Document of The World Bank FOR OFFICIAL USE ONLY Report No. 15229 PROJECT COMIPLETION REPORT THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-TH) DECEMBER 29, 1995 Infrastructure Operations Division Country Department II Asia-Regional Office This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EOUIVALENTS Currency Unit - Baht (B) Average used in appraisal estimates: (September 1984): US$ = B 27.0 Actual yearly average market values: l/ US$ = B 27.16 (1985) US$ = B 25.59 (1990) = B 26.30 (1986) = B 25.52 (1991) = B 25.72 (1987) = B 25.40 (1992) = B 25.30 (1988) = B 25.32 (1993) = B 25.70 (1989) = B 25.30 (1994: 6 months) Weighted average of loan disbursements for Baht expenditures: US$ = B 25.47 FISCAL YEAR October 1 to September 30 WEIGHTS AND MEASURES m = meter (3.28 feet) sq m = square meter (10.8 square feet) cu m = cubic meter (35.3 cubic feet) km = kilometer (0.62 miles) rai = 0.16 hectare or 0.395 acres ha = hectare (6.25 rai or 2.471 acres ABBREVIATIONS AND ACRONYMS ADAB - Australian Development Assistance Bureau DOLA - Department of Local Administration within MOI LGDO - Local Government Development Office MDF - Municipal Development Fund MOI - Ministry of Interior NESDB - National Economic and Social Development Board NIDA - National Institute for Development Administration OUD - Office of Urban Development within MOI NHA - National Housing Authority PMU - Project Management Unit PPD - Public Prosecution Office PWD - Public Works Department within MOI RCDP - Regional Cities Development Project RTG - Royal Thai Government TOCD - Technical Office for Cities Development within MOI UNCHS - United Nations Centre for Human Settlements UNDP - United Nations Development Program Average market value (rf) values from 'International Financial Statistics' published by the International Monetary Fund. FOR OFFICIAL USE ONLY The World Bank Wauhlngton, D.C. 20433 U.SA. O0fic of th Dirdor-Gerl Options Evwluon December 29, 1995 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Project Completion Report on Thaland Regional Cities Development Project (Loan 2520-TH) The Project Completion Report (PCR) on the Thailand: Regional Cities Project (Loan 2520-T1 approved in FY85) was prepared by the East Asia and Pacific Regional Office, with Part II contributed by the Borrower. The Loan for US$27.5 million was approved on April 23,1985, and closed on June 30, 1994. A total of US$9.3 million was cofinanced by the Australian Government, UNDP, and the United Nations Centre for Human Settlements (UNCHS). A sum of US$7.2 million was canceled at the Borrower's request and an undisbursed balance of US$0.44 million was also canceled. The project was the first Bank supported project of its kind in Thailand. Its objectives were to: stimulate economic development in the three poorest regions by strengthening four key municipalities as productive urban centers; increase their financial autonomy; and help reduce migration to the central region. The project comprised: (i) improving selected basic infrastructure in the project cities; (ii) enhancing their administrative and financial performance and the central government's capacity to assist the municipalities through technical assistance and policy changes; and (iii) establishing a fishport and a commercial/industrial area in Songkhla, one of the project cities. Physical achievements exceeded the appraisal estirnates. More than 450,000 people in the four cities benefited from the infrastructure improvements. Slum upgrading improved the environment of low- income areas. The Songkhla fishport has begun operating. In the project cities, local revenues increased substantially due to the improved tax base and collection efficiency, but the net improvement in financial performance was marginal because of a rapid increase in operating expenses. The project contributed significantly to the new accounting, budgeting, and management systems in the project cities and to the central govemnment capacity to assist development of provincial cities. The estimated economic rate of return for physical components was 30 percent. Project preparation (6 years) and implementation (8 years) took a long time because of the need to arrange complex inter-agency coordination, and slow procurement procedures, shortages of skilled labor and materials, and late addition of previously deferred contracts. The main lessons were: (i) participation of officials at all levels in project preparation and implementation resulted in a strong project ownership and contributed to the cooperation of communities to be benefited; (ii) the project achievements could dissipate unless legislative measures are introduced for strengthening the cities' revenue generating capacities. This document has a restricted distribution and may be used by recipients only in the performance of their I official duties. its contents may not otherwise be disclosed without World Bank authorization. l 2 The project outcome is rated as satisfactory and its institutional development impact as moderate. The sustainability of project benefits is uncertain because of the growth of operating costs which threaten the funding of the operations and maintenance programs of each project city. The PCR is good, but it does not elaborate on the potential project contribution to enhancing the productivity of the regional cities in less developed provinces. The project may be audited. Attachments PROJECT COMPLETION REPORT FOR OFFICIAL USE ONLY THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520 TEl) Table of Contents Page No. Preface .............................. .......................... i Evaluation Summary ......................... ....................... ii PART 1: PROJECT REVIEW FROM BANK'S PERSPECTIVE .1 Project Identity ....................... ........................ 1 Background ......................... ....................... 1 Sector Background and Development Objectives .......................... 1 Project Background and Objectives ........... ................ I Project Description ...................... ....................... 2 Description ........................ ........................ 2 Revisions ........................... 2 Project Organization, Design and Preparation ......... ................... 2 Project Organization .................... ...... ................ 2 Project Design and Preparation .............. ..................... 3 Project Implementation .................... ...................... 3 Loan Processing and Project Start-up ............................ 3 Procurement .......................... 4 Implementation ........................... 5 Project Costs and Financing ...................................... 5 Loan Allocations and Disbursements ............ .................... 6 Project Results ....................... ......................... 6 Physical Results ........................... 6 Financial Results ........................... 6 Economic Results ........................... 7 Institutional Results ................... ........................ 7 Project Sustainability ........................... 8 Bank Performance ....................... ...................... 8 Borrower/Implementing Agency Performance ........... ................. 9 Performnance of Consultants . ........................... 9 Performance of Contractors and Suppliers ............................ 9 Conclusions and Lessons Learned ............... .................... 9 PART 11: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE .........1 ...... I Introduction ........................ ....................... 11 Objective .......................... ....................... 11 Preparation ......................... ....................... 11 Cost ............................. ........................ 12 Project Scope ........................ ....................... 12 Implementation .......................... 13 Project Office and Organization .......................... 13 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Table of Contents (continued) Page No. PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE (continued) Problems and Obstacles ................... ..................... 13 Correction Guidelines ........................ 14 Relations with the World Bank ................ .................... 15 Creation of OUD and Cities' Project Teams ..................... ... 15 Institutional Building in the Cities ........................ 15 Future Project Preparation .................. ..................... 15 PART HII: STATISTICAL INFORMATION ......... ............... 16 1. Related Bank Loans .................... ..................... 16 2. Project Timetable and Issues Raised ......... ............... 17 3. Loan Disbursements .................... ..................... 20 4. Project Implementation: Monitoring Indicators Physical Paramneters ........ .... 22 5. Project Costs and financing ................ ..................... 24 6. Project Benefits ....................... 26 7. Status of Major Covenants ....................... 35 8. Use of Bank Resources ....................... 38 ANNEX 1: Description of the Project ................ ................... 41 Annex 2: Details of Project .................... ...................... 42 Annex 3: Songkhla Fishport: Financial Rate of Return ......................... 46 - i - PROJECT COMPLETION REPORT TEL4ILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-THE PREFACE This is the Project Completion Report (PCR) for the Regional Cities Development Project in Thailand, for which Loan 2520-TH in the amount of US$27.5 million to the Kingdom of Thailand was approved on April 23, 1985. The project was the first Bank supported project of its kind in Thailand. During project implementation, US$7.17 million of the loan amount was canceled at the request of the Borrower. The loan was closed on June 30, 1994 when the undisbursed balance of US$0.44 million was canceled. The final disbursed amount was US$19.89 million, about 72 % of the original loan amount. The borrower also obtained grants from the Australian Development Assistance Bureau (ADAB), an agency of the Australian Government, equivalent to about US$6.79 million for technical assistance on the design and management of the project, training and preparation of a future project. During the project identification and preparation stages, the United Nations Development Program (UNDP) provided grant funds totaling nearly US$1.0 million equivalent for technical assistance. During implementation, UNDP and the United Nations Centre for Human Settlements (UNCHS) granted US$1.5 million equivalent to finance local consultants for construction supervision. The PCR has been prepared jointly by the Infrastructure Operations Division of the Asia Regional Office (Preface, Evaluation Summary and Parts I and III) and the Local Government Development Office (formerly the Office of Urban Development) Department of Local Administration, Ministry of the Interior, Royal Thai Government which prepared Part II. aCLUFr nacKLrouna ann IJevelnnmpnt (i )hisrthuc PROJECT COMPLETION REPORT THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-TH) EVALUATION SUMMARY The Project and its Objectives i. The Regional Cities Development Project was designed to support the Government's efforts to: (1) improve the quality of infrastructure and services in provincial urban centers which lagged behind those of Bangkok and the central region of Thailand; (2) stimulate the economies of the country's provincial regions by correcting key deficiencies which constrained the roles of regional cities as service and market centers for the adjoining, primarily rural, economies; (3) reverse the trend of increasing reliance of regional cities on financial support from the central government; and (4) improve the capacity of the central government agencies to provide technical assistance to regional communities (paras. 1.1-1.4). ii. The project concentrated on four cities in the three least developed regions, namely: Chiang Mai in the Northern Region, Khon Kaen and Korat in the Northeast, and Songkhla in the South (paras. 1.6 and 1.9). iii. Infrastructure works included in the project comprised: transportation, drainage and flood protection facilities; waste water collection and treatment facilities; solid waste collection and disposal equipment and facilities; a combined fishing port and commercial industrial zone in Songkhla; and slum improvements, concentrating primarily on access, fire protection and sanitation. Technical assistance was provided to the cities and the Ministry of Interior (MOI) for construction supervision and to develop and implement efficient project management procedures. iv. The financial and institutional development components of the project included, in addition to project management, technical assistance and training for.the cities and MOI. The objectives for the cities were to strengthen municipal administration in planning, programming, budgeting, financial management, revenue improvement and operation and management of infrastructure. For MOI, the objectives were to strengthen capacity to assist municipalities and to prepare a future project. Implementation Experience v. Feasibility studies, detailed design, and complementary studies of municipal administration and finance reforms were carried out by various consulting organizations with grant aid from the United Nations Development Program (UNDP) and the Australian Development Assistance Bureau (ADAB). Further grant aid from these agencies financed technical assistance on project management and construction supervision. vi. The Bank-supported National Sites and Services Project (Ln. 1870) included studies and advisory assistance on reform of property valuations, and the Land Titling Project (Ln. 2440), also Bank financed, included an urban mapping program. Both of these produced invaluable inputs for this project (paras. 