Document of

The World Bank

FOR OFFICIAL USE ONLY LfErh%

Report No. 3044-TH

THAILAND

STAFF APPRAISAL REPORT

BANGKOK AND SATTAHIP PORTS PROJECT

October 15, 1980

Projects DepartmentEast Asia and Pacific Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit = Thailand Baht (B)

B I = US$0.05B 1 million = US$50,000US$1 = B 20

WEIGHTS AND MEASURES

Metric British/US Equivalent

1 meter (m) = 3.28 feet (ft)I cubic meter (cum) = 1.307 cubic yardsI metric ton = 0.98 long tonI litre = 0.28 US gallons (gal)

= 0.22 British gallons (imp gal)

ABBREVIATIONS

ADB = Asian Development BankARD = Office of Accelerated Rural Developmentcfs = container freight stationDOH = Department of HighwaysEEC = European Economic CommunityETO = Express Transport OrganizationLWOST = Low Water Ordinary Spring TideMOC = Ministry of CommunicationsMOF = Market Organization of FarmersPAT = Port Authority of ThailandRTN = Royal Thai Navy

SRT = State Railways of Thailand

FISCAL YEAR

October 1 - September 30

THAILANDFOR OFFICIAL USE ONLY

STAFF APPRAISAL REPORT

BANGKOK AND SATTAHIP PORTS PROJECT

Table of Contents

Page No.

1. TRANSPORT SECTOR .... . . . . . . . . . . . . . . . . . . . . 1

A. Transport System .... . . . . . .. 1General ..... . . . . . .. 1Road Infrastructure .... . . . .. 1Railways ..... . . .. 2Inland Waterways .... . . . . .. 3Coastal Ports and Shipping .... . . .. 3Airports . . . . . . . . . . . . . . . . . . . . . . . . . 4

B. Transport Demand. 4

C. Transport Planning, Coordination and Investments . . . . . . 5

D. Bank Lending to the Transport Sector . . . . . . . . . . . . 6

2. PORT AUTHORITY OF THAILAND AND THE EXISTING PORTS OFBANGKOK AND SATTAHIP .... . . . . . . . . . . . . . . . . . 6

A. General ..... . . . . . . . . . . . . . . . . . . . . . 6

B. Port Authority of Thailand .... . . . . 7Organization .... . . . . . .. 7Tariffs and Costs .... . . . . .. 8Budgets, Accounting and Audit . . . . . . . . ... . . . . 9

C. Existing Facilities .... . . . . .. 9The Port of Bangkok . . . . . . . . . . . . . . . . . . . 9The Port of Sattahip .. 11

3. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . 12

A. General . . . . . . . . . . . . . . . . . . . . . . . . . . 12

B. Berths Utilization at Bangkok (Klong Toei) . . . . . . . . . 13

C. Improvements to Operations and Cargo Throughput at Bangkok(Klong Toei) .13Cargo Discharge to Berth and Overside . . . . . . . . . . 13Container Handling Performance . . . . . . . . . . . . . . 15Berth Allocation Between Conventional and ContainerCargo .16

This report is based upon the findings of a Bank mission which visitedThailand in February 1980 comprising Messrs. Higginbottom (mission leader),Seigel (Financial Analyst) and Weckerle (Economist).

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contenst may not otherwise be disclosed without World Bank authorization.

-2-

Page No.

D. Physical Improvements at Bangkok (Klong Toei) and

Sattahip and Proposed Bang Su Development . . . . . . . . . 17

Port Improvements ... . . . . . . . . . . . . . . . . . 18Bang Su Development . . . . . . . . . . . . . . . . . . . 19Organization of Bang Su . .. . . . . . .. . . . . . . . 19

4. PROJECT COSTS, FINANCING, DISBURSEMENT AND ECOLOGY . . . . . . . 21

A. Cost Estimate .... . . . . . . . . . . . . ....... . 21

B. Financing Plan .... . . . . . . . . . . . . ....... . 22

C. Construction and Procurement ... . . . . . . . ....... 23

D. Disbursement .... . . . . . . . . . . . . . . . . . . . . 24

E. Ecology . . . . . . .. . . . . . . . . . . . . . . . . . . 24

F. Completion Report .... . . . . . . . . . . ....... . 25

5. ECONOMIC EVALUATION .... . . . . . . . . ......... . 26

A. Investment Objectives ... . . . . . . . . . . ....... 26

B. Import and Export Volumes ... . . . . . . . . ....... 26

C. Container Traffic . . . .. . . . . .. . .. . . . . . . . 27

D. Traffic Distribution Between Port Facilities ... . ....... 28

E. Investment Alternatives . . . . . . .. . . . . . . . . . . 29

F. Project Benefits, Costs and Returns . . . . . . . . .. 30

6. FINANCIAL EVALUATION . . . . . . . . . . . . . . . . . . . 33

A. General ... ... 33

B. Past Financial Performance . . . . . . . . . . . . . 33

C. Forecast Financial Performance - Sattahip 35

D. PAT's Consolidated Financial Performance . . . . . . 36

E. Sensitivity Analysis and Financial Risks . . . . . . 38

F. Revaluation of Assets and Insurance . . . . . . . . 40

7. AGREEMENTS REACHED AND RECOMMENDATIONS ....... .. 41

-3-

TABLES

1. Indicative Inland Freight Traffic of Thailand by Modes2. Government Investments in Transport during Third and Fourth

Five-Year Development Pl ans3. PAT's Principal Rates and Charges as of September 30, 19794. Import and Export Trade T'hiough Bangkok Port System - By Commodities5. Import and Export Trade Through Bangkok Port System - By Facilities,

1975-856a. Civil Works - Klong Toei6b. Civil Works - Sattahip6c. Mechanical EquI4ment Klong Toei6d. Mechanical Equilp.ent - Satrahip6e. Floating Equipment - Sattahip6f. Consultants' Technical Assistance and Training6g. Bang Su Container Freight Stations and Bonded Warehouses7. Implementation Schedule8. Estimated Disbursement Schedule9. PAT Consolidated Income Accounts, 1976-8510. PAT Consolidated Balance Sheets, 1976-8511. Port of Sattahip Income Accounts, 1980-8512. PAT Consolidated Cash Flow Data, 1980-8513. Container Traffic at Bangkok (Klong Toei) and Sattahip Ports14. Daily Costs of General Cargo Ships15. Economic Rates of Return16. Prices of Petroleum Products in Thailand

ANNEXES

1. Technical Assistance and Training for Port Authority of Thailanl2. Operating Efficiency Indicators3. Import and Export Trade (Non-POL) through Bangkok Port Systep,4. Assumptions for Financial Projections5. Selected Documents and Data Available in the Project File

MAPSThailand Ports - 14856R1

Port of Bangkok - 2791RPort of Bangkok - Klong Toei Berths - 14988

Port of Sattahip - 14989

CHART

Port Authority of Thailand Organization

1. TRANSPORT SECTOP.

A. Transport System

General

1.01 During the last 10-15 years, the Thai economy, as a result of thestrong showing of the agricultural sector, grew at a rapid pace andgenerated a high demand for transport. Transport growth in this period wasabout 8% p.a. for freight and 12% p.a. for passenger traffic; it wassupported by large Government investments for transport and generallyliberal transport policies which stimulated a competitive road transportindustry. Most of the transport growth was in the roads sector because ofthe Government's strategy of building a comprehensive network of primary(national) and secondary (provincial) roads. Today, virtually the entireprimary roads system serving interprovincial trade is complete, andsignificant progress has been made towards the build-up of the secondarysystem. Railways, inland waterways and coastal shipping, confined tospecific locations and handling mostly bulk-commodities, have also grown,but at a more modest rate.

1.02 llith the progress made in developing primary and secondary roads,among the future transport requirements will be: first, extension andimprovement of tertiary roads in support of the needs of local communities;second, the upgrading of the performance of other modes of transport; andthird, the removal of specific capacity bottlenecks in the nationaltransport system, such as the Port of Bangkok. Tertiary roads areunderdeveloped and inadequately maintained. Inland waterways and coastalshipping perform at below attainable output and efficiency levels, and theiras well as the railways' capacity for energy efficient transport isunderutilized. However, improvement and development of the inland waterwaysand coastal shipping are being addressed in a separate Bank loan (paras.1.10 and 1.12), and port capacity in the Bangkok area will be expanded underthis project. A brief discussion of the various components of the Thaitransport system follows.

Road Infrastructure

1.03 By traffic volumes, network length, area coverage and capitalexpenditures, roads are Thailand's most important transport infrastructure.The Department of Highways (DOH) competently administers and maintains thenational as well as the provincial roads systems. Nhtional highways, theprimary roads system, total nearly 14,000 km. They radiate from Bangkok tothe national borders, and most are paved. Built or reconstructed to present

standards in the last 20 years, many of these roads are however soon toreach full capacity or to require reconstruction as a result ofuninterrupted traffic growth.

1.04 Provincial roads, the secondary roads system, total about30,000 km. They serve provincial needs in linking changwat capitals withlarger changwat towns. The length is currently increasing at a rate ofseveral thousand km per year since roads, which have been under the juris-diction of other agencies, are now being classified and transferred to DOHwhich has an established record in roads planning, construction and mainte-nance. About 15,000 km have had some improvements, and about 8,000 km ofthem are paved. The remainder of provincial roads, 15,000 km, are tracks orsubstandard earth and gravel roads, some of them impassable in the rainyseason.

1.05 In addition to the primary and secondary roads system of 44,000km, Thailand has an estimated 40,000-50,000 km of tertiary roads. The exactnumber is difficult to assess since inventories are incomplete and generallyout-of-date. Standards vary between tracks and engineered roads of variouslevels. Planning is deficient and maintenance, on average, poor or nonexis-tent. Tertiary roads responsibilities are being shared with little coor-dination by several Government agencies, of which the most important is theOffice of Accelerated Rural Development (ARD). Planning, constructionmethods and maintenance of tertiary roads need to be improved, and thejurisdictions of rural roads agencies need to be redefined. To deal withthese issues, the Government is conducting a consultants' study under Bankfinancing (Sixth Highway Project, Loan 1519-TH).

Railways

1.06 The railways are a trunk line carrier with 3,800 route-km of which600 km are branchlines. The meter gauge lines are single track except forsome 90 km near Bangkok. Four lines radiate from Bangkok: north to ChiengMai, northeast to the Laotian border near Vientiane, east to the Kampucheanborder and south to the Malaysian border. Following its decision to developSattahip as a commercial deep-sea port (para. 2.02), the Government commis-sioned an engineering study for an extension of the railway fromChachoengsao on the Fastern Line to the new port. The study was completedby mid-1980, and the Government intends to construct the line, under its ownfinancing, between early 1981 and late 1983 (para. 3.17).

1.07 The State Railways of Thailand (SRT) are an operationallyefficient and well-managed state enterprise with weak finances due to tightGovernment control over its tariffs. Under the current Five-Year Plan, andwith Bank assistance (Fifth Railway Project, Loan 1662-TH), SRT are engagedin rehabilitation of plant and equipment, and extension of line and rolling

stock capacity. Faced with stiff competition from road and inland waterwaystransport, the railways are, within the framework of existing Governmentregulation, gradually converting into a market oriented enterprise; however,deregulation, in particular of tariff policies, will be required to fullyaccomplish this conversion.

Inland Waterways

1.08 Thailand has a comprehensive inland waterways system of about1,300 km in the N&orthern Corridor stretching from Bangkok to Uttaradit inthe Central Region. The main components are: (a) the Chao Phrya river fromthe Gulf of Thailand to Nkhon Sawan (325 km); (b) the %n river from MakhonSawan to Taphan Hin (78 km) and from there to Uttaradit (274 km); (c) thePasak river from Ayutthya, where it enters the Chao Phrya, up to the Rama IVdam (45 km); and (d) sections of the Ibi and Suphan Tha Chin rivers (about100 km), which offer a bypass of some difficult sections of the Chao Phrya.

1.09 During low water season from January to Mlay, however, navigationin the Mhn and Chao Phrya, except for the section from the Gulf to Ayutthya(110 km) is restricted, and barge traffic is forced to detour on slow andmore costly routes, reduce payloads or cease operations. As a result,inland waterways traffic is thinning out quickly to the north of Ayutthya,even though the rivers reach into the heartland of Thailand's mostproductive agricultural region; and large quantities of agricultural andother bulk commodities, which are in principle suitable for barge traffic,are carried by road.

1.10 To utilize the inland waterways potential for low-cost transport,a project (Inland Waterways and Coastal Ports, Loan 1889-TH) is beingimplemented with Bank financing, under which the shallow river sections willbe deepened. The project includes improvements at two river ports, MakhonSawan and Taphan Hin, to facilitate transshipment between water and road orrail. Provision of a pilot barge convoy, also part of the project, is todemonstrate the operational and economic advantages of replacing thetraditional wooden barges by modern units. After completion by aboutend-1983, traffic (excluding sand) from the project region, which is atpresent in the order of 0.6 million tons, is to quadruple. Mfost of thistraffic consists of rice and maize.

Coastal Ports and Shipping

1.11 The coastal ports sector which covers all shallow draft seaports,comprises about 40 facilities ranging from small fishing and cargo wharvesof purely local importance to large regional ports with annual volumes ofseveral hundred thousand tons of cargo. Most coastal ports are located onthe east and west coasts of the southern peninsula and are owned and managed

- 4 -

by local governments or private operators. Despite recent improvements ofland transport in coastal zones, coastal ports and shipping remain essentialparts of the areas transport system. Virtually all of then also serve asbases of marine fishing. About 2.0-2.5 million tons of cargo and petroleumand 1.2 million tons of fish are annually loaded or landed in these ports.

1.12 The condition of the port access channels is the principalconstraint under which coastal shipping operates. All coastal ports areriverine with severe draft restrictions at the rivers' mouth and subject tocontinuous siltation from riverine and littoral sources. Frequentmaintenance dredging and in some cases capital dredging is required but theHarbor Department's capacity to execute these functions, is limited due tolack of equipment and expertise. The Inland Wlaterways and Coastal PortsProject which is referred to above (para. 1.10), will deepen the entrancechannels to two of the larger ports and improve the Department's channelmaintenance performance. Implementation is scheduled for 1981/82.

Airports

1.13 Thailand's international and domestic air transport are centeredat Don Muang airport in the vicin'ty of Bangkok. Airport capacity is tightand plans are under study for dealing with the need for further expansion.Two other international airports, Fat Yai near the 2falaysian horder andChieng MIai in the north, are capable of receiving commercial jet planes.There are another 40 airfields of various sizes of which about half receivescheduled flights. Domestic public air transport is being provided by ThaiAirways, and Thai International Airway is the international carrier. Bothcompanies are Government-owned. Civil domestic aviation fs in the order of0.3 million passengers and 1.2 million tons of cargo per year.

B. Transport Demand

1.14 All modes combined, freight transport in Thailand is in the orderof over 50 million tons and 14 billion ton-km p.a. (Table 1). Roadsgenerate about 70% of ton-km, followed by the railways with close to 20% andinland waterways with about 10%. Freight is geographically concentrated inthe Nbrthern Corridor between the Gulf of Thailand and the Nbrth and alongthe traffic axes radiating from Bangkok to the south and northeast.Direction, composition and size of traffic flows reflect (a) Bangkok'scentral location and dominance as the country's principal port andconsumption center, (b) Thailand's generally rural character, and (c) theagricultural strength of the Central Region. An estimated 30-50% of allfreight is agricultural produce, of which about one half is exported, mostof it through the Port of Bangkok and the Eastern Seaboard port facilities.

C. Transport Planning, Coordination and Investments

1.15 The Mlinistry of Communications (MOC) is responsible for transportpolicy, coordination and planning. Through its own departments, or throughsupervising transport enterprises, it is concerned with all transportoperations. During the last 10-15 years, the Government has been able tokeep transport investments generally in line with the needs of the growingeconomy. These investments by themselves have in turn helped to stimulateeconomic development. An efficient and competitive privately owned roadtransport industry has evolved. The railways are gradually meeting thechallenge of road competition, but deregulation is needed to make them fullyeffective competitors (para. 1.07). Despite the existing railwayregulation, there is no evidence of significant intermodal distortions.

1.16 At the recommendation of the Bank, a Transport Planning IUnit (TPU)was set up in 1974 in the MOC to act as the focal point of transportplanning and policy review. The Unit, with technical assistance providedunder Bank financing (Sixth Highway Project, Loan 1519'-TH), is currentlyparticipating in the formulation of the Fifth Five-Year TransportDevelopment Plan (1982-86); among the main issues it will address are thetransport policy implications of rising fuel cost (for current fuel pricedata, refer to Table 16). Another major item in its work plan is a study ofroad user and inland waterways charges; the main body of the study is to becompleted by the early 1981.

1.17 During the Third Five-Year Development Plan in 1972-76, Thailand'spublic sector investments in transport were about B 21 billion in currentprices, and under the ongoing Fourth Plan for 1977-81, capital expendituresare estimated at B 28 billion (Table 2). Transport's share of publicdevelopment expenditures, 20% in 1972-76, are expected to drop to about 11%in 1977-81 because of the earlier achievements primarily in the road sector.In both Plan periods, road infrastructure received between 75% and 80% ofall funds allocated. However within the roads sector, some shifts aretaking place, since tertiary roads have gradually increased their share ofthe roads' budget from 10% in 1972-76 to 25% in 1977-81. The 1982-86Transport Plan is currently under preparation. With an intensified interestin rural development the Government is expected to continue raising theinvestment shares of roads identified with primary sector and localcommunity development. Moreover, with its concern about the energysituation the Plan is also anticipated to emphasize the fuller developmentof energy efficient transport.

