance (22 man-months of local consultancy) would be financed to reassess: (a) the organizational structure of ORRAF; (b) the links between technical and financial staff; (c) the extent of decentraliza- tion needed; and (d) information and organizational needs for improving its planning and monitoring capability including the role of the Planning and Monitoring Unit. About 9 man-months of additional consultancies would also be financed to improve ORRAF's socio-economic survey work. Assurances were obtained that: (a) not later than May 31, 1987, ORRAF would have employed these consultants under terms of reference acceptable to the Bank; and (b) that the consultants reports would be sent to the Bank for comment together with an action plan for implementation. Monitoring and Evaluaticn 61. The Planning and Monitoring Unit in ORRAF is responsible for monitoring the implementation of the rubber replanting program particularly - 19 - with regard to the socio-economic impact of rubber replanting, smallholder incentives and program participation. Its role in the administrative struc- ture of ORRAF will be reexamined with technical assistance provided under the project (para. 59). Accounts and Audits 62. ORRAF's accounts are audited by the Office of the Auditor General at the end of each financial year on the basis of guidelines recommended by the Bank for the Second Tree Crops Project. ORRAF's internal auditing is carried out by a special unit which is responsible to its Deputy Director for Finance and Administration. The internal audit unit staff are competent and ORRAF's accounting and auditing procedures are satisfactory. Assurances were obtained that ORRAF would: (a) maintain, in accordance with sound accounting practices, records of its financial and operational activities; (b) have its accounts for each fiscal year audited by independent auditors acceptable to the Bank, in accordance with appropriate auditing procedures consistently applied; and (c) submit to the Bank within six months of the end of every fiscal year during project implementation a certified copy of the auditor's report including a separate opinion in respect of disbursements made on the basis of statements of expenditure. Similar assurances, in line with existing arrangements under present Bank projects with DOA (for RRIT) and DOAE, have also been obtained for the DOA and DOAE components. Cost Recovery 63. The ORRAF "'grant" presently represents about 51% of the market cost of replanting one hectare of rubber or about 46Z of the farmer's incremental costs of replanting when income foregone is taken into account. Cost recovery of the ORRAF "grant" can be viewed in tw-o ways: (a) as a "pension fund" where beneficiaries have paid into the replanting fund in the form of cess collected during their pre-replanting years and can now draw on these payments as pen- sion (the "grant"); or (b) as a loan to be recaptured through the cess (as rubber taxation) on future production. Under both perspectives, the ORRAF program gives good cost recovery. For the former, a typical new planter in the mid 1960s would have approximately paid for the replanting "grant" he/she would receive starting in the late 1980s under the project (with a discount rate of only 3%). Similarly, for the latter, the total ORRAF "grant" cost would, on average, be more than recovered by the cess over the life of the replant (at 12% interest). In sum, project costs would be more than adequate- ly recovered by taxation specific to the rubber industry. Benefits and Risks 64. The proposed project has many attractive features: its economic rate of return is adequate (18%) after having taken into account (a) the cost of administering the ORRAF program, (b) the opportunity cost of replanting senile rubber land and (c) the cost of distortions to rubber prices implied by the cess. The investment cost per person directly benefited is low (US$381) and the number of persons directly benefited is large (estimated at about 113,000 families, most of whom are in relative poverty). Over a period of 35 years, incremental production attributed to the project (4.1 million tons) - 20 - would be worth US$3.8 billion (1986 constant prices), virtually all of which would be foreign exchange earnings. Of the increased employment opportunities (equivalent to almost 120,000 man years p.a. at full development), at least half would be for women. The typical ORRAF-assisted replanter (with about 4 ha of land, about half of which is under rubber) will experience income/ capita net improvements at about 43Z (from US$208 to US$298) over the life of the replant. Group processing and marketing assistance and high level tapping with yield stimulation supported through DOAE would directly benefit nearly 10,000 needy rubber smallholder families. The secondary effect of improving incomes of other replanting beneficiaries (e.g. through increased demand for hired labor) could be almost as large. 