Report No. 867-TH

Thailand FILE COPYRubber Replanting ProjectMarch 30,1976 RETURN TOGeneral Agriculture Division REPORTS- ¢East Asia and Pacific Region vPtJ .

WITHINONE WEF;'FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restncted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

US$1.00 = Baht (V) 20.0% 1.00 = US$0.5

D{ETRIC EQUIVALENTS

1 Rai 0.16 ha = 0.41 ac

ABBREVIATIONS

CDC - Commonwealth Development CorporationDAE - Department of Agricultural ExtensionRRAF - Rubber Replanting Aid Fund (Fund)GMO - Group Marketing Organization

MOAC - Ministry of Agriculture and CooperativesRRC - Rubber Research Center

THA IlAND

RUBBER REPLANTING PROJECT

TABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ................... * i - ii

I. IBTRODUCTN **O**_****e*O*e*****I**S**S***O* 1

II. BACKRUND *....................... 1

A. General ........... vs******v* B. The Rubber Industry ...... 3C. Institutions in the Rubber Industry ..... 5

III. THE ONGOING REPLANTING PROGRAM OF THE FUND ........ 7

A. Past Implementation .... 7B. Organization and Staffing 8C. Financial Position and Fund Structure .... 9

IV. THE PROJECT - THE ACCELERATED REPLANTING PROGRAM ... 10

A. Objectives and Constraints 10B. Project Description 11C. Detailed Features 2................... 1 2D. Cost Estimates .................... 15E. Financing .... ......... ,, 17F. Procurement ............... 18G. Disbursements 1.. . ...... 18H. Accounts and Auditing .......... 0 ....... 19

V. PROJECT MANAGEMENT AND ORGANIZATION ................ 19

VI. YIELDS, MARKETING AND FINANCIAL BENEFITS ........... 22

A. Yields and Production ....... 22B. Marketing . ... . . . .. . . . . .. 23C. Farmer Benefits .. 23D. Government Cash Flow and Cost Recovery ... 25

VII. BENEFITS AND JUSTIFICATION ......................... 26

VIII. REOQMMNDATIONS ..................... 27

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

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ANNEXES

1. South Thailand

2. The Thai Rubber IndustryTable 1: Exports of Rubber by GradesAttachment 1: GMO Sale Form

3. The FundAppendix 1: Rubber Replanting Aid Fund Act 1960 - Amendments of

1962 and 1975, and Ministerial Population of 1960Appendix 2: Present Fund OrganizationAppendix 3: Proposed Fund OrganizationAppendix 4: Assumptions for Incremental Manpower Needs of the

FundAppendix 5: Fund Salary StructureAppendix 6: Management Consultants: Terms of ReferenceAppendix 7: Guidelines for External Auditing of the FundTable 1: Fund's Cash Flow and Fund Structure 1961-1974Table 2: Expenditures of the Subsidiary FundTable 3: Area Replanted 1961-1975Table 4: Replanting Grant Payments made to Farmers, 1961-1974

Attachment 1: Grant Application FormAttachment 2: Survey and Inspection FormAttachment 3: Schedule of Grant Installments and Inspection

4. The RRCAppendix 1: Organization Chart of the RRC

5. Costs, Financing, and DisbursementsTable 1: Project CostsTable 2: Assumptions for Calculating Disbursements of

Outstanding GrantsTable 3: Disbursement of Items other than Fertilizers,

1976-1980Table 4: Fertilizer Requirements and Cost of the Accelerated

ProgramTable 5: Administration CostsTable 6: IBRD Financed ExpendituresTable 7: IBRD Disbursements

6. Fiscal ImplicationsTable 1: Resource Transfer to and from the Rubber Sector

with Constant and Accelerated Replanting ProgramTable 2: Fund Cashflows under the Alternative Replanting

ProgramsTable 3: Fertilizer Requirements and Costs with a Replanting

Rate of 20,000 ha/yearTable 4: Disbursement of Grant Payments other than Fertilizer

with a Replanting Program of 20,000 ha/year 0

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Table 5: Disbursement of Items other than Fertilizers forthe Accelerated Program (1980 and later)

Table 6: Computation of Tax Rate/kg of RSS 3 Rubber in CurrentPrices

Table 7: Incremental Production Attributable to Acceleratingthe Replanting Program