- 6 -

D. Bank Lending to the Transport Sector

1.18 The Bank has been involved in all transport modes (except civilaviation) and has helped finance 15 transportation projects in Thailand.Three loans, totalling $20.3 million, have been made for port development.The first two port projects were completed on schedule, and the thirdproject, Loan 702-TH, was completed in MIay 1976, about two years behindschedule, largely because of delays in awarding civil works contracts.Comments of the Project Performance Audit Report for Loan 702-TH are givenin para. 4.09. An inland waterways and coastal port project ($53 million)has recently been approved. The Bank has made five loans totalling $68.7million to help implement SRT's development plans. Four projects have beencompleted satisfactorily; about $7.5 million of the loan amount for thethird project was cancelled when the Government chose to purchase thelocomotive through direct negotiations. The Bank has made six loans, thefirst in 1963 and the most recent in 1978, totalling $261.6 million, forconstruction and maintenance of national and provincial roads. In addition,about 1,300 km of village access roads are being constructed by the Officeof Accelerated Rural Development (ARD) under the Nbrtheast Thailand RuralDevelopment Project (Loan 1198-TH). The first four completed roads projectswere executed efficiently and with substantial savings in cost. The qualityof construction throughout was good, domestic prices remained stable, andthere was strong competition among contractors. However, on the fifthproject, there were cost overruns and delays caused by sharp increases inprices which required rebidding of several contracts, but under the ongoingsixth project costs are presently running close to the estimates. The sixthproject has continued assistance in strengthening road plann!ng andmaintenance in the Department of Highways and transport planning through TPUin MOC. The operations evaluation report on Loan 626-TH (Fourth HighwayProject) commented that the project had achieved its objectives; roadconstruction costs had been overestimated as the inflation rate was slowerthan anticipated, and traffic had grown at a rate higher than projected.

2. PORT AUJTHORITY OF THAILAND AND THEEXISTING PORTS OF BANGKOK AND SATTAHIP

A. General

2.01 Thailand's seaborne dry cargo trade comprises: (a) conventionalbreak bulk and containerized imports and exports shipped through the Bangkok

- 7 -

Port; and (b) agricultural exports handled through Bangkok or, when exportedin bulk, through 2Iah Boon Krong and the deep sea anchorage at Ko-Sichang,both on the Fastern Seaboard. Petroleum products are handled through SriRacha, also on the Eastern Seaboard.

2.02 Plans for the development of a second deepwater port, withinreasonable distance of Bangkok, have been under consideration for some time(para. 5.14) and were finally narrowed down to a choice between a site atLaem Krabang and the existing port at Sattahip (Map 14856), with the latterfinally selected. Sattahip was originally developed as a military portunder the control of the Poyal Thai Navy (RTN) and was handed over tocivilian control in late 1979.

2.03 Two other ports in Southern Thailand, Phuket and Songkhla, arebeing studied, under financing by the Asian Development Bank (ADB), aspossible deep-sea ports to serve overseas traffic from the southern region.

2.04 The Bangkok Port comprises private and public wharves and isspread along some 40 km of the river Chao Phrya upstream from its mouth.The main wharves, operated by the Port Authority of Thailand (PAT), arelocated about 27 km up-river at Ylong Toei. PAT has also been maderesponsible for operating the new port at Sattahip. Details of PAT and ofBangkok and Sattahip ports follow below.

B. Port Authority of Thailand

Organization

2.05 The Port Authority of Thailand (PAT) was established as anautonomous organization in 1951, aided by Loan 37-TH. It is responsible formanaging and operating the general cargo wharves at Rlong Toei, and for thedredging and conservancy of the navigation channel in the Chao Phrya riverwithin the port limits, including the Bar Channel at the river mouth (Map2791R).

2.06 PAT is directly responsible to the Mlinistries of Communicationsand Finance. It is managed by a Board of Commissioners consisting of aChairman, the Port Director, and nine members. The Director, assisted bytwo Deputy Directors and the chiefs of the various service and operationaldepartments, is responsible for day to day operations. The major,departments include Port Operations, Engineering, Marine, Personnel, andComptrollers (Chart). Total permanent staff is about 1,250; PAT alsoemploys about 6,000 day laborers.

-8-

2.07 PAT has comprehensive responsibilities for handling breakbulkgeneral cargo after it is landed on the berths. Its functions for containeroperations are limited to the container freight stations where the goods areremoved from the container for storage or delivery to consignees. Transferof cargo from the ship's hold to berth, stevedoring, is the responsibilityof the ships agents, as is the stacking of containers and all containermovements; each of the agents is allocated an area in the container yardaccording to the traffic handled. A review of operating procedures isincluded in Chapter 3.

2.08 Except for the operating problems currently being encountered,which are addressed by the project, the management of the port issatisfactory; the present Director and senior staff have worked closely withBank staff for a number of years in the execution of Loan 702-TH.

2.09 The port of Sattahip has been under control of the RTN until late1979. It is now operated for commercial trade and controlled by PAT. BothBangkok and Sattahip have separate managers and staff reporting to theDirector, PAT; and separate accounts will also be kept which will beconsolidated into overall PAT accounts on an annual basis.

Tariffs and Costs

2.10 Tariff levels (Table 3 and Chapter 6) have been sufficient in thepast to enable PAT to maintain a sound financial position; however, tariffsare not cost-based with the result that port resources are or could beinefficiently used. For example, low storage charges have contributed tothe serious congestion difficulties presently being experienced at KlongToei. The issue of cost-based tariffs was initially addressed under Loan702-TH, and costbased tariffs were recommended by consultants. However, theproposed tariff, which met strong opposition from the Ship Owner'sAssociation, was not introduced. Since this study was completed prior tothe development of container traffic, costing of container services was notexamined. Therefore, a review of PAT's cost structure which has changedsignificantly over the past few years, would be appropriate. Further, a newsituation has arisen with the development of Sattahip as Thailand's secondmajor deep-water port. During negotiations, PAT agreed to employconsultants to complete a tariff and costing study by June 30, 1981 underterms of reference satisfactory to the Bank; the study will provide thecosts of its various services and facilities at Ylong Toei and Sattahip,recommend appropriate tariffs, and analyze the scope and requirements forusing port pricing for an efficient traffic distribution between the twoports to complement PAT's Klong Toei berth allocation policy (para. 3.11).PAT has further agreed that upon completion of the study it will restructure

its tariffs in a manner acceptable to PAT and the Bank.

- 9 -

2.11 PAT's overall costs bear a reasonable relationship to revenues andstaffing levels are adequate. Since PAT employ labor for cargo handling aswell as other port functions, wages and salaries represent a higher thanusual percentage of working expenses.

Budgets, Accounting and Audit

2.12 PAT has control of its operating budget, which requires onlyapproval of the Board of Commissioners, and submits it to the Cabinet forinformation only; but its capital budget has to be approved by the Cabinet.The capital budget has some flexibility in that only Board approval is

needed to spend additional funds up to a fixed amount.

2.13 The accounting system follows commercial accounting practice andwas designed and introduced with the assistance of consultants under Loan702-TH; but as noted earlier, it does not treat container operations as aseparate cost center; depreciation of fixed assets is based on originalcosts and estimated useful life. At negotiations, PAT agreed to utilize PATstaff to (a) modify the accounting system to include the impact ofcontainers, (b) implement such modifications at the ports of Sattahip andKlong Toei; (c) examine the advisability of computerizing PAT's accountingsystem; and (d) strengthen financial planning and reporting with emphasis ondeveloping proper linkages between traffic data and financial data (Annex1). PAT further agreed to undertake the accounting/financial planning workdescribed above in accordance with terms of reference acceptable to PAT andthe Bank and to implement the agreed changes by December 31, 1981.

2.14 Section 5.02 of the Loan Agreement of Loan 702-TH requires PATto furnish the Bank with audited financial statements within six months ofthe end of each fiscal year. The audit is the responsibility of theGovernment's Audit Council, and has been satisfactorily carried out. Duringnegotiations, PAT has reaffirmed Section 5.02 of the Loan Agreement of Loan702-TH.

C. Existing Facilities

The Port of Bangkok (rlaps 2791R and 14988)

2.15 The Bangkok Port comprises wharves, warehouses and mid-streamdolphin berths stretching for some 40 km along the Chao Phrya river from itsmouth. These facilities are mostly privately owned and operated except forPAT's wharves at Klong Toei, and are largely used for export of agricultural

products; imports should by law be handled over PAT's facilities at Klong

- 10 -

Toei. The maximum draft of ships which can use the port is limited by theavailable depth of 8.5 m (LWOST) at the entrance channel (10,000 to 12,000dwt general cargo and 400/500 TEU container ships). The navigationalchannel within the river has varying dredged depths between 8.5 m and 11.5 m(LWOST) and permits passage of ships up to 172 m (565 ft) length. Tidalrange is 1.54 m. Deep water exporting facilities are available in the Gulfof Thailand at Mah Boon Krong on the Eastern Seaboard and the anchorage atKo Sichang island opposite flah Boon Krong.

2.16 The privately operated wharves at Bangkok include 82 public andprivate wharves, landing places and finger piers along a considerabledistance of the river and 33 midstream anchorages and moorings at differentlocations along the river.

2.17 PAT's facilities, the Klong Tcei wharves, comprise at present:

(a) 10 conventional (break-bulk) general cargo berths on the W7est Quaywith a total length of 1,660 m and a dredged depth of 11.0 m(LWOST) backed up by transit sheds, port warehouse space, and openstorage;

(b) 6 berths used for container ships on the East Ouay totalling1,255 m, also with 11 m depth alongside; two were originallydesigned for break-bulk cargo and are backed up by transit shedswhich are currently being used as container freight stations(cfs); the remaining four are backed up by a container yard; and

(c) 36 dolphin berths located midstream opposite the Klong Toeiberths, which are mostly used for export cargo loaded from barges;however due to congestion in the port, Customs Department is alsopermitting homogeneous bulk imports to be discharged to barges atthe dolphin berths for subsequent landing at private facilities.

2.18 Adequate mechanical equipment is available for conventional cargohandling, but the container yard equipment needs to be augmented. Floatingcraft and dredgers are adequate for maintenance and operations. Maintenanceof the existing facilities is good. Poll on-roll off facilities could bereadily provided if such traffic developed.

2.19 Road access to Klong Toei berths, improved under Loan 37-TH, issatisfactory, and there is a good rail connection to the East Quay.

2.20 As previously noted, PAT is responsible for all operationsinvolved in handling break bulk general cargo handled over the Rlong Toeiberths; however, when the ships are tied up alongside, cargo is dischargedboth on to the berth and overside to barges; that proportion landed tobarges is handled ex barge through the private facilities and warehouses.

- 11 -

The Port of Sattahip (Map 14989)

2.21 The port and harbor are located in a large bay on the eastern sideof the Gulf of Thailand and at the southern end of Thailand's EasternSeaboard. The harbor is protected from the open sea by a breakwater some1,000 m long. The dredged entrance channel is some 150 m wide and has anavailable depth of 10 m (LWOST). There has been very little silting in thechannel or harbor, but tugs are necessary, due to a cross current of about 1knot in the entrance channel at some stages of the tide. Tidal range isabout 1.4 m.

2.22 To form the required berths within the harbor, land has beenreclaimed behind quay walls constructed of concrete caisson built out fromthe original shore line. There are three 182 m long berths on the West face(berths 1-3 inclusive), each of which has a transit shed, and two 175 m longberths on the North face, which have no transit shed. There are no berthson the South face which fronts the entrance channel and is open to waveaction during South Wlesterly weather conditions. The depth alongside theberths is 10 m at LWOST. The dredged fairway fronting the western berths isadequate for safe ship handling but that for the northern berths requiresimprovement. Fendering requires renewal.

2.23 Over 60 ha of open storage is available, but the pavement isinadequate, and both new paving and renewal of the existing is required. Nbmechanical handling equipment, small craft or survey launches are currentlyavailable. Except for the three transit sheds, there is little coveredstorage space available. There is however a good mechanical workshop.Ancillary works and services are satisfactory. Adequate space is availablefor future development.

2.24 The Government intends to construct a railway line (Map 14856) toSattahip between early 1981 and late 1983 (para. 3.17). The new line willjoin an existing line from Bangkok at Chaochoengsao. The immediate roadaccess to the port is adequate, and there are a number of alternative roadsbetween Bangkok and Sattahip which are also adequate to serve Sattahip byroad.

2.25 So far there has been little civilian traffic at Sattahip becauseof its recent change of status. The only major cargoes have been imports ofpipe for the offshore gas field in the Gulf of Thailand and some bulkagricultural exports. The former traffic is handled by the pipelinecontractors, and this cargo is expected to continue until 1983. Sattahip'sfuture traffic will be containers diverted from Klong Toei, which will beoperating near capacity by the end of 1982, and agricultural bulk exports.

- 12 -

3. THE PROJECT

A. General

3.01 Traffic in the Bangkok Port System has rapidly increased in thelast 10-15 years and heavily taxed port capacity. After having undergoneseveral improvements over the past years, the capacity of the System, and inparticular Klong Toei, is now being exhausted, and port congestion will soonreach critical levels. This project will deal with this problem, byproducing the necessary capacity for traffic projected through 1985e Itsmain components will be improvement of efficiency of existing operations andinstallations (at Klong Toei), development and expansion of port facilities(at Sattahip) , and construction of a container freight station (at Bang Su).However, it is also expected that the port facilities, as improved by theproject, will need to be expanded further in the near future to handleforecast traffic after 1985. The project therefore provides consultingservices to provide a Master Plan for such port development up to the year2000. The project was prepared by the Sattahip Committee appointed by theGovernment with assistance by an individual consultant of the Port ofSingapore Authority and by Maunsell Consultants (Australia) in associationwith Sindhu Pulsirivong (Thailand) and Sir William Halcrow and Partners(UK).

3.02 To achieve its efficiency and capacity objectives, the projectwill comprise four separate but interlocking parts. First, it will increasethroughput of cargo at Klong Toei, with special reference to conventionalbreak bulk cargo by: (a) optimizing use of available quay space (para.3.03), (b) correcting the operational problems currently being experiencedon conventional cargo and improving container handling (paras. 3.05-3.10),and (c) revising the berth allocation between conventional and containercargo ships (para. 3.11); second, it will include the physical improvementsrequired at Klong Toei so that the necessary operational improvements can beachieved (paras. 3.12 and 3.15). However, even after these improvementshave been accomplished, total traffic to be efficiently handled at KlongToei in 1983 in the absence of an alternative port, would be beyond thecapacity of the improved port, and no space is available for physicalexpansion at Klong Toei. Some traffic will, therefore, be diverted toSattahip. Since most imports are and will continue to be destined for themetropolitan area (currently 90%), most of the traffic landed at Sattahipwill have to be transferred by rail or road, back to Bangkok. The leastcost transport solution, will be to use Sattahip as a container port ratherthan as a port for break bulk goods, which would have to be transported innumerous parcels to separate consignees in Bangkok. The third element ofthe project is the necessary physical improvements at Sattahip for handling

- 13 -

containerized ships diverted from Riong Toei (paras. 3.13 and 3.15); andthe fourth and final element is a new inland container freight station andbonded warehouse complex at Bang Su, outside Bangkok, to stuff and unstuffcontainers handled through Sattahip (paras. 3.14 and 3.15). D)etails of theoperational and physical elements of the project are discussed below.

B. Berths TJtilization at Bangkok (Klong Toei)

3.03 The number of ships normally berthed at Klong Toei is 16, butavailable quay length on occasion permits berthing of 18 ships. There areten existing conventional berths totalling about 1,660 m length on the WestQuay, and six nominal container berths totalling about 1,255 m length on theEast Quay. In addition, there is a barge berth at the western end of theEast Quay which can be used for smaller ships. PAT has a policy of berthingas many ships as possible and agreed during negotiation to continue withthis policy in the future.

C. Improvements to Operations and Cargo Throughput at Bangkok (Klong Toei)

3.04 Klong Toei imports are either conventional break bulk cargo orcontainerized goods. In 1979, 3.7 million tons were imported, of whichabout 2.9 million tons were conventional and about 0.8 million tonscontainerized (Table 5). Conventional break bulk cargo at Klong Toei isexpected to increase steadily, and by 1985, total conventional cargo importsis forecast at 3.85 million tons (Table 5).

Cargo Discharged to Berth and Overside

3.05 The tons/net gang hour of conventional cargo discharged throughthe West Quay in 1979 was about 33 when landed to the berth, and about 18when landed overside. While good by international standards, these ratesare lower than those achieved in earlier years. However, they are expectedto recover to the original levels of about 40 and 20 respectively, after theproject has been implemented.

3.06 The number of ships berthed at the West Quay in 1979 was about 730conventional and about 390 combo ships./l At the East Quay, about 330 comboand the same number of container ships were berthed, the latter being feeder

/1 Combo ship is a conventional general cargo ship with containers as deckcargo.