65. The level of risk associated with the project is quite low. Rubber prices for 1986 (estimated at US$0.88/kg in constant 1984 terms for RSS 1, New York) ranks with 1975 as the lowest level since 1940 and long term prospects are for improvement from this cyclical low to about 1.28 constant 1984 dollars per kg. The primary implementing agency, ORRAF, is effectively implementing a large-scale rubber replanting program whose staff are well accepted by farmers. Related agencies are committed to coordinating their activities more closely but continued monitoring of the proposed coordination framework would be required. The main project risk is the repetition of cess revenue short- falls and the adverse impact on implementation encountered by the Second Tree Crops Project because of lower than projected rubber prices (paras. 36-37). This prospect has been reduced by making a more conservative assumption of cess revenues during the project period. Environmental Impact 66. The project would mainly replace existing old rubber with new rub- ber, and less than 1OZ of the area to be replanted would need terracing to prevent runoff and erosion. The scattered nature of the plantings would limit the impact of such runoff and of dissolved plant nutrients. Intercroppinp would be confined to the flat and slightly undulating land to minimize risk of soil erosion. Fertilizers would be applied to avoid depletion of soil nutri- ents. The relatively small amounts of agrochemicals used would have no adverse environmental effects. PART V - RECOMMENDATION 67. 1 am satisfied that the proposed loan complies with the Articles of Agreement of the Bank, and recommend that the Executive Directors approve the proposed loan. A.W. Clausen President Attachments April 21, 1986 Washington, D.C. ANNEX I _ 21_ Page 1 of 6 DDINNO'MIS OF SOCIAL reDucTRoS Nou Acltoughsheldataedrawn ro sou w lyjudpdthemosautauiave andrliatshod lbso beuse thbustheysynot bemtma ly _ampab beme d the lack of sandilm deluitlam d conet usd by dilem cosum in ca4ctg the data. The data ame uethelee usefu to deib atdetn of magnitude. nditca tmads. aud dasuc crmain mqo- d4iemnm betwee count The teae oaa (m sIt amem country poup of the sutbject cou ad (2) a country group with somewhat highr average tcre then tbe county group of tsbject sycpt for -Higs 1mc OIl Eporte" group where Midde Income North Arinca and Mdde Easr machos buof strangr sociocultuIral titall refeonce g pop daoa t avwag ae popdainnwmght artmei na ror each indicator sdo shown only wben maoty aftecauuieinagroupadataforthainbcaoSinceh coeaeofountriesamogtheidc depensoth* avilabilityofdata ndisnauniform. cada mubt c mdi relating averas. Maoe indiam tor toaer T1hs avee are only usful mcomparg th value af on midmcator at a tiime amng te coun and refre ce groupt AREA (thousand sq.km.) Crud BWA Rot (per thomuO-Nuumber of livc births in the year Tad-Total surface area compnsing land area and inland water; per thousad of mid-year population: 1960. 1970. and 1983 data. 1960.1970 and 1983 data. Cr Deah Race (per tho-tund)-Number o' deaths in the year Agrkulrwni-Estimate of agricultural area used temporily or per thouand of mid-year population; 1960. 1970, and 1933 data. permanently for cropspastur market and kitchen prdens or to Gre *Rp erweu hit-Average number of daughters a woman lie fallow. 1960. 1970 and 1982 data. will bear in her normal reproductive peiod if she expeienc present age-specie fertility rates; usually five-year averages ending GNP PER CAPITA (USS)-NP per caita estimates at current in 1960. 1970. and 1983. market prices, calcuated by samte converson method as World &a PluiAepms.A ulthmd-nulan- BmkAtha 1981-83basis); 1983da data.A F&V* -Acpnes# AA_o (thoueu Annual num- ber of aeptors of birth-cotrol devices under auspices of national ENERGY CONSUMPTION PER CAPITA-Annual apparet family planning program. consumption of commercial primary energy (coal and lignite, Fam* PIm-Uss (percet e fma-ld uswmeae)-The perccn- petrokum natural gas and bydro-. nuclear and geothermal elec- tap of married women of child-bearing age who are pacticing or tricity) in kilograms of oil equivalent per capita 1960. 1970. nd whow husbands are practicing any formorcontraception. Women 1932 data. of child-bearing age are genally women aged 1549. although for some countries contraceptive uae is measured for other age POPUIATION AND VITAL STATISTICS groups. Tnd1AleP113ldote. MAd-Yin (thausausi--As ofJuly 1 1960.1970. FOOD AND NUTRmON and 1933 data. _frh.~ hpukdea ( lad:x ond Prvdui Pr Capit (1969-71 - 10)-Index of per Urhm opoldn (prcen oftraea)-Ratio of urban to total capita annual production of all food commodities. Production populatoan different definitions of urban area may affect compar- excludes animal feed and seed for agriculture. Food commodities ability of data among countrie; 1960. 