7. Implementation Schedule

8. World Market Prospects for Rubber

9. Economic and Financial AnalysisTable 1: Alternative I - Replanting with Unselected SeedlingsTable 2: Alternative II - Replanting with Budded StumpsTable 3: Incremental costs and Benefits of Intercropping

with RiceTable 4: Farm Budget-Development of 15 Rai Holding in Three

StagesTable 5: Financial and Economic Analysis of On-Farm Develop-

mentTable 6: Summary of Financial and Economic Analysis and

Sensitivity AnalysisTable 7: Individual Grant Payments to FarmersTable 8: Price Forecast for Compound FertilizerTable 9: Rubber Price ForecastTable 10: Distribution of Land and Incomes in South ThailandTable 11: Rubber Yield Prospects

10. Technical InformationAppendix 1: lursery Requirements

Schedule 1: Timetables for Stock Nursery Activities(for budded stumps)

Schedule 2: Timetable for Activities for BudwoodMlultiplication Nursery

Schedule 3: Timetable for Major Nursery and Field ActivitiesAppendix 2: Establishment Costs per ha - Budded Stumps NurseryAppendix 3: Establishing Costs per ha - Budwood NurseriesAppendix 4: On-Farm Technical SpecificationsSchedule 1: Tiumetable for Field Operations

Appendix 5: Cost of Chain Saw FellingAppendix 6: Intercropping PossibilitiesAppendix 7: Hiiglh Level Tapping and Ethrel ApplicationsAttachment: Ethrel Requirements for the Replanting Program

IUPPS

1. IBRD 115202. lb!.D 11185

THAILAND

RUBBER REPLANTING PROJECT

SUMMARY AND CONCLUSIONS

i. The Government of Thailand has requested a Bank loan to assist infinancing the expansion of the ongoing program of the Rubber Replanting AidFund (Fund) from 20,000 to 50,000 ha pa in the period 1976-80. This reportappraises a project for which a loan of US$50 million is proposed.

ii. The project would provide financial and technical assistance andwould increase the organizational and operational capability of the Fund tomeet the demands of the substantially increased program. The replantingproject would be the Bank's eleventh agricultural project in Thailand.

iii. The economy of Thailand is predominantly agricultural. Althoughthe sector accounts for only 30% of GDP, it employs 75% of the labor forceand provides 70% of export earnings. However, large income disparities existbetween urban and rural areas and among regions. The main agricultural issueswhich serve as the basis for Government's rural development strategy are:(a) the need for about 320,000 jobs each year to absorb incremental rurallabor availability; (b) imprQvement of the presently very low yields of

* rainfed crops; (c) regulation of settlement in virgin lands; (d) improve-ment in the coordination of public agencies dealing with agriculture; and(e) fuller use of irrigation facilities. Government has directed its agri-cultural development strategy to the resolution of these issues and theproposed project forms part of this strategy.

iv. Rubber is the second most important export of Thailand, accountingfor 9.2% of total exports. The total area of rubber is estimated to be1.7 million ha, of which 95% is located in the south west peninsula region.Over 430,000 ha of this rubber was planted over 30 years ago with low yieldingtrees and their replanting is now overdue. A further 700,000 ha of similarstock were planted 13-30 years ago. There is, therefore, a large area ofold low yielding rubber which should be replanted.

v. In 1960, the Government of Thailand established the Fund with thetask of implementing and supervising a grant aid program of rubber replant-ing. Since then the Fund has carried out the replanting of 160,000 ha withmarked success.

vi. The present level of replantings at 20,000 ha p.a. is, however,insufficient to permit replanting all the old rubber areas within the thirty-year economic life cycle of trees. A level of 50,000 ha p.a. would berequired to achieve this end, and would furthermore, accelerate the processof increasing the incomes of large numbers of smallholders and be more in linewith Dresent and forecast replanting demand. With correct husbandry andinputs average yields in the very favorable growing conditions of SouthTh&iland would reach 1,800 kg/ha, about six times present averages. Expansion ofoutput also offers an attractive opportunity for increased export earnings.

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vii. The proposed Bank loan would assist in overcoming the main constraintsto the expansion of the Fund program, which are financial and organizational.The project, which would be implemented by the Fund, would comprise all ofthe Funds replanting program activities from 1976 through 1980. This wouldinclude (a) initial replanting of about 160,000 ha and maintenance of about120,000 ha replanted prior to 1976, (b) raising the yield of old rubber byethrel stimulation beginning 3 years before replanting, (c) reorientationof rubber research to meet the needs of the smallholder, (d) technical as-sistance and support services, and (e) management consultants to review theFund's structure and procedures and help implement the agreed recommendations.