- 14 -

ships connecting with main routes to and from Hong Kong and Singapore. Theconventional cargo, which passes over the ten West Ouay berths, is handledboth over the berths and overside to barge while the ship is tied upalongside. Due to the high volume of conventional cargo and existingregulations and procedures for landside cargo operations, cargo handledoverside (170,000 ton/berth) has, in 1979, exceeded cargo handled over theberth (125,000 ton/ berth), and cargo handling cost and ship waiting timewere therefore excessively high.

3.07 The following factors are responsible for the situation on theWest Quay:

(a) the practice to handle containers from combo ships in the portarea where landed; this operation occupies valuable quay space andslows operations;

(b) the large quantities of goods in storage for excessive periods;and PAT's inability to move goods into bonded warehouses, or todispose of cargo which has not been claimed by the consignee orpurchased at the auctions of unclaimed cargo; and

(c) the requirement that goods for delivery from the port are carriedin trucks supplied by the Express Transport Organization (ETO), aGovernment organization.

3.08 To resolve these operational problems and reach satisfactory portefficiency levels, a set of administrative, organizational and operationalchanges will be instituted under the project, and this was agreed duringnegotiations. The changes are outlined below, except for those dealing withthe reassignment of container yard responsibilities which are discussed inparas. 3.09-3.10. To monitor the effectiveness of those port efficiencymeasures, PAT will record and keep appropriate data and statistics (Annex2). Specifically, the following measures will be taken: (a) the CustomsDepartment will (i) continue to permit containers to be moved to thecontainer yard for handling, irrespective of the berth it is landed at, andsimilarly be moved from the container yard for loading at any berth; (ii)permit goods in bond to be moved from the port to approved bonded warehousesoutside the port, if unclaimed after three weeks in the port storage; and(iii) dispose of unclaimed cargo which has not sold at the normal auctionfor such cargo; (b) PAT will (i) handle all containers in the East Quaycontainer yard irrespective of which berth the containers are landed at;(ii) increase its storage charges so as to penalize cargo which is left in

the port more than seven days, in accordance with the recommendations of thetariff study (para. 2.10); and (iii) take appropriate steps to encourage andenable interested parties to establish by December 31, 1981 bondedwarehouses outside the port and expand the practice to move cargo from port

- 15 -

storage to an approved outside bonded warehouse after three weeks, at thecost of the consignee; in the event that such outside bonded warehousestorage is not established , review not later than March 31, 1982 with theBank measures necessary for its establishment; and (c) the Government willensure that consignees will be free to choose a haulage contractor of theirown choice whenever ETO vehicles are not promptly available.

Container Handling Performance

3.09 Because of the present organization of the container yard at KlongToei, the average handling rate for containers, some 6.3 TEU /1 per hour,is very low, and the throughput per container berth was only 230,000 tons(in 1979), rather than 500,000 tons per yer, which should be attained. Eachof the ten shipping companies represented in the port handles its own importand export containers in the space allotted. Nb container freight stations(cfs) are available, though two transit sheds built for conventional cargooperations, are used. The sheds, operated by PAT, are in the wrong placeand have insufficient cargo space, and are consequently congested. As aresult, some containers are unstuffed in the container yard, where also allthe export containers are being stuffed. The situation is furtheraggravated by the arrangement that the empty containers, which representabout 80% of the some 4,000 TEU in the yard, are stacked in the same portarea.

3.10 To streamline container operations, reach an improved handlingrate per hour and increase traffic handled by the individual berths underthe project, the container yard responsibilities will be redefined under theproject. These changes, which are outlined below, will become effective assoon as the new cfs under the project are available, and in any event notlater than December 31, 1982. Arrangements will also be made under theproject that each movement of a container into the container yard from theship and from the yard for the respective services or for reloading on ship,be documented; and PAT's operating department will be reorganizedaccordingly. In addition, PAT will provide more cfs space by making twoSupplementary Sheds Nbs. 2 and 3 (Map 14988) available as cfs. Further, PATwill allow shipping companies to retain in the yard only that number ofempty containers which are required for their export trade. Technicalassistance (Annex 1) to assist PAT in the reorganization will be providedunder the project. The arrangements described in this paragraph were agreedduring negotiations.

/1 TEU is a twenty foot equivalent unit; one 20 ft long container and one40 ft long container, for example, would be three TEUs.

- 16 -

Operation Responsibility

Off load/load ship Ship's agent

Operate yard for all shipping PAT or single agentcompanies using the port appointed by shipping

companiesOperate cfs PAT

Operate new open area for stuffing PAT or single agent appointedcontainers (approximately the area by PATof new paving provided by the project)

Move container unloaded from combo ships PATon the West Quay to the East Quay con-tainer yard for unstuffing/stuffing

Berth Allocation between Conventional and Container Cargo

3.11 Because of PAT's berth allocation policy, the conventional cargohandling berths on the West Quay are highly utilized, while the East Quaycontainer berths are grossly underutilized. With increasing traffic,continuation of this policy would result in considerable waste of portcapacity and in the build-up of high levels of ship wating time. To redressthis imbalance in berth utilization, taking into consideration the mostefficient use of Sattahip, PAT will under the project reduce the number ofcontainer berths at Klong Toei by converting them into general cargoberths; and it will correspondingly provide new container berths atSattahip. While in principle Sattahip could also have been developed as ageneral cargo port, using it primarily for containers is more economic, asland transport between Sattahip and Bangkok is cheaper for containerizedgoods than for breakbulk (para. 3.02). The pace, at which Klong Toeicontainer berths will be turned over for general cargo usage, will bedetermined by increases in traffic and in such a way, that the annual numberof ship waiting days at Klong Toei does not exceed current levels. Bypresent traffic estimates, a reduction from six to three container berths atKlong Toei would be required in 1983 to keep ship waiting time at currentlevels; and by 1985, only 2 container berths are suggested at Klong Toei.It was agreed at negotiations that: (a) during the period 1983-1985, PATwill limit the number of berths used for container operations at Klong Toeiin such a way, that the annual ship waiting time for all berths and allships at Klong Toei does not exceed 1,000 days; and (b) after 1985, the

- 17 -

number of container berths at Klong Toei will be determined in a manner

satisfactory to PAT and the Bank. With the new berthing policy, complemen-

tary investments and efficiency measures taken at Klong Toei, the port's

annual capacity will be about 5 million tons of cargo arrived at as follows:

15 conventional cargo berths at 230,000 tons/berth /1 3.45

3 container berths at 500,000 tons/berth 1.50

Total 4.95

Accordingly in 1983, with a total of about 5.35 million tons containerized

and break bulk cargo to be handled, some 400,000 tons will have to be

diverted to Sattahip, and more in subsequent years (Table 5).

D. Physical Improvements at Klong Toei and Sattahip,and Proposed Bang Su Development

3.12 The physical improvements proposed under the project at Klong Toei

will provide additional container freight station capacity, improvement to

the container yard and new container handling equipment.

3.13 The improvements proposed at Sattahip will comprise dredging to

the entrance channel and harbor, improvements to fendering, resurfacing the

container yard area and a new cfs and auxilliary buildings services; and

provision of container handling equipment.

3.14 A new cfs and bonded warehouse complex will be built at Bang Su,

outside Bangkok, to handle the containers landed at Sattahip with goods for

the Bangkok area. Bang Su is the location of the main cargo handling depot

for Bangkok traffic of the State Railways of Thailand (SRT). The new

railway line which the Government intends to construct (paras. 2.24 and

3.17) has direct connection to Bang Su, and improvement of a short length of

road will provide an adequate link to the Bangkok ring road and to the main

road to Sattahip. As the Eastern Seaboard development, the subject of a

Bank financed study (Loan 1638-TH), commences, it is foreseen that some

traffic will be consigned to Sattahip, and a small cfs at Sattahip to handle

LCLs /2 is therefore also included in this project; but it is anticipated

that most of such traffic, when it develops, will be received as FCLs./2

/1 Does not include containerized cargo landed from combo ships at

conventional berths and handled through the container yards.

/2 LCL is a container with goods for more than one consignee (less than

full container load). FCL is a full container for one consignee.

- 18 -

3.15 The proposed physical improvements at Klong Toei and Sattahip andthe new construction proposed at Bang Su are described in detail below:

Port Improvements

(a) Civil Wlorks at Klong Toei

(i) Construction of two new container freight stations 120 m by45 m complete with paved area and drainage, adjacent to theEast Quay entrance gate; surfacing 31,000 sq m in thecontainer yard, and resurfacing 10,000 sq m and provision ofa rail loading slab.

(b) Civil Works at Sattahip

(i) 820,000 cu m dredging to the entrance channel and harbor fora uniform 10 m depth at LWOST; provision of new tug berth andrenewal of existing fendering;

(ii) 230,000 sq m paving to container yard and vehicle park areas;rail trackwork inside port limits and railway loading slab;

(iii) administrative offices, a 120 m by 45 m cfs, and ancillarybuildings; and

(iv) water supply, drainage, sewerage, electrical services andancillary work.

(c) Mechanical Equipment for Klong Toei and Sattahip

(i) 9 30-tons rubber tired gantries (transtainer cranes);

(ii) 25 fork lift trucks from 25 tons capacity to 3 tons capacityand 2 30-tons top spreader fork lifts; and

(iii) three mobile cranes; 28 tractors and flat bed trailers; andmiscellaneous transport vehicles, fire engine, navigationaids, radio and ancillary equipment;

(d) Floating Equipment at Sattahip

(i) one pilot launch, one survey launch, two mooring boats andfive work boats/launches; and two 3,200 HP tug boats;

(e) Consulting Engineering Services for design, supervision andprocurement of the above works and equipment; and

- 19 -

(f) Technical Assistance and Training for PAT's staff for:

(i) study of preventing erosion in the Sattahip bay;

(ii) study of location and type of port development on the EasternSeaboard required in the period from 1985 to the year 2000;

(iii) study of PAT tariffs, including storage charges; and

(iv) reorganization of PAT's conventional cargo and container yardoperations and responsible operating department.

Bang Su Development

(a) Civil Works

(i) two container freight stations of about 240 m x 45 m, onecontainer freight station of about 300 m x 45 m and fourbonded warehouses about 200 m x 45 m; each complete withpaving and drainage to surrounding area; and

(ii) improvement to the road and rail access to the site andprovision of rail loading slab;

(b) Mechanical Equipment

(i) two 30-tons rubber tired gantries (transtainers);

(ii) ten 25-tons fork and 94 3-tons fork lift trucks and tentractors and trailers; and

(c) Consulting Engineering Services for design, supervision andprocurement of the above works and equipment.

Organization of Bang Su

3.16 The Bang Su cfs and bonded warehouse complex will handle the goodsfrom the containers landed at and exported through Sattahip. The Governmentwill finance the complex (US$52.4 million) using Bank funds (US$31.5 mil-lion), and it will hold title to the complex. Land for Bang Su, which isowned by SRT, will be leased to the Government. However, the Governmentintends to lease Bang Su, after its construction, to an operator, who wouldbe responsible for its day-to-day management; and in the interest ofefficiency, it is hoped that private entrepreneurs can be attracted becauseof the excellent business opportunity, which Bang Su is expected to provide.Accordingly, the consultants, who will undertake the engineering of Bang Su

- 20 -

under the project, will also review the institutional arrangements foroperating Bang Su, and submit their recommendations, including those on thesuitability of specific potential operators, by not later than December 31,1981. Based on their recommendations, the Government will select anoperator for Bang Su, and lease the complex to the operator on terms andconditions satisfactory to the Bank. In the event, however, that leasearrangements with a suitable operator can not be made, the Covernment wouldoperate Bang Su itself under own arrangements. Bang Su will be constructed,and leased to an operator, according to a schedule which is compatible withthat of the other project elements. All the above financing, operationaland leasing arrangements were discussed and agreed during negotiations.

3.17 As previously mentioned (para. 2.24), the Government intends toconstruct a new railway line between Chaochoengsao on SRT's Fastern Line andSattahip, to serve the Eastern Seaboard and its hinterland, the new deepseaport and future industrial development. The new line will initially serveprimarily the needs of Sattahip, but could subsequently derive its mainimportance from being a bulk goods carrier for the various industries to bedeveloped in the port's hinterland (Eastern Seaboard). The new line willalso carry some passenger traffic. Construction is to start early 1981 andto be completed by late 1983. Total track costs including land andsignalling, based on detailed engineering, are estimated at about US$105million including physical and price contingencies; and rolling stockrequirements for 1985 ports traffic are estimated at about US$25 milliontotal costs including contingencies. Overall capital costs summed up to1985 are therefore about US$130 million. During negotiations, the Bankexpressed concern about the economic viability of the new line andappropriate timing for its construction (para. 5.18) and suggested that therailway investments be reviewed in the context of the Eastern Seaboard Study(para. 3.14). It was agreed that in the event, the railway was notavailable, there are already adequate roads between Bangkok and Sattahipwhich could accommodate the container traffic during Sattahip's initialyears of operation, and that there is a competitive trucking industry inThailand which would provide the road transport. In any case, whatever thetiming will be for the new railway line, it was agreed during negotiationsthat the Government will allow the road transport industry to compete forcontainer or other transport between Sattahip and Bang Su, and thatconsignees of cargo shipped through Sattahip can use road haulagecontractors of their own choice for any movement of cargo.

- 21 -

4. PROJECT COSTS, FINAICING, DISBURSEMENT AND ECOLOGY

A. Cost Estimate

4.01 The estimated cost of the proposed project works detailed in theprevious chapter is US$109.2 million including US$50.9 million foreignexchange of which US$47.0 million would be financed by the proposed loan.Details of the estimated cost of the project are given in Table 6 andsummarized below:

Local Foreign Total Local Foreign Total---- (Baht million) ---- --- (S$ million) ---

Klong Toei & SattahipKlong Toei - Civil works 90.5 - 90.5 4.52 - 4.52

Sattahip - Civil works 271.4 68.6 340.0 13.57 3.43 17.00Klong Toei - Mech. equipment 65.0 96.2 161.2 3.25 4.81 8.06Sattahip - Mtech. equipment 68.0 89.6 157.6 3.40 4.48 7.88Sattahip - Floating equipment 73.0 - 73.9 3.70 - 3.70Consulting Services - 25.7 25.7 - 1.28 1.28Tech. assistance & training - 22.9 22.9 - 1.15 1.15

Base Cost 568.8 303.0 871.8 28.44 15.15 43.59

Physical contingencies 70.6 15.4 86.0 3.53 .77 4.30Price contingencies 108.7 68.3 177.0 5.43 3.42 8.85

Total Port Works 748.1 386.7 1,134.8 37.40 19.34 56.74

Bang Su ComplexCivil works 263.2 315.2 578.4 13.16 15.76 28.92Mechenical equipment 30.0 110.0 140.0 1.50 5.50 7.00Engineering consulting

services - 38.0 38.0 - 1.90 1.90

Base Cost 293.2 463.2 756.4 14.66 23.16 37.82

Physi-al contingencies 45.0 70.0 115.0 2.25 3.50 5.75Price contingencies 80.0 97.0 177.0 4.00 4.85 8.85

Total 418.2 630.2 1,048.4 20.91 31.51 52.42

Project Total 1,166.3 1,016.9 2,183.2 58.31 50.85 109.16

- 22 -

4.02 The estimated costs are based upon preliminary engineering, andinclude 20% physical contingencies for civil works. Final engineering isnot expected to be completed until after loan signature but the projectinvolves very little foundation works and no underwater works except acomparatively small amount of dredging. Unit prices for the estimate areJanuary 1980 prices for similar work in Thailand. Mechanical and floatingequipment prices are based upon recent quotations, and in the case ofmechanical equipment for Klong Toei and the floating equipment at Sattahip,most of the equipment has already been ordered or procured under financingfrom PAT's budget. Financing details are given in Table 6. Price contin-gencies for civil works are calculated on the basis of inflation rates of15% for 1980, 12% for 1981 and 10% for 1982 and 1983 based upon anticipatedincreases in construction costs in Thailand; those for mechanical equipmentprocurement and other direct foreign costs are based upon 10.5% for 1980, 9%for 1981, 8% for 1982 and 7% for 1983. The average man-month cost for about110 man-months of technical assistance proposed in the project inclusive ofman-month rate, fee and international travel is expected to be aboutUS$10,000, plus an additional local allowance of about US$2,000 equivalent.

B. Financing Plan

4.03 The project's financing plan is as follows:

Port works Bang SuFinance source Local Foreign Local Foreign Total

--------------- US$ million--------------

IBRD - 15.5 - 31.5 47.0Government of Thailand - - 20.9 - 20.9Port Authority of Thailand 3 7.4 3.9 - - 41.3

To tal 37.4 19.4 20.9 31.5 109.2

The proposed $47 million loan will be made to the Government, which willonlend $15.5 million to PAT on the same terms and conditions as the Bankloan, for the execution of the port works. The Bank loan will finance theseitems:

- 23 -

Port works Bang Su To tal---------- I…S$ million -------…--

Civil works 5.46 22.60 28.06Mechanical equipment 7.66 7.00 14.66Consulting services 1.28 1.90 3.18Technical assistance & training 1.10 - 1.10

Total 15.50 31.50 47.00

C. Construction and Procurement

4.04 PAT will undertake the project works for Klong Toei and Sattahipports; and SRT are expected to be appointed by the Government as executingagency for the construction of Bang Su. Consultants, which are acceptableto the Borrower and the Bank and appointed on terms and conditionsacceptable to the Bank will assist in the project implementation. This wasagreed during negotiations. The works will be completed by June 30, 1984 inaccordance with the implementation schedule given in Table 7, on theassumption that the proposed loan will be effective by February 1981.