1970. and 1983 data. include primary commodities (eg. sugarcane instead of sugar) Npa'i.u Ph*tia which are edible and contain nutrients (e.g. .offee and tea are Population in year 2000-Tbe projection of population for 2o00. excluded); they comprise cereals root crops. pulses. oil seeds. made for each economy seprately. Starting with infonnati on vegesblks. fruits. nuts. sugarcane and sugar beets. livestock. and totia population by age and sex, ferlity rates. mortality rates. and livestock products. Aggreate production of each country is based itentional migration in the base year 1980. these pamwters on national average producer price weights; 1961-65. 1970. and were projected at fie-year intervals on the basis of generalized 1932 data. assumptions until the population became stationary. hr Capita Supy ofCalls (pecent efrequire-sexrf-Comput- Srasinsy populauion-ls one in which age- and sex-specific mor- ed from calorie equivalent of net food supplies available in country tality rates have not changed over a long period. while age-specific per capita per day. Available supplies comprise domestic produc- fertility rates have simultaneously remained at replacmnt lvel tion. imports less exports. and changes in stock. Net supplies (net reproduction rate-I ). In such a population. the birth rate is exclude animal feed, seeds for use in agriculture. quanmities used in constant and equal to the death rate, the age structure is also food processing. and losses in distribution. Requirements wer constant. and the growth rate is zero. The stationary population estimated by FAO based on physiological needs for normal activity size was esimated on the basis of the projected characteristics of and health considering environmental tenperature. body weights. the population in the year 2000. and the rate of decline of fertility age and sex distribution of population. and allowing 10 percent for rate to replacement level. waste at household level; 1961. 1970 and 1982 data. Popmdaiton Momenrn-ls the tendency for population growth to her Capita Supy of Pre (,grms per dy)-Protein content or continue beyond the time that replacement-levd fertility has been per capita net supply of food per day. Net supply of food is defined achieved that is. even after the net reproduction rate has madied as above. Requirnments for all countries established by USDA unity. The momentum of a population in the year I is measured as provide for minimum allowances of 60 grams of total protein per a ratio of the ultimate stationary population to the population in day and 20 grams of animal and pulse protein. of which 10 grams the year t. given the assumption that fertility remains at mplace- should be animal protein. These standards.are lower than those of m-t level from year t onward. 1935 data. 75 grams of total protein and 23 grams of animal protein as an Ap.asi Densiy average for the world. proposed by FAO in the Third World Food Per sqkm.-Mid-year population per square kilometer (100 hec- Supply. 1961. 1970 and 1982 data. tar) of total area; 1960. 1970. and 1933 data. hr Capita harech Supp fim Amal ud Pise-Protein supply Per sqkm. agricultaral land-Computed as above for agricultural of food derived fromn animals and pulses in grams per day: 196 1-65. land only. 1960. 1970. and 1982 data. 1970 and 1977 data. Puoltl.u Age Structe (percesb)-Children (0-14 years). work- CAd (qes 1-4) Deat Rare (per theasaud)-N umber of deaths of ing age (I 5-64 years), and rd (65 years and over) as percentage children aged 1-4 years per thousand children in the same age of mid-year population; 1960. 1970. and 1983 data. group in a given year. For most developing countries data derived Populutln Gr.mnh Rare (percensrj--otael-Annual growth rates of from lifc tables 1960. 1970 and 1983 data. total mid-year population for 1950-60. 1960.70. and 1970-83. HEACLH Peoplatlen Growt Rare (perceartA-erm-Annual growth rates L4ie Expeceswy s Bir (years)-Number of years a newborn of urban population for 1950-60. 1960-70. and 1970-83 data. infant would live if prevailing patterns of mortality for all people 22 ANNEX I Page 2 of 6 at the time of of its birth wer to stay the sane throughout its lile: A*p-reacher Ratio - primarr. and secondar -Total students en- 1960. 1970 and 1983 data. rolled in primery and xcondary levels divided by numbers of I4w MArtaBty Rar (per shiussd)-Number of infants who die teachers in the corresponding evels. before reaching one year of age per thousand live births in a given year 1960. 