viii. Total project costs are estimated at USS148.0 million during1976-80 with an estimated foreign exchange component of US$61.9 million or42%. The Bank loan of US$50 million would finance foreign exchange costsof US$36.0 million and US$14.0 million of local currency requirements. TheCDC would provide additional financing of US$6.8 million and UNDP US$1.0million for technical assistance. The remaining project costs (US$90.2 mil-lion) would be financed from the Fund's cess revenues (US$65 million), fromdrawdown of the Fund's reserves (US$15.0 million) and from Government con-tributions (US$10.2 million).

ix. Fertilizer and agricultural chemicals (US$63.3 million) would beprocured by international competitive bidding according to Bank procedure.Vehicles (US$0.9 million) would be purchased on the basis of competitivebidding advertised locally. Most other Fund expenditures (US$83.8 million)including cash payments to farmers, planting materials and administrativecosts are direct Fund expenditures and are not suitable for competitivebidding.

x. The income from rubber of a typical smallholder family cultivating2.4 ha would increase from US$350 to US$1,750 per year at full maturity ofthe rubber trees. As rubber presently accounts for about one half of cashfarm incomes in South Thailand, the five-fold increase in net incomes fromrubber production through the replacement of the present rubber stand withhigh yielding varieties would in the long run more than double the agri-cultural cash incomes in the region. Rubber constitutes the principalsource of cash income for about 75% of rural households, and income increasesdue to the project would be spread over the great majority of the ruralpopulation of Southern Thailand.

xi. The economic rate of return of the project is estimated at 20%.The incremental replanting program would create about 30,000 new jobs.Incremental annual production due to accelerating the program would averageabout 190,000 metric tons between 1984 and 1999. Valued at the f.o.b. priceof US65i/kg this would earn about US$120 million of foreign exchange forthe economy.

THAILAND

RUBBER REPLANTING PROJECT

I. INTRODUCTION

1.01 The Government of Thailand has requested a Bank loan to assistthe expansion of the ongoing program of the Rubber Replanting Aid FundBoard (the Fund) for the period 1976-80. This report appraises a projectfor which a loan of US$50 million is proposed. With this assistance andthe support of the Rubber Research Center (RRC) of the Ministry of Agricul-ture and Cooperatives (MOAC) and of the UNDP, the grant-aid program of theFund would be substantially expanded to raise the level of Fund-supportedreplanting from the present level of 20,000 ha per annum to 50,000 ha by1978.

1.02 To date, the Bank Group has made 8 agricultural loans and creditsto Thailand, all of them for irrigation. The Sirikit Dam Project (Loan514-TH for $26 million) has been successfully completed. The North EastIrrigation Improvement (Credit 461-TH for $7.0 million), as well as the ChaoPhya Irrigation Improvement Project (Credit 379-TH for $5.5 million) arebeing implemented somewhat behind schedule. A loan for the PhitsanulokIrrigation project ($95 million) was approved in July 1975. Two loans forthe Northeast, one for rural development ($19 million), and another forlivestock development ($5.4 million) were approved by the Executive Directorsin January 1976.

1.03 The project was prepared by staff of the Fund and of the RRC withthe support of the Bank's Regional Office, Bangkok. This report is basedon the findings of a Bank Mission composed of Messrs. J. Andreu, P. Daxand B. Gray which visited Thailand January 26 to February 22, 1975. Messrs.J. Canty and E. Panton of the Commonwealth Development Corporation (CDC)joined the mission to appraise CDC's participation in the external financingof the rubber replanting program.

II. BACKGROUND

A. General

2.01 Thailand has a total area of 51.4 million ha of which 10,9 mil-lion ha is under cultivation. The population of 39.7 million (mid-1973)has been increasing at about 3.1% annually. In the past ten years, the

* economy has grown annually at an average real rate of more than 7% and out-put per capita has increased at over 4% p.a.

2.02 Thai7and's economy is predominantly agricultural. Although thesector accounts for only 30% of GDP, it contributes about 75% of totalemployment and 70% of export earnings (mainly rice, maize, cassava, kenaf,rubber and sugar). In 1974, rubber accounted for 9.2% of total exportsand was, after rice, the most important source of foreign exchange earnings.The annual growth rate of agricultural output has averaged 5.5% in the pastdecade and is one of the highest among developing countries in Asia.The fact that growth of output in other sectors was more rapid accountsfor the fact that the contribution of agriculture to GDP declined from 40% in1960 to 30% in 1970. The growth in crop production, which accounts for about 73%of total agricultural production, has been primarily attributable to expansionin the area cultivated at an average rate of about 4% p.a. in the period1960-74 indicating that yields per unit of land area have increased only slightly.New areas suitable for cultivation are rapidly diminishing, and future growthwill depend largely upon concerted efforts at intensification of productionin existing agricultural areas.