1.6 and 1.33; and Part 111-1). vii. The Ministry of Interior (MOI) had overall responsibility for the project. Its agencies were responsible for some of the detailed design and construction supervision, and the technical staff of - iii - the project cities supervised construction of some of the smaller contracts. The National Housing Authority (NHA) *designed slum improvement components. viii. Various levels of the central government were responsible for policy measures and the municipalities were responsible for implementation of measures to improve administration and operations. ix. These arrangements were logistically demanding, but they proved satisfactory. This was due largely to good cooperation between consultants and government officials and to a high degree of participation at all stages of the project by all levels of government from the municipalities on up. x. The project had very long gestation and implementation periods, however; about 6 years lapsed between project identification and the loan signing, and about 8 years more to project completion. Delays during preparation are attributed to the complexity of the project, the politically sensitive areas it involved, the time required to arrange grant aid, financial constraints which led to downsizing the project after appraisal, a change in Government and, perhaps, the Government's attempt to reduce commitment charges on a loan (paras. 1.19, 1.20, 1.22 and 1.23). xi. Delayed implementation of the physical components, which controlled overall project completion, resulted from cumbersome and slow procedures for procurement and processing of payments, some design changes, shortages of skilled labor and some materials during portions of the construction period, and the addition late in the implementation period of previously deferred contracts once it was clear that financing was adequate (paras. 1.26-1.28 and 1.30-1.32). The institutional components were carried out satisfactorily over the extended implementation period (para. 1.33). xii. The final total project cost was about Bhat 1,118 million (about US$ 43.9 million equivalent) before interest and other charges on the loan during construction. This was about 81 % of the appraisal estimate of Baht 1,375 million. The savings were realized despite the addition to the project of several sub-components and were due mainly to good project management and to price escalation and physical contingencies which were substantially below the appraisal forecasts (paras. 1.34-1.36 and 2.10; Part I11-5a). xiii. The project was financed by the Project cities (22%), the Government (14%), The Bank (45%), ADAB (15%) and UNDP and the United Nations Centre for Human Settlements (4%) (para. 1.36; Part III-Sb). Disbursements from the loan were slow; the total disbursement period was about three years longer than the original forecast. At the Borrower's request, the allocation of the loan proceeds was revised a number of times and about US$7.2 million of the loan was canceled (paras. 1.37 and 1.38; Part 1ll-a and b). Project Results xiv. The physical objectives of the project were exceeded. The infrastructure improvements in the four cities are benefiting more than 450,000 people by reduced property loss and disruption from flooding, improved transportation efficiency and an improved environment through the drainage, waste water and solid wastes systems that were installed. Slum upgrading components improved access, safety and sanitation in low-income area of three of the cities. The Songkhla fishport is operating and promises to achieve a long term net increase in the city's revenues (paras. 1.39, 2.11; Part 111-4). xv. The institutional objectives were satisfied by careful introduction and phasing of changes. MOI and other central government agencies gradually improved their capacities to provide technical assistance to regional communities. In the project cities, tax mapping and tax rolls were completed, fees were increased and collection efficiency has been improved. New accounting, budgeting and - iv - management systems were successfully installed in each municipality. Training targets were met and trainees have generally been employed productively. While the considerable progress in these areas resulted in a much improved revenue base and an increase of nearly 85% in local revenues in the project citiies as a whole, without increases in land or property taxes, operating costs also increased substantially and the net improvement in financial performance was marginal (paras. 1.40-1.45 and 1.49-1.52; Part IlIb). xvi. The appraisal estimate of the economic rate of return (ERR) from the project was 30%, based on elaborate socio-economic and other special surveys. Equivalent data were not available to calculate the ex-post ERR for the PCR. Based on qualitative judgement, however, the ERR is expected to equal or exceed 30 %. The internal financial rate of return (IFRR) for the fishport and commercial/industrial zone at Songkhla, estimated at 7.6% using appraisal data, is now expected to be about 9% on completion (paras. 1.46-1.48 and Part III-6a). Sustainability xvii. Achievement and enhancement of the project's potential benefits requires completion of the operating and maintenance programs that were prepared for each project city, particularly by adequate budget allocations and provision and training of staff. Also, the Government should continue introduction of legislative measures needed to enhance the cities' revenue generation capabilities, and the cities should take full advantage of these by levying fees required to support essential services and take steps to stem the increasing operation cost trend (paras. 1.53 and 1.54). Findings and Lessons Learned xviii. This was a good project, marred by extraordinary implementation delays. All planned measures to strengthen institutions and improve financial performance were eventually taken with reasonably success, and the physical works completed generally exceeded the project quantatative targets. xix. The project was complex, and the first of its type in Thailand. It involved: a variety of construction activities with a high degree of local participation in the successful introduction of improved project planning, management and supervision procedures; and the implementation of difficult reforms in municipal tax bases, revenue collection and management of municipal finances and infrastructure. xx. Two apparent area for criticism are over-estimation of costs and underestimation, by about one-third, of the construction period. The cost estimates, however, anticipated continuation of a period of inflation which, in fact, was brought under control at about the time procurement began. And about half of the time overrun was caused by the reintroduction, late in the construction period, of works previously deferred because of perceived financial constraints. xxi. The principal lessons emerging from the project are: a) in-depth participation in project preparation and implementation by all levels of officials and staff contributes to the cooperation of communities intended to benefit from the project (paras. 1.50 and 2.22); b) the experiences of responsible central government and local agencies can result in valuable suggestions which should be considered seriously for improvement of future projects (paras. 2.14-2.19); - v - c) early agreement between Bank staff, the project authorities and consultants on the organization and content of records and reports of progress and costs produces timely and useful monitoring information (para. 1.58 and Part 111-7); d) the potential for project success increases if it can draw on the products of other projects, in this case the Bank-supported National Sites and Services Project and the Land Titling Project (paras. 1.6 and 1.33; and Part 111-1); e) when audit reports for a number of local entities are required by the Bank, preparation of the reports in the national language should be adequate, provided that an appropriate local agency reviews the audit reports and submits them to the Bank with a statement in English confirming that the accounts have been reviewed and describing steps being taken to implement any recommended improvements (para. 1.59). -1- PROJECT COMPLETION REPORT THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-TH) PART I: PROJECT REVIEW FROM BANK'S PERSPECTIVE Project Identity 1. Project Name: Regional Cities Development Project Loan Number: 2520-TH RVP Unit: Asia Regional Office Country: Thailand Borrower: Kingdom of Thailand Sector: Urban Development Background 1.1 Sector Background and Development Objectives By the early 1980's, the annual rate of growth in Thailand's urban areas was two and one half times faster than the national growth rate, reflecting, in part, increasing rural-urban migration. The main urban growth was in Bangkok with a population of about 5.6 million people, 60% of the total urban population, in the relatively industrialized central region. The central area enjoyed a substantial advantage in economic performance and living standards compared to the predominantly rural provincial areas, thus motivating migration to that area. 1.2 Provision of services and social and industrial infrastructures in the regional cities lagged well behind the central region, and responsibility for services was fragmented among various ministries, state enterprises and the municipalities. Conspicuous infrastructure deficiencies within the responsibilities of the municipalities were inadequate drainage, flood protection, sanitation and road capacity. None of the municipalities had infrastructure to accommodate urban expansion, or sufficient technical and financial resources to deal with a growing backlog of remedial works. 1.3 All of Thailand's municipalities were administered by municipal organizations whose staff, policies, and financial resources fall chiefly under the purview of the Ministry of Interior (MOI). The decision making powers of municipalities were narrowly circumscribed by government regulations which largely determined budgets and expenditure programs, the level of fees for services and the number and quality of staff. Revenue generation was weak and the past failures to allow municipal taxes and to keep pace with expenditures meant not only an increased drain on the central government budget but also inadequate services and maintenance of facilities. 1.4 The Government's Fifth Plan (1982-86) included emphasis on improving economic efficiency and distribution of services. In support, the Bank's urban sector lending strategy for Thailand aimed at, inter alia: strengthening the national agencies and local governments in planning, financing and delivering urban services; and enhancement of urban centers, especially in the peripheral regions, to stimulate economic development. For the regional cities, the emphasis was correction of the key deficiencies which constrained their role as service and market centers to the adjoining rural economy, thus helping them to attract productive activities. 1.5 Project Background and Objectives During a Bank urban sector mission in 1979 to review national policy issues affecting the development of regional cities, agreement was reached on the -2- scope of a project to focus on five cities located in the country's three poorest regions. They were Chiang Mai in the Northern Region, Khon Kaen and Korat (also known as Nakhon Ratchasima) in the Northeast, and Hat Yai and Songkhla in the South. The selection took into consideration economic diversity, growth potential, relative administrative abilities and planned infrastructure investments. 1.6 In 1980, pre-feasibility studies, financed by UNDP with the Bank as executing agency, identified major investments to overcome infrastructure deficiencies in the five cities. During 1982, as part of the Bank supported National Sites and Services Project (Ln. 1870-TH), UNDP-financed feasibility studies, with MOI and UNDP acting jointly as the executing agency, were undertaken together with complementary studies of municipal administration and finance and of property valuation and taxation. On the basis of these studies, the Bank appraised the Regional Cities Development Project in May 1983. The study findings in respect of the project cities were not finally approved by the Government until January 1985, however. 1.7 The project objectives were to: stimulate economic development and regional growth in the three poorest of Thailand's six regions by strengthening the key municipalities to better serve as market and service centers; reduce their financial reliance on the central government; and help ease the pressure of rural to urban migration on the central region. Project Description: 1.8 Description: Annex 1 shows the project description from Schedule 2 of the Loan Agreement. Annex 2 is a summary of the project as described in the Staff Appraisal Report. The project comprised: (a) improvement of selected basic infrastructure in the project cities, including: (i) road and drainage improvements; (ii) wastewater disposal; (iii) solid waste collection and disposal; (iv) flood protection; (v) new roads and bridges; and (vi) road maintenance equipment; (b) provision of a combined fishing port and commercial/industrial zone in one of the cities (Songkhla); and (c) institutional development through policy changes and technical assistance to strengthen; (i) administration and financial performance of the municipalities; and (ii) MOI capacity to carrying out development programs. 1.9 Revisions Between appraisal and negotiations, Thailand's economic circumstances prompted the Government to reassess the investment and borrowing needs of the project. This resulted in the revision of the project components, a reduction in the Government's contribution and a requirement that the project cities carry a greater share of the costs. The limited local resources expected to be available to the cities dictated deferment of some components to a future Phase 2, and one of the original five cities (Hat Yai) declined to participate. The estimate of project costs and the proposed Bank loan were reduced by about 50%. 