1970 and 1983 data. CONSUMPTION A wnte S%fe AfWa (porn of p b.h- X md Nsueqe Cws (per Seeaw- pepulio)-Passenger cars corn- rwal--Number of people (totaL urbat and nanl) with reasonable prie motor cars scating less than eight pewons excludes ambul- aas to safe water supply (mdudes treated surfoce watem or ances hearses and military vehicles. untrated but uncontaminated water such as that from protected Radio ReIWS (pe rhesandpopuatieui-AlI types of receivers boole springs and sanitary wels) as percentages of ti rspec- rot radio broadcasts to geeral public per thousand of population: tive populations In an urban area a public fountain or standpost exdudes un-licensed receivers in countries and in years when located not more than 200 mcters from a house may be ---te I o locate not nore han 20 metrs frm a huse m be ~registration or radio sets was in effect; data for recet years may as being within reaotable acce of that house. In rural areas not be mpamble since most countries abolised licensmng. reasonable seccss wvud imply that the housewife or members of the houselbold do not have to spend a disproportionate part of the day lRo VeRal per thousand popum_TV rxecivers for broadest in fetching dhe family's water needs. to genra public per thousand popuaion excludes unlicensed TV in fcwhing the familfs water needs. mceivers in countries and in years when rgsration of TV sets was Acce sto Ectea Disposa (per'ctw- of ppalidtl -titofal. 'rw-* in effect. ad ral-Number of people (total, urban, and rural) served by *n dlea excreta disposal as percentages of their respective populations. wsp C pe rumpeu )ows the aver- Excreta disposal may include the collection and disposaL with or age circulation of -daily general interest newspaperC- defined as a without treatment. of human excezta and waste-watr by water- perodical publicaton devoted pmnarily to recording general news. borne systems or the use of pit privies and similar installations. It is considered to be -dailyf if it appears at less four tinies a week. PtplArl.e per PAysPam-Population divided by number of prac- Cmewi A _ sEa AtteAaw per Cara pr Yea-Based on the tusing physicians quaified from a medical school at university lewd. number of tickets sold during the year. induding admissions to Popufaiu per Nwsiu Persow-Population divided by number of drive-in cinemas and mobile units. practicing male and female graduate nurses. assistant nurses. practical nurses and nursing auxilaries. LBOR FORCE Popmhu per HNsa Bel-oat, wha, ad sptilation Toa Labs Frc (rhmamdEn-Economically active persons. in- (total. urban. and rurl) divided by their respective number of cludig armed forces and unemployed but excluding housewives. hospital beds available in pulic andprivae. n and specializd students. etc.. covering population of aU ages Definitions in hospitals and rehabiitation centers. Hosptals ar esbshmnts various countries are not comparabk 1960. 1970 and 1983 data. pemanently staffed by at kast one physician. Establbshments prov- Fask (peitarj)-$rnale labor force as percentage or total labor iding principally custodial care are not induded. Rural hospitals force. however. indude health and medil centers not permanendy staffed X,iere (percearl-Labor force in fanning. forestry. hunting by a physician (but by a medical assistant. nurns midwife. etc.) and fishing as percentage of total labor force: 1960. 1970 and 1980 which offer in-patient acconunodation and provide a limited range data. of medical acsities.t (percetr)-Labor force in mining. construction. manu- Admissiaw poer Hospisf hi-Total number of admissions to or facturing and electricity, water and gas as percentage of total labor dischargcs from hospitals divided by the number of beds. force 1960. 1970 and 1980 data. Phuieiaieu Rate (p s-eabatoale. - djfm-4e-articipation HOUSING or activity rates are computed as total. trial and female labor force Aerae Size of HasekAM (per pgr IsJ_ehoMr-atd4 wham as percentages of totaL male and female population of all ages adrend-A household consists of a group of individuals who share respectively: 1960. 1970. and 1983 data. These arc based on lLOas living quarers and their main mcals. A boarder or lodger may or participation rates reflecting age-sex structure of the population. and may not be induded in the housdeold for statistical purpose long time trend. A few estimates are from national sources. Averae Nuw-er of Pleros per Roo_-eA wham, ad &CAT O DATA UNSET TNIAU.i RZPSACNCE GROUPS CIIIZG1TRD AVRRAGI) 1.! MIST (olr mWan KSTh ) lb ~~ £9Th& .~Rruw NICoLE imcam NICOLE floWl 19 -1A 1974L Zn,unlk ArIU U Ancnc IAT. AIRICA 6Ca AL (cMMMAN,I. M) TOTAL 516.0 514.0 516.0 AIUCILUIL 12R.l 141.2 192.8 C CP aUs CRO) .. .. 420.0 1011.1 1675.9 (itocRam or o.L qcvsuT) 4.0 350.0 2h5.0 5bb.6 n3.0 7QIII AND VL IS=CS2r OPLAXMOND-SA CIRWUUS) 26867.0 36370.0 491*9.0 U rSo8 POPULTIU or 0ToL) 12.5 13.2 17.9 35.9 7., POPULsETON Pfl03W10 PWUPMATI0 DI All 2000 (IMLL) 65.1 ITAfOa rPorTUM CILL) 100.0 OPLT Mrf 1.6 roroaar - 1. PO?ULA?TUM 3551W PU SQ. M1. 