2.03 Almost 50% of agricultural holdings in Thailand are less than2.4 ha and only 5% are 10 ha or more. There are large income disparities,mainly between urban and rural areas, but also among the four main ruralregions of the country. The Northeast and the North are the poorest regionswith per capita incomes of US$100 and $120 respectively due to the lack ofbasic agricultural resources, including insufficient and erratic rainfall.Government is actively pushing for their development and is being assistedin this by the Bank. The average per capita income for the South is US$250or roughly in line with the national average.

2.04 The main agricultural issues in the near future appear to be:

(a) finding 320,000 jobs p.a. in the agricultural sectorto absorb increases in the labor force which cannot betaken up by other sectors;

(b) increasing the very low (and decreasing) present yieldsof rainfed crops, such as rice, maize, rubber, cassaveand coconuts, to increase production and exports, and toavoid deterioration in the incomes of smallholders;

(c) regulating the settlement and exploitation of the rapidlydwindling virgin lands;

(d) improving the coordination of public agencies dealingwith agriculture; and

(e) making fuller use of existing irrigation facilitiesand areas.

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B. The Rubber Industry

2.05 Area Features. About 95% of the Thai rubber is produced inSouthern Thailand which comprises 12% of the country's area and 10% of the

population (Annex 1). The remainder comes from thie southeast coastal areabordering on Cambodia. In the latter area, plantations are generally youngand the need for replanting is less urgent. This section of the report is,therefore, limited to the south.

2.06 The region has a favorable resource endowment relative to theNorthern and Niortheast regions and a relatively low population density ofabout 57/km 2 . Nine-tenths of the population of 4 million are rural. Theoldest settlements are found along the Lastern coastal belt but since the1930's, population pressure has caused continuing migration to the interior.Population has been increasing at the rate of about 3% p.a. during the lastdecade, and the area of virgin land suitable for agriculture is rapidlydiminishin-O .

2.07 The climate is tropical and there are rain forests to the Southand West. Rainfall averages 1,800 to 2,800 mm p.a. and is largely concen-trated in May to December, except in the extreme south, where it is distri-buted fairly evenly throughout the year.

2.08 The South is divided into three main land types (UMaps 1 anu 2):(a) the western, central and southern mountain ranges and hill areas withgenerally gray and red-yellow podzolic soils, covered largely by rain forests;(b) the central and southern lowlands with colluvial and shale-derivedsoils, and mostly cultivated; and (c) the cultivated sandy soils of thecoastal plains. The first two are eminently suitable for rubber and offerfew other alternatives for large scale development,

2.09 Rubber was introduced to Southern Thailand from Malaysia at theturn of the century (Annex 2), and substantial plantings were made in the1930's. Infrastructure development has kept pace with expanding settlement.The South has a wide network of health and educational facilities, as wellas the highest density of roads per km2 in the country. The region is linkedby rail with Bangkok and Malaysia and air transport is well established.Ilowever, the expansion and improvement of port facilities have been identi-fied as priority projects in the South Thailand Regional Development Study(para 6.04).

2.10 Land Tenure and Farm Size. The average total farm size in theSouth is still substantially larger than in the rest of the country. MIorethan half of the agricultural area is in smallholdings of 2.5 to 6 ha each.Problems of tenancy and landlessness are minor. However, although customaryoccupancy and cultivation rights are well established, only a small propor-tion of farmers have full title deeds to their holdings. This may become amajor problem with increasing population pressure in future.

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2.11 There are about 1.6 million ha of rubber in Southern Thailand,comprising more than half of the gross cultivated area. The number of rub-ber holdings is estimated at about 500,000 and the average size is about 3.2ha (20 rai). Data are limited but the Agricultural Census of 1963 indicatesthe distribution of rubber holdings and of area by size of holding asfollows:

Up to 15 rai 15-60 rai Above 60 rai(2.4 ha) (2.4-9.6 ha) (9.6 ha)

% of holdings 31 60 9% of area 10 56 34

2.12 Yields and Production. The average rubber yield is about 300 kg/ha,which is one sixth of yields that can be expected under modern methods ofcultivation. The approximate age distribution and yields are as follows:

Rubber Plantings

Area Age of Trees YieldYear of Planting ('000 ha) (Years) (kg/ha)

1905-1930 140 45-70 1001931-1945 290 30-44 250 01946-1962 710 13-29 530/a1963-1975 460 1-12 70--

/a Immature rubber area included in this calculation.