1.10 Late in the implementation period, when it was clear that financing would be adequate, the Bank approved the Government's request to increase the size of the project by adding back most of the deferred Phase 2 components. Proiect Organization. Design and Preparation 1.11 Project Organization The Ministry of Interior (MOI) had overall responsibility for the project which was directed by the Director General of MOI's Department of Local administration --3- (DOLA). The project cities were responsible for execution with guidance by MOI which provided administrative and technical support through DOLA and the Public Works Department (PWD) respectively. Project units were established in each city, comprising staff responsible, on the one hand, for improvements in municipal finance and management and, on the other hand, for the infrastructure components including negotiating purchases of private land, tendering and supervising small-scale works, maintaining project accounts and supervising operation and maintenance of project facilities. 1.12 PWD's Office of Urban Development (OUD), with consulting assistance, provided technical support to the cities by: initiating and supervising acquisition of private land; providing detailed engineering and procurement documentation; supervising procurement and construction for large or complex works; providing assistance for the works handled by the cities; monitoring and advising the cities on operation and maintenance; and assisting with preparation of future regional cities infrastructure improvement projects. 1.13 OUD's responsibilities with respect to the project also included: monitoring overall progress; supervision of the program to strengthen municipal planning and financial management; acquisition of publicly-owned land; and coordination with the Bank, including processing of loan withdrawal applications. 1.14 Project Design and Preparation Preliminary planning, including feasibility, municipal administration, finance and taxation studies, and the detailed design were well done. There were, however, long delays in the engagement of consultants. 1.15 Preliminary planning was carried out in two stages by foreign consultants (para. 1.6): the 1980 pre-feasibility studies by one consulting firm; and the 1982/83 feasibility studies, municipal administration and finance study and property taxation and valuation study by three other firms. The work of the municipal administration and finance consultant was not satisfactory to the government officials and the contract was terminated. A new contract was awarded to a joint venture of the Thai National Institute for Development Administration (NIDA) and the local branch of a foreign financial management firm. 1.16 There was a delay of about 10 months in the engagement of consultants by MOI for the second stage of preliminary planning, due mainly to the fact that Moi was experiencing serious internal difficulties and the time required to establish a steering committee and obtain Cabinet approvals. 1.17 The Australian Development Assistance Bureau (ADAB) provided financing on a grant basis for detailed design as well as construction management. Again, there was a considerable delay in the engagement of consultants while the Government arranged for the grant, a process complicated by restrictions on the use of Australian funds and the dissolution of the Thai parliament before cabinet approval for this financing was obtained. An agreement with ADAB was eventually signed and engineering consultants mobilized in October 1983. 1.18 In the meantime, the project was appraised in May 1983. The conditions for negotiations included the requirement that engineering consultants for detailed design be appointed, and the draft appraisal report included a substantial amount of loan funds for detailed design and construction management in the event that grant funds were not obtained. Proiect Implementation 1.19 Loan Processing and Project Start-up The project had a very long gestation period; about 7 years from the first correspondence between the Bank and the Government about a regional cities development project (1978) until the loan signing (Part III-2a). Prior to appraisal, there were 12 Bank -4- missions which included project identification, preparation and pre-appraisal activities (Part III-8b). There was a period of about two years between project appraisal and loan signing in June 1985, during which time there were two more Bank missions. 1.20 There were a number of reasons for these long periods. The project was the first of this type in Thailand's urban sector and the Government moved deliberately and cautiously in politically sensitive areas such as those involving land and property taxation reforms. The Government's requirement that all technical assistance be financed on a grant basis also led to delays while the financing was arranged and the financing and consultant selections were approved by the Government (paras. 1.16 and 1.17). Also, it took time for the government agencies to overcome problems caused by lack of experience in preparing terms of reference for advisors and consultants, and by a general reluctance of officials to use outside consultants, especially foreign. 1.21 Loan processing by the Bank after the May 1983 appraisal went well; within two months the Issues Paper and Decision Memorandum were issued, management comments were received, and the Government was invited to negotiate a loan of $57.4m in January 1984. 1.22 Negotiations for a reduced loan of $27.5 million actually took place in February 1985, 21 months after appraisal. The process of revising the project between appraisal and negotiations (para 1.9) was complicated by a change in government. Also, since detailed design did not start until after the project was appraised, loan funds would not be required for some time, and it appears the Government, sensitive to criticism about excessive commitment fees, wished to postpone negotiations and conmmitment to a loan to as close as possible to the time of disbursements. 1.23 The latest date for effectiveness, originally September 10, 1985, was extended three times; the loan was declared effective on January 17, 1986 (Part III-2a). The main reason for this delay was difficulty in completing the agreements between the Ministry of Finance (MOF) and MOI, and between MOI and the project cities on project financing and implementation arrangements. Procurement began soon after loan effectiveness; the last of the detailed design work was completed in December 1985, the first contract was awarded in June 1986 and the first loan withdrawals were made in March 1987. 1.24 Procurement Most detailed designs and contract documents were prepared by the consultants. The others, under the general supervision of the consultants, were prepared by PWD's Technical Office for Cities Development (TOCD) and the National Housing Authority (NHA), which prepared the slum improvement projects. 1.25 Prior to preparing contract documents, the consultants made a valuable study which compiled and compared the many varied contract conditions used by MOF and other Thai government agencies with respect to procurement and construction contracts. A number of modifications were recommended and, after settlement of issues such as described below (para. 1.26), they were generally adopted as amendments to MOF regulations and distributed to other government agencies, thus bringing the general conditions of contract in line with generally accepted international standards. 1.26 There were only two large civil works contracts requiring international competitive bidding (ICB), one for a bridge in Chiang Mai and the other for the fishport development in Songkhla. Bidding for these was delayed about 7 months by an issue raised by the Public Prosecution Department (PPD) over inclusion of the internationally accepted standard "Force Majeure" and "Excepted Risks" clauses in the General Conditions of Contract as required by the Bank. This was resolved finally in March 1987. 1.27 A persistent procurement problem on local competitive bidding (LCB) contracts throughout the implementation period was the length of time required to obtain the required Budget Bureau (BB) approvals of individual contract budgets. A year after loan effectiveness the BB agreed to provide --5-- approved budgets prior to or during bidding, but this improvement was very slow in being implemented. In addition, in some instances the approved budgets were below the low evaluated bid prices. This led to negotiations between the employer and the contractor, and, in the event of failure, necessitated rebidding, all of which caused considerable delays in awarding a number of contracts. Some contracts were re-bid two or three times. 1.28 Award of contracts for supply of equipment also required re-bidding to permit bidding for individual items rather than requiring potential suppliers to bid on all items in a contract. 1.29 Implementation The project was completed in about June 1994, more than four years behind schedule, and the loan closing date was extended three times to March 31, 1994 (part III-2a). Implementation started slowly and progress thereafter was much slower than expected. This is attributed largely to time required for the several involved government agencies to resolve a wide range of issues in technical, administrative and regulatory areas and to adjust to the new or larger responsibilities and improved management, operational and financial procedures required to satisfy the project objectives. 1.30 The physical components ultimately controlled the completion date. There were substantial delays in the award of contracts (paras. 1.27 and 1.28). A few delays resulted from design changes. Procedures for making payments to contractors for the LCB contracts were extremely slow, causing cash flow problems for some contractors and consequent work delays. Also, during 1987 and 1988, booming construction activity in Thailand's private sector resulted in general shortages of labor and construction materials, particularly cement, which delayed some works by a year or more. 1.31 The final extensions of the construction period and loan closing date resulted from additions to the project of the deferred Phase 2 works comprising 7 civil works contracts (para. 1.10) for which the detailed designs and contract documents had already been prepared. 1.32 Land acquisition, which had been considered one of the main project risks, did, together with some surveying problems, cause delays on a few contracts, but did not contribute significantly to the overall delay. 1.33 The institutional components of the project were carried out satisfactorily over the extended implementation period. The project cities took the measures recommended by the project studies for enhancement of revenues and strengthening of project administration and supervision. Action programs for operation and maintenance of infrastructure have been adopted by the project cities. New finance systems were introduced, enabling better financial monitoring and budgeting, and tax mapping, based on the results of the Bank supported Land Titling Project (Ln. 2440-TH), was completed and tax rolls were made current in all the project cities. 1.34 Project Costs and Financing The project cost estimates as shown in the appraisal report are compared with actual costs in Part 111-5a. The final cost of the project was about Baht 1,118 million (about US$43.9 million equivalent) before interest and other charges on the loan during construction. These costs are about 81 % of the appraisal estimates when expressed in Baht, but about 86% of the estimate when expressed in US$ because of the difference between the appraisal exchange rate (US$ = Baht 27.0) and the weighted average exchange rate (US$ = Baht 25.47) that applied during the loan disbursement period. Foreign exchange costs were about 36% of the total, slightly more than the appraisal forecast (34%). 1.35 The project cost savings occurred despite the fact that additional works were carried out (para. 1.10) and are due mainly to a significant decline in the rate of inflation and lower than expected physical contingencies; bids for construction works were about 25% lower than the design estimates, --6- and the cost of land purchases was less than the earlier assessments. The savings can also be credited to good project management. 1.36 Part III-5b compares the appraisal estimates and actual sources and amounts of the project financing. The project cities contributed about 22% of the required funds, and the Government, about 14%. The Bank loan financed about 45% of the project costs, compared to the 54% expected when the loan was made. ADAB, UNDP and the United Centre for Human Settlements (UNCHS) provided grants totaling about US$8.3 million equivalent (about 19% of costs) for technical assistance (paras. 1.6 and 1.17). 1.37 Loan Allocations and Disbursements The final allocation of the loan proceeds is shown in Part lI1-3b. The original percent of expenditures on civil works contracts to be financed from the loan was 75%. To accommodate the Government's request to use different percentages for the individual cities, ranging from 62% to 76%, the Bank, in May 1987, agreed to raise the allowable percentage to 80%. Other changes made at the Government's request over the disbursement period were elimination of the special account, various reallocations, and two cancellations totaling about US$7.2 million made possible by project cost savings and receipt of UNDP grant aid totaling about US$1.5 million for technical assistance. An unused balance of about US$0.4 million was canceled when the loan was closed on June 30, 1994. 1.38 The cumulative estimated and actual loan disbursements are shown in Part lII-3a. About 99% of the loan was disbursed for local currency expenditures. The disbursement period from the date of the loan to closing was about 9 years, three years longer that the original forecast. Except for a few large contracts, withdrawals from the loan were reimbursements to the government for payments made to contractors and suppliers. Usually there was a lag period of two or three months in preparing the withdrawal applications, which may have contributed to contractor payment delays (para. 1.30). Proiect Results 1.39 Physical Results The physical results of the project, together with the appraisal estimates, are shown in Part 111-4. By virtue of proceeding with Phase 2 (paras. 1.10 and 1.31) road improvements were increased by nearly 50% over the estimates and drainage and waste water conduits, by nearly 25 %. 