4.05 Execution of the Bank-financed civil works to be carried out underthe project will be by two separate contracts:

(a) Sattahip civil works; and

(b) Bang Su complex civil works.

The balance of the civil works, which will be financed by PAT and theGovernment, will be undertaken by PAT under local contracts. Mfechanicalequipment will be procured under three separate contracts:

(a) Transtainer cranes;

(b) forklift trucks; and

(c) tractors and trailers.

Floating equipment and some mechanical equipment have been or will beprocured by PAT. Tenderers for civil works and equipment may submit bidsfor more than one contract if they so wish.

- 24 -

4.06 All civil works, and equipment procurement financed under the Bankloan will be let in accordance with international competitive bidding inaccordance with Bank Guidelines. A preference not exceeding 15% ofthe c.i.f. price or the customs duty whichever is less will be granted tolocal manufacturers for the procurement of mechanical and floatingequipment. During negotiations the above procurement procedures wereagreed. The Government intends to levy import taxes on all items procuredfor the project.

D. Disbursement

4.07 Disbursement of funds from the Bank Loan for the various works tobe executed under the loan will be as follows, excluding taxes, in eachcase:

Civil Works at Sattahip .................. 55% Total costBang Su Civil Works ...................... 55% " "Mechanical Equipment ..................... 100% Foreign exchange

cost or ex-factorycost for locallymanufactured and65% of total costif procured local-ly other than ex-factory

Consulting Services ...................... 100%

An estimated schedule of disbursements is given at Table 8. Disbursement isexpected to be completed by the second quarter of FY85. The closing datefor the loan is December 31, 1984.

E. Ecology

4.08 The only work which might affect the ecology of the harbors con-cerned is the dredging at Sattahip. The dredged material will be disposedof in shallow water for land reclamation. It will not affect fishing, whichis undertaken outside the harbor; and the reclamation fill level will bemaintained below water level, for subsequent completion when the land is

required, to avoid any risk of dust problems.

- 25 -

F. Completion Report

4.09 Promptly after completing the project, PAT will prepare andfurnish to the Bank a report on the execution and initial operation of theproject (except for the Bang Su complex), its costs, and the benefitsderived and to be derived from it. For the Bang Su complex, the Governmentwill make separate reporting arrangements. This was agreed during negotia-tions. The main comments of the Project Performance Audit Report for Loan702-TH were: (i) it appeared that PAT could have financed a larger part ofthe project from its own resources without endangering its financial posi-tion, (ii) the project was not analyzed for its impact on the urban environ-ment, and (iii) implementation of covenants concerned with social and admin-istrative issues can be difficult and time consuming to apply and need to behandled cautiously. In this project, a significant portion of the KlongToei and Sattahip investments are being financed by PAT. With regard to theurban environment and traffic, the project does not appear to pose unduerisks.

- 26 -

5. ECONOMIC EVALUATION

A. Investment Objectives

5.01 During the last 10 years, the Bangkok Port System has supported agrowth of Thailand's dry imports in volume terms by about 11% p.a. and anequally high export growth averaging about 9%-10% p.a. The capacity of thesystem to efficiently handle further increases in external trade, in par-ticular imports of breakbulk goods, is now being exhausted, and port conges-tion costs are soon to reach critical levels, to burden the country's importbill and to constrain its export potencial. The ports capacity which willbe created under the project in Klong Toei and Sattahip, will be adequatefor traffic levels of 1985, after which date generation of additionalcapacity will be required. Type, scope and timing of this new capacity willbe determined under the port master plan included in this project.

B. Import and Export Volumes

5.02 In the 1960s, Thailand's economy grew at the fast rate of over 8%p.a., and in the first half of the 1970s, at about 6.5% to 7.5% p.a. Thegrowth target of 7% adopted for the Fourth Development Plan 1977-81 has sofar been exceeded, however, largely at the expense of deteriorating balanceof payments, which in conjunction with the current slowdown of world tradecould lead to a reduction in GDP growth during the remainder of the ongoingPlan period. The current outlook for the Fifth Development Plan 1982-86 isone of continuing growth but presumably at a somewhat reduced rate.

5.03 Growth of volumes (tons) of dry import cargo, following closelythe general trend of the economy, has been between 6%-7% p.a. from 1960 to1975. Between 1975 and 1978, the latest year for which verified actualstatistics are available, the rate jumped to about 22% p.a. fueled by aconstruction boom, and from 1978 to 1985 it is expected to settle down toabout 5% p.a. on average (Table 4). Export tonnages grew at an estimated 9%p.a. from 1970 to 1975, and at the much higher rate of about 16% from 1975to 1978 largely due to an increase in tapioca exports (Table 4). The maincontributions to the export growth apart from tapioca, came from rice, maizeand sugar/molasses. Growth of overall export volumes from 1978 on to 1985is estimated at only about 2% p.a. because of a decline of tapioca volumesto below the 1978 level.

5.04 While during the 1960s and early 1970s import volumes havegenerally developed in close correlation to GDP, this relationship has not

- 27 -

proven useful for trade estimates during the most recent years. Importtrade forecasts up to 1985 under the project have therefore been made on acommodity by commodity basis taking into account structural changes in theThai economy. Similarly, exports for 1980 to 1985 were forecast on thebasis of individual commodity projections with particular emphasis on thosecommodities which represent potential cargos for the Sattahip port.

5.05 For the import forecast up to 1985 the consultants preparing theproject distinguished and analyzed 17 major commodity groups of which involume terms the most important currently are: iron and steel includingscrap, fertilizer, chemicals, paper and raw materials, cement, and vehicles,machinery and parts. The first three import categories will, in tonnages,contribute most to the import growth followed by timber, while others willstagnate or grow only slowly, and cement will disappear completely from theimport list. Regarding exports, agricultural produce will in the next 10-15years remain Thailand's main export in volume and revenues, and tapiocaproducts are expected to be the principal export commodity with an annualvolume of twice that of rice, the second most important export produce. Abrief discussion of the development of principal import and exportcommodities is given in Annex 3. Container traffic is being discussedseparately below (paras. 5.06-5.07).

C. Container Traffic

5.06 Containerization is a relatively recent phenomenon to Thailand,and containerized imports and exports combined have grown from close to0.6 million tons in 1977 to over 1 million tons in 1978 and an estimated1.4 million tons in 1979 (Table 5). Over the same period the share ofcontainerized cargo of total breakbulk cargo, again imports and exportscombined, rose from about 15% to an estimated 30%.

5.07 After the rapid rate of growth of the last 2 to 3 years, thecontainerization of suitable commodities is projected to stabilize in the1980-85 period at about 35% of total breakbulk import and export cargo.Nonetheless, the volume of containerized traffic is projected to increasefurther to about 2.1 million tons in 1985 because of the growth of trade.The 35% of containerized cargo, projected by the consultants preparing theproject, is based on a commodity-by-commodity analysis taking into accountthe principal origins and destinations of each cargo group and shippingtrends. Variations of the 35% share do not significantly change theproject's economic return (Table 15).

- 28 -

D. Traffic Distribution Between Port Facilities

5.08 The assessment of future traffic distribution between thefacilities comprising the Bangkok Port System requires a distinction betweenagricultural bulk (tapioca and maize), breakbulk and container traffic. Theresults of this assessment are given in Tables 4 and 5, the first showingthe 1975 to 1985 import and export trade through the Bangkok Port System bycommodities, and the second shows the trade by facilities, also up to 1985.

5.09 Tapioca is currently being exported through a jetty at Mah BoonKrong, near Sri Racha southeast of Bangkok, and through barges unloaded intobulk carriers anchored in the waters of Ko Sichang. Because of theprojected reduction of tapioca exports between 1980 to 1985 to below 1978levels, no new export facilities would be required on port capacity grounds.However, the development of Sattahip for non-bulk traffic will also entailcost advantages for tapioca exports due to reductions of (port) landside andship loading costs and reductions in land transport costs. Based on thesefactors including an analysis of the points of origin of tapioca, adiversion of tapioca to Sattahip from the deep sea anchorage of Ko Sichanghas been projected, in the order of 0.5 million tons in 1980 and 1.4 milliontons in 1985. Loading of tapioca at Sattahip is already underway since1979.

5.10 Maize is another agricultural bulk commodity which is expected toutilize the new port. However, the economic case for diversion of maizeexport to Sattahip from Bangkok port, where it is presently being handled,is less clear than that for tapioca. The pattern of crop productionsuggests that there would not be an apparent reduction in land transportcosts from shifting some maize export to the new port. Nonetheless, theMarket Organization of Farmers (MOF) has iet a contract for the constructionof a maize silo and bulk loader at Sattahip and plans to export 0.3 milliontons per year through the port. Maize handled in Sattahip has thereforebeen projected at 0.1 million tons in 1982 growing to 0.3 million tons by1985, but no project benefits have been credited to Sattahip from thistraffic.

5.11 Forecasts of Sattahip breakbulk and container traffic are derivedfrom the policy decisions envisaged under this project in response to theincreasing Klong Toei port congestion. In 1978, congestion in the portresulted in 1,200 ship waiting days, and in 1983, the figure would be closeto 4,000 days unless new port capacity was generated. From an operationalviewpoint, relief of Kiong Toei congestion could be accomplished throughdiversion to Sattahip of either breakbulk or containers. Diversion ofcontainers, however, is by far the better economic strategy due to theircomparatively low land transport cost between Sattahip and the new c.f.s. at

- 29 -

Bang Su. Accordingly, the policy has been devised under the project togradually reduce the number of Klong Toei container berths to make room forthe growing breakbulk traffic, and simultaneously to use compensatingcontainer capacity at Sattahip. Under this arrangement, inbound containercargo in Sattahip is expected to total 0.24 million tons in 1983 and 0.76million tons in 1985, and outbound cargo is expected to be around 0.16million tons in 1983 and 0.51 million tons in 1985 (Table 13). Someoccasional container traffic is already passing through Sattahip.

E. Investment Alternatives

5.12 To cope with existing and anticipated Klong Toei port congestionand insufficient capacity, the Government had to consider the followingalternatives: increasing the capacity of Klong Toei and/or private wharvesin the Chao Phrya; increasing the volume of cargo handled midstream in theChao Phrya; and creating new port facilities in the Gulf of Thailand.Increases in existing Klong Toei capacity are essentially limited to reallo-cation of berths between conventional cargo and container ships and raisingberth productivity. Both are envisaged under the project but are, by them-selves, insufficient capacity generators. Construction of new Klong Toeiberths is physically not possible as the port site is hemmed in to the eastby an oil installation and to the west by other existing waterside develop-ment. Further there is the depth limitation at the entrance bar (8.5 m).Other riverside space in the Bangkok area is also fully used up or lacksadequate land access and would, in any case, require capital cost equal toor above those of the Sattahip port. Existing private port capacity isalready fully engaged.

5.13 Handling cargo in the Chao Phrya through use of lighters from mid-stream anchorages and dolphins is already being practiced for selectedhomogeneous cargo which has the approval of Klong Toei customs and isdestined to riverside warehouses and factories. Once ship waiting days havereached emergency levels, midstream handling could, subject to customsconcurrence, conceivably be extended to nonhomogeneous goods, though onlywith considerable operational difficulties and at very high cost. The pooreconomics of such a port solution are apparent from the comparison of thisproject with its reference case (para. 5.15).

5.14 The search during the last few years for new port sites in theGulf of Thailand resulted in the identification of two feasible port loca-tions, Laem Krabang and Sattahip. Laem Krabang, located about 50 km closerto Bangkok than Sattahip, would have offered the advantage of lower landtransport costs and more land space in the immediate port area forindustrial development. It would, however, have faced water supply

- 30 -

difficulties similar to Sattahip, involved much higher investments and posedenvironmental risks to the seaside resort of Pattaya, one of Thailand'smajor tourists areas. In the final analysis, the Government decided againstLaem Krabang on the basis of an economic comparison of the two ports whichhighlighted Sattahip's sunk capital costs and its relatively low additionaldevelopment cost.

F. Project Benefits, Cost and Returns

5.15 The economic analysis of the project is based on a comparison withthe reference case. Under this reference case, the Port of Bangkok with theKlong Toei and private wharves would continue as Thailand's principal portfor breakbulk and containerized cargo; but ship waiting time, for lack ofberths, would increase substantially above current levels, and from 1983 on,breakbulk lighterage of ships anchored mid-stream in the Chao Phrya would beexpected to commence. Based upon this scenario the project benefits are indecreasing order of importance, savings in ship-waiting costs (at KlongToei), agricultural bulk export costs (tapioca at Ko Sichang) and breakbulklighterage costs (at Klong Toei). The project is not expected to be detri-mental to the urban environment and traffic. From 1985 on, savings inship-waiting costs are estimated at close to 70% of total project benefits.The calculation of shipwaiting costs is based on a ship queueing analysisunder which the total number of shipwaiting days under the reference case,would increase from current levels of 1,000-1,200 days to about 4,000 daysin 1985; about 3,600 days would be incurred by conventional cargo and theremainder by containerized cargo. While this figure of 4,000 days, to berealized if the project was not implemented, is obviously not subject toempirical verification, some upward or downward variations of it would notappreciably affect the project's aggregate benefits, as the averageshipwaiting costs per ton of cargo are about equal to the average lighteragecosts.

5.16 Savings from shipwaiting time are valued at US$7,600/day in theeconomic analysis based on the cost of a 10,000 dwt breakbulk carrier (Table14). Cost savings from lightering ships anchored midstream in the ChaoPhrya are composed of reductions in direct lighterage costs, costs fromlosses and breakage of cargo and costs from increased ship service time; allthree savings categories combined amount to about US$12/ton of cargo.Savings in tapioca export costs, amounting to about US$4.5/ton, are made upof savings in land transport and ship-loading costs, offset in part by anincrease in ocean voyage costs. Tapioca passing through Sattahip will enjoya road transport advantage of some 80 km. Ship loading from barges in thebay (Ko Sichang) will provide most of the bulk export benefits. However,ocean shipping costs will increase since bulk carriers over 75,000 tons

- 31 -

calling on Sattahip cannot be fully laden due to the limitation on sailingdraft. There are no limitations on the size of vessels anchored in the bayof Ko Sichang.

5.17 The project costs charged against the project benefits are thecapital costs and recurrent transport costs of moving containers betweenSattahip and Bangkok. The capital costs, apart from those related to landtransport (para. 5.18), comprise (a) all capital expenditures in Klong Toeiand Sattahip ports and for the new cfs at Bang Su, incurred in 1980-84, and(b) the costs of port equipment replacement and maintenance dredging,incurred in 1985-2000. The economic costs are financial costs net of taxes.The capital costs and related benefits of the port development phasefollowing this project and serving traffic growth beyond 1985, are excludedfrom this project's rate of return analysis.

5.18 As previously mentioned (para. 3.17), the Government intends toconstruct a new railway line linking the Eastern Line and Sattahip to servethe Eastern Seaboard and its hinterland, the new deepsea port and futureindustrial development. Conceptually, only the economic cost of rollingstock, close to US$20 million (early 1980 prices), can be charged to theport project without difficulties, whereas the economic road infrastructurecost of US$70-75 should be spread over the various future users which are atpresent not yet firmed up. Somewhat arbitrarily, therefore, half of therailways total economic capital costs, that is about US$45 million, weredebited to this ports project in the economic analysis. In addition, acalculation was made in the sensitivity analysis under which the railway'sentire economic capital cost, about US$90-95 million, would be borne by theproject. Aside from above capital cost, there will be the annual costs ofrunning the container trains between Sattahip and Bangkok. These costs(US$3.50/ton), which are partly offset by savings in ship voyage costbetween Sattahip and Bangkok (US$1/ton), are charged to the project in full.In the event that the railway is not constructed, the Sattahip/Bangkoktransport of containers is expected to be satisfactorily handled by road fora number of years. While the operating costs of road transport would besomewhat greater than those of rail transport, this cost difference would befar outweighed by the minor road infrastructure cost, mainly roadmaintenance cost, which would be incurred under the road transport option.Accordingly, the economic rate of return of this project would increase ifSattahip was not to be served by rail.

5.19 The economic rate of return of the entire project, calculated onthe basis of above data, assumptions, definitions and methodologies is 21%(Table 15); and the project benefits in 1983 after most of the capitalinvestments have been made, represent about 26% of the capital cost in thepreceding years. The project is timely, and the high economic return isindicative of the critical stage through which the Bangkok Port System is

- 32 -

moving and the costs to Thailand's external trade and economy from notsupplying new port capacity. The global rate of return analysis has beensupplemented by calculations on individual project items which show that the

project is well composed. Investments in Klong Toei and Bang Su yield areturn of 19%, and those in Sattahip alone, 22%. Dredging at Sattahip,which conceptually can also be separated from other investments, gives areturn of above 50%.