Yields of unselected and poorly maintained rubber decline markedly after30 years of age. About 430,000 ha (25% of the total rubber area) of rubberis more than 30 years old and the area under overaged rubber is increas-ing at the rate of 30,000 ha p.a. At prevailing prices tapping of thesetrees is unprofitable. However higher yielding rubber varieties and improvedtechniques provide an opportunity for reversing the unfavorable trend inyields and increasing rubber smallholder incomes.

2.13 Most of the rubber in South Thailand is processed into unsmokedsheet (wet sheet) by the farmers. It is sold to thousands of small villagetraders, 800 to 1,000 wholesalers and ultimately to about 18 smokers/packers/exporters. Several independent marketing studies show that profit marginsare not excessive with farmers obtaining on-farm prices which represent75/80% of f.o.b. prices net of taxes. Most of the rubber is exported asRibbed Smoked Sheet (RSS) 3 and 4 (Annex 2).

2.14 Marketing. The main marketing constraints for the smallholder arethe uneven and generally low quality sheet they produce and the lack ofadequate sheet weighing equipment. This results in lower prices, sincevillage traders must allow for risks connected with uncertain quality and

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weight of the sheets they purchase. As a result of past failure with sophis-ticated schemes, the RRC has concentrated more recently on organizing smallgroups of neighboring producers into Group Marketing Organizations (GM0's)for sheet-grading, weighing and marketing. The existing 80 CMO's have beenlargely successful and as a result, participating smallholders have beenobtaining about 10% higher price for their produce (Annex 2).

2.15 Rubber packers, who are also exporters, plan to set up sufficientblock rubber processing capacity to handle most of Thailand's production bythe early 1980's. The RRC is presently investigating the best system forsmallholder processing, and the role of GMO's in adapting production toblock rubber requirements.

2.16 Rubber exports in 1974 were 380,000 mt (95% of total production)making Thailand the third largest exporter (11% of total) followingMalaysia (50%) and Indonesia (27%). About nine-tenths of the rubberexported is shipped from the southern ports, of Songkla, Phuket, and Pattani;the rest is shipped from Bangkok.

C. Institutions in the Rubber Industry

2.17 There are five main Government institutions responsible for de-velopment in the rubber sector. A brief description of their organizationand function is given in the following paragraphs.

2.18 (i) The Rubber Replanting Aid Fund (the Fund, Annex 3). This isthe main public sector institution responsible for the development of therubber industry. It was established in 1960 as an independent statutorybody to assist the replanting of old rubber holdings with high yieldingvarieties, and to introduce modern methods of cultivation. The main sourceof Fund revenues are the proceeds of cess levied on rubber exports. Thepast implementation of the replanting program and the organization andfinancial status of the Fund are described in Section III, since it is theongoing program of this institution that the proposed loan would help expandand accelerate.

2.19 (ii) The Rubber Research Center. RRC was established in 1965as a branch of the MOAC's Rubber Division (Annex 4). It is responsible forresearch into production and processing; adaptation of research findings, anddissemination of information among producers and processors. The RRC financesare provided by (a) 5% of the annual proceeds of the rubber cess; and (b) bud-get allocations of the Rubber Division. Financing has recently been adequatepartly due to a UNDP contribution of US$2.3 million largely disbursed in the1970's. Annual expenditure averaged $ 15 million (US$750,000) per annum inthe last three years.

2.20 The RRC's Director heads two main headquarter divisions: one foradministration and another for technical development and assistance. Thelatter is divided into the following sections: agronomy, soil science,processing technology, development, and economics.

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2.21 The RRC staff at headquarters in Hattyai, Southern Thailand, and inthe 17 field stations spread throughout the major rubber areas, numbered 130as of December 31, 1975. Of these, about 90 are graduates of Universitiesand Agricultural Colleges. Staff are recruited on merit following civilservice procedures. Staff remuneration is based on civil service standardsand this, together with an attractive work program, has permitted recruit-ment and retention of good staff. Since its establishment in 1965, the RRChas greatly benefitted from UNDP/FAO technical assistance provided througha resident team of expatriates at headquarters. The FAO team comprises ex-perts in general research, soil science, agronomy, plant pathology andeconomics. It has helped establish the main lines of the RRC's activitiesand has a major role in on-the-job training of staff.

2.22 The RRC has concentrated its activities on: (a) training of Fundstaff and rubber smallholders at both headquarters and field stations; (b)ensuring adequate supplies of high quality planting materials through opera-tion of the RRC inspection service for certification of planting material;(c) disease prevention and control through advisory work; and (d) demon-strating bud grafting and other modern techniques to planters. More re-cently it has commenced trials with new varieties, to determine theirsuitability to the different regional climates in the South. The RRChas worked closely with the Fund in the past and is prepared to reorientits activities in line with future program needs (paras 5.09 and 5.10).