1.40 Financial Results A summary of estimated and actual pertinent financial data for the four project cities for FY86 through FY95 is given in Part 111-6(b). The relevance of comparisons between forecasts and actual results is limited because appraisal forecasts were through FY88 only, the actual data is for FY86 through FY92 and the data for FY93 through FY95 are estimates taken from the cities' five year plans. 1.41 To achieve the financial objectives of the project, it was intended that: (a) all properties within the cities' boundaries would be recorded (tax maps); (b) records of house, building and land ownership would be updated (tax rolls); (c) property valuations would be re-assessed; and more efficient accounting and collection systems would be introduced. During the project, considerable progress was made in all of these areas, supported by a series of training programs and the acquisition of computers. 1.42 The bases for local revenue generation (updated property records and valuations) and collection efficiencies have been improved. About 28,000 households (23% of the total) were added to the tax rolls during the project period, and 39,000 property assessments were revised. Still, a significant number of owners are escaping full liability and property record updating must be continued. --7-- 1.43 The trend in the financial performances of the four cities has been similar in most areas, showing generally satisfactory improvements, although a rapid increase in operating expenses since 1986 has offset many of the benefits attained through improved local revenue generation. 1.44 Local revenues increased 343% between FY81 and FY93, and by 127% between FY86 and FY93, without any increases in property and land tax rates, and with a population growth rate of only 6%. Operating expenses over those periods increased by 320% and 213% respectively, however, with only about half financed from local revenues. Reliance on central government allocations has been reduced only marginally. The growth of city. overheads is a major concern and means of controlling them is being studied by MOI. 1.45 The Songkhla fishport and commercial/industrial zone were expected to produce revenues beginning in FY90. Fishport revenues actually began in FY91, but the commercial/industrial zone was delayed with no actual revenue production during the project implementation period. Calculations based on revised agreements, fee schedules and financial projections provided by Songkhla Municipality to LGDO for these enterprises indicate that they will produce satisfactory results (para. 1.48). 1.46 Economic Results The appraisal estimate of the economic rate of return (ERR) for the project was 30% (Part III 6(a). The bases for this analysis were an elaborate socio-economic survey conducted in each project city by the Department of Town and Country Planning and a special survey of households and properties and to assess damage from flooding. 1.47 Similar surveys and data collection have not been undertaken for the project as completed and a revised estimate of the economic rate of return has not been prepared. In view of the facts that the facilities created or improved by the project are greater than planned, that costs were significantly less than the estimates, that the institutional and financial components have been carried out satisfactorily and that the circumstances which dictated the need for the project have not changed, it appears reasonable to believe that the economic return from the project will at least equal the appraisal estimates. 1.48 The estimated internal financial rate of return (IFRR) for the fishport and commercial/industrial zone, not calculated for the appraisal, has been calculated for the Project Completion Report, however, using appraisal data for the Appraisal Estimate and 1993 data for the Revised Estimate, taking into account the actual costs of the works and land and the latest projections for revenues. This shows that the estimated IFRR for the fishport at appraisal would have been about 7.6%, while the revised estimate on completion is about 9.0%. This is considered adequate in view of the additional economic value of land reclaimed for the fishport, cost savings through improved efficiency of operations and the value of land released for development. 1.49 Institutional Results The project made important contributions to institutional development in the four project cities as well as to MOI and its two key departments, DOLA and PWD. Prior to the project, support for the municipalities had been piecemeal and assistance was arranged on an ad-hoc basis through numerous departments of MOI and other ministries. Development of municipal staff was fragmented and limited, responsibility for operations was unclear and the organizations lacked the capacity to conduct municipal affairs at an acceptable level. 1.50 The project was the first large scale attempt to develop regional cities in Thailand and acted as an example for introduction of increased cooperation and sharing of responsibilities between central government agencies and the cities. Benefits achieved during the project included: staff training and developmeut; a productive experience by the cities with active participation in project planning,' management and construction supervision; and improved city finances and financial management. The introduction of new budgeting and accounting procedures enabled the cities to prepare their first --8-- medium and long term plans. And although the structure of municipal finance has changed very little, and local financial autonomy has not been achieved, a decline in the proportion of local expenditures financed from local sources has been checked. 1.51 Although programs for operation and maintenance of solid waste, drainage and waste water systems and other municipal infrastructure have been installed in the project cities (para. 1.33), local personnel lack experience and additional training and instruction manuals are required (para, 2.16). 1.52 OUD, established originally to administer the preparation of this project, and recently renamed the Local Government Development Office (LGDO), and the Technical Office of City Development (TOCD) in PWD, have made very good progress in strengthening government capacity to support and coordinate municipal development activities. To overcome resistance to new policies and methods, LGDO held regular meetings with local officials and residents to encourage participation and emphasize improved efficiency in services and reduction of bureaucratic delays. Project Sustainabilitv 1.53 Achievement and enhancement of the project's potential benefits requires continued efforts to complete implementation of the operating and maintenance programs that were prepared for each project city, particularly by adequate budget allocations and provision and training of staff. At the same time, the recent trend toward rapid increases in overall operating costs should be controlled by careful planning. 1.54 The Government also should continue introduction of legislative measures needed to enhance the cities' revenue generation capabilities, and the cities should take full advantage of these by levying fees required to support essential services and taking steps to stem the increasing operating cost trend (para. 1.42 and 1.43). Bank Performance 1.55 The Bank made a very large contribution of its staff resources to this project, especially during the preparation and appraisal stages, during which periods their were 15 missions (Part III-8a and 8b). Much of this input could be classified as technical assistance. In addition, staff of the Bank's Resident Mission provided considerable aid as a channel of communication between headquarters and government officials and a source of information about local problems and concems. 1.56 There were a number of times during the exceptionally long gestation period when the Bank clearly would have been justified in deciding against further participation, but a conviction as to the importance of the project and concem that another source of suitable major financing would not become available encouraged the Bank to continue its involvement. It appeared certain as well that the UNDP and bilateral grant aid for technical assistance on which the Government depended would not have been forthcoming without assurances of continued active participation by the Bank. According to a statement by UNDP during the project preparation stage, for example, the Bank's close involvement encouraged UNDP to commit to the project, and the project was an excellent example of UNDP/Bank collaboration. 1.57 There were no significant issues between the Bank and the project authorities. The records show that the Bank was supportive of Government requests for project revisions, reallocations and cancellations of parts of the loan proceeds and extensions of the closing date. Supervision missions were timely, considering Bank staff constraints. -9- Borrower/Implementin, Agencv Performance 1.58 Except for very slow progress, performance of the project agencies at all government levels and of the project cities was generally good. Institutional and procedural changes were carefully introduced and phased, and most objectives were satisfied. Performance of OUD in managing the project was very good. The format and content of records and reports on physical progress and costs, established at the beginning of the project in collaboration with the consultants and the Bank, proved to be very successful. 1.59 The furnishing to the Bank of the accounts and audit reports for the project cities was extremely slow (Part 111-7). Much of the problem was in translation of the accounts and reports from the Thai language to English. Late in the project, it was agreed that translation was not necessary provided that the accounts and reports were furnished to the Bank with a covering statement from OUD describing the results of the audits and the actions being taken with regard to any qualifications. This resulted in an improving trend in the submittal of audit reports. 1.60 Construction supervision of a number of smaller contracts by city staff was deficient in the early stages because of staff constraints and because staff were accustomed to working to much lower standards. With the guidance of the consultants, however, this improved as city staff paid more attention to compliance with the specifications and quality control. 1.61 The efficiency of procurement and the processing of payments to contractors was hampered seriously throughout the project by cumbersome bureaucratic systems of checks and balances (paras. 1.30, 1.38 and 2.14). Payments for contracts supervised by the project cities, for example, required approvals from the municipal engineers, the municipal councils, provincial authorities and three or four levels of central government. Performance of Consultants 1.62 Performance of all local and foreign consultants involved in the preparation and implementation was good. The one case where government agencies were not satisfied with the preliminary stage of a consultant's study of municipal management and finance (para. 1.15) appeared to result from differing interpretations of the terms of reference and study objectives. The work of the replacement joint venture was good. Performance of Contractors and SuRpliers 1.63 The standard of performance of contractors on the larger contracts was generally good. For the remaining contracts, the standard of contractors ranged from poor to good, according to the supervising consultants. 1.64 Performance on the equipment supply contracts was good: deliveries were on schedule and all equipment supplied conformed to specifications. Conclusions and Lessons Learned 1.65 This was a good project, successfully implemented. All planned measures to strengthen institutions and improve financial performance were taken with reasonably success, and the physical works completed generally exceeded the project targets. 1.66 The project was complex, and the first of its type in Thailand. It involved: a variety of construction activities with a high degree of local participation in the successful introduction of --10-- improved project planning, management and supervision procedures; and the implementation of difficult reforms in municipal tax bases, revenue collection and management of municipal finances and infrastructure. 1.67 Two apparent area for criticism are over-estimation of costs and underestimation, by about one-third, of the construction period. The cost estimates, however, anticipated continuation of a period of inflation which, in fact, was brought under control at about the time procurement began. And about half of the time overrun was caused by the reintroduction, late in the construction period, of works previously deferred because of perceived financial constraints. 1.68 The principal lessons emerging from the project experience are: a) in-depth participation in project preparation and implementation by all levels of officials and staff contributes to the cooperation of communities intended to benefit from the project (paras. 1.50 and 2.22); b) the experiences of central government and local agencies directly responsible for procurement and construction can result in identification of problems and valuable suggestions which should be considered seriously for improvement of future projects (paras. 2.14-2.19); c) at the beginning of project implementation, agreement between Bank staff, the project authorities and consultants on the organization and content of records and reports of physical progress and cost data produces timely and useful monitoring information (para. 1.58 and Part III-7); d) the potential for the success of a project is increased if it can draw on the products of other projects, in this case the Bank- supported National Sites and Services Project and the Land Titling Project (paras. 