5.20 There are a number of risk factors affecting the proiect,including slower than expected foreign trade development, underestimate ofKlong Toei port capacity under the reference case, and higher than expectedoperating cost for land transport of containers between Sattahip andBangkok. None of these risks can be perceived on an order of magnitude thatthey would change the basis result of the economic analysis, namely that theproject is very timely, if not overdue, and highly feasible. The numericalresults of sensitivity analyses leading to this conclusion are given inTable 15.

5.21 For the economic analysis it has been assumed that all thebenefits would accrue to Thailand. While this is clearly the case foravoided lightering costs and agricultural bulk export costs, it is somewhatless certain with regard to avoided shipwaiting costs, where the benefitsmight in the first instance accrue to the predominantly foreign shippinglines. However, several points may be made here. First, above normalshipwaiting tends to result in conferences imposing port congestionsurcharges to recover the extra costs, thereby passing the cost on to theshippers. With consultation between conferences and shippers councilsbecoming more common and conferences increasingly being required to justifyincreases and surcharges to national shippers councils (as exists inThailand - there is also regional cooperation with the ASEAN Group), it isincreasingly likely, that conference surcharges will reflect costs. Second,in the case of Thailand, the liner shipping services on several importanttrades, e.g. between Thailand and Japan and from Thailand to Europe, areprovided by conferences covering only Thailand rather than a range ofcountries in a region. Finally, although the present share of the cargoesarriving in Thai vessels is limited, it is expected to increase in thefuture. The effect on the economic rate of return of less than 100% of thesavings in shipwaiting cost accruing to Thailand was tested as part of thesensitivity analysis (para. 5.20), and the analysis showed that even ifonly 50% of these benefits accrued to Thailand, the project would still havea satisfactory rate of return (Table 15).

- 33 -

6. FINANCIAL EVALUATION

A. General

6.01 During the past four years, PAT has been in excellent financialcondition. Revenues have kept pace with increased operating costs withresulting increases in operating surpluses in each of the fiscal years1976-79. Further, PAT has maintained a strong balance sheet with ampleliquidity and low debt to equity ratios. Commencing in 1980, PAT willassume administrative and financial responsibility for the commercial portat Sattahip and PAT's annual accounts will reflect the combined financialperformance of the ports of Klong Toei and Sattahip. As a start-up opera-tion with only limited traffic initially, the port of Sattahip is expectedto experience operating losses in the early years (1980-84) of its develop-ment. Nevertheless, with appropriate periodic tariff adjustments PAT'sconsolidated financial performance is expected to remain strong. PAT'sfuture cash flow is projected to be sufficient to service debt, financecurrent operations, provide a significant return to the Government, and makea meaningful contribution to the Investment Program.

B. Past Financial Performance

6.02 The profit and loss statements for the fiscal years 1976-79 areset forth in Table 9 and summarized below. The financial ratios reflect theearnings of the period under consideration. The financial performance wasstrong throughout the 1976-79 period, and the returns on fixed assets in use(para. 6.10) were consistently higher than the 8% required under Section5.03 of the Loan Agreement for Loan 702-TH. With tariffs constant from1976-79, revenues increased in response to traffic increases, changes incargo mix and enhanced storage income due to congestion. Concurrently,working expenses increased 57% primarily reflecting wage awards. As aresult, PAT experienced a steady improvement in operating profits and theoperating ratio was maintained at a satisfactory 70% throughout the period.

- 34 -

1976 1977 1978 1979------ (Baht million) ------

Total operating revenue 497 579 664 834Less: working expenses 349 371 420 549Depreciation 39 40 42 42

Total operating expenses 388 411 462 591

Operating surplus 109 168 202 243Interest charge 15 15 16 15

Ratios: Operating 78 71 70 71Times interest earned 7.3x 11.2x 12.6x 16.2xDebt service coverage 6.2x 8.1x 9.1x 10.6xReturn on net fixed assets 8.3% 12.5% 14.7% 17.4%

Ratios required under Loan 702-THDebt service limitation 1.75x 1.75x 1.75x 1.75xReturn on net fixed assets 8% 8% 8% 8%

6.03 Balance sheet data for fiscal years 1976-79 are presented in Table10 and summarized below:

1976 1977 1978 1979…-- (Baht million) ------

Current assets 386 460 622 731Net fixed assets 606 577 567 1,306Work in progress 708 795 807 117Other assets 16 22 35 62

Total assets 1,716 1,854 2,031 2,216

Current liabilities 115 113 130 150Long-term debt 183 206 212 205Net equity 1,418 1,535 1,689 1,861

Total liabilities and equity 1,716 1,854 2,031 2,216

Ratios: Current 3.4x 4.1x 4.8x 4.9xDebt/equity 11/89 12/88 11/89 10/90

- 35 -

The current ratio, working capital and overall liquidity are ample. Thecash position strengthened from ten months to twelve months of combinedworking expenses and debt service in 1976 and 1979 respectively. This topicwill be addressed in para. 6.08. PAT's build-up of cash is partly explainedthrough its low level of debt and consequent debt service requirements. Thelong-term debt of 205 million Baht in fiscal 1979 consisted solely of theoutstanding principal for Bank Loan 702-TH. The debt/equity ratio remainedmodest falling from 11/89 in 1976 to only 10/90 in 1979. In summary, PAT'shistorical balance sheets have been excellent.

C. Forecast Financial Performance - Sattahip

6.04 The assumptions outlined in Annex 4 are used to develop thefinancial forecasts for the port of Sattahip. Details are given in Table 11and summarized below:

1980 1981 1982 1983 1984 1985------------- (Baht million) ---------------

Operating revenue 34/a 15/a 12 77 161 260

Less: working expenses 26 38 55 86 107 149Depreciation 36 50 61 71 79 84

Total operating expenses 62 88 116 157 186 233

Operating surplus (28) (73) (104) (80) (25) 27

Operating ratio (%) 182 587 967 204 115 90Working ratio (%) 76 253 458 112 66 57Internal generaton of cash 8 (23) (43) (9) 54 111

/a Pipe and pipe coating traffic associated with natural gas developmentin Gulf of Thailand.

As with most new commercial undertakings, the port of Sattahip willinitially experience operating deficits and cash losses. However, as thecontainer traffic develops, the port of Sattahip's operating finances willimprove. Toward the end of the project period, the working ratio is

- 36 -

expected to diminish to a satisfactory 57% which compares favorably with aprojected working ratio of 73% for PAT's consolidated finances in 1985.This result is due to the high capital to labor ratio implicit in containeroperations. However, when depreciation is considered, the port ofSattahip's forecast operating ratio in 1985 is excessive, reflecting thefact that the plant and equipment to be procured under the proposed project,while required for the forecast traffic, is capable of handling a somewhathigher level of container traffic than is projected for 1985.

D. PAT's Consolidated Financial Performance

6.05 PAT's consolidated income account forecast is presented in Table 9and summarized below:

1980 1981 1982 1983 1984 1985----------------(Baht million)-------

Operating revenue 952 1,078 1,226 1,378 1,567 1,724

Less: working expenses 614 733 851 974 1,104 1,257Depreciation 100 132 154 175 187 195

Total operating expenses 714 865 1,005 1,149 1,291 1,452

Operating surplus 238 213 221 229 276 272

Interest charge 14 19 25 33 37 38Interest earned 62 60 54 60 85 115

Net revenue surplus 286 254 250 256 324 349

Payment to government andemployee bonus 129 137 122 120 123 160

Revenue surplus tobalance sheet 157 117 128 136 201 189

Ratio: Operating 75 80 82 83 83 84Times interest earned 17.Ox 11.2x 8.8x 6.9x 7.5x 7.2xDebt service coverage 12.lx 10.lx 9.lx 8.lx 8.3x 8.lx

- 37 -

Combining the port of Sattahip's weaker financial performance with the portof Klong Toei's finances will result in operating ratios which are large inrelation to PAT's historical operating ratios. Nevertheless, all indices offinancial health are consistenly strong throughout the forecast period.PAT's financial objectives of financing a significant portion of its invest-ment program (para. 6.08), maintaining satisfactory debt coverage ratios,and attaining low levels of financial risk (para. 6.09) are well satisfied.During negotiations, PAT has reaffirmed Section 5.04 of the Loan Agreementfor Loan 702-TH which requires PAT not to incur additional debt if itsrevenue is less than 1.75 times the maximum debt service requirements.

6.06 The estimated balance sheet summaries for 1980-85 are presented inTable 10. The debt/equity ratios are satisfactory rising from 7/93 in 1980to only 11/89 in 1985. The forecast current position is favorable withworking capital more than adequate to finance current operations.

6.07 Estimated rates of return on the average net fixed assets in usefor the 1980-85 period are as follows:

1980 1981 1982 1983 1984 1985

Return on average net fixedassets in use (historical costs) 15.0% 10.7% 10.3% 9.8% 11.5% 11.4%

The reduction in the rate of return in 1981 reflects the full impact ofPAT's assumption of the port of Sattahip's assets and operating losses foraccounting purposes. Thereafter, the rates of return are estimated toremain in the 9-12% range which would readily enable PAT to achieve itsfinancial objectives. Accordingly, PAT has agreed that it will earn anannual return on net fixed assets of not less than 9% in 1981-83, 10% in1984 and 11% thereafter. For the purposes of the rate of return computa-tion, net fixed assets is to be defined relative to the existing asset baseas presently valued plus subsequent additions. Following PAT's revaluationof assets (para. 6.10), it was agreed that the schedule of required annualrates of return would be appropriately adjusted in a manner acceptable toPAT and the Bank.

6.08 Overall, the projected cash position of PAT is healthy. Adetailed cash flow forecast for 1980-85 is presented in Table 12. Thestatement below, summarizing the financial plan during the forecast period,reveals that PAT would be able to finance a satisfactory 63% of itsinvestment program requirements from internally generated funds.

- 38 -

(Baht million) %

Cash RequiredProposed project 1,135Other capital expenditures 457

1,592 100Cash AvailableInternally generated cash 2,828Less: debt service (267)Reductions in operating working capital 102Payment to Government and employee's bonus (791)Increase in cash balance (869)

Internal cash available for investment 1003 63

Funds provided by Government 279 18Loans 310 19

1,592 100

During the years of heavy investment (1980 and 1981), PAT is expected todraw down about 80 million Baht of its existing cash resources. Thereafter,PAT's cash account is projected to increase to about 1.5 billion Baht.Clearly, PAT will not be able to fully utilize such cash surpluses. Aportion of this cash will be used in 1984-86 for the local currencyfinancing of the second phase development of the port of Sattahip. Inaddition, some of PAT's projected increase in cash should be distributed toGovernment. At negotiations, the Bank was informed that a review byGovernment of its participation in PAT's profits is presently underway. Itwas agreed that the Government will forward to the Bank a copy of thisreview upon its completion.

E. Sensitivity Analysis and Financial Risks

6.09 The sensitivity of PAT's projected financial performance tochanges in key assumptions and the various alternatives to be examined are

- 39 -

presented below. In each alternative, a single variable has been alteredfrom the base case assumptions outlined in Annex 4 with all other factorsremaining unchanged.

Alternative 1: 10% reduction in revenues due to a shortfall intraffic;

Alternative 2: 50% reduction in storage revenue in 1982-1985 dueto accelerated response to new storage chargeseffective December 31, 1981;

Alternative 3: 10% increase in proposed project costs;

Alternative 4: Labor force growth rate of 3% p.a.; and

Alternative 5: 50% increase in inflation assumptions used forcalculating working expenses.

The impact of each of these alternatives on PAT's cash position issummarized below:

Total1981 1982 1983 1984 1985 1981-85------------- (Baht million) ------------

Yearly Cash Decrease

Alternative 1 108 123 138 138 172 698Alternative 2 - 138 145 164 175 622Alternative 3 47 50 30 18 5 150Alternative 4 18 42 73 111 157 401Alternative 5 15 67 131 217 327 757

PAT's exposure would be minimal during 1983-85, a period in whichaccelerated cash accumulation is forecast. Clearly, in the event of highinflation portrayed in Alternative 5, corrective tariff adjustments would bemade. Even in the years of substantial investment (1980-82), PAT's cashposition remains sound under the above alternatives. In alternative 1,depicting the largest cash reduction in 1981-82, PAT's current ratio neverfalls below 2.lx. Under the unlikely case in which Alternatives 1, 3 and 4

- 40 -

occur concurrently, only minor borrowing would be required to enable PAT tomaintain an adequate current ratio and cash position. In summary, PAT'soverall level of financial risk is low.

F. Revaluation of Assets and Insurance

6.10 PAT's assets have not been revalued in about 30 years with theresult that the present depreciation charges distort PAT's financialresults. Therefore, PAT has agreed to revalue its assets not later thanJune 30, 1982 and at least every three years thereafter.

6.11 PAT has also agreed to provide for insurance for such risks and insuch amounts as are consistent with good commercial practice.

- 41 -

7. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 Agreement has been reached with the Government that it will:

(a) require the Customs Department at Klong Toei (i) to continue itspermission for movement of containers to the container yardirrespective of the berth they are landed at in the port; (ii) topermit movement of goods in bond from the port to approvedwarehouses outside the port if unclaimed after three weeks in the

port storage; and (iii) to dispose of cargo which has remainedunsold at the normal auction for such cargo (para. 3.08);

(b) ensure that consignees at Klong Toei can provide their ownvehicles whenever vehicles by the Express Transport Organizationof Thailand (ETO) are not promptly available (para. 3.08);

(c) (i) ensure that the land, owned by SRT, which is required for thecomplex, will be leased to the Government; (ii) hold title to the

complex; (iii) select, to the satisfaction of the Bank, anoperator for the complex for its day to day operation; (iv) leasethe complex to an operator on terms and conditions satisfactory tothe Bank; (v) ensure availability of the complex in accordancewith the construction schedule for the project; and (vi) operatethe complex in the event a lease with a qualified third partyoperator cannot be arranged (para. 3.16);

(d) allow the road transport industry to compete for container trans-port between Bangkok and Sattahip, and allow consignees of cargoshipped through Sattahip to use road haulage contractors of theirown choice (para. 3.17); and

(e) make arrangements for preparation and submission to the Bank,promptly after project completion, of a report on the executionand initial operation of the Bang Su complex, its costs and thebenefits derived and to be derived from it (para. 4.09).

7.02 Agreement has been reached with PAT that it will:

(a) undertake a tariff and costing study on terms of referencesatisfactory to the Bank which will be completed not later thanJune 30, 1981, provide the costs of its various services andfacilities and recommend related tariffs for Bangkok and Sattahip;

and that upon completion of the study it will restructure itstariffs in a manner acceptable to PAT and the Bank (para. 2.10);

- 42 -

(b) review its accounting system and financial planning procedures inaccordance with terms of reference acceptable to the Bank, andimplement the agreed changes not later than December 31, 1981(para. 2.13);

(c) reaffirm section 5.02 of the Loan Agreement for Loan 702-THrequiring PAT to furnish the Bank with audited financialstatements within six months of the end of the fiscal year (para.2.14);

(d) continue its policy of optimizing the use of available berth spaceat Klong Toei by berthing more than 16 ships whenever this ispracticable (para. 3.03);

(e) (i) handle all containers in the Klong Toei East Quay containeryard irrespective of which berth containers are landed at; (ii)increase port storage charges to penalize retention of cargo inthe port more than seven days, in accordance with the recommen-dation of the port tariff study included in the project; (iii)take appropriate steps to encourage and enable interested partiesto establish by December 31, 1981 bonded warehouses outside theport, and expand the practice to move cargo from port storage toapproved bonded warehouse storage after three weeks in portstorage at the consignee-s expense; in the event, that suchoutside bonded warehouse storage is not established, review notlater than March 31, 1982 with the Bank measures necessary for itsestablishment; and (iv) keep records and statistics to monitor keyperformance indicators (para. 3.08);

(f) reorganize its container yard operations at Klong Toei and makecorresponding changes to its operating department (para. 3.10);

(g) for the period from 1983 to 1985, reduce the number of berths usedfor container operations at Klong Toei in such a way that theannual shipwaiting time for all berths at Klong Toei does notexceed 1,000 days; and for the period after 1985, determine thenumber of Klong Toei container berths in agreement with the Bank(para. 3.11);

(h) appoint consultants acceptable to the Borrower and the Bank forpreparation of bidding documents and supervision of the works andprocurement of equipment on terms and conditions acceptable to theBank (para. 4.04);

(i) execute the two civil works contracts and three mechanicalequipment procurement contracts in accordance with the BankGuidelines (para. 4.06);

- 43 -

(j) promptly after completion of the project, prepare and furnish tothe Bank a report on the execution and initial operation of theproject (except for the Bang Su complex), and the benefits derivedand to be derived from it (para. 4.09);

(k) reaffirm section 5.04 of Loan Agreement of Loan 702-TH requiringPAT not to incur additional debt if its revenue is less than 1.75times maximum debt service requirements (para. 6.05);

(1) (i) earn an annual financial return on net fixed assets in use ofnot less than 9% in 1981-83; 10% in 1984, and 11% thereafter; and(ii) adjust the schedule of rates of return after asset revalua-tion in a manner acceptable to PAT and the Bank (para. 6.07);

(m) revalue its assets not later than June 30, 1982 and at least everythree years thereafter (para. 6.10); and

(n) provide appropriate insurance consistent with good commercialpractices (para. 6.11).