2.23 (iii) The Rubber Division in the MOAC has general responsibilityfor implementation of Government policies in the industry, including theregulation of dealer activities and quality standards. It is also responsi-ble for collecting statistics in the sector. The Rubber Division producesand distributes some of the planting material for the replanting program(Annex 2).

2.24 (iv) The Department of Agricultural Extension (DAE) in theMOAC advises rubber growers on agricultural techniques. It has been activein the dissemination of information concerning the replanting program, andthe identification of potential replanters. The DAE remains responsiblefor general agricultural extension and for rubber extension from the secondyear after tapping (Annex 2) and has been recently charged by governmentwith the responsibility for supporting GMOs.

2.25 (v) The Government Rubber Estates Organization has been incharge of production of planting materials for the major portion of theFund's replanting program. It has currently a capacity of producing about14 million budded stumps per year, sufficient for field planting of about17,500 ha.

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III. THE ONGOING REPLANTING PROGRAM OF THE FUND

A. Past Implementation

3.01 About 160,000 ha, or 10% of the rubber areas of Southern Thailand,have been replanted since the start of the Fund's operations in 1960. Re-planting reached the rate of about 12,000 ha by 1970 and has rapidly accel-erated since, to the present level of over 20,000 ha each year (for detailssee Annex 3, Table 3).

3.02 The Fund has steadily improved its performance in terms of satis-fying the demand for replanting grants. The ratio of approvals to applica-tions has risen from around 65% in the early sixties to 80% at present.The ratio of replanted area to approved applications also rose, from around85% in the sixties to a present level of about 95%.

3.03 Although the applications for replanting grants have increasedsteadily since the beginning of the program, fluctuations in the price ofrubber introduce a random element into this demand. At periods of highprices, the number of applications may decline because of the increasedprofitability of tapping. Applications reached a record high of about44,000 ha in 1973. However, in view of the very favorable prices prevail-ing in early 1974, many replanters requested postponement of their replant-ings, and only about half of the area was replanted. Also, due to the ex-port embargo on fertilizer in 1974 by Malaysia, the chief source of supplyfor the Thai rubber industry, the Fund was compelled to encourage thispostponement. For these reasons, applications for replanting fell off toabout 26,000 ha in 1974, of which an estimated 23,000 ha have been re-planted in 1975. Since appraisal, the Fund's most recent estimate forapplications in 1975 is 34,000 ha. Assuming that about 75% of these appli-cations will be approved and replanted, 1976 replantings would slightlyexceed the Fund's forecast for replanting 25,000 ha in 1976. Withoutfinancial constraints the Fund will not have to discourage applicationsin the future but would expand its promotion efforts, and should withoutdifficulty reach the target level of replanting 50.000 ha/year by 1978and thereafter as proposed under the project (Annexes 5 and 6).

3.04 The Replanting Grant. Farmers file grant requests, generally withthe help of a Fund extension officer (Annex 3, Attachment 1). To qualify fora replanting grant a rubber farmer needs to:

(a) have over-aged rubber trees at a minimum density of160 trees/ha growing on an area of not less than0.32 ha (2 rai);

(b) have clear rights to the produce of the rubber treesA to be replanted; and

(c) have a holding with suitable soil and topographyfor rubber growing.

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3.05 The grant consists of materials provided in kind and of cashpayments. It is released to replanters in installments over a period ofabout 6-1/2 years. Release of each installment is conditional on satis-factory completion of specified tasks certified by an inspector. (Detailsof each installment and a survey and inspection form are shown in Annex 3,Attachments 2 and 3). Material inputs include planting material, fertilizer,and chemicals in amounts determined by agronomic and economic considerations,and are sufficient to reap the full benefits of modern rubber technology.The cash component of the grant aims to alleviate the decrease of smallholderincomes after felling the old trees, an incentive which is necessary toinduce replanting by smallholders who depend on rubber for their entire cashincome (paras 6.05 to 6.08).

3.06 The amount of the grant is determined by the Board of the Fund.In an effort to keep up with rising costs, the Fund has raised the grantfrom an initial level of 1500 Baht/rai in 1961 to 1850 Baht/rai in 1966/67and finally to 2000 Baht/rai since 1968. However, these are nominal amountsonly. Since the material components of the grant are fixed in terms ofquantities rather than money, the fluctuations in their price affect theactual cost of the grants. The rapid rise of compound fertilizer price byabout 140% between 1973 and 1975 resulted in an increase in the cost of thegrant to about 9 3,000/rai ($940/ha) in early 1975. Of this, 54% wasfertilizer cost, 33% cash payments for labor, 8% the cost of chemicals andcover-crop seeds, and 5% for the cost of planting materials. (For detailssee Annex 9, Table 7.)