52.3 7u.S 936.6 35b.9 48.0 PU SO. . ArR!. LSD 209.6 257.7 250.2 1591.2 91.1 ropuLATim st srncnz (2) 0-14 U1S ".6 £6.2 36.1 38.2 38.5 15-66 tS sz.5 50.7 59.1 57.7 57.1 65 AND AOVE 2.7 3.0 3.2 3.5 .2 POPULAT CROWM SATE (2) TOTAL 2.5 3.0 2.3 2.3 2.* URAN 4.6 3.6 4.0 4.1 3.8 c1D DIn RATE (PE moos) 63.9 38.5 27.0 30.1 30.9 cmi nctsn am (PER TINS) 14.7 10.5 8.0 9.4 6.0 GRaO PSUICTIP RATE 3.2 2.7 1.8 1.9 2.U 9illILY PlAInIm ACePTOS. AMOIAL (T11NUS) .. 202.9 Jc 1b3.3. USRIS CZ O HAUS WOEIP) * 15.0 59.0 5b.5 45.3 FOOD AND NEcn ZIC OF FMO PRO. E CAnTs C1965-71-100) 92.0 100.0 138.0 124.4 1)9.0 rat cs.PrA SUPPLY OF CALOUIS CZ OF ISmUR US) 91.0 9n.0 105.0 15.7 113.2 P208KM (C0RM5 PU DAY) 40.0 .7.0 67.0 60.3 69.4 OF MM5 AMIGNAL AND P3USE 11.0 15.0 15.0 Id 14.1 34.2 iLD (AS 1-4) DEAlT TZ 12.9 9.1 4.0 7.2 4.6 LPC EXPECT. Ai NIR (YInRS) 52.3 58.2 63.1 60.6 64.8 PAI MMRT. RMTS (PU LOS) 103.0 74.5 50.0 64.9 59.7 AMES TO SAFE WCu (-101) TOTAL .. 17.0 63.0 It 46.0 05.3 ORB. 60.0 bS.0 /1 57.6 78.5 SAL .. 10.0 63.0 T 37.1 4.2 ACCSS TO CYm DISOSAL CZ OF POPeLATioN) TOrAL *- 17.0 46.0 1. 50.I 5b.3 uN .. 65.0 64.0 l. 5z.v 73.4 20k. ..0 41.0 ie 44.I 25.5 POPUILAn PEE PiTSICIAN 7900.0 8430.0 71W.0 it 7751.7 1909.7 POP. IER MUSING PERSON 4830.u A 7030.0 2400.0 244.6 b0.2 Po. MM HOSPITAL Ia TOrAL 1380.0 89O.0 600.0 lh 1112.1 362.u UAN 260.0 A 180.0 530.0 7 651.4 422.0 RUSAL 21420.0 13860.0 1280.0 7T; 2598.9 2710.7 AIiSSIOII Pl! DSPITAL E .. 31.0 44.8 /b 41.1 27.5 HOSIN A£9AC4 SUZ OP HDUSEHOLD TOTAL 5.5 s 5.8 5.5 hlb DROM 5 ~~s3 5.8 5.5 /b... RURAL 5. 5.5s l AVERAGE NO. w PERcSOu/SIR TOtAL .. .. 2.4 /h URBS .. .. 2.2 7h REAL .. .. 2.4h. PCCTACE OF DHIELLI1S 511W Ml. TOTAL .. 18.9 URBAN 86.1 RURAL .. 9.0 _ 24- ANNEX I Page4 of 6 T A L E 34 PACE 2 THALnAD -SOCIAL INDICATORb DATA SREST TRWALAND RCERECI GROUPS (UCICEGCD AMERAU=) / MOST (MOST EECENT ESTIMATE) .Li RECENT MIDDLE INCONE MIDDLE DNCO l960o!± 1970&!! lESTIMATE& ASIA A PACIFIC LAT. ArMCA A CAR ADJUSTED ENROLLNIUT RATIOS PRIMAKT: TOTAL 83.0 83.0 96.0 100.7 106.7 MALE U8.0 86.0 98.0 104.4 108.5 FEKALE 79.0 79.0 94.0 97.2 104.6 SECOIDArT TOTAL 13.0 17.0 29.0 47.8 ".2 KlE 16.0 20.0 30.0 50.6 42.7 1BLCA 10.0 15.0 27.0 44.8 4.9 VOCATIONAL (S OS SECONDARY) 19.1 22.3 20.9 18.4 13.3 PDPIL-TEAIE RATIO RIKMU 36.0 35.0 25.01 30.4 29.9 S9CODARY 20.0 16.0 23.0 d 22.2 16.7 PASSEER CAIS/TIIOUSAOD POP 1.8 5.1 6.3 A 10.1 46.0 RADIO BCEIVs/OUAIDS POP 6.1 76.3 149.2 172.9 328.3 TV RCIIIRS/BOUSANID POP 2.2 6.6 17.2 58.5 112.4 NESPAPS ("DAILY LIEAL LSZ-) CIUCULTON PER THOUSAND POPULATION 10.6 23.3 53.5 65.3 81.1 CINEA ANMAL ATTEDNCRCAPTA .. 0.4 .. 3.4 2.4 TOTA LU FORCE (TWOS) 13772.0 16958.0 24618.0 FMALE (ERNBM) 48.4 46.8 45.4 33.6 23.6 AGRICILTURZ (PERCENT) 84.0 80.0 76.0 J S2.2 31.4 INDuSTRY (PERCET) 4.0 6.0 9.0 17.9 24.3 PARTICIPATION RAUE (PVRCENT) TOTAL 51.3 46.6 49.8 38.9 33.5 KALE 52.7 49.3 53.7 50.8 51.3 FMALE 49.8 43.9 45.3 26.8 15.9 ECONIC D R RATO 0.9 1.1 0.8 1.1 1.3 PIC OF PRIVTE IICEH RSCEIED sr EIGEEST 52 or 11011s 21.8 I 23.8 23.0 . HI1S 20Z OP SOUSHEOLDS 50.9 j 49.7 1 49.8 4 4.O LOWEST 20S or HOURSUOLDS 6.2 6.1 T 5.6 w 6.4 1LlEST 40S oF HOUS#RDLDS 14.9 15.9 15.2 15.5 - ABSOLUTE 1O93FT! INCOME LEVL (US PE CAPITA) URBAN .. 159.0h .. 288.3 RtAL .. . 106.0 A 151.9 185.3 WTIMATED RELATIu POVERTY C ILVL CUSS PUR CAPITA) URBAN .. . 115.0 4 177.9 519.8 RURAL ., ,, l11.0 164.7 359.7 ESTIMTD POP. BMW ABSOLUTE POVERT INONA LEVEL (C) AN .. .. 15.0 23.5 RURAL .. .. 34.0 A 37.8 NOT AVAIABLE Mr APPLICABLE OrTES /a The grotp averegee foe each Indtcator am populatioa-eighted aritzbtc eman. Coragp of countriea ag the Indicators depend oan avalability of date and La noet for_m Unles otebrwiwe noted, "Dta for 1960" raefr to any yer between 1959 and 1961; "Data for 1970" betwee 1969 and 1971; end data for "Most Recnt Eutimt." betwem 1981 and 1983. Ie Goermnmt progrFm ony; /d 1977; h 1980; If 1979; I 1962; Ab 1976; /L 1972; IL 1968; Ak 1978. Jung, 1985 25 A5..I lupolatim t 30.700 jmd.-194. toamamiat) alp VW capita. U3iff (19364) UIAIUI - X3ONO1c 11mC32013 (on3 aillam at mar. oil CDP aP war e|st |current Priem eIdroat TMie.) 4 ammi lr . 4) fa e at prrm lat _tbat 7riee A t earrt dries.) lodtt ter IMS1913 19f40. 1970.7 197 I98-6b 913-0b 1U6D 3U70 9 * U00 19113/ MATIOPI ACCOOM CGro tic I et 303.3 6.4 6.3 7.6 3.3 5.3 160.0 100.0 300.0 300.0 100.0 i=tm 7.373 3.3 3.3 3.2 3.6 2.6 39.6 23.3 11.5 26.2 19.3 ZUiAU-tt 10.990 113 7.3 11.4 3.3 6.1 13.7 25.3 24.e 27.U 2n.3 larie. 20,27 9.0 7.3 7.9 6.4 6.3 61.5 46.4 Al.7 46.3 32.2 eoa ,t1a 30.931 7.3 7.0 7.3 4.4 4.7 133.7 713.7 79.3 V13.3 79.7 Groaw iawae t 3.932 13.6 3.6 3.2 0.3 6.3 13.7 26.2 23.4 27.9 23.0 exports of GM 9.437 30.3 3.6 13.4 1.3 3.1 17.4 16.7 19.1 23.0 24.3 7_IM. of cm 10,483 13.9 3.7 10.3 1.3 6.4 13.9 21.5 23.7 31.1 27.0 Or.. natioaal .awi- 7.495 13.7 4.1 3.5 1.1 9.2 14.1 21.5 20.7 20.7 19.3 CAmpoaltiLa. of 196 1970 11E73 (19110 1(1831 399/b 7.082 5.3 9.0 14.4 6.4 6.2 100.0 100.0 100.0 100.0 100.0 100.0 PrImE7 4.405 6.2 6.6 10.0 0.1 3.7 97.3 00.3 77.3 60.2 62.2 58.3 Ibaufactare. 