7.03 The proposed project is suitable for a Bank loan of US$47.0 mil-lion equivalent to the Government. The loan will be for a term of 20 yearsincluding a grace period of five years. US$15.5 million of the loan amountwill be onlent to PAT on the same terms and conditions as the Bank loan.

October, 1980

- 44 -

Table 1

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Indicative Inland Freight Traffic of Thailand by Modes la

InlandYear Rail /b Road waterways Total

A. Tons (million)

1968 5.0 14.0 8.0 27.01973 5.0 25.0 8.0 38.01976 5.4 37.0 /c 8.5 50.91981 8.2 59.0- 66.0 8.5 75.7- 82.71986 10.5 91.0-113.0 11.5 113.0-135.01991 13.3 139.0-190.0 13.7 166.0-217.0

B. Ton-km (million)

1968 2,000 3,500 1,300 6,8001973 2,000 6,500 1,300 9,8001976 2,500 9,700 /c 1,400 13,6001981 3,500 15,200-17,100 1,400 20,100-22,0001986 4,500 23,400-29,300 1,950 29,850-35,7501991 5,700 35,600-49,300 2,400 43,700-57,400

/a Based on 1978 World Bank draft. Assumes implementation of InlandWaterways Project in 1981-83. Estimates exclude coastal shipping whichin 1977 is estimated at 1.2-1.5 million tons.

lb 1968-76 actuals, 1981-1991 projections. Assumed growth rate after 19815% p.a.

/c In an independent assessment, consultants Louis Berger Int., Inc.arrived at the following tentative estimates for 1978: 61 million tonsand 7.800 million ton-kn.

October, 1980

- 45 -

Table 2

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Government Investments in Transport During Third and FourthFive-Year Development Plans

(B million) /a

Third Development Fourth DevelopmentMode Plan 1972-76/b Plan 1977-81/b

RoadsNational 8,200 7,689Provincial 6,800 7,906Local 1,600 5,125

Subtotal 16,600 20,720

Railways 2,470 1,750

Inland waterways and ports 920 1,224

Civil aviation (including airports) 890 4,348

Total 20,880 28,042

Transport as percentage ofdevelopment expenditures 20 11

/a In current prices.

/b Actual expenditures for 1972-76 and projected expenditures for 1977-81.

Source: National Economic and Social Development Board (NESDB).

October,1980

- 46 -

Table 3

THAILAND

BAN4GKOK AND SATTAHIP PORTS PROJECT

PAT's Principal Rates and Charges as of September 30. 1979

A. Charges Against Shipowners or Ships' Agents

1. Channel Dues (inward passage only)Vessels of less than 500 net reg. tons NilVessles of 500 to 1,500 net reg. tons B 2.00 per ton

Vessels exceeding 1,500 net reg. tons B 3.00 per ton

2. Wharf RatesB 1.10 per vessel net reg. ton for each call not B 550 per lighter perexceeding 72 hours, plus B .30 per ton for callevery subsequent 24 hours or fraction thereof.

3. BuoyageB 300 per buoy per 24 hours or fraction thereof. B 200 servicecharge per mooring, unmooring of a ship.

B. Charges Against Consignees

4. Inward Cargo Landing ChargesClass 1 B 17.50 per metric ton - most general cargoClass 2 B 22.50 per metric ton - beer, wines, spirits, tobacco, oils,

dyes, china, textiles, etc.

Class 3 B 27.50 per metric ton - dangerous and poisonous goods,chemicals, furniture, cement, ores

and metals, etc.Class 4 B 37.50 per metric ton - vehicles, etc.

5. Outward Cargo Quay DuesClass 1 B 37.00 per metric ton - most general cargo

Class 2 B 50.00 per metric ton - machinery, cement, chemicals, etc.

6. Outward Cargo Quay DuesClass 1 B 1.25 per metric ton - most general cargoClass 2 B 1.60 per metric ton - timber, gold and silver

7. Outward Cargo Ilandling ChargesHalf rate of charges listed in above.

8. Storage ChargesIHolding of cargo in transit sheds is free for the first 72 hoursafter completing a vessel's discharge. Thereafter charges rangefrom B 4 per ton per day during the first week to B 12 per tonper day during the ninth and subsequent weeks.

October, 1980

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Import and Export Trade (non-POL) through Bangkok Port System - By Commodities la

('000 tons)

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1990 1995 2000

ImportsCereals 61 135 81 105 110 120 120 130 140 140 150 - - -

Paper & paper-makingmaterials 192 266 327 300 320 350 300 275 300 260 300 - - -

Chemicals 416 535 741 730 790 850 910 970 1,030 1,090 1,150 - - -

Crude minerals 73 48 107 100 110 115 120 130 140 150 160 - - -

Fertilizer 425 621 871 750 860 1,000 1,150 800 1,000 1,250 1,500 - - -

Iron & steel, scrap 814 1,167 1,484 1,860 1,950 2,050 2,200 2,250 2,450 2,650 2,700 - - -

Machinery & parts 221 243 267 200 210 220 240 250 260 280 300 - - -

Vehicles & parts 144 220 300 260 290 300 300 300 300 300 300 - - -

Cement - - - 290 800 1,200 - - - - - - - -

Timber 5 9 53 140 160 180 200 230 260 300 340 - - -

Other 679 716 805 754 800 1,200 880 925 970 1,020 1,060 - - -

Total Imports 3,030 3.960 5.036 5,489 6.400 7.585 6,420 6,260 6,850 7,440 7,960 10.500 14.000 18.000

ExportsTapioca 2,385 3,720 3,945 6,285 4,100 5,500 5,500 5,500 5,500 5,500 5,500 - - -Maize 2,105 2,419 1,542 1,972 2,100 2,030 2,070 2,100 2,130 2,170 2,200 - - -Rice 951 1,973 2,946 1,607 2,600 1,890 2,050 2,220 2,400 2,610 2,820 - - -Sugar/molasses 1,095 1,846 2,608 1,944 1,870 2,110 2,200 2,300 2,390 2,490 2,600 - - -

Manufactured goods 181 280 321 491 555 575 625 690 730 805 880 - - -Other 1,811 1,827 1,454 1,283 1,455 1,704 1,819 1,545 1,575 1,605 1,630 - - -

Total Exports 8,528 12.065 12,816 13,582 12.680 13.809 14,264 14,355 14,725 15,180 15.630 17,300 19,200 21,300

Total Trade 11,558 16,025 17,852 1 9.07 19,080 21,394 20,684 20,615 21.575 22,620 23.590 27.800 33.200 39.300

/a The Bangkok Port System includes the Klong Toei wharves on the river Chao Phrya operated by the Port Authority of Thailand (PAT)and other facilities on the river, collectively known as the Port of Bangkok; the commercial port of Sattahip; and a deep-water

anchorage for loading tapioca off Ko Sichang and a jetty at Mah Boon Krong (Sri Racha), which is also a deep-water facility forloading tapioca. The tonnages for 1975-78 are actuals; for 1979, estimates; and for the following years, projections.

Source: Sindhu Maunsell.

October 19804-

- 48 -

5

TRAILANP

BAMKYO1t AND SATTAHIP PoPTS PPOJECT

Import and Export Trade (non-POL) through Bangkok Port System - by Facilities, 1975-95('000 tons)

Facilities/traffic /a 1975 1976 1977 1978 1979 1980 1a81 1982 1983 1Q48 18R5

Klong Toei

ImportsContainers 220 2981 { 354 580 790 970 1,020 1,070 86n 68n 47nBreakbulk 2 { 3,114 2,815 2,930 3,020 2,950 3,090 3,2sn 3,480 3,57n

Subtotal 2,209 2,981 3,468 3,395 3,720 3,990 3,Q70 4,16n 4,14n 4,l 4n

ExportsContainers 89 249 { 223 470 610 630 680 72n 600 490 350Breakbulk { 106 110 75 80 9n 1ln 125 145 165Bulk 57 123 146 142 140 140 140 149 140 140 140

Subtotal 146 372 475 722 P25 850 910 970 865 775 655

Imports & Exports 2,355 3,350 3,943 4,117 4,545 4,R40 4,p8n 5,13n 5,005 4,935 4,695

Sattahip

ImportsContainers - - - - - - - - 24n 480 76nBreakbulk - - - - - 360/b - 40 4n 75 75

Subtotal - - - - - 360 - 4n 28n 555 835

ExportsContainers - - - - - - - - 160 32n sinBreakbulk - - - - - 189/b 2

84/b 12 12 25 25

Bulk - - - - - 500 650 900 1,150 1,400 1,675

Subtotal - - - - - 689 934 912 1,322 1,745 2,1n

Imports & Exports - - - - - 1,049 934 952 1,60? 2,300 3,n45

Other Facilities

ImportsTMN wharfs 140 150 233 292 400 400 400 40n 400 4n0 400Dolphins & anchorage 355 281 442 838 } 8 2,835 ?,050 1,66n 2,n30 2,325 2,685Private wharves 326 548 893 064 } '

Subtotal 821 979 1,568 2,094 2,680 3,235 2,450 2,060 2,430 2,725 3,085

Exports /c 8,382 11,693 12,341 12,860 11,855 12,270 12,42n 12,471 12,538 12,660 12,765

Imports & Exports 9,203 12,672 13,909 14,954 14,535 15,505 14,P70 14,533 14,968 15,385 1,0

All Facilities

Imports 3,030 3,060 5,036 5,4R9 6,400 7,585 6,420 6,26n 6,R5n 7,44n 7,o6nExports 8,528 12,065 12,816 13,582 12,680 13,809 14,264 14,355 14,725 15,ln 15,630

Imports & Exports 11,558 16,025 17,852 1q,071 lq,n8O 21,394 20,684 20,615 "1,57r 22,6"0 23,sqn

/a Traffic: 1975-78, actutal; 1979, estimated; 1980-85, projected.

/b Pipes and pipe coating material for natural gas development project.

/c Includes exports of tapioca through deep-water anchorage at Yo Sichang and jetty at Y4ah Boon Krong.

Source: Sindhu Maunsell.

October 1980

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Civil Works - fUong Toei

PAT andGovernment Cost estimate

financed Baht million US$ millionItem Description 1980-84 IBRD financed Local Foreign Total Local Foreign Total

1 2 container freight stations /aincluding paving and drainageeach about 120 m x 45 n 70.0 - 70.0 - 70.0 3.50 - 3.50

2 31,000 sq m new- paving /a 13.0 - 13.0 - 13.0 0.65 - 0.65

3 10,000 sq m resurfacing /a 4.5 - 4.5 - 4.5 0.22 - 0.22

4 Concrete slab for rail trans-tainer crane /a 3.0 - 3.0 - 3.0 0.15 - 0.15

Subtotal 90.5 - 90.5 - 90.5 4.52 - 4.52

Physical contingencies 18.0 - 18.0 - 18.0 0.90 - 0.90

Cost contingencies 17.0 - 17.0 - 17.0 0.85 - 0.85

Total 125.5 - 125.5 - 125.5 6.27 - 6.27

/a Foreign exchange not included for items wholly purchased by PAT.

October 1980 I

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Civil Works - Sattahip

PAT andGovernment Cost estimate

financed IBRD financed Baht million US$ million

Item Description 1980-84 Total (F.E.) Local Foreign Total Local Foreign Total

1 230,000 sq m resurfacing con-tainer yard area 72.5 - - 72.5 - 72.5 3.63 - 3.63

2 820,000 cu m dredging and dis-posal of spoil 74.5 - - 74.5 - 74.5 3.73 - 3.73

3 40-m tug berth 7.0 (4.0) 3.0 4.0 7.0 0.15 0.20 0.35

4 Renewal of fendering to quaywall 35.0 (20.0) 15.0 20.0 35.0 0.75 1.00 1.75 1

5 Container freight station and _

administration office /a 51.0 51.0 - 51.0 2.55 - 2.55

6 Cate house /a 1.4 1.4 - 1.4 0.07 - 0.07

7 Ancillary buildings 22.7 (11.0) 11.7 11.0 22.7 0.58 0.55 1.13

8 Drainage and sewerage /a 12.9 12.9 - 12.9 0.64 - 0.64

9 Water supply 8.0 (3.0) 5.0 3.0 8.0 0.25 0.15 0.40

10 Electrical services 17.0 (10.6) 6.4 10.6 17.0 0.32 0.53 0.85

11 Weighbridge /a 4.0 4.0 - 4.0 0.20 - 0.20

12 Rail truck in port area 34.0 (20.0) 14.0 20.0 34.0 0.70 1.00 1.70

Subtotal 216.3 123.7 (68.6) 271.4 68.6 340.0 13.57 3.43 17.00

Physical contingencies 43.0 25.0 (15.4) 52.6 15.4 68.0 2.63 0.77 3.40

Cost contingencies 49.1 40.9 (25.3) 64.7 25.3 90.0 3.24 1.26 4.50

Total 308.4 189.6 (109.3) 388.7 109.3 498.0 19.43 5.46 24.90

/a Foreign exchange not included for items wholly purchased by PAT.

October 1980

TEA ILAND

BANGK'OK AND SATTAIIIP PORTS PROJECT

Mlechanical Equipment - Klong Toei

PAT andGovernment Cost estimate

financed IBRD financed Baht million UJS$ million

Iten Description 1980-84 No. Total (F.E.) Local Foreign Total Local Foreign Total

1 5 rubber-tired gantries 27.6 2 18.4 (16.0) 6.0 40.0 46.0 0.30 2.00 2.30

2 5/a 25-ton forklift trucks 11.2 3 16.8 (12.0) 8.0 20.0 28.0 0.40 1.00 1.40

3 3 12-ton forklift trucks 10.8 1 5.4 (4-7) 2.2 14.0 16.2 0.11 0.70 n.81

4 10 tractors 10 13.0 (10.0) 3.0 10.0 13.0 0.15 0.50 0.65

5 10 trailers 4.0 6 6.0 (4.2) 3.0 7.0 10.0 0.15 0.35 0.50

6 2 10-ton forklift trucks 2 6.0 (5.2) 0.8 5.2 6.0 0.04 0.26 0.30

7 2 30-ton top spreaderlifts /b 16.0 16.0 - 16.0 0.80 - 0.80

8 1 30-ton mobile crane,22 m radius /b 22.0 22.0 - 22.0 1.10 - 1.10

9 2 yard hustlers /b 2.0 2.0 - 2.0 0.10 - 0.10

10 4 trailers /b 2.0 2.0 - 2.0 0.10 - 0.10

Subtotal 95.6 65.6 (52.1) 65.0 96.2 161.2 3.25 4.81 8.06

Cost contingencies 17.6 20.4 (12.4) 14.0 24.0 38.0 0.70 1.20 1.90

Total 113.2 86.0 (64.5) 79.0 120.2 199.2 3.95 6.01 9.96

/a 2 25-ton forklifts replaced by Item 7.

/b Foreign exchange not included for items wholly purchased by PAT.

October 19800D

THAILAND

BANGKOK AND SATTATITP PORTS PROJECT

Mechanical Equipment - Sattahip

PAT andGovernment Cost estimatefinanced IBRD financed Baht million US$ million

Item Description 1980-84 No. Total (F.E.) Local Foreign Total Local Foreign Total

1 4 30-ton rubber-tiredgantries 12.0 3 27.8 (24.0) 6.0 33.8 39.8 0.30 1.69 1.99

2 4 25-ton forklift trucks 8.0 3 18.0 (16.5) 4.0 22.0 26.0 0.20 1.10 1.303 2 20-ton forklift trucks 2 9.6 (8.0) 1.6 8.0 9.6 0.08 0.40 0.484 2 12-ton fortlift trucks 6.0 0.8 5.2 6.0 0.04 0.26 0.305 3 3-ton forklift trucks /a 10.5 10.5 - 10.5 0.52 - 0.526 10 tractors 10 12.5 (10.0) 2.5 10.0 12.5 0.12 0.50 0.627 10 trailers 10 8.0 (5.6) 2.4 5.6 8.0 0.12 0.28 0.408 1 14-ton mobile crane 1 6.0 (5.0) 1.0 5.0 6.0 0.05 0.25 0.309 1 30-ton mobile crane at

22 m radius /a 22.0 22.0 - 22.0 1.10 - 1.1010 Transport vehicles, fire

engine, ambulance, navi-gation aid, radio andpallets /a 17.2 17.2 - 17.2 0.86 - 0.86

Subtotal 75.5 81.9 (69.1) 68.0 89.6 157.6 3.40 4.48 7.88

Cost contingencies 10.0 22.0 (19.9) 13.0 19.0 32.0 0.65 0.95 1.60

Total 85.5 103.9 (89.0) 81.0 108.6 189.6 4.05 5.43 9.48

/a Foreign exchange not included for items wholly purchased by PAT.

October 1980 a0r

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Floating Equipment - Sattahip

PAT andGovernment Cost estimate

financed Baht million US$ million

Item Description 1980-84 IBRD financed Local Foreign Total Local Foreign Total

1 2 mooring boats 1.7 - 1.7 - 1.7 0.08 - 0.08

2 1 survey launch 3.2 - 3.2 - 3.2 0.16 - 0.16

3 2 tug boats, 3,200 hp 69.0 - 69.0 - 69.0 3.45 - 3.45

Total 73.9/a - 73.9 - 73.9/b 3.69 - 3.69 w

/a No cost contingencies as all expended 1980.

/b Foreign exchange not included for items wholly purchased by PAT.