3.07 The Fund's system of providing grants to smallholders is wellorganized, efficient, and has adequate safeguards against abuse. Materialcomponents of the grant as well as cash-payments are supplied through theProvincial Offices of the Fund. Delivery of planting material to the small-holder is arranged at a time agreed between the smallholders and the fieldoffice. In the past, fertilizer was purchased by the Fund from fertilizercompounding firms in Malaysia. Dealers in small towns and villages withadequate storage facilities contract with the Fund to release fertilizerand chemicals to rubber smallholders against presentation of a voucher.Agricultural chemicals are distributed in a similar manner. Cash paymentsare also payable at the Provincial Offices after satisfactory completionand inspection of work. All records of payments and inspections are keptin the replanter's individual booklet, a copy of which is kept at Headquarters.

B. Organization and Staffing

3.08 The Fund was set up in 1960 as a statutory body (Annex 3, Appendix 1gives details of the Fund statutes and subsequent modification) and enjoysfull operational autonomy. The Director is responsible to a Board of whichlhe is a member. The Chairman of the Board is the Mtinister of Agricultureand Cooperatives, and most of the members represent public sector agencies..Members are appointed by the Council of Mlinisters for 2 year terms and can

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be reappointed. Decisions are reached by simple majority vote. The Boardsets policy, approves structural and procedural changes, annual programsand budgets and oversees the Funds activities. In these functions the Fund'sconstitution allows wide latitude.

3.09 The Fund's present organizational structure consists of five head-quarters divisions (see Annex 3, Appendix 2) and twelve provincial offices(ten in Southern Thailand and two in provinces near the eastern border withCambodia). The provincial offices administer grant payments, supervisereplantings, and provide all rubber extension to replantings up to the secondyear of tapping. The provincial offices report directly to the DeputyDirector. This organizational structure is fundamentally sound, althoughthe expansion of the Fund's activities will require more decentralizationof functions to the provincial offices as well as the changes in organiza-tion and procedures proposed under the Project (Annex 3, Appendix 3).

3.10 Fund staff numbered 1,170 at December 31, 1975. Of these about80% were in field offices, and about 60% were graduates of Universitiesand Agricultural Colleges. Of the 466 field inspectors (who are alsoextension officers) 20% were agronomists and 90% graduates from vocationalschools. The present size and distribution of the staff have been adequateto carry out Fund programs successfully in the past, but would have to beexpanded and changed in line with the planned expansion of operations (para5.07 and Annex 3, Appendix 4).

3.11 Fund recruits are selected on the basis of merit. The qualityof Fund staff is satisfactory. One-month introductory courses on rubberare given to new recruits by Fund and RRC staff, and shorter, specializedcourses are given to older staff. Participating replanters are given anumber of training courses which are effective and well organized.

3.12 Staff remuneration (Annex 3, Appendix 5) compares favorably withCivil Service standards when benefits and hardship allowances are added tobasic salaries. This, and the flexibility available to the Fund for trans-fers and promotions, has helped greatly in recruiting and keeping highquality staff. Consequently no difficulty is expected in recruiting addi-tional staff for an expanded program.

C. Financial Position and Fund Structure

3.13 The Fund has three sources of funds: (i) the most important one byfar is the rubber cess (Annex 6, Table 6), 95% of the proceeds of which aregiven to the Fund; (ii) interest income on deposits, and (iii) governmentsubventions. Revenue from the replanting cess passes directly to the Fund.By law, 90% of cess revenue is to be used for grant payments, 5% is set asidefor administrative expenses. (The remaining 5% is passed on to the Departmentof Agriculture to supplement the finance of the Rubber Research Center).The separation of administrative costs from grant payments is sound financialpractice, although the present allocation of the Fund's cess revenuebetween administrative expenditures (5%) and grant payments (90%) is necessarilyarbitrary.

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3.14 In the past, financial constraints have not limited the Fund'soperations; on the contrary, it has been able to accumulate reserves whichamounted to about US$30 million at the end of 1974 (Annex 3, Table 1). Also,due to the rapid accumulation of cash balances during the build-up periodof the replanting program, interest income has been substantial (about US$17million). This situation however, was reversed in 1974 and deficits wouldcontinue between 1975 and 1979, even if the present level of replantings of20,000 p.a. is maintained. This would necessitate government contributionsto fill the gap until cess revenues could cover replanting expendituresbeyond 1979 (Annex 6, Table 2).