2.677 29.2 20.9 25.1 0.9 9.2 2.2 19.3 22.7 39.13 37.a 41.7 . _rCdi11 imort. 9.383 11.3 3.3 10.3 1.2 4.e 100.0 100.0 ln0.0 100.0 100.0 0n.0 7.d 39 4.1 -2.7 11.9 3.6 6.5 9.6 5.4 4.4 3.4 3.3 3LI petrolaen 2.111 11.1 3.0 8.7 -4.7 1.6 10.9 8.e 22.1 31.4 22.3 31.3 Machinry S .quiu..t 2."4 16.1 3.9 7.6 3.3 5.3 23.3 36.1 33.1 23.3 21.5 31.5 Otb. 6.437 10.1 1.0 9.3 4.7 4.9 34.2 49.7 37.7 41.7 47.3 53.2 3973 1977 1979 160 193l 1"2 19 194 1913 PRIM Up Iator 62.6 70.8 83.9 10.O 10.0 111.6 11s.2 316.6 1183. -abama tat 20.4 20.4 20.3 20.3 21.5 23.0 23.0 23.6 27.0 1Ott pile. fIne 67.3 68.3 14.9 100.0 9.3 91.1 93.7 93.1 17.9 Impat pIe, loam 36.2 63.9 131.3 100.0 113.1 316.3 112.6 11.9 116.4 Tatum of ti. L 113.7 103.6 104.3 100.0 66.3 77.0 63.2 132.0 73.4 _ s of Cw 1960 gm7 3973 196 1933 19631. iuJ vmuz / Onraut tyEm 13.6 33.1 11.2 14.0 13.4 15.2 Current euped itia 10.6 32.6 1 1. 13.3 13.1 13.9 Sp_ (4) or deficit (-+ 43.0 +1.2 *1.4 40.3 0.3 -1.7 capital a iLtre 4.3 3.1 3.4 3.9 3.6 4.4 Foraij riminalg 0.2 0.1 0.1 0.2 n0. n.9 1u60-7n 1970-73 1973-eo 19e38/. 13-0b oum 5 CW rat rate (S) 1.4 6.2 6.9 3.1 3.1 cup par capita zRow rat (1) 3.2 3.4 4.6 2.8 3.3 ICOR 2.1 4.0 3.L *.2 *.s0 Iorlml aViapo tate 0.29 0.23 0.21 0.16 0.36 Impact eLattdrty 1.7 0.6 1.3 0.6 n0.7 /a Prlediua.ry. /b Pojected. Ic Central nowromt t017. April 17. 1966 W- r _26 _ 0pLsae * 3 (.73 - (md1-31. chmdf) _p0 iat1 m8m (.13) UILAU - WALMaN OFP FATHOM. 5KTW1. CAPTAL AD BU3? (goS .1111. at curtaut Iua Acotal -At. Pro lectd odiacor 1 470 1976 977 1 76 979 LiO l9en 33W2 13 9 * 1A 136i7 pen twu of toa 'meafctar _ecv_ma 3.,06 3.690 6.129 4.676 4.16 1.191 3,971 9.167 9.000 9.163 9.61 I2.626 11.911 17.11 Of ebieht Ihrcb1.a f...b. 66 2.99 1.456 4.043 3.23 6 .449 6.66 6. 33 6.30 7.237 7.062 7."7 6.929 11.213 rorta go0dea _ mf__actet oarw_ -1.360 -1.692 -3.0"6 -3.39 -3,123 -9.9_ -10.711 -_.29 -1.3117 -131j,3 -30.670 -133219 -2.9 -I0.031 ef icbs Ihucbandim f.o.b. -1.141 -1.143 -6.2'? -6.13 -4.7m7 -41.32 -4920 -G.A06 -10.1.? -10.263 -9.133 9.9111 -30.977 -16.017 It. tact_ macm tlew abroad 23 -62 -9 -264 -680 -610 -99 -1.057 -1.022 -63 -392 -2 -not -1.117 be tinteru 69 23 Ad 40 6n In 122 303 277 176 140 333 161 3a3 Ommm mein.t 3s2mg. -230 -460 -107 -1. -2.064 -2.223 -2.,61 -1.006 -2,371 -2.113 -1."6 -1.06 -1.119 -1.230 ftIe.S direct 1__n 63 79 106S 33 le7 292 139 36 6l1 123 331 30,31 17 EST L_p (at_) *2 268 3" 670 1.413 1.66s 1.631 1.327 1.23U 1.317 old 1.171 97a 1.112 Oft"al 21 109 16l 290 6 26 621 6U 0 861 6s& A6 66 637 302 .oigns A in 119 163 36" 910 1.Off 3.010 67 417 6613 253 127 1l9 lEn Otborr Co - a 91 219 760 762 1.160 -S 3,26 30 66 173 3317 2 12 I7" C- ladlamla. Iacr-a.e) 62 - 93 -369 -36l 116 -60 e420 119 I ls -133 -193 '176 _K r_au.aeieaal tinging 906 1.90 1837 2.353 3.1W7 3.063 2.376 2.632 2.333 2.36 2.771 2.912 .1.3s i 1.nQ9 _-ueuacatm3tof i 6 e x e r & 3 3 1 * I 1 I 2 i CWIL AL 11M c_ae_Sl I 11 52 7m 314 242 230 223 216 250 222 381 639 St7 u2 UAC It 63 NG 6 173 176 In 132 206 210 331 62 w0 399 rs - 7 * 3 * 3 23 19 17 I I 30 A 6 I o*-a - - 39 62 60 69 11 66 27 32 60 27 t1 2 _e_9m aL lo~ Ion 67 3sn 113 1.3 16 2.134 2.e20 1.910 2.033 2.656 3.621 2.417 2.3l3 2.16e OfticIl eapet credits 7 - 1z - - 3 0 9o 216 3" 133 1s13 11 137 t| 19 63 61 131 119 163 29 370 623 300 26 261 234 312 413r mLellaceslL 2 66 33 66 16 o3 64 102 106 t33 132 167 190 26 Priace p_bW4 .erilsba 17 lo1 16 611 62 n9 33 633 322 606 233 132 I3 163 Primut I a 163 277 369 373 M 1.027 79 6m 96 1.617 1.037 1.66 3.461 1.3" Teal e_ di _eam.ca Ie 319 a3 1.216 2.033 2.156 2.211 2.123 2.2e3 2. 20,e 2.62 2,7ns 3.711 BgM Bak had tons) dl.bw3 ei 120 21 1.139 1.320 2.812 6.126 3.169 6.168 7.?. 7. 9 3.133 3.70n .2W 11.387 Officila 291 672 "S 1.236 1.671 27315 2 .66 3.430 6.213 4.763 3.422 6.0" 6.72n 3.517 Priut. 17 1s 226 36 161 1.112 2.2 2.67 2.733 2.79 2.7`7 2.629 2.S13 2.,30 outatmadlv4 a" die3.ruod U12 i3s 3o0 il1 1.261 1.703 2.0" 2.296 2.653 3.163 1.619 6.14 6.776 9.36 Total deft outcadt. .5_ dl4i_yad 710 1.41 1.*09 2.,71 *,073 3.131 7.26 3.436 9.637 10.927 11.137 31.31 l 1.987 17,121 Tondt.hoaed detc Ila 4n 1.364 1.309 2.161 .nnl0 3.033 3.512 1.6 30032 2.613 2663 ^ 1 1,72 Total macuic p.p7ts 162 376 642 P32 '62 1.226 1.125 1.S93 1.768 2.23 2.225 2.4a 2.76i 1,.29 Interast 16 307 126 I90 122 303 686 697 763 "3 913 977 I.nl,0 1.1n Foyan_ s- 2 o3tm of good. '_6 m tactor _e_.ccaa 36.6 31.6 31,0 n 36,1 16.9 121. 15.6 13.9 19.2 21.5 21.6 21.3 71.1 3T7. A_.Sa_ TIterest Nato OaK.. tan. (CZ IC 6.f 7.6 7.n f,6 7.4 9.1 30.2 *.2 6.3 3.7 9. 'n 7T. 7,6 Otectal 9.4 7.9 6.1 3.6 1.6 6.3 7.4 6.7 6.1 7.9 - - - - Privata 6.n 7.1 8.1 3.9 31.ns 13.6 3.4 In.6 3., 9.6 - 4=Low amaturity goS LOOPS (years) IC Z31.' 