1.6 and 1.33; and Part III-1); and e) for projects where audit reports for a number of local entities are required to be furnished to the Bank, preparation of the reports in the national language should be adequate, provided that an appropriate central agency reviews the audit reports and submits them to the Bank with a statement in English confirming that the accounts have been reviewed and describing steps being taken to implement any recommended improvements (para. 1.59). -11- PROJECT COMPLETION REPORT THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-TH) PART II: PROJECT REVIEW FROM BORROWER'S PERSPECTIVE Introduction 2.1 The concept of regional cities' development was first officially recognized in Thailand during the Fourth National Economic and Social Development Plan (NESDP) 1977-1981. The Royal Thai Government (RTG) considered that large scale migration to Bangkok could only be reduced by adopting a national policy of balancing the urbanization between the poorer regions and Bangkok. This policy was later translated into the strategy to increase the attraction of the medium sized regional cities to potential migrants from the adjacent rural areas. The strategy was coordinated by the National Economic and Social Development Board (NESDB) and implemented through the Ministry of the Interior (MOI), in particular through the Office of Urban Development (OUD) and the Technical Office for Cities Development (TOCD). These agencies administered the Regional Cities Development Project (RCDP). Objective 2.2 The objectives of the Project were to improve the basic infrastructure in the Project cities to strengthen i) municipal administration (particularly finance); ii) planning and implementation; iii) operation and maintenance of urban services; and iv) the capacity of MOI to assist municipalities in carrying out their development programs. 2.3 The Project cities included Chiang Mai in the Northern Region, Khon Kaen and Nakhon Ratchasima in the Northeast and Songkhla/Hat Yai in the South. Selection of the cities took into consideration inter-regional disparities, administrative capabilities and location. The population in 1980 was as follows: - Chiang Mai 164,000 - Khon Kaen 110,000 - Nakhon Ratchasima 177,000 - Songkhla 85,000 - Hat Yai 117,000 2.4 These cities are the largest in Thailand after Bangkok, which had a population of 5.5 million in 1980. Preparation 2.5 Pre-feasibility studies financed by UNDP in 1981 identified major investment which would overcome infrastructure deficiencies in the five cities. A regional cities' development strategy incorporating the project was included in the RTG's Fifth Development Plan (1982-1986) and placed emphasis on achieving greater economic efficiency and equitable distribution of services and wealth. 2.6 During 1982, UNDP-financed feasibility studies were undertaken together with complementary studies of municipal administration and finance improvement and reform. The findings of the studies in respect of four cities (finance for Hat Yai was not included) were finally approved by the RTG in January 1985. -12- 2.7 Detailed engineering and project management advisory services for physical implementation of the Project were financed by the Australian Development Assistance Bureau (ADAB) through its Bank co-financing facility, and were undertaken from 1983-1986 and 1986-1988, respectively. 2.8 The emphasis of the Sixth Development Plan (1987-1991) as applied to the urban sector included, in addition to developing regional cities as counter-magnets to Bangkok, a program of encouraging growth of cities in areas which had a real competitive advantage. The Department of Local Administration (DOLA), which is responsible for the major cities outside Bangkok, responded by preparing a program of infrastructure upgrading in these cities. These efforts were focused by OUD which administered the RCDP. The key to the Project was the strengthening of municipalities to perform the planning and supervision of tasks required for project implementation. 2.9 Full project implementation supported RTG's regional development strategy by providing an improved infrastructure base and strengthening municipal administration to support growing economic opportunities in the four Project cities. The Project also improved environmental conditions affecting some 540,000 people in the four cities' municipal areas. Cost 2.10 The Project cost Baht 1,118 million ($43.9) which was financed by a World Bank loan of $19.9 million (45%), Budget Bureau funds of $6.0 million (14%), municipalities' funds of $9.7 million (22%), and ADAB and UNDP grants totaling $8.3 million (19%). The Project had three major components: - an infrastructure component comprising sub-projects (including equipment procurement). Sub-projects including roads, drains, wastewater, solid waste and slum upgrading (mainly footpaths, roads and drains); - a revenue generating component comprising the Songkhla fishport and industrial estate; and - an institutional component designed to strengthen OUD, TOCD and the municipalities of the four cities. The major focus of this component was on finance systems, operation and maintenance systems, project supervision (number and quality of staff) and training. Proiect ScoDe 2.11 RCDP incorporated infrastructure sub-projects within each of the subject cities selected from the following sections: - traffic, roads and bridges. - drainage and flood control. - water supply. - solid waste collection and disposal. - wastewater management schemes. - municipal enterprises. - fishport. finnt'tuil nnn,nnnnnr hnes, n kon nr.rn,A nn+ -13- Implementation 2.12 The project was the result of feasibility studies undertaken during the period 1981-1983 by consultants and Government agencies, representing the first stage of implementation of the overall RCDP, which was divided into four primary stages as follows: - Pre-feasibility study. - Feasibility study. - Engineering Design. - Construction. Project Office and Organization 2.13 MOI was responsible for the overall execution of the Project, which was carried out under the general guidance of the RCDP Steering Committee (SC), which was set up by a cabinet resolution in 1979. The SC was chaired by the Under-secretary of the MOI. The Project Director (the Director General of DOLA), directed the activities of the OUD. The Deputy Project Director (Technical) who is the Deputy Director General of the Public Works Department (PWD) chaired the Technical Sub- conmmittee (TSC) and directed the activities of the TOCD. MOI also established the Project Management Unit (PMU) which comprised staff from OUD and TOCD. The PMU provided the necessary technical, management and administrative support to the four regional city municipalities. The PMU was chaired by the Director of OUD, who was also the Project Manager for RCDP. Problems and Obstacles 2.14 Pre-construction Problems a) The designs differed from the actual situation due to a lapse of one to two years between the detailed design and construction which resulted in significant changes in the situation. b) There was a delay in approval of funds from the Budget Bureau. c) Contracts for many civil works were tendered more than once. Some bids had to be reevaluated for the new price estimation, which caused delay in construction and disbursement. d) During 1988-1989, skilled labor was scarce due to Government and private sector construction, causing DOLA to re-tender. 2.15 Problems during Construction a) The contractor did not have adequate experience in the municipal area of the project. b) There was a lack of co-ordination between the contractor and the public utility agencies in the area. c) The contractor's construction plan was inadequate. d) The terms of payment in the contract were not appropriate and there was no fluidity of disbursement by the contractor. Therefore, there was not enough revolving budget for construction. -14- e) The work construction supervisor was unable to make decisions regarding problems during construction, which then had to be passed to the highest administrative officers which delayed construction work, and caused the contract to be extended. 2.16 Post Construction Problems a) The contractor did not have experience in preparing as-made drawings. b) Municipal officials did not have adequate knowledge of maintenance and did not prepare the budget for this purpose. Correction Guidelines 2.17 Preconstruction a) Meetings should be arranged between OUD, TOCD and the Municipality before inviting bids. b) Arranging meetings between the officials of OUD, TOCD, and the Budget Bureau would hasten approval of the budget. c) Meetings between OUD and TOCD could agree on the necessity of adjusting the government standard price to suit the existing situation. 2.18 During Construction a) Explanatory meetings should be carried out with the contractors to ensure that they understand the problems in the municipal area. b) The municipality should issue letters to other concerned agencies to assist the contractors in carrying out their work. c) OUD, TOCD and the contractors should meet to prepare plans for construction of the project. d) OUD and the contractors should agree that when 85 % of construction is completed, OUD should be informed to prepare the budget for payment in order that the contractors can disburse the payment more rapidly when the construction is finally completed. e) Meetings between the Inspection Committee and the contractors should be held once per week before construction, so that problems can be identified quickly and a shop-drawing prepared and submitted to the contract awarder for approval. f) Increase the Budget Bureau's cost estimates for the project. 2.19 Post Construction a) Field officers should be assigned to oversee the contractor's design plan and site organization for actual construction. b) OUD, TOCD and the Municipality should hold technical meetings with officials at technical and decision making levels. -15- Relations with the World Bank 2.20 There is a good relationship between the implementing agencies of the RTG and the World Bank but some improvement could be made, i.e. the latter should allow for a special method in the contract when bidding is invited many times in order to save time. Creation of OUD and Cities' Project Teams 2.21 The cabinet assigned MOI to implement the project, whereby DOLA and PWD set up internal offices (i.e. OUD and TOCD) and the World Bank provided assistance for office equipment and training of personnel abroad. This resulted in strengthening the capacity of officials to prepare projects, including budgeting and monitoring, and the evaluation of the first round of the Regional City Development Project. Institutional Building in the Cities 2.22 The RCDP was implemented according to the National Development Plan. The project created the interest of municipalities for development in the areas of basic infrastructure, town maps, project administration and budget administration. Future Proiect Preparation 2.23 DOLA has planned RCDP II (Baht 4,152.05 million) comprising 61 components, and will in the first phase undertake the implementation and engineering design of 37 components in the project cities which .include Pitsanulok, Nakhon Sawan, Udol Thani, Chon Buri, Ratcha Buri, Surat Thani, Phuket and Hat Yai. 2.24 DOLA plans to implement RCDP III in the fiscal year 1995 in 13 provinces (14 municipalities), including Chiangrai, Ukun Rachatham (Warim Chamrab), Roi-et, Surin, Rayong, Chachoengsao, Kanchanaburi, Petchaburi, Pattani, Sakonnakorn, Saraburu, and Nakhon Sri Thamarrat, and wishes to receive assistance from the World Bank in preparing pre-feasibility studies, feasibility studies and detailed designs. DOLA hopes that the World Bank will be able to consider this request. -16- PROJECT COMPLETION REPORT THAILAND REGIONAL CITIES DEVELOPMENT PROJECT (LOAN 2520-TH) PART III: STATISTICAL INFORMATION 1. Related Bank Loans Title Purpose Approved Status Comment National Sites and Low cost housing and 06/80 Complete. Included funds for Services Project technical assistance for Loan closed feasibility studies for (Ln. 1870-TH) Ministry of Interior (MOI). 12/31/85. Regional Cities PCR No. Development Project in 6816 event grant funds did not become available. Also included municipal f inance and administration study and advisory assistance on reform of property evaluation and establishment of a National Evaluation Authority. Land Titling First phase of National 20- 10/11/84 Complete. Included an urban Project (Ln. year land titling and Loan closed mapping program for 2440-TH) cadastral mapping program. 