October 1980

SA

a'ON

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Consultants' Technical Assistance and Training(All IBRD financed)

Cost estimateBaht million US$ million

Item Description Local Foreign Total Local Foreign Total

1 Consulting engineering services - 25.7 25.7 - 1.29 1.29

2 Technical assistance - 2.9 2.9 - 0.14 0.14

3 Studies - Erosion at Sattahip - 5.0 5.0 - 0.25 0.25

4 Studies - Outline of port developments on EasternSeaboard: 1985-2000 - 15.0 15.0 - 0.75 0.75

Total - 48.6 48.6 - 2.43 2.43

October 1980

(D

Fh

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Bang Su Container Freight Stations and Bonded Warehouses

Baht '000 US$ millionItem Local Foreign Total Local Foreign Total

(a) Civil Works2 - 240 m container freight stations withnecessary paving & drainage 107,300 118,800 226,100 5,365 5,940 11,305

1 - 300 m container freight stations withnecessary paving & drainage 73.900 79,900 153,800 3,695 3,995 7,690

4 bonded warehouses 77,000 111,500 188,500 3,850 5,575 9,425Road access 5,000 5,000 10,000 250 250 500

Subtotal 263,200 315,200 578,400 13,160 15,760 28,920

(b) Mechanical Equipment2 - 30 ton rubber tired gantries1 - 25 ton forklift trucks78 - 3 ton forklift trucks

for bonded warehouses16 - 3 ton forklift trucks

10 - tractors and trailers

Subtotal 30,000 110,000 140,000 1,500 5,500 7,000

Consulting Services - 38,000 38,000 - 1,900 1,900Base Cost 293,200 463,200 756,400 14,660 23,160 37,820Physical contingencies 45,000 70,000 115,000 2,250 3,500 5,750Price contingencies 80,000 97,000 177,000 4,000 4,850 8,850

Total Bang Su Complex 418,200 630,200 1,048,400 20,910 31,510 52,420

October 1980

- 56 -

Table

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Implementation Schedule

1980 1981 1982 1983 19846 12 6 12 6 12 6 12 6 12

PortsKlong Toei - Civil works ---------------------------

Mechanicalequipment i---------------------------

Sattahip - Civil work ------------------------------------------Mechanical

equipment ------------------------------------Floating equip-

ment --------------

Consultant services ------------------------------------------------

Technical assistance andstudies -------------------------

Bang Su ComplexContainer freight station

1 (CFS) and bonded ware-house 1 (BW) ---------------

CFS 2 and BW 2 -----------------

BW 3 1----

CFS 3 and BW 4 ----------

Road works ------

Mechanical equipment …------------------------------------

Consultant services -------------------------------------

Bank StaffOctober 1980

Table 8

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Estimated Disbursement Schedule('000 US$)

Bank fiscal yearand quarter Quarterly Cumulative

1981- III-_

IV 1,980 1,980

1982 - I 3,640 5,620II 3,980 9,600III 3,500 13,100IV 3,500 16,600

1983 - I 2,600 19,200II 4,600 23,800III 3,100 26,900IV 3,100 30,000

1984 I 3,000 33,000II 2,250 35,250III 2,750 38,000IV 3,250 41,250

1985 I 3,070 44,320II 2,680 47,000

Bank staffOctober 1980

- 58 -

Table 9

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

PAT Consolidated Income Accounts: 1976-85(Baht million)

Actual Estimated Forecast1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

Operating RevenueShip handling 61 69 78 69 75 83 91 106 120 135

Cargo handling 281 366 430 540 602 706 836 956 1,091 1,206Storage 145 125 142 210 228 260 276 290 329 350

Other 10 19 14 15 47 29 23 26 29 33

Total Operating Revenue 497 579 664 834 952 1,078 1,226 1,378 1,567 1,724

Operating ExpensesSalaries and wages 282 300 341 465 509 601 696 788 886 985Repairs and maintenance 25 27 31 36 42 53 65 82 95 126/aFuels 24 29 27 29 37 48 54 64 76 93

Miscellaneous 18 15 21 19 26 31 36 40 47 53

Total Working Expenses 349 371 420 549 614 733 851 974 1,104 1,257

Depreciation 39 40 42 42 100 132 154 175 187 195

Total Operating Expenses 388 411 462 591 714 865 1,005 1,149 1,291 1,452

Operating surplus (deficit) 109 168 202 243 238 213 221 229 276 272

Interest charge 15 15 16 15 14 19 25 33 37 38

Interest earned 21 24 33 40 62 60 54 60 85 115

Net revenue surplus (deficit) 115 177 219 268 286 254 250 256 324 349Payments to Government andemployee bonus 48 56 85 106 129 137 122 120 123 160

Revenue surplus tobalance sheet 67 121 134 162 157 117 128 136 201 189

Ratios: OperatingTimes interest earned 78 71 70 71 75 80 82 83 83 84

7.3x 11.2x 12.6x 16.2x 17.Ox 11.2x 8.8x 6.9x 7.5x 7.2x

/a Includes dredging.

Source: PAT and Bank staff

October, 1980

- 59 -

Table 10THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

PAT Consolidated Balance Sheets: 1976-85(Baht million)

Actual Estimated Forecast1976 1977 1978 1979 1980 1981 1982 1983 1984 1985

ASSETSCurrent AssetsCash & short-term deposits 307 386 520 623 598 540 597 854 1,149 1,492Other 79 74 102 108 122 139 158 178 202 222

Total Current Assets 386 460 622 731 720 679 755 1,032 1.351 1.714

Fixed AssetsGross non-depreciable 54 54 54 54 54 54 54 54 54 54Gross depreciable 969 971 1,002 1,777 2,718 2,919 3,326 3,625 3,819 4,010

Subtotal 1,023 1,025 1.056 1,831 2,772 2,973 3.380 3.679 3.873 4,064

Less accumulated depreciation 417 448 489 525 822 954 1,108 1,283 1,470 1,665Net fixed assets in operation 606 577 567 1,306 1,950 2,019 2,272 2,396 2,403 2,399Work in progress / 708 795 807 117 164 389 335 201 148 -

Total Fixed Assets 1,314 1,372 1,374 1,423 2,114 2,408 2,607 2,597 2,551 2,399

Other Assets 16 22 35 62 62 62 62 62 62 62

TOTAL ASSETS 1,716 1,854 2,031 2,216 2,896 3,149 3,424 3,691 3,964 4,175

LIABILITIES AND EQUITYCurrent liabilities 115 113 130 150 173 210 250 288 324 366Long-term debt 183 206 212 205 191 260 342 410 434 414Equity AccountsCapital 322 318 338 348 862 892 917 942 954 954Retained income 1,096 1,217 1,351 1,513 1,670 1,787 1,915 2,051 2,252 2,441

Total Equity 1,418 1,535 1,689 1,861 2,532 2,679 2,832 2,993 3,206 3,395

TOTAL LIABILITIES & EQUITY 1,716 1,854 2,031 2,216 2,896 3,149 3,424 3,691 3,964 4,175

Ratios: Current 3.4x 4.1x 4.8x 4.9x 4.2x 3.2x 3.Ox 3.6x 4.2x 4.7xDebt/Equity 11/89 12/88 11/89 10/90 7/93 12/88 11/89 12/88 12/88 11/89

/a Excess assets held in work in progress account until resolution of accounting dispute in 1978.

Source: PAT and Bank staff.

October 1980

- 60 -

Table 11

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Port of Sattahip Income Accounts: 1980-85(Baht million)

Estimated Forecast1980 1981 1982 1983 1984 1985

Operating Revenue,Ship handling 2 2 2 6 11 17Cargo handling 1 2 9 65 138 226Storage - - - 3 8 11

Other 31/a 11/a 1 3 4 6

Total Operating Revenue 34 15 12 77 161 260

Operating ExpensesSalaries and wages 21 27 37 51 57 64Repairs and maintenance 2 5 10 21 25 47Fuels 1 2 2 8 16 28Miscellaneous 2 4 6 6 9 10

Total Working Expenses 26 38 55 86 107 149

Depreciation 36 50 61 71 79 84

Total Operating Expenses 62 88 116 157 186 233

Operating Surplus (Deficit) (28) (73) (104) (80) (25) 27

Ratios: Operating 182 587 967 204 115 90Working 76 253 458 112 66 57

/a Pipe and pipe coating traffic associated with natural gas development in theGulf of Thailand.

Source: PAT and Bank staff.

October, 1980

- 61 -

Table 12THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

PAT Consolidated Cash Flow Data: 1980-85(Baht million)

Estimated Forecast1980 1981 1982 1983 1984 1985

Cash RequiredA. Capital Investment Program

Project 232 390 324 136 53 -PAT ongoing program 232 36 29 29 88 43

Total 464 426 353 165 141 43

B. Debt ServiceInterest 14 19 25 33 37 38Principal 14 15 16 17 19 20

Total 28 34 41 50 56 58

C. Change in working capital (9) (20) (21) (18) (12) (22)

D. Payment to Government andemployee bonus 129 137 122 120 123 160

Total Cash Required 612 577 495 317 308 239

Cash AvailableA. Internally Generated Cash

Operating surplus 238 213 221 229 276 272Depreciation 100 132 154 175 187 195Interest earned 62 60 54 60 85 115

Total Internally GeneratedCash 400 405 429 464 548 582

B. Long-term loans - 84 98 85 43 -

C. Funds provided by Government 187 30 25 25 12 -

D. Cash available; beginning ofyear 623 598 540 597 854 1,149

Total Cash Available 1,210 1,117 1,092 1,171 1,457 1,731

Cash at End of Year 598 540 597 854 1,149 1,492

Ratios: Debt service coverage 12.1x lO.lx 9.1x 8.1x 8.3x 8.1xReturn on average net fixed

assets in operation 15.0% 10.7% 10.3% 9.8% 11.5% 11.3%

Source: PAT and Bank staff.

October, 1980

- 62 -

Table 13

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Container Traffic at Bangkok (Klong Toei) and SattahiP Ports(in thousands)

Port/traffic /a 1977 1978 1979 1980 1981 1982 1983 1984 1985

Klong Toei

InboundTotal number ofcontainers 27/b 47/b 59 72 76 79 64 50 34Total number of TEU 38 63 79 97 102 107 86 , 68 47

Total tonnage 354 580 790 970 1,020 1,070 860 680 470

OutboundTotal number ofcontainers 24/b 42/b ------ same as for inbound traffic ------

Of which empties 5 7 ------------- not projected -------------

Total number of TEU 35 57 ------ same as for inbound traffic ------

Of which empties 5 9 18 24 34 35 26 19 12

Total tonnage 223 470 610 630 680 720 600 490 350

Sattahip

InboundTotal number ofcontainers - - - - - - 18 36 57

Total number of TEU - - - - - - 24 48 76

Total tonnage - - - - - - 240 480 760

OutboundTotal number ofcontainers - - - - - - 18 36 57

Of which empties - - - - - - 5 9 14

Total number of TEU - - - - - - 24 48 76

Of which empties - - - - - - 8 16 25Total tonnage - - - - - - 160 320 510

/a Traffic: 1977-78, actual; 1979, estimated; 1980-85, projected.

/b Outbound traffic is underestimated due to statistical method.

Source: Sindhu Maunsell.

October, 1980

- 63 -

Table 14

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Daily Costs of General Cargo Ships /a(US$)

Ship typeCombinationbreakbulk/

Breakbulk /c Breakbulk container

SizeDWT 10,000 22,000 18,000NRT 4,000 8,800 7,200

Capital cost 12,000,000 24,000,000 20,000,000

Daily Port CostCapital charge /b 4,400 8,800 7,340Crew }Ilaintenance } 2,500 2,600 2,600Stores }Insurance }Diesel oil 700 700 700

Total 7,600/c 12,100 10,600

/a Late 1979 prices.

/b Based on 20-year annuity at 12%.

/c Container feeder ship costs are greater than or equal to total breakbulk costs.

Source: Sindhu Maunsell.

October, 1980

- 64 -Table 15

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Economic Rates of Return

Rates of Return (%)

1. Base case calculationWhole project 21

2. Project components(a) Klong Toei port and Bang Su only 19(b) Sattahip port only /a 22(c) Dredging of Sattahip > 50

3. Sensitivity analysis(a) Rise by 10% in berth productivity

under Reference case /b 15(b) Reduction by 10% in container berth

productivity under project case 21(c) Tests a and b above combined 15(d) Total railway capital costs attributed

to project 15(e) Increase by 10% of 1985 container traffic 22(f) Container ship allocation at Klong Toei

under Base case: 3 instead of 2 berthsin 1985 17

(g) Increase by 10% in recurrent land transport costs 21(h) Reduction in maximum ship waiting days

(conventional cargo) underReference case from 3,600 to 3,000 21

(i) Reduction in projected rise of tradevolumes between 1979 and 1985 from24% to 20% 21

(j) Increase by 10% in capital costs 19(k) Reduction by 50% of benefits from savings in

ship waiting time 12(1) No railway capital costs attributed to Project 31

/a Assuming entire project would be implemented.

/b Conventional cargo handling rates for project and reference case are assumedto be identical: 40 tons/net gang hour for discharge over berth, and 20tons/net gang hour for discharge over side. Assumed handling rates for con-tainers are: 9 TEU per hour under reference case, and 15 TEU per hour underproject case.

Source: Sindhu Maunsell.October 1980

- 65 -

TABLE 16

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Prices of Petroleum Products in Thailand(US$/litre)

Product Retail Price Retail Price Opportunityincluding taxesa/ excluding taxesh/ Costsc/

Regular gasoline 0.46 n.a. ) 0.30Premium gasoline 0.49 n.a. )

Diesel fuel-low speed 0.31 n.a. ) 0.28high speed 0.33 n.a. )

Aviation fuel (jet A-1) 0.45 n.a. 0.29

a/ As of October 1980h/ Current tax/subsidy component unavailable. In mid-1979, both

gasoline and diesel fuel were subsidized; and net subsidies wereestimated at about 5% and 10%, respectively, of retail pricesincluding taxes.

c/ As of July/August 1980. Opportunity costs based on theoretical CIFprice for imports of finished petroleum products.

n.a. - not availableSource: Bank Staff

October 1980

- 66 -

ANNEX 1

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Technical Assistance and Trainingfor Port Authority of Thailand

1. PAT is a well established organization with adequate staff ofhigh calibre. The introduction of containerized traffic has, however,introduced new circumstances both in the accounting and operating departmentswhich require a reappraisal of procedures. Further, the opening of the newport at Sattahip to commercial traffic and the increasing scale of operationsanticipated, will introduce some problems. Finally, the existing tariffs arenot properly cost based, and although this question was addressed in Loan702-TH, PAT's cost structure has changed significantly and a new reviewwould be appropriate; also there is a need to revalue the Authority's assets.Accordingly these consultant services and studies are envisaged:

(a) Technical Assistance and Training

Reorganization of containeroperation and documentation 3 manmonths consultant services

Tariff study 6

(b) Financial Studies

Accounting system and planning to be undertaken by PAT staffonly

Asset revaluation "

2. In addition, the following studies (tentatively 100 man months)will be conducted by consultants: (a) study to prevent erosion of thebeach on the North side of the bay at Sattahip, comprising a mathematicalmodel; and (b) Master Plan for port development on the Eastern Seaboard tohandle traffic to the year 2000. The studies will be financed under theTechnical Assistance to be provided under the loan, and terms of referencewill be agreed with PAT and the Government. The estimated costs of thestudies are $250,000 and $550,000 respectively.

October 1980

- 67 -ANNEX 2Page 1

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Operating Efficiency Indicators

1. Measures of port efficiency are essential to management inassessing and improving the utilization of port resources. However, thedefinition of statistical measures which adequately reflect trends inperformance in a specific port is complicated by the variations in types ofships and kinds of cargos.

2. The important data that should be collected for each ship and foreach category of cargo, i.e., break bulk general, unitized, liquid bulk, drybulk and containerized, are:

(a) date and time of arrival if ship;

(b) name, dead weight tonnage, length, and draft on arrival of ship;

(c) ship waiting time for berth;

(d) ship service time at berth (and location of berth);

(e) date and time of departure of ship;

(f) fraction of time berthed, ship worked;

(g) tonnage and type /1 of cargo loaded and discharged by each ship;

(h) number of gangs employed per ship per shift; number of men in eachgang; and

(i) total gang-hours worked per ship.

3. From the above data the following monthly efficiency indicators^an be det.ved for each of the berths in the port with indication of thecategory of cargo. The suggested efficiency factors for the three moreimportant statistics are indicated.

/1 As categorized above.