17.1 14.5 17,3 17.0 16.6 36.7 19.1 20.1 17.2 17.0 16,1 12.9 11.7 0tfteI 39,6 20.6 14.6 21.1 22.6 21.1 22.4 21.6 22.6 23.0 Prrt_e 11.2 7.1 7.0 9.6 10.n 8.6 9.3 11.6 10.7 30.1 e,a rp 3 CZ) !1RenoMM tot" Dug 22.4 13.6 T7.1 31.3 11.9 33.& 12.9 13.3 17.1 17.0 17.3 136.9 I.4 31.7 E13 dibutommts/total sreo, dia3.t*aaut 9.1 11.1 1m.n N. 7.n 6.1 13.0 17.6 13.3 10.2 12.0 ' .1 ' .6 0,6 118 debt _avLce/total debt Ger-Ic, 13.3 Q,4 100 n 3 6 .9 6.3 6.6 6.3 3.9 3.2 32.5 13.6 M? 11.2 10. ODU/Itetl D0 - n07 1.0 n.9 0.r 0.6 0.7 0.6 0.9 0.9 , .9 0.9 ' ,n n.0 ID0 dlabton_mItotal groe. disahawAmue - I.1 1.1 0.6 ,n 7 .2 0.9 0.9 0. 0.37 n.&6 0.71 n017 n.o7 IDA debt _wvtceltotAl debt aar-Ice - ft.s n0 n,n nn 2.0n 0.2 0.0 0.0 n0.4U n0n0 n4.0 n4 n, Am Z of debt outtanding at *ad of 1903 Ibtow.ty .ttuctot of debt outc stdinl Principal due Ithln 5 7ear. 66.n tIacIpol d_ 6itbIn 10 TO&TV 87.9 Internet .wtutor of debt eatetandlix Interest de alttuo fELrat "or 7.9 /- I to cbD_ le c_la*-Elattol. projected data for ert. MLT lon.' includo of the ceaowy Other capttal.' 7W 'Othr caidtal' laclada oat ue of 1Hr funds and mt flow of short-toer capLtGI- 7- InteciZ dita do s aee amtlude nouuoerntaad Pr_Iate debt. Aetll 17. 196 _ 27 _ ANNEX II Page 1 of 3 THE STATUS OF BANK GROUP OPERATIONS IN THAILAND A. STATEMENT OF BANK LOANS AND IDA CREDITS /a (As of March 31, 1985) Amount (S million) Loan or less cancellations credit Undis- number Year Borrower Purpose Bank IDA bursed Fifty-six loans and five credits fully disbursed 1,933.12 93.50 1630 1978 Kingdom of Thailand Irrigation 17.50 - 2.7n 1638 1979 Kingdom of Thailand Urban transportation 7.98 - 0.54 929 1979 Kingdom of Thailand Agriculture - 25.0n 8.56 1752 1979 Kingdom of Thailand Agriculture extension 40.00 - 11.48 1787 1980 Kingdom of Thailand Irrigation Rn.o0 - 44.40 1852 1980 Electricity Generating Power 72.00 - 4.40 Authority of Thailand 1863 1980 Provincial Waterworks Water Supply 40.00 - 22.q2 Authority 1870 1980 Kingdom of Thailand Housing 24.50 - 3.28 1871 1980 Provincial Electricity Rural electrification 75.00 - 13.47 Authority 1889 1980 Kingdom of Thailand Inland waterways 53.n0 - 3n.65 1918 1980 Kingdom of Thailand Ports 47.00 - 44.71 1922 1980 Kingdom of Thailand Agriculture research 30.n0 - 22.72 2000 1981 Electricity Generating Power 100.00 - 37.08 Authority of Thailand 2022 1981 Kingdom of Thailand Irrigation 57.00 - 43.01 2035 1981 Kingdom of Thailand Provincial roads 32.00 - 6.13 2078 1982 Kingdom of Thailand Tree crops 142.00 - 24.31 2143 1982 Telephone Organization Telecommunications 125.10 - 33.18 of Thailand 2178 1982 Kingdom of Thailand Education 52.70 - 31.24 2184 1982 Petroleum Authority of Liquified petroleum gas 80.00 - 37.n7 Thailand 2198 1982 Kingdon of Thailand Agriculture 17.nO - 15.1n 2311 1983 Kingdom of Thailand Provincial roads 100.0o - 75.73 2312 1983 Provincial Electricity Rural electrification 30.60 - 19.45 Authority 2402 19R4 Kingdom of Thailand Rural development 50.n0 - 16.69 2407 1984 Electricity Generating Authority of Thailand Mining 59.1) - 58.86 ANNEX II 28- Page 2 of 3 Amount (S million) Loan or less cancellations credit Undis- number Year Borrower Purpose Bank IDA bursed 2440 1984 Kingdom of Thailand Agriculture 35.00 - 33.36 2520 1985 Kingdom of Thailand 11rban development 27.50 - 27.5n 2548 1985 Bangchak Petroleum Co. Refinery 85.00 - 85.00 2639 1986 Petroleum Authority Energy Thailand 33.00 - 33.00/C Total 3,446.10 118.50 806.56 of which has been repaid 458.79 3.98 Total Now Outstanding 2,987.31 114.52 Amount sold /b 91.23 of which has been repaid 64.no 27.23 Total Now Held by Bank and IDA 2,960.08 114.52 Total Undisbursed 798.no 8.56 806.56 /a The statue if the projects listed in Part A is described in a separate report on all Bank/IDA financed projects in execution, which is updated twice yearly and circulated to the Executive Directors on April 30 and October 31. /b Of which $43.3 million sold to the Bank of Thailand. /c Not yet effective. ANNEX II Page 3 of 3 B. STATEMENT OF IFC IWVESTMENT (As of March 31, 1986) Amounts ($ million) Year Company Type of business Loan Equity Total 1959 Concrete Products and Cement and construction 0.3 - 0.3 Aggregate Co., Ltd. materials 1964/1971 Industrial Finance Corpora- Development finance - 0.4 0.4 tion of Thailand (IFCT) company 1969/1976/ Siam Cement Croup Cement and construction 28.3 4.4 32.7 1978/1980/ materials 1985 1977 Mutual Fund Company Ltd. Money and capi:al market - 0.3 0.3 1977 United Sugar Terminal Ltd. Food and food processing 2.5 0.2 2.7 1978 Siam Commercial Bank Small- and medium-scale 2.0 - 2.0 industries 1979/1980/ Bangkok Glass Industry Co. Class containers 9.9 0.4 10.3 1983 Ltd. 1979/1981/ Siam City Cement Co. Ltd. Cement and construction 113.4 4.7 118.1 1985 materials 1979 Thai Orient Leasing Co. Capital market - 0.1 0.1 Ltd. 1983 Sea Minerals Limited Mining - 0.6 0.6 1983 National Petrochemical