03 /3 1 / 92. use as basis, inter alia, PCR No. for preparation of tax 11896. maps. -17- 2. Project Timetable and Issues Raised a) Proiect Timetable Activity/ Date Revised Actual Event Planned Date Date First mention in files 06/78 Project Identification --- 07/79 Preappraisal Mission --- --- 08/09-31/82 Appraisal Mission 06/82 11/82 12/82 05/83 05/02-23/83 Negotiations 01/83 08/83 01/84 05/84 07/84 02/04-08/85 Board Approval 03/83 10/83 03/84 04/84 07/84 10/84 04/23/85 Loan Signature 06/10/85 Loan Effectiveness 09/10/85 11/12/85 01/13/86 02/13/86 01/17/86 Completion Date 03/31/90 12/31/91 12/31/92 09/30/93 06/30/94 Closing Date 03/31/91 03/31/92 03/31/93 03/31/94 Final Disbursement 06/30/91 06/30/92 06/30/93 06/30/94 -18- 2. Project Timetable and Issues Raised b) Issues Raised (PreaDDraisal through Board Presentation) IdentificationlPreappraisal Stage: (06/78 - 04/83) Reluctance of RTG to borrow for technical assistance required for project preparation: While RTG struggled with this problem, the Bank included components for technical assistance for this project in the National Sites and Services Project (Loan 1870-TH, FY80) with the understanding that these funds would be reallocated if grant funds were obtained. Eventually, with Bank assistance, grant aid for feasibility studies and preliminary design was obtained from UNDP. Whether the Bank or the Ministry of the Interior would be the executing agencv for Phase 2 of the UNDP financed feasibility studies: This was strictly a government internal issue. There had been no issue about the Bank as executing agency for Phase 1, and MOI requested that the Bank take the same role again so as to expedite recruitment of consultants and reduce its responsibilities at a time when MOI was experiencing substantial internal problems. NESDB disagreed, however, insisting that MOI accept the responsibility even if it lead to delays, and with the concurrence of the Bank, MOI assumed responsibility for the second phase as a means of building capability for managing projects. No doubt the experience gained was valuable, but the decision did contribute to a delay of about 9 months in the selection of consultants, due in part to continued disarray within MOI and the time to establish a steering committee and obtain Cabinet approvals. During the process it was agreed that UNDP and MOI would be joint executers of the studies. Appraisal Stage: (05/83 - 06/83) Reluctance of RTG to borrow for technical assistance reguired for detailed design: Although RTG resisted, the Bank required that funds for consulting services for detailed design and project management be included in the loan because of uncertainties about the possibilities of RTG obtaining adequate grant funds for this purpose. Eventually, most of the required funds were obtained from the Australian Development Assistance Bureau (ADAB), and during the Bank loan disbursement period the amount allocated for these consulting services was reduced by cancellation or reallocation to other categories. -19- 2. Project Timetable and Issues Raised b) Issues Raised (Preappraisal throueh Board Presentation) Post-Appraisal: (07/83 - 01/85) Timiin, of the Government's formal commitment to a loan: As project preparation reached the stage where the timing of loan processing appeared reasonably predictable, the Bank target was for a loan commitment in the Bank's FY84. The Government, however, as part of its debt management strategy regarding use of foreign borrowings and sensitivity about public criticism of excessive commitment fees, wanted to postpone a loan commitment to as close as possible to the time of the first disbursements, and thus aimed for loan signing during its FY85 (beginning October 1, 1984). Due in part to these concerns, negotiations were delayed until February 1985. The loan was approved by the Bank in April 1985 and signed in June 1985, but did not became effective until January 1986. The first disbursements were made in March 1987. Management Review: (07/83) No significant issues were raised during management review. Negotiations: (02/85) Lending terms: The lending terms at the time of the invitation to negotiate (November 1993) were 20 years including a 6 year period of grace, whereas at negotiations the Bank was proposing 17 years including a four year grace period which was consistent with the country terms applicable to Thailand as recently revised by the Bank. At the request of the RTG delegation, the Bank agreed to a loan of 20 years including a 5 year grace period mainly on grounds that Thailand was at the bottom of the middle income group of Bank borrowers and that the projected disbursement period was 6 years. Subsidiary Loan Agreement: The draft loan agreement included the standard provisions for a Subsidiary Loan Agreement. The RTG delegation opposed this, arguing that with Cabinet approval of the project, including arrangements for financing the project cities' respective shares of the project costs, the subsidiary agreement was not necessary. The Bank agreed with the request to delete the requirement, but the concept of the subsidiary agreement was retained in the agreements to be reached between MOF and MOI and between MOI and each project city, all subject to approval by the Bank as an additional condition of loan effectiveness. Board Presentation: (04/23/85) No significant issues were raised at the time the loan was considered by the Board. -20- 3. Loan Disbursements a) Cumulative and Actual Disbursements (US $ '000) IBRD FY Appraisal Actual and Semester Estimate % of Appraisal Ending Amount Amount Estimate 1986 12/31/85 1.50 06/30/86 2.00 1987 12/31/86 6.00 06/30/87 10.10 0.50 5% 1988 12/31/87 15.40 1.62 11% 06/30/88 20.70 4.31 21% 1989 12/31/88 23.50 7.37 31% 06/60/89 26.20 8.24 31% 1990 12/31/89 27.50 10.21 37% 06/30/90 27.50 12.11 44% 1991 12/31/90 27.50 13.54 49% 06/30/91 27.50 14.72 54% 1992 12/31/91 27.50 15.20 55% 06/30/92 27.50 16.13 59% 1993 12/31/92 27.50 17.24 63% 06/30/93 27.50 17.49 64% 1994 12/31/93 27.50 18.12 66% 06/30/94 27.50 19.89 72% Cancellations: on 03/23/87 $4,500,000 on 02/29/88 2,668,000 on 06/30/94 442,253 Total Canceled: $7,610,253 Net amount of loan: $19,889,747 Closing Date: Original: 03/31/91 Revised: 03/31/92 Revised: 03/31/93 Final: 03/31/94 Loan Account closed: 06/30/94 -21- 3. LOAN DISBURSEMENTS (Continued) b) Original and Final Allocation of Proceeds (US$ equivalent) 1' Loan Agreement Amount of % of Actual Loan Expenditures Amount Category Allocated To Be Financed Disbursed (1) Civil works (a) for Parts A 16,500,000 75 15,078,573 and C of the (amended to 80%) Project (b) for Part B of 5,000,000 75 3,777,209 the Project (amended to 80%) (2) Equipment and 500,000 100% of foreign 837,010 vehicles expenditures; 100% of local expenditures (ex-factory cost); and 65 % of local expenditures for other items procured locally (3) Consultants' 1,000,000 100 196,954 Services 2/ (4) Special Account 1,500,000 Amounts to be deposited 0 pursuant to paragraph 3 (a) of Schedule 5 to this Agreement (5) Unallocated 3,000,000 0 TOTAL 27,500,000 19,889,747 1/ Schedule 1 of Loan Agreement. 2/ Borrower chose not to use the Special Account. -22- 4. Pro*ect Implementation Monitorinz Indicators - Physical Parameters 1/ 2' Schedule Actual % of ADpraisal Estimate Main Drainage and Flood Protection Length of diversion channel Chiang Mai 1.2 km 5.3 km 440% Khon Kaen 3.5 km 10.7 km 300% Korat 6.2 km 7.6 km 120% SongkhIa 1.1 km 0.9 km 80% Sewerage Interceptors/Waste Treatment Plants Interceptors WTPs Interceptors WTPs Khon Kaen 7.0 km 1 4.4 km 1 63% 100% Korat 0.6 km 1 3.0 km 1 500% 100% Sotid Waste Manaaement Sanitary Landfills and Collection Vehicles Landfills Vehicles Landfills Vehicles Khon Kaen 1 13 1 13 100% 100% Korat 1 13 1 13 100% 100% SongkhLa 1 3 1 3 100% 100% Roads and Roadside Drainage Improvement Length of Improvements: Roads Drains Roads Drains Chiang Mai 2.5 km 6.4 km 7.1 km 13.3 km 280% 208% Khon Kaen 5.2 km 4.6 km 4.3 km 3.2 km 83% 70% Korat 3.0 km 15.6 km 3.0 km 10.0 km 100% 64% Songkhla 5.6 km 5.1 km 9.5 km 5.0 km 170% 98% Fishport and Commerciat-IndustriaL Zone Fishport with Associated Facilities and Commercial Zone Songkhla 1 port 1 zone 1 port 1 zone 100% 100% Slum Upgrading Areas Households Areas Households Chiang Mai 11.8 ha 526 11.8 ha n.a. 100% -X Korat 5.6 ha 618 5.6 ha n.a. 100% SongkhLa 6.6 ha 600 6.6 ha n.a. 100% I/ From Staff Appraisal Report Annexes 2, 3, 4, 5, and 6 2/ From contract documents. Since all cities have combined drains (surface water plus waste water) it is not possible to clearly distinguish between the main drainage, road drainage and sewerage conduits. Altogether, about 63 km were actually constructed, compared to the appraisal estimate of about 51 km, an increase of about 25%. n.a. = data not available -23- 4. Project Implementation (Continued) Monitoring Indicators (Continued) (1987 - 1993) Computers Supplied: Number Chiang Mai 18 Khon Kaen 2 Korat 11 Songkhla 3 Total 34 Computer Operators Trained: Number Chiang Mai 4 Khon Kaen 0 Korat 10 Songkhla 1 Total 15 Households Added to Tax Maps: Number Chiang Mai 9,938 Khon Kaen 4,658 Korat 10,933 Songkhla 2.256 Total 27,785 Households Reassessed for Propertv Tax : Number Chiang Mai 25,310 Khon Kaen 4,875 Korat 7,722 Songkhla 784 Total 38,691 Increased Revenue Due to Tax Roll and Assessment Baht Improvements: (millions) Chiang Mai 280.61 Khon Kaen 83.06 Korat 106.41 Songkhla 78.54 Total 545.62 -24- 5. Project Costs and Financing a) Proiect Costs (Baht millions) Appraisal Estimate Actual Costs Project Component Local Foreign Total Local Foreign Total Land 183.79 0.0 183.79 144.30 0.0 144.30 Drainage and sanitation 157.12 104.75 261.87 179.24 129.45 308.69 Urban transport 268.56 151.06 419.62 152.29 85.65 237.94 Revenue earning facilities 149.60 70.40 220.00 91.16 42.90 134.06 Slum improvement 26.23 15.41 41.64 22.75 13.36 36.10 Technical assistance 79.83 124.86 204.69 88.13 130.92 219.05 Project administration 43.94 0.0 43.94 37.95 0.0 37.95 Total Project Cost 909.07 466.48 1,375.55 715.82 402.28 1,118.10 Percent of total 66% 34% 100% 64% 36% 100% Proiect Costs (US$ '000) ADpraisal Estimate 1/ Actual Costs 2/ Project Component Local Foreign Total Local Foreign Total Land 6,807 0 6,807 5,665 0 5,665 Drainage and sanitation 5,790 3,909 9,699 7,037 5,082 12,119 Urban transport 10,020 5,521 15,541 5,979 3,363 9,342 Revenue earning facilities 5,544 2,604 8,148 3,579 1,684 5,263 Slum improvement 972 570 1,542 893 524 1,417 Technical assistance 3/ 2,937 4,644 7,581 3,467 5,140 8,607 Project administration 1,628 0 1.628 1 490 _ 1,490 Total Project Cost 33,698 17,248 50,946 28,110 15,793 43,903 Percent of total 66% 34% 100% 64% 36% 100% 1/ Exchange rate at appraisal: US$ = Bhat 27.0 2/ Weighted average exchange rate for loan withdrawals in local currency during the loan disbursement period: US$ = Bhat 25.47 3/ Actual costs include (i) AIDAB and UNDP (TH/86/001) contributions for studies, design, training and supervision of construction of RCDP I (US$6.0 million and US$1.5 million, respectively); (ii) AIDAB contribution for studies of RCDP nI (US$0.79 million); and (iii) Government contribution to supervision of construction of RCDP I (US$0.3 million). -25- 5. Proiect Costs and Financing b) Project Financinf (Baht millions) Appraisal Actual Amount % Amount % Total Project Cost 1,375.55 100.0 1,118.10 100.0 Project Financing Bank Loan 742.00 54.0 506.60 45.3 Australian Grants 135.00 9.8 172.94 15.5 Govermment Contribution 150.10 10.9 152.78 13.6 Cities Contribution 348.45 25.3 247.58 22.1 UNDP/UNSCH Grants 0 0 38.20 3.5 Total Financing 1,375.55 100.0 1,118.10 100.0 Project Financinf (US$ millions) Appraisal I/ Actual 2/ Amount % Amount % Total Project Cost 50.9 100.0 43.90 100.0 Project Financing Bank Loan 27.5 54.0 19.89 45.3 Australian Grants 5.0 9.8 6.79 15.5 Govermnent Contribution 5.6 10.9 6.00 13.6 Cities Contribution 12.69 25.3 9.72 22.1 UNDP/UNSCH Grants 0.0 0 .0 1.50 3.5 Total Financing 50.9 100.0 43.90 100.0 1/ Exchange rate at appraisal: US$ = Bhat 27.0 2/ Weighted average exchange rate for loan withdrawals in local currency during the loan disbursement period: US$ = Bhat 25.47 -26- 6. Proiect Benefits a) Economic Impact Appraisal Estimate Actual Economic Rate of Return Drainage and flood control 25% Solid waste disposal 14% Roads 45% Bridges 33% Songkhla fishport and commercial/indust. area 18% Slum improvement 13% Weighted average 30% Incremental Financial Rate of Return: Songkhla Fishport and I a/ Clommercial/Indust. area 7.6% 9.0% a/ IFRR calculated for the Project Completion Report using appraisal data and the data and forecasts available in 1994. Underlving Assumptions: For Appraisal Estimate: The basis for this analysis was an elaborate socio-economic survey conducted in each project city by the Department of Town and Country Planning which collected substantial amounts of data as a means of evaluating numbers of beneficiaries, the value of individual benefits and estimated growth factors. The survey collected information on numbers of households by income groups for different areas. There also was a special survey of households, commercial properties and city maintenance officials to assess damage, both out-of-pocket and labor, to repair flood damage. Standard measures of benefits were used in the economic analysis. The foreign exchange component was shadow priced at 100%, while the market rates were considered to reflect market conditions for the local component. Benefits derived from the fishport and commercial/industrial zone included: the economic value of about 16 ha of reclaimed land for commercial development, excluding the port area itself; cost savings in fish landing and handling; and the economic value of land released for development of potentially valuable areas previously constrained by noisome fish land operations. For the Proiect Completion Report: Surveys were not updated for the purposes of the Project Completion report and a revised estimate of the economic rate of return has not been prepared. The estimated internal financial rate of return (IFRR) for the fishport and conmmercial/industrial zone, not calculated for the appraisal, has been calculated for the Project Completion Report, however, using appraisal data for the Appraisal Estimate and 1993 data for the Revised Estimate, taking into account the actual costs of the works and land and the latest projections for revenues (Annex 3). -27- b) Financial Impact Key Indicators - CHIANG MAI Financial Results - (Thousand Baht) 1986 1987 1988 1989 1990 Local Revenues: Estimate 46345 53433 60970 Local Revenues: Actual 48395 56323 51129 59574 78599 Surcharge & Shared Taxes: Estimate 56376 64536 74019 *1 Surcharge & Shared Taxes: Actual 58309 61325 71063 86781 105143 Grants: Estimate 20058 20941 21979 Grants: Actual 24142 24664 25226 31273 40408 Total Resources: Estimate 267873 211710 217852 Total Resources: Actual 177886 170499 192537 210786 246748 Operating Expenses: Estimate 103127 119376 132999 Operating Expenses: Actual 77035 80286 87406 92192 109676 Capital Expenditure: Estimate 159064 82195 71803 Capital Expenditure: Actual 63819 77079 72841 98764 80003 Net Surplus: Estimate 3082 3539 4050 Net Surplus: Actual 37032 13134 32290 19830 57069 1991 1992 1993 1994 1995 Local Revenues: Estimate */ *1 128929 146997 LocalRevenues: Actual 102167 113609 131261 ***/ Surcharge & Shared Taxes: Estimate */ *1 224951 263544 Surcharge & Shared Taxes: Actual 138740 169930 197669 ***/ Grants: Estimate */ 124798 129646 Grants: Actual 32495 52154 88516 ***/ Total Resources: Estimate *1 *1 478678 540187 Total Resources: Actual 296646 396679 427946 ***/ Operating Expenses: Estimate */ */ 180999 196424 Operating Expenses: Actual 121761 127152 194120 ***/ Capital Expenditure: Estimate *1 288105 332960 Capital Expenditure: Actual 146065 266596 179550 ***/ Net Surplus: Estimate */ 9574 10803 Net Surplus: Actual 28820 2931 54276 **/ */ Estimates in SAR made only to FY1988 (SAR Annex 11) * Estimates for FY1994 and FY1995 taken from city's 5 year plan prepared in 1992 ***/ Actual results to FY1993. -28- b) Financial Impact Key Indicators - CHIANG MAI Financial