3.15 The Act (Section 18, Annex 3, Appendix 1), specifies that interestincome is to cover administrative expenses over and above the 5% allocationof cess revenues, and that remaining balances are to be reallocated to thereplanting fund proper. However, substantial reserves from interest incomehave been allocated into three reserve funds (Land and Buildings Fund, Sub-sidiary Fund (Annex 3, Table 2) and Unallocated Interest Reserve) in theadministrative budget whose cash balances now amount to about US$7.5 million.Total allocations from interest income to the replanting fund proper, haveonly amounted to US$2.5 million.

3.16 The Government has so far assumed only the responsibility to fi-nance the deficits of the Fund's administrative budget. Although interestincome would have been more than sufficient to cover the shortfall over 5%of cess revenues from actual administrative expenses, the Government hascontributed subventions to administrative expenditures totalling about US$5million between 1969 and 1974. Under the proposed acceleration of the re-planting program the commitment to finance only the Funds administrativedeficits will not be sufficient (paras 4.15 and 4.16). A more rationalaccounting structure is required to define the Government's commitment tothe financing of future deficits, both for administrative expenses and forthe replanting program proper.

IV. THE PROJECT - THE ACCELERATED REPLANTING PROGRAM

A. Objectives and Constraints

4.01 The main objectives of the rubber replanting program are (i) toincrease and maintain the income levels of the lowest 50% income group throughsubstantially increased rubber yields and (ii) to ensure that smallholdingsare viable economic units. Although rubber production increased at a rateof about 7% during the past decade, further development under traditionalmethods of planting and cultivation is constrained by (a) the rapidly diminish-ing area of virgin lands suitable for rubber, and (b) low and decreasingrubber yields due to the aging of the present rubber stands as well as thepersistence of traditional methods of cultivation with low maintenance stand-ards and unselected planting material.

4.02 The Fund was created to overcome these constraints by the intro-duction of high yielding planting material and modern methods of cultiva-tion. The ongoing replanting program has succeeded in these objectivesalthough on a scale which is insufficient to eliminate the present backlogof about 430,000 ha of rubber trees planted over 30 years ago, and at thesame time keep up with the required replacement of a further 700,000 hawhich were planted with unselected seedlings 13-30 years ago. The projectwould help attain these objectives by accelerating the program to replant25,000 ha in 1976, 35,000 in 1977 and 50,000 ha p.a. thereafter, therebypermitting sustained renewal of all old rubber stands.

4.03 The Fund faces two major constraints to the acceleration of thereplanting program proposed above. First, the Fund's projected cess rev-enues would be inadequate to carry out the accelerated program (or evento maintain the program at the present level of 20,000 ha/year). The pro-posed Bank loan, complemented with other sources of external financing,would cover about 85% of the Fund's expected financial gap during 1976-1980.Secondly, changes in organizational structure and procedures, as well asincreased staff, would be required to implement the program. Proposals inthis regard are detailed in Section V.

B. Project Description

4.04 The project would be carried out over four years as detailed inAnnex 7 and would comprise the entire Fund program during that period.Principal project components would be:

(a) replanting, using improved material and techniques, ofabout 25,000 ha of rubber in 1976, 35,000 ha in 1977, andabout 50,000 ha each year thereafter, involving about80,000 rubber replanters (para 4.05 and Annexes 5 and 6);

(b) increasing the capacity of the Fund, and the RubberDivision's nurseries to cope with the production ofhigh quality planting material for an annual replantingprogram of 50,000 ha (para 4.06, Annex 3, and Annex 10,Appendix 1);

(c) maintenance of all replantings administered by the Fund(para 4.07, Annex 10, Appendix 4);

(d) establishment of about 400 Group Marketing Organizations(GMO), (para 4.08, Annex 2, and Annex 3, Appendix 4);

(e) increasing the use of modern yield stimulation techniquesduring the final 3 years prior to replanting, over an areaequivalent to 60% of the area to be replanted (para 4.09,and Annex 10, Appendix 7);

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(f) increasing training programs for Fund staff and for rubbersmallholders, in techniques of planting, field maintenance,tapping, processing, and marketing, (para 5.08, Annex 3,Appendix 4);

(g) technical assistance to project planning and implementation byUNDP/FAO (para 5.10, Annex 4);

(h) establishing a monitoring system for evaluation and assessmentof