Chemicals & petrochemicals - 0.4 0.4 Corporation 1983 Thailand Tantalum Mining 53.5 3.4 56.9 1984 World Aquaculture Food and food processing 2.7 0.6 3.3 1984 Southeast Asia Venture Money & capital market - 1.0 1.0 Investment (Seavi) '986 Hasbhumi Limited Mining - /a /a Total Cross Commitments 212.6 16.5 229.1 Less cancellations, termina- tions, repayments and sales 155.0 4.1 159.1 Net held by the corporation 57.6 12.4 70.0 Total Undisbursed (including participant's portion) 82.6 2.8 85.4 /a $45,969. - 30 - ANNEX III Page 1 THAILAND THIRD RUBBER REPLANTING PROJECT Supplementary Project Information Sheet Section I: Timetable of Key Events (a) Time taken to prepare the project: 15 months (b) Agencies which prepared the project: ORRAF, DOAE and BRIT with assistance from FAOICP and the Bank. (c) Date of first presentation to the Bank: January 1984 (d) Date of Departure of Appraisal Mission: May 1985 (e) Completion of Negotiations: March 1986 (f) ..nned date of effectiveness: October 1986 Section II: Special Bank Implementation Actions None Section III: Special Conditions Government has agreed that: (a) It would take the necessary steps to introduce a flat rate (Baht/kg) cess and increase the proportion of cess revenues for ORRAF admini- stration costs to at least 10Z by September 30, 1990 (para. 56). (b) After project completion, it would provide ORRAF with the necessary funds to bring into production ongoing rubber replantings initiated under the project (para. 57). (c) The Ministry of Agriculture and Cooperatives (MOAC), through the issuance of a ministerial order by December 31, 1986, would confirm the extension of ORRAF's jurisdiction over the replanting benefi- ciary from 5-1/2 years to 7-1/2 years and the allocation of respon- sibilities for extension, training and demonstration, among ORRAF, RRIT and DOAE (para. 44). (d) The National Rubber Policy Committee (NRPC) would by December 31, 1986: (i) establish three Technical Subcommittees (para. 46); (ii) establish a task force to set up the criteria for selecting target districts/subdistricts for the Needy Rubber Smallholders Development Program (NRSDP), monitor progress and implement the NRSDP arrangements (para. 47). - 31 - ANNEX III Page 2 Government and ORRAF have agreed that annual reviews, commencing not later than October 1, 1987, would be held among the Bank, ORRAF, and Govern- ment to (i) ensure and agree an adequate funding for ORRAF (para. 56) and (ii) determine the adequacy of the replanting "grant" (para. 57). ORRAF has agreed that: (a) It would carry out and admir.ister the fellowship for management training under a program acceptable to the Bank (para. 43). (b) It would complete, under the proposed project, the relevant cost reduction measures recently initiated through the Second Project (para. 59) |&P __00 flIo 10 1JP CHINA r,rY' 1l I- 1.< ( ~~~~~~~~~~~~~BURMA -200 * ~~~~~~~~~CingRi2'-THAILAND) \ 20° § f, 2 ]1-azrAtt )* -. \KAMPUCiEA ( ae Hong Son Phiyao LAO PEOPLE'S DEM. REP ^cj ji '-! VI ETrA Chiang Mai Nan Kr' ~~~~~Lamphtin, / S b .< S,7r, f A1 LamnpaTo On~re/N ;INONESIA,/SNGAPOE '< on Kha /tW ,<, SINGAPORENhv S '-b t < / 11'1 l~u 'k 1 - t8NawnhonS4wdn ( S N~~~~~~Lou d RTh akhTX uon f 1 4a : X __-fg'- - taad:x + ± Palhanomfl * 0 R . ako ae t Tak1- > ~.-f Kancha Thaur r P -140 ' 14 txq-4 y '' khul Son,kham A , , .,,. , Ralchabull ~ ~ ~ ~ Th Ca~ 'h6l8b, DEMOCRATIC KAMPUCHEA i20 1W1 j PrachKua Khlri THAILAND NakbilTanmaalTHIRD RUBBER REPLANTING PROJECT z~~~~~~~~~~~5 Thamm;nvqat k .>\\@ ) \$s it ^PzkPhorian EXISTING CONCENTRATION OF RUEBER GROWING B0:< *.. (, , * ORRAF PROVINCE OFFICES ~ 5Mt; KribJ,, @ t ' fl_ \ r: 3 ORRAF HEADOUARTERs ANO NATIONAL CAPITAL 8° uke( Trah *' R X . PRIT RUBBER RESEARCH CENTERS Tr | Tnng bl ng RRIT RU BBER EXPERIMENTALITHIAINING STATIONS . ', do mon ILIiemKrabal, o ,,Ths IthbuFI DEMOCRATIC KAMPUCHEA -120 12"L i e > R DPI U8P ~~~~~~~~~~~~~~Khlrl ) ..Khan ) Oumiphon "Van 'iN~~~~~~~~~~~n / ) o-THAILAND .* )> akh-', SI ThammarTHIRD RUBBER REPLANTING PROJECT . ^. > .... )\9 lNalshk 1 Thomwot\F wjO* > \ . ... 3 < J PakPltana EXISTING CONCENTRATION OP RUBBER GROWING -B° .8. . *PX ( * ORRAF PROVINCE OFFICES ,80i Krab \ g_ vj7 i _) 0 ORRAF HEADQUARTERS AND NATIONAL CAPITAL 'nuXtt -'i \ q '.. * PRIT RUBBER RESEARCH CENTERS T Tr S RRIT RUBBER EXPERIMENTALJTRAINING STATIONS rxX,~5\Xx Zngklihla ROADS RAILWAYS YHal;i wbpattani ti AIRPORTS PORTS Satu;,JrZ * >\i>e l- - CHANGWAT (PROVINCE) BOUNDARIES ___ . { , --REGION BOUNDARIES 0 50 100 150 200 250 300 I athl -t- INTERATIONALBOUNDARIES 0n KILOMETERS 2NA0 20N LO ° t 5 . 0 1 0 0 1 5 0 2 0 0 A MILES M cef AVz im b we di I ~1s*w" _tr S" .v ,ff / Sqa~ c.wset. IS dolwl-"" mM MW MANA DANM &- AM Aw- bM -. V~. - t of41.7 TNUI SW M 54el mU,ww41 tftdW. C.AMft B7A"~A. on -M9b "a a" ~ "ei~'~- _ . M A I A Y S I A '°GLo ^~Wld~w"_wb"#"*X_ tw°o i I