Results - Percentages 1986 1987 1988 1989 1990 Local Revenues as % of Estimate Operating Expenses: Actual 45% 45% 46% - 63% 70% 58% 65% 72% Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimnate 100% 99% 101% - Actual 139% 147% 140% 159% 168% Local Revenues as % of Total Resources: Estimate 17% 25% 28% - Actual 27% 33% 27% 28% 32% Surcharge & Shared Taxes as % of Total Resources: Estimate 21% 30% 34% - Actual 33% 36% 37% 41% 43% Grants as % of Total Resources: Estimate 7% 10% 10% - - Actual 14% 14% 13% 15% 16% 1991 1992 1993 1994 1995 Local Revenues as % of Operating Expenses: Estimate - - - 71% 75% Actual 84% 89% 68% - - Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate - - - 196% 209% Actual 198% 223% 169% - Local Revenues as % of Total Resources: Estimate - - - 27% 27% Actual 34% 29% 31% - - Surcharge & Shared Taxes as % of Total Resources: Estimate - - - 47% 49% Actual 47% 43% 46% - - Grants as % of Total Resources: Estimate - - - 26% 24% Actual 11% 13% 21% - -29- b) Financial Impact Key Indicators - KHON KAEN Financial Results - (Thousand Baht) 1986 1987 1988 1989 1990 Local Revenues: Estimate 20762 23625 26501 *1 Local Revenues: Actual 22263 25792 25961 26652 31627 Surcharge & Shared Taxes: Estimate 21380 24155 27304 *l Surcharge & Shared Taxes: Actual 15610 16768 19621 25294 33231 Grants: Estimate 20218 23578 25226 *l Grants: Actual 58716 57344 50353 44997 34642 Total Resources: Estimnate 152554 140196 102041 *l Total Resources: Actual 108120 112491 114018 106433 109514 Operating Expenses: Estimate 53948 61106 66178 Operating Expenses: Actual 30186 37064 36543 43250 59903 Capital Expenditure: Estimate 97342 77657 34249 Capital Expenditure: Actual 73286 71725 74237 62861 45668 Net Surplus: Estimate 1264 1433 1614 *l Net Surplus: Actual 4648 3702 3238 322 3943 1991 1992 1993 1994 1995 * *1 Local Revenues: Estimate *c */ 40198 42768 Local Revenues: Actual 34713 35577 41501 ***/ Surcharge & Shared Taxes: Estimate */ *l 97592 125046 Surcharge& SharedTaxes: Actual 46000 59103 67113 ***/ Grants: Estimate 92714 111349 Grants: Actual 48357 65549 134182 ***/ Total Resources: Estimate */ *l 230504 279163 Total Resources: Actual 133686 175845 242796 ***/ Operating Expenses: Estimate */ *l */ 147385 174581 Operating Expenses: Actual 83145 106190 127289 ***l Capital Expenditure: Estimate */ *l 48422 52028 Capital Expenditure: Actual 45568 57301 109665 ***/ Net Surplus: Estimate */ *l 34697 52554 Net Surplus: Actual 4973 12354 6202 ***l */ Estimates in SAR made only to FY1988 (SAR Annex 11) **/ Estimates for F Y1994 and F Y1995 taken from city's 5 year plan prepared in 1992 *** Actual results to FY1993. -30- b) Financial Impact Key Indicators - KHON KAEN Financial Results - Percentages 1986 1987 1988 1989 1990 Local Revenues as % of Operating Expenses: Estimate 38% 39% 40% - Actual 74% 70% 71% 62% 53% Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate 78% 78% 81% - Actual 125% 115% 125% 120% 108% Local Revenues as % of Total Resources: Estimate 14% 17% 26% - Actual 21% 23% 23% 25% 29% Surcharge & Shared Taxes as % of Total Resources: Estimate 14% 17% 27% - Actual 14% 15% 17% 24% 30% Grants as % of Total Resources: Estimate 13% 17% 25% - - Actual 54% 51% 44% 42% 32% 1991 1992 1993 1994 1995 Local Revenues as % of Operating Expenses: Estimate - - - 27% 24% Actual 42% 34% 33% - - Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate - - - 93% 96% Actual 97% 89% 85% - - Local Revenues as % of Total Resources: Estimate - - - 17% 15% Actual 26% 20% 17% Surcharge & Shared Taxes as % of Total Resources: Estimate - - - 42% 45% Actual 34% 34% 28% - - Grants as % of Total Resources: Estimate - - - 40% 40% Actual 36% 37% 55% - - -31- b) Financial Impact Key Indicators - NAKHON RATCHASIMA Financial Results - (Thousand Baht) 1986 1987 1988 1989 1990 Local Revenues: Estimate 23698 26265 28860 *1 Local Revenues: Actual 35593 35921 35127 35140 40035 Surcharge & Shared Taxes: Estimate 33080 39518 47300 */ *1 Surcharge & Shared Taxes: Actual 28275 29918 35802 47194 59928 Grants: Estimate 15855 17434 19431 Grants: Actual 66775 54903 62036 44733 33516 Total Resources: Estimate 204131 172536 119728 */ TotalResources: Actual 137070 131513 165021 133109 157226 Operating Expenses: Estimate 61204 70939 84155 *1 *l Operating Expenses: Actual 41216 45154 65957 51773 79188 Capital Expenditure: Estimate 141224 99624 33288 *1 *l Capital Expenditure: Actual 90179 77392 102671 56548 37294 Net Surplus: Estimate 1703 1973 2285 *l *l Net Surplus: Actual 5675 8967 1700 24788 33744 1991 1992 1993 1994 1995 Local Revenues: Estimate *l */ 74431 79455 Local Revenues: Actual 56088 60451 66123 ***/ Surcharge & Shared Taxes: Estimate */ *l 128667 141534 Surcharge & Shared Taxes: Actual 83143 105018 116970 ***/ Grants: Estimate */ 94511 103962 Grants: Actual 70901 80281 81485 ***/ Total Resources: Estimate */ *l 297609 324951 Total Resources: Actual 225979 275732 283811 ***/ OperatingExpenses: Estimate */ *1 151501 164217 Operating Expenses: Actual 92482 114109 132075 ***/ Capital Expenditure: Estimate */ *1 143098 157408 Capital Expenditure: Actual 96559 144891 130645 ***/ Net Surplus: Estimate *l */ 3010 3326 Net Surplus: Actual 36938 16732 21091 ***/ */ Estimates in SAR made only to FY 1988 (SAR Annex 11) */ Estimates for FY 1994 and FY 1995 taken from city's 5 year plan prepared in 1992 ***/ Actual results to FY 1993. -32- b) Financial Impact Key Indicators - NAKHON RATCHASIMA Financial Results - Percentages 1986 1987 1988 1989 1990 Local Revenues as % of Operating Expenses: Estimate 390/o 37% 34% - Actual 86% 80% 53% 68% 51% Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate 93% 93% 90% - - Actual 155% 146% 108% 159% 126% Local Revenues as % of Total Resources: Estimate 12% 15% 24% - Actual 26% 27% 21% 26% 25% Surcharge & Shared Taxes as % of Total Resources: Estimate 16% 23% 40% - Actual 21% 23% 22% 35% 38% Grants as % of Total Resources: Estimate 8% 10% 16% - - Actual 49% 42% 38% 34% 21% 1991 1992 1993 1994 1995 Local Revenues as % of Operating Expenses: Estimate - - - 49% 48% Actual 61% 53% 50% - - Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate - - - 134% 135% Actual 151% 145% 139% Local Revenues as % of Total Resources: Estimate - - - 25% 24% Actual 25% 22% 23% - - Surcharge & Shared Taxes as % of Total Resources: Estimate - - - 43% 44% Actual 37% 38% 41% - - Grants as % of Total Resources: Estimate - - - 32% 32% Actual 31% 29% 29% - - -33- b) Financial Impact Key Indicators - SONGKHLA Financial Results - (Thousand Baht) 1986 1987 1988 1989 1990 Local Revenues: Estimate 24175 28114 32303 */ */ Local Revenues: Actual 18588 19404 20002 20756 22983 Surcharge & Shared Taxes: Estimate 11892 13358 15013 */ */ Surcharge & Shared Taxes: Actual 13822 14613 18994 20274 26276 Grants: Estimate 21166 23492 26268 */ */ Grants: Actual 18793 64202 58190 94128 61581 Total Resources: Estimate 114147 176280 127434 */ */ Total Resources: Actual 51283 120875 105997 150119 124516 Operating Expenses: Estimate 46834 53758 61707 */ */ Operating Expenses: Actual 24075 24982 26140 30382 57157 Capital Expenditure: Estimate 66231 121278 64308 */ */ Capital Expenditure: Actual 19553 89806 68935 113299 53841 Net Surplus: Estimate 1082 1244 1419 */ */ Net Surplus: Actual 7655 6087 10922 6438 13518 1991 1992 1993 1994 1995 Local Revenues: Estimate */ */ 41037 45326 Local Revenues: Actual 30120 40606 44126 ***/ Surcharge & Shared Taxes: Estimate */ */ 54066 68956 Surcharge & Shared Taxes: Actual 33852 42723 49566 ***/ Grants: Estimate 44934 48259 Grants: Actual 41535 37659 57409 ***/ Total Resources: Estimate 144592 167096 Total Resources: Actual 111292 129545 160720 ***/ Operating Expenses: Estimate */ */ */ 87208 100691 Operating Expenses: Actual 68231 74257 86220 ***/ Capital Expenditure: Estimate */ */ */ 30300 36332 Capital Expenditure: Actual 27187 35358 52254 ***/ Net Surplus: Estimate *1 *1 27084 30073 Net Surplus: Actual 15874 19930 22246 ** */ Estimates in SAR made only to FY1988 (SAR Annex 11) **/ Estimates for FY 1994 and FY 1995 taken from city's 5 year plan prepared in 1992 ***/ Actual results to FYI 993. -34- b) Financial Impact Key Indicators - SONGKHLA Financial Results - Percentages 1986 1987 1988 1989 1990 Local Revenues as % of Operating Expenses: Estimate 52% 52% 52% - - Actual 77% 78% 77% 68% 40% Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate 77% 77% 77% - - Actual 135% 136% 149% 135% 86% Local Revenues as % of Total Resources: Estimate 21% 16% 25% - - Actual 36% 16% 19% 14% 18% Surcharge & Shared Taxes as % of Total Resources: Estimate 10% 8% 12% - Actual 27% 12% 18% 14% 21% Grants as % of Total Resources: Estimate 19% 13% 21% - - Actual 37% 53% 55% 63% 49% 1991 1992 1993 1994 1995 Local Revenues as % of Operating Expenses: Estimate - - - 47% 45% Actual 44% 55% 51% - - Local & Surcharge/Shared Revenues as % of Operating Expenses: Estimate - - - 109% 113% Actual 94% 112% 109% Local Revenues as % of Total Resources: Estimate - - - 28% 27% Actual 27% 31% 27% - - Surcharge & Shared Taxes as % of Total Resources: Estimate - - - 37% 41% Actual 30% 33% 31% - - Grants as % of Total Resources: Estimate - - - 31% 29% Actual 37% 290/o 36% - - --35-- 7. Status of Major Covenants Covenant Subiect Compliance/Comments Loan AEreement 2.02 (b) Borrower to open and maintain in Borrower elected to use existing MOF dollars a Special Account. revolving fund and Bank approved request to delete this category from Schedule 1. 3.01 (b) Borrower to enter into project financing Delayed compliance. Arrangements were not and implementation arrangements with completed until January 1986, delaying loan MOI and cause MOI to make such effectiveness by two months (Section 6.01). arrangements with each Project City, satisfactory to Bank. 3.01 (c) Project to be carried out substantially in Slow compliance. Overall completion was accordance with inplementation about four years behind schedule. schedule satisfactory to the Bank, including activities to be undertaken The required levels of staffing were achieved and appointment of key staff to Project only in two cities (Chiang Mai and Songkhla). Units established within DOLA, PWD and each Project City. 3.02 Procurement of goods and works and Generally satisfactory compliance, although employment of consultants to be cumbersome procedures for reviewing and governed by Schedule 4 of Loan approving contract awards contributed to Agreement. substantial project delays. 3.04 (b) Borrower to: Satisfactory compliance with respect to (i) maintain records adequate to monitor records of physical progress and costs; records Project progress, including costs and are excellent. Data conerning benefits derived the benefits to be derived from it; and from the project were not collected, however. (iii) furnish to the Bank such Satisfactory compliance with respect to reports information as the Bank shall on physical progress and costs; reports are reasonably request on project costs and, very good. No reports on benefits were where appropriate, the benefits .... requested or received. --36-- 7. Status of Maior Covenants Covenant Subject Compliance/Comments Loan Agreement 3.04 (d) Not later than six months after the Satisfactory compliance, although benefits closing date, or such later date as may from physical components are not reported. be agreed, the Borrower to fumish to the Bank a report on the execution and initial operation of the project, its costs and benefits, the performance of the Borrower and the Bank, etc, etc.. 3.05 Borrower to acquire as and when Generally satisfactory compliance. Few needed all land and rights required for contracts were delayed by land acquisition carrying out the Project. problems. 3.06 Borrower to cause each Project City to: (a) by 10/01/87 furnish to the Bank Delayed compliance. At Borrower's request, for comment an action program compliance date extended to 02/01/88 due to to improve operation and delay by Project Cities in providing data. maintenance of roads, drainage Program furnished on 02/28/88. and sanitation works; and (b) carry out the programs. 3.07 For Part B of the Project, the Borrower to: (a) by 12/31/85 furnish to Bank for Delayed but satisfactory compliance. comment, a plan for At Borrower's request, and due to delay in marketing/operation by Songkhla loan effectiveness, agreed date for furnishing of the commercial/industrial plan was extended to 01/31/86. Draft plan zone, and thereafter cause the reviewed by Bank in 01/86 and final report plan to be carried out; and furnished in 05/86. (b) cause Songkhla to make, by Delayed but satisfactory compliance. 06/30/86 an agreement with the At Borrower's request, date for compliance FMO, or other organization, to extended twice to 08/31/87 due to delay in operate and maintain the new contracting for construction of new fishport. fishport and close the existing Bank received agreement 11/87 and approved FMO fishport. 11/17/87 --37-- 7. Status of Major Covenants Covenant Subiect Com,liance/Comments Loan Agreement 4.02 (a) Borrower to maintain, or cause to be Satisfactory compliance. maintained, adequate records and accounts in respect of the project, as well as full accounts of each Project City. 4.02 (b) Borrower shall maintain separate Statements of expenditures were not used for accounts reflecting all expenditures for project. which loan withdrawals requested on basis of statements of expenditures. 4.02 (c) Borrower to cause DOLA and each Satisfactory compliance on audits of project Project City to have the accounts (4.02 accounts. a) for each fiscal year audited and to furnish copy of auditor's report to the Very late compliance on audits for each Bank not later than 6 months after project city; average delay was 21 months and year's end, including separate opinion ranged from 51 months to 2 months with on statements of expenditure (4.02 b). improving trend. Bank agreement, late in project, to accept reports in Thai language with covering statement by supervising government agency as to adequacy and results of audits, reduced delays significantly. 4.04 Borrower to carry out action program Satisfactory compliance. New accounting for fiscal improvement and municipal systems were implemented and progress on finance reform in consultation with revenue enhancement has been satisfactory. Bank. 6.01 The agreements on project financing Delayed compliance. See Section 3.01 (b) and implementation with MOI and and above. between MOI and each Project City (Section 3.01 b) to be completed as an additional condition of loan effectiveness. -38- 8. Use of Bank Resources a) Bank Staff/Consultant Inputs (Staff weeks) Stage of Proiect Cycle Bank Fiscal Year Pre- FY85 FY85 FY86 FY87 FY88 FY89 Preparation/ Preappraisal 137.2 Appraisal 77.5 Negotiations 6.4 16.6 Supervision 1.1 16.8 13.8 5.4 7.1 PCR Prep. _ _ - - - _ TOTALS 221.1 17.7 16.8 13.8 5.4 7.1 Stage of Project Cycle Bank Fiscal Year FY90 FY91 FY92 FY93 FY94 FY95 TOTALS Preparation/ Preappraisal 137.2 Appraisal 77.5 Negotiations 23.0 Supervision 4.2 6.2 7.7 7.4 4.7 74.4 1/ PCR Prep. _ - _ _ 0.2 4.8 5.0 10.0 TOTALS 4.2 6.2 7.7 7.6 9.0 5.0 322.1 1/ Estimated -39- 8. Use of Bank Resources b) Bank Missions Overall Type of Performance Problem Mission Dates Staff Ratings Types Identification 02/79 (1) Consult. Identification 05/79 (1) Staff Identification 07/16-08/03/79 (4) Staff (1) Consult. Preparation 11/79 (1) Staff (1) Consult. Preparation 04/14-21/80 (1) Consult. Preparation 05/16-06/06/80 (3) Staff Preparation 07/80 (4) Staff Preparation 11/12-12/13/80 (4) Staff Preparation 09/81 (3) Staff Preparation 02/82 (5) Staff Pre-appraise 08/09-31/82 (3) Staff (2) Consults. Pre-appraise 03/02-09/83 (2) Staff Appraisal 05/02-25183 (4) Staff (1) Consult. Post-appraisal 12/83 (1) Staff Post-appraisal 09/84 (1) Staff SPN # 1 06/85 (2) Staff I SPN # 2 10/14-21/85 (2) Staff I SPN # 3 02/12-03/06/86 (2) Staff I SPN #4 10/10-17/86 (2) Staff I -40- 8. Use of Bank Resources b) Bank Missions (Continued) Overall Type of Performance Problem Mission Dates Staff Ratings Types SPN # 5 03/13-27/87 (2) Staff 1 SPN # 6 08/29-31/87 (2) Staff 1 SPN # 7 02/26-03/01/88 (2) Staff 1 SPN # 8 10/18-20/88 (2) Staff 1 SPN # 9 11/28-12/09/89 (2) Staff 1 SPN # 10 10/01-12/90 (1) Staff 1 SPN # 11 06/06-07/91 (1) Staff SPN # 12 11/02-12/91 (1) Staff l (1) Consult. SPN # 13 02/09-15/92 (1) Staff 1 (1) Consult. SPN # 14 03/12-19/93 (1) Staff 1 (1) Consult. Procurement SPN # 15 10/18-22/93 (1) Staff I (1) Consult. Procurement SPN # 16 01/31-02/01/94 (1) Staff 1 (1) Consult. Procurement -41- ANNEXES -42- Annex 1 1/ Description of the Project The objectives of the project are to improve the basic infrastructure in the Project Cities, to strengthen municipal administration, particularly in finance and planning, and in implementation, operation and maintenance of urban services, and to strengthen the capacity of MOI to assist municipalities in carrying out their development programs. The project consists of the following parts: Part A: Infrastructure Improvements 1. The carrying out of road, bridge and drainage improvements in the Project Cities, including, inter alia, the provision of road maintenance equipment to Khon Kaen. 2. The carrying out of improvements in the wastewater collection and treatment facilities in Nakhon Ratchasima and Khon Kaen and the strengthening of solid waste management in Nakhon Ratchasima, Khon Kaen and Songkhla through the provision of landfill disposal facilities, workshops and equipment therefor. 3. The carrying out of slum improvement measures in Chiang Mai, Nakhon Ratchasima and Songkhla, including access and environmental sanitation facilities. Part B: Revenue Earning Facilities The construction of a fishport and adjacent commercial/industrial zone in Songkhla. Part C: Technical Assistance and Training The provision of technical assistance and training to MOI and the Project Cities for purposes of: (i) strengthening municipal administration in the areas of planning, programming, budgeting, accounting, financial management and revenue improvement; (ii) assisting in project implementation, operation and maintenance; and (iii) preparing future urban development projects and undertaking related studies. * * * The project is expected to be completed by March 31, 1990. 1/ From Schedule 2 of the Loan Agreement dated June 10, 1985. -43- Annex 2 1/ (Page I of 4) Details of Proiect Municipal Infrastructure 1. Drainage and Sanitation. The interrelated systems of flood protection, drainage and waste disposal comprise the chief infrastructure deficiency influencing environmental conditions in the Project Cities. This was to be dealt with through the project as summarized below: a) Improvements to about 12 km of key main drains to be made in all Project Cities together with improvements to about 16 km of secondary drains in roads and streets. Seasonal and flash flooding are expected to be reduced and dry weather flows improved thereby reducing stagnant conditions; b) Health-threatening and obnoxious conditions during low flow periods would be further reduced as the major drainage waterways serving Khon Kaen and Nakhon Ratchasima (also known as Korat) are improved through provision of 6 km of wastewater interceptor sewers, pumping stations, and diversions. The condition of badly polluted receiving waters also would be improved in Khon Kaen and Korat through the introduction of wastewater treatment pond systems. These improvements represent the first attempt to deal with municipal wastewater on a city-wide scale in Thailand. c) Solid waste management systems in Korat, Khon Kaen and Songkhla would be improved to substantially reduce uncollected waste through increased collection coverage and efficiency and the provision of sanitary landfill sites. Additional collection, disposal and maintenance equipment would be provided and management and operations improved through better planning and maintenance. 2. Urban Transport Urban transport improvements in all the Project Cities would reduce congestion and facilitate traffic movement along principal arteries and in central commercial areas as follows: a) About 14 km of road improvements and several major intersection improvements would be constructed in all the Project Cities. They would include new roads, realignments and widenings, resurfacing, road marking, traffic signals and sidewalk construction. Drainage improvements would be carried out simultaneously as necessary. b) In Chiang Mai, a much needed four-lane bridge would be constructed over a river dividing the municipal area. The capacity of the existing bridge would be improved by widening to accommodate separated pedi-cab traffic streams. c) Small amounts of road maintenance equipment would be furnished to Khon Kaen as part of an effort to upgrade municipal maintenance capacity. 1/ From paragraphs 2.04-2.12 of Staff Appraisal Report dated March 8, 1985. -44- Annex 2 (Page 2 of 4) Details of Project (Continued) Revenue EarninR Facilities 3. A fishing port and commercial/industrial zone would be constructed at Songkhla as a key measure in the municipality's efforts to stimulate commercial/industrial development, increase tourism and improve productivity of the city's main industry, fishing. Existing inefficient and congested fish handling facilities close to the city center caused environmental nuisance and depressed the potentially high values of surrounding property. The improvements would include the following: a) a 340 m long main wharf and a 300 m long wharf for small craft would be constructed on the fringe of a 23 ha site reclaimed from Songkhla Lake; b) about 4.6 ha of the site would be leased, together with the port facilities, by the municipality to the Fish Marketing Organization, or other appropriate authority, who would operate and maintain the port. The remaining 18.4 ha would be serviced and leased by the municipality as an industrial/commercial zone. The Government would prepare a plan, satisfactory to the Bank, for the marketing and operation of the industrial estate, including typical leasing arrangements and principles of the leasing fee determination; and c) treatment of the wastewater from the port and zone operations prior to discharge to the environmentally sensitive lake. Slum Improvements 4. Four pockets of relatively high density, poorly serviced low-income residential areas in Chiang Mai, Korat and Songkhla, containing about 1,750 families were to be provided with improved access, drainage systems and solid waste collections. Where feasible, water and electricity supplies would be arranged through the Provincial Water Works Authority (PWA), or the municipal supply in Korat, and the Provincial Electricity Authority. (Water supplies to the slum areas in Chiang Mai, Korat and Songkhla were inadequate and were to be addressed under separate water supply projects planned by the respective water authorities). The municipalities in each case were to be assisted in the implementation by the National Housing Authority (NHA). Institutional Development 5. In all Project Cities, the project was to address administrative and financial deficiencies, as follows: a) new accounting and budgeting systems were to be installed and improvements to the municipalities' planning procedures and financial reporting were to be introduced; b) assistance was to be provided to address inefficiencies in the collection and assessment of property taxes, the main source of local tax revenue; -45- Annex 2 (Page 3 of 4) Details of Project (Continued) c) the Central Government was expected to amend the appropriate legislation to permit increases in local fee, fine and permit revenue; and d) the project was to support the establishment in each Project City of a permanent unit concerned with economic, social and spatial planning and evaluation as well as coordination with central planning agencies. 6. Technical Assistance and Training The principal aims of the technical assistance and training component were to: strengthen Government's project implementation capacity through advisory assistance and engineering services; and to assist Government in the preparation of a future regional cities project which would reinforce and further develop the policy measures formulated by this project. The studies included in the project were: a) a review of the Municipal Development Fund; and b) preparation studies for future regional cities development projects, including, inter- alia: city selection criteria; further municipal administration and revenue reform measures; and feasibility and preliminary engineering. 7. Advisory and Engineering Services for Project Implementation Technical assistance was to be obtained from local and expatriate consultants to provide on-the-job training and to supplement the skills and capacity of the city and central agency staffs concerned with project implementation as follows: a) the Public Works Department (PWD) to be provided with 20 staff-years of foreign and 62 staff-years of local consultants' assistance for detailed engineering, construction supervision, project management and monitoring. Also, consultants would provide on-the-job training to 34 staff-years of junior staff from PWD and the cities; b) the Department of Local Administration (DOLA) would be provided with 15 staff- years of municipal financial management advisory services to assist with: (i) implementation and monitoring of new systems; (ii) design and implementation of project accounts; and (iii) study the requirements for an expansion of the Municipal Development Fund. 8. Training In addition to the training of project agency staff as above, the following training assistance and equipment was to be provided: a) to PWD for (i) wastewater analysis training and laboratory equipment; and (ii) training fellowships; and b) to DOLA for municipal administration training, equipment, study tours and fellowships. -46- Annex 2 (Page 4 of 4) Details of Project (Continued) 9. Future Proiect Preparation and Studies Assistance would be provided to the National Economic and Social Development Board (NESDB) and the Ministry of Interior (MOI) for planning, feasibility and preliminary engineering studies for a future project, based on the experience gained on this project. -47- Annex 3 Page 1 of 2 Songkhla Municipality - Fishport Financial Rate of Return (Current Prices - Million Baht) Appraisal Estimate Civil New Old Works Fish- Fish- & port Plot port NET Year Land 0 & M Fees Fees Rent FLOW 1/ 2/ 3/ 1986 4.44 - -- -- -- - 4.44 1987 102.46 - -- -- -- -102.46 1988 62.63 -- -- -- -- - 62.63 1989 70.87 -- -- -- -- - 70.87 1990 3.11 4.50 46.70 5.60 53.69 1991 3.27 4.50 15.50 5.88 22.61 1992 3.42 4.50 18.20 6.17 25.45 1993 3.60 5.60 17.40 6.48 25.88 1994 3.78 5.60 8.60 6.81 17.23 1995 3.97 5.60 9.50 7.15 18.28 1996 4.17 7.00 10.00 7.51 20.34 1997 4.38 7.00 10.60 7.88 21.10 1998 4.60 7.00 11.15 8.28 21.83 1999 4.83 8.75 11.50 8.69 24.11 2000 5.07 8.75 26.75 9.13 39.56 2001 5.32 8.75 31.15 9.58 44.16 2002 5.59 10.94 33.60 10.06 49.01 2003 5.87 10.94 31.05 10.56 46.68 2004 6.16 10.94 15.40 11.09 31.27 Financial Rate of Return = 7.67% Notes on Appraisal Estimates: 1/ Estimated cost of land for new fishport and commercial/industrial plots. 2/ Taken from fishport feasibility study: Special Report No. 2, March 1984. 3/ Lease fees for new commercial and industrial plots. 4/ Lease fees from businesses on land of the old fishport. -48- Annex 3 Page 2 of 2 Songkhla Municipality - Fishport Financial Rate of Return (Current Prices - Million Baht) Actual Civil New Old Works Fish- Fish- & port Plot port NET Year Land Fees Fees Rent FLOW 5/ 6/ 7/ 1986 -- -- -- -- 0.00 1987 13.78 -- - 0.11 -13.67 1988 33.61 -- -- 0.11 -33.50 1989 61.33 -- -- 0.11 -61.22 1990 25.34 - -- 0.09 -25.25 1991 6.18 -- -- 6.18 1992 9.89 - 0.89 10.78 1993 10.33 -- 0.93 11.26 1994 11.36 1.20 0.98 13.54 1995 12.50 1.20 1.03 14.73 1996 13.75 1.20 1.08 16.03 1997 15.12 4.63 1.14 20.89 1998 16.63 4.63 1.19 22.45 1999 18.29 8.30 1.25 27.84 2000 20.12 8.30 1.31 29.73 2001 22.14 8.30 1.38 31.82 2002 24.35 8.90 1.45 34.70 2003 26.49 8.90 1.52 36.91 2004 29.46 8.90 1.60 39.96 Financial Rate of Return = 8.96% Notes on actual results and new projections: 5/ Figures extrapolated from actual results 1991 through 1993 and projected on expected increased use. 6/ Contracted amounts to be paid to the city by the developer. 7/ Old fishport sold and actual negotiated fees to be paid to the city through year 2004. 0 - - M A.-'_T 1,3 -- ,e-. - , lj .. = r; .I: ; , -1 . _ . -..