- 68 -

ANNEX 2Page 2

Tonnage per berth Total tonnage worked for all general 230,000 tons(tons/ship) cargo ships, at the berth during (165,000 tons

period under review divided by over the berth)number of ships

Average storage Total ton-days of storage divided 3 weekstime in port by total tons in period(days)

Tons per Total tonnage worked, divided by 40 tons/gang-gang-hour net total gross gang time less stoppages hour over berth(tons/iet occuring during the gang workgang-hour) period which cannot be attributed 20 tons/gang-

to the gang (e.g., weather, meal hour oversidetimes) to barge

Waiting time Total time between arrival and(hours/ship) berthing for all berthing ships,

divided by number of berthing ships

Service time Total time between berthing and -

(hours/ship) departure for all ships, dividedby number of ships

Arrival rate Number of ships arriving during a(ships/day) month, divided by number of days

in the month

October 1980

- 69 -

ANNEX 3Page 1

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Import and Export Trade (Non-POL)through Bangkok Port System /1

A. Imports

1. Iron and steel currently represent about 1/3 of total importsand are projected to maintain their share with an annual average growth of5%-6%. Thailand has not yet any basic steel making capacity of its own, anddomestic steel demand of about 2 million tons annually, at present, ismet partly from foundries supplied by domestic and imported scrap and partlyfrom rerolling mills using billets and ingots from the domestic foundriesand imported waste and coil. Though several studies have been commissionedduring the last 15 years on the establishment of basic Thai steel-makingfacilities, it is not to be expected that either a sponge iron or integratedsteel complex will be in existence before 1985.

2. With 0.75 million tons in 1978, fertilizer occupies the second placein Thailand-s imports even though the Thai agriculture is one of the lowestusers of fertilizers in East Asia. Almost all requirements are currentlyimported. Use of fertilizer has increased at more than 20% p.a. from 1975 to1978 and is expected to continue at about 15% p.a. up to 1985, bringing totaldemand to 2 million tons per year by 1985. Of this amount, about 0.5 milliontons have been assumed to come from domestic production by 1985, with astartup production commencing in 1982.

3. Imports of chemicals are presently about 0.8 million tons p.a.,having risen at an average rate of 20% p.a. since 1975. Because of theexpected slow-down of the economy caused by liquidity problems and dampenedworld trade, the import demand for chemicals is expected to rise at only about6% to 7% p.a. up to 1985. No major domestic production capacity is expectedto come on stream before that date, but there is a possibility that a sodaash plant, currently in the planning stage, will be built by about that yearwhich in the later 1980s, will completely replace Thailand's current importof 60,000 tons annually.

4. Imports of paper and paper-making materials have jumped at anannual rate of 16% from about 0.2 million tons in 1975 to 0.3 million tonsin 1978. The domestic demand is expected to continue to rise at a similarpace but a number of new mills using domestic raw materials are also planned,whose aggregate capacity will be about 0.2 million tons a year. Importrequirements up to 1985 have therefore been projected at 1978 levels annually.

/1 Discussion of major import and export categories only.

- 70 -

ANNEX 3Page 2

5. Thailand has traditionally been a net exporter of cement but therecent construction boom has exhausted production capacity. Imports whichreached already 0.5 million tons in the first half of 1979 are expected togrow to a level of 1.2 million tons in 1980 but to drop off completelythereafter on account of new domestic production capacity.

6. Machinery and parts imports have fluctuated up and down between 1975and 1978 and are presently at their lowest level since 1975 basically due tosuccessful import substitution and despite a growth in domestic demand.Resumption of import growth is however expected on account of growing sophis-tication of demand. Vehicles and parts imports rose steeply in the mid-70saveraging 15% p.a. but dropped from 1977 to 1978 presumably because of fuelprice development. In view of the growing proportion of locally manufacturedparts and the complete ban of imports of fully assembled cars, imports havebeen projected to move up only slightly above current levels.

B. Exports

7. Tapioca exports mostly in form of pellets have grown from about 0.7million tons in 1965 to 6.3 million tons in 1978. While the Thai agriculturewould havc the potential for further growth in tapioca production and exports,Thailand has agreed to limit its exports from 1980 on to the European CommonMarket (EEC), its main customer, to 5 million tons a year in response topressure of EEC farmers on the EEC Commission. On this basis, total Thaitapioca exports to all countries for 1980 to 1985 have been projected at 5.5million tons a year. Exports in 1979 however are estimated at only 4.1million tons due to unfavorable weather conditions.

8. Export of maize, roughly 2 million tons a year from 1975 to 1978, isprojected to stay around 2.0 to 2.2 million tons a year up to 1985. The areaunder maize in Thailand has increased from about 7 million rai in 1973 to 8million rai in 1977 and is expected to reach 10 million rai by 1985, whichcorresponds to an annual increase from 1973 to 1985 of about 3% p.a. Domesticdemand for maize from the animal feed industry is projected to rise even morerapidly at about 6% p.a., thus leaving no more than about 2.0 to 2.2 milliontons for export.

9. Until the end of the 1960s, rice has been the largest exportcommodity by volume. There has been no clear trend in rice exports, which in1975 to 1978 for example have fluctuated between 1 and 3 million ton per yearlargely as a function of weather conditions. There is however a trend towardsintroduction and wider use of improved rice varieties and expansion of irriga-tion allowing for a second crop, which together in a year of normal rainfall,will more than offset an also growing domestic rice demand. The internationalmarket outlook for Thai rice is good due to the broadening of the market inthe Middle East and Africa and the shortages in Kampuchea and Indo-China.Based on these considerations, rice exports, which were 1.6 million tons in1978, are projected at 2.8 million tons in 1985.

- 71 -

ANNEX 3Page 3

10. Sugar and molasses, by volume one of the four principal export

commodities, are a relative newcomer to the Thai agricultural scene. Sugarproduction has increased eight times during the last 10 years initially tosatisfy local demand only and subsequently also to be exported. Since 1970when exports were below 0.1 million tons, exports have risen to 2.6 milliontons in 1977 though dropped to 1.9 million tons in 1978 because of worldmarket oversupply and price depression. Thai export tonnages, which aresubject to the International Sugar Organization quotas, are projected torecover gradually and to reach the 1977 levels again by 1985.

October, 1980

- 72 -

ANNEX 4Page 1

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Assumptions for Financial Projections

1. The methodology and principal assumptions underlying the forecastsare presented below:

(a) Revenues. With the exception of storage income, revenues atSattahip and at Klong Toei are based on traffic forecasts (seeTables 4 and 5) and on the existing tariff schedule. Forcomputational purposes, a storage charge with substantial weeklyincrements is assumed to be effective September 30, 1981.Uniform tariff adjustments across the board have been assumed asfollows:

Effective Date Overall Tariff Adjustment

September 30, 1980 15%September 30, 1981 10%September 30, 1982 10%September 30, 1983 8%September 30, 1984 8%

These tariff increases employed in the Bank's forecasts are notproposals but rather indications of the order of magnitude of thetariff adjustments which will be required to attain the agreedfinancial objectives discussed in para. 6.05.

(b) Working Expenses. It is assumed that about 70 employees at KlongToei will be transferred co Sattahip. Otherwise, labor costs takeinto account only minor increases in staff at Klong Toei. Overallstaffing levels at Sattahip are based on the following schedule:

1980 1981 1982 1983 1984 1985

No. of employees 214 255 317 390 390 390

Fuel, repairs and maintenance have been projected in line with thegrowth in trade. The recent 50% increase in the cost of diesel

- 73 -

ANNEX 4Page 2

fuel is included in the forecast for 1980. In addition, it isassumed that wage levels will be increased by 15% on September 30,1980. Thereafter the increase in working expenses have beenprojected on the basis of a 12% annual inflation in 1981-85.

(c) Depreciation on existing assets is calculated on the life andresidual value of each asset using the straight line method.Assets procured under the proposed project have been classifiedas civil engineering or plant and equipment; an average annualdepreciation rate of 3.5% has been applied to the formerclassification and 12% to the latter.

(d) Interest Charges on the proposed Bank loan were forecast on thebasis of 9.25% p.a. (repayable over 20 years, including 5 yearsgrace).

(e) Interest Earned. Short-term deposits are assumed to earn 10% p.a.

(f) Government Appropriation and Employee Bonus' are computed to be40% and 8% respectively of the prior year's net revenue surplus.

(g) Capital Expenditures. Cash flow calculations assumed the capitalinvestment program detailed in the implementation schedule and thedisbursement schedule which are given in Tables 7 and 8.

October 1980

- 74 -ATNEX 5

THAILAND

BANGKOK AND SATTAHIP PORTS PROJECT

Selected Documents and Data Available in the Project File

A. General Reports and Studies on the Transport Sector

A.1 "Transport Planning Unit Project"by BCEOM in association with Robert Nathan Associates(financed under Fifth Highway Project, Loan 870-TH),2 volumes February 1976

A.2 "Study of Highway Maintenance and Equipment Needs"by Kampmann, Kierulff and Saxild A/S (financed under FifthHighway Project, Loan 870-TH),4 volumes December 19.'6

A.3 "Inland Waterways - Phase III, Feasibility Study"by BCEOM-CNR with participation of UECC (financed underSixth Highway (Provincial Roads) Project, Loan 1519-TH),2 volumes December 1979

A.4 "Coastal Ports Study"by Maunsell Consultants Ltd. (London), Coopers & LybrandAssociates Ltd. and Sindhu Pulsirivong & Associates(financed under Sixth Highway (Provincial Roads) Project,Loan 1519-TH),2 volumes April 1980

B. General Reports and Studies Relating to the Project

B.1 "Sattahip Commercial Port Study"by Maunsell Consultants (Melbourne), Sir William Halcrowand Partners and Sindhu Pulsirivong & Associates (financedunder Bangkok Traffic Management Project, Loan 1638-TH)2 volumes July 1980

October 1980

THAILAND

BANGKOK AND SATTAHIP PARTS PROJECT

|RANST WARSI EO PORT CA MRINE l M

OFFICE OF THE DIRECTOR

| OFLICE OE ADVISVRS T D SEII

(OERATTIDONSC | (ADMINISTRATION)

POR OPNGNERNG|RATERONEIll COTRLERSDEP | |DPT llDP

U~~~~~~~~~~~~AREROu - -3ra|CIVLEG|[ >i X<

i CAN NIN REVENUESI ISTENAL | i GNRLSIT DIV. AUI IS. L V 3~EDy

Source: Po-t Anehority If Thail-nd

October 1980

.- : t.- . ~~.. H. -1-. N. A-~.: - . -- A0\\1 1 /C 12 :: L.: :: : ::: :.- ::: : A : : : : : : : -. '1-, NAKIHN NAYOK

BUll MA )'~LAND~~~a 14 KANCHANABIRI N PR H_ 8 I f

An_B e ljR: A -A H-- t0 C C ) BNLT< i0iamK J a X - <\

Ot.: 21 .M NN- - .T/T NAM--K

,< Ot' tI4CH~J -. i1 < 2; .......... . q_ 7,4rPtACSAC

N~~~~ (~~RATCHABURI

THAILAND~ A*HN

Bangkok-, t ~SOGHRAMUR I M4'UCHt~~~~~jJ BAN hAT * ~~~taeme Kroaboog -

Andcsmaar

98°~~~~~~~~~~~~~~~~ T A I ... .......... <3 ]HR HNp)

4REA BURT ILA

MA/' Chal Bp AN SATTAHI

MAASIA M . .

I PACHUAP

980 >J~~~~~~~~~HIRI KHAN

THAILAND/ ~~BANGKOK AND SATTAHIPPORTS PROJECT

(- : - - A/- PORTS

CHUMPHON

COASTAL PORTS

10° . ' tRANONG S CHANGWAT CENTERS 100

.--::1;920L Lngsuan ROADS

-4---* RAILWAYS

- CHANGWAT BOUNDARIES

4 I t BANDON _- _ INTERNATIONAL BOUNDARIES

? %210 i;~~~~ponsak 11

'( ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~819 ,tJ >\ 1NNKHON Sl THAMMARAT

/44\\ f \\ j#>~~~~Pak2 Phnang

KILOME S -ntKRAB : unT u \

This Songsbe reae yteWrl ak tf or,.vt o a ote,no Bt-..

jKcntang RA\ n3

SONGKHLA

'/0 1000 i :(:.:102:13</~~~~~~~~~~A TTANI

SATU{S S ai Buri

MILES *~~~~~~~} -{\ r <>~~~~~~ NARATHIWAT! , 1 OOIL E . . .. . . .> J

6° 5 0 1°0 ,

KILOMETERS j 2 Sna:

.hs np has b- orpared by th. World 6-k't s taf -6--xivly for thecnnic , r--i- .. c

bounane shwn-n & thmp donptimp.f-nthepanof he-h.d.f Th.pn it ,..- ---..----- -::- >~~~~~~~~-tpa~ffftes.ar WjddEretohlg-ksafsfayentrornedorsme ...- ^- : : ... V .:. .. :... A: .....:-: p ocep tmce of such bn~ ~~~edanes ... : -- .:V. -fi- w w , ............ ....... ...... ..... ..... .. -- .-.. . . . .. . (

98°~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. ...... . : . . . . ...

IBRD 2791 RJULY 1980

BANG SU STATION

Souheln RaIlway GRAND MAKKASAN STATION

STAIO PALACEEay, 0 /il 0THONB R I E'-e R {7 =_

MEMORIAL BRIDGEII\

THONBURI 3w7 1\A G O

Anchorage north ofKrungthep Bridge M STATO

- / Port Authority of Thailand

KRUNGT2EP/8.// < \< o \ (PA.T)

BRIDGE ne An\horano e Kng Too

IS: Mcor,n KongTi jVMN W h rA a 07) 9 ) Militcry Oil~~~~~~ ~~~~Refinery

TMN Whar Anchoaya,

Sathuprad 3 d/ ,~j~ i t E o Thai Navy

PhrSil Pr ten

SAMUT\ i. ~~~PRAKAN

THAILAND < >i

BANGKOK AND SATTAHIP PORTS PROJECT /'PORT OF BANGKOK

LOCATION, ROAD, RAIL AND WATER ACCESS

Main rocods /0

S, E | Railwc/ys °

Anchorages \

==I Bar ch LFnnel F L

e Light beacons X +

*e Light buoysaligne\ FORT oo0ffo \ \ Chachoeng Sao

0100005rO 1 2 3 4 \ \ Chon Buri* 1 2 3 40 Loan Krabang

KI LOMETERS '^+ '0

* dark 400m0 0 0 G' map0 T L N

t~~~~~~~~~~~~~A//S/

W: .. k ..ff WW1 S/

of &0 r#/0f Of

teeon ty,a wteop aatofAWoe omok mt as eood ayA

:.mm 00 ' /ealOo 'f . . '- P-ro eaself: ' :

OY emmw or OndOZ- Pmet essef

e,asmaptoee:errertSr o- -od :oedIe - ~ -/ hnte -

- DEAl DIII - ____________ -I- THA LArID APP [Y80/7 005 =d 88 /tLA BANGKOK AND SATTAHIP PORTS PROJECT/.' R E S E R \[ '*JE D A 1l R [ A0 SS' // T PORT OF BANGKOK (KLONG TOEI)

II IA~~~~~~~~~~~~~~~~~~~~~~~~

an, Mu~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ ,PEuyW

I g ::::'SEt/ \, "f_,~~~~I 7I

Itt NC Y ,_-, __ '

___ __ _________________ _________ __ IAAA< ~~~~~~~~~~~~~~~~1<1/K flEAs '~~~~~~~- __ ________ _____________ ~~~~~~~~~~~~~~~~~~-------_-'----- -~~~~~~~~~- i00o,~~ K

II 1111

OT5AE

iBRD 14989

. ' CHI NA

// '/ >~~~~~~~~~~~~~~~'~~~~~ / 7 / ~~~~~~~~~~~~~~THAILAND~~VE

7/77777/77/7 7,), / ~~~~~~~~~~~~~~~~~~~~~~~~~~~~" ~Bngkok v

/';,/ 77<' / / ;;.:q '' ~~~~~ ' N INGOR¶

7, .7~~.IVl GNRk AG

7,7 77 / 7/ /7~~,7, - 'CTNOAENER

/ $'•~~~~~~'~~-; F7,efrre6~~~~~Y RJ) PE S7/ 77 / 7;~~~~~~~~~~~~*'/7/Y 7\ ' j~~~~~~~OAG

/7/7; '> 77~~~~~~~~~7,7/7 Li10D,

/7/ / ~K'$ /,>/'~ 77 _________________ '\ A

77 '/,A' ~~~~~~~""~~~" ~ ~~ Li YARD 95/. OP~~~~~~~CCENS 'oh AG

>P. A f nkN 77,,,/,7' WAY ~~~~~~~~~~~~~~~~~~~~~

/77 ,;./~~~~~~~~~~~~~~~~ ~~~~/, ,, U F,50~~~~~~~~~~C- . ;Q-O

7, Recreonen Comn,un5 0,1 0~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Pojc area------

;, / /7. ,5~~~~~~~~;,77 577P'flQ Age0 ,5' nffj 0~~~~~~~~~~~~~~~ F5 PopoedTew uilin

//7' /7 '>~~~~~ /~~77,7 ,,7/,~~~~~, / 7 0A'OCTMOI '-R'/.enoorregi,gare

7/ 7 " Popoed . ,, oles~

7<' 7 / 7 <>7,- ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ TOO~~~~~ L7"~~~~~ "'"""~~~~~LJ nm,xPor lo~nar7/7 / /~~~~~~~~~~~~~7 * / ~~~~~~~~~~' , ~~~~~~~~ gRE ~~~Eisin or ae

7/7 7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Eitn ulig

77 ~~~~~~~~~~~7 7 7. 7 7/ W ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ --- uur cila

7,7~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~EES20 i //477 0/

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~FE // 7

/77/ ~ ~ ~ ~ ~ ~ ~~~ ~~~ ~~~~~~~~~~~~~~~~~~~~~~~~d 77; /, h/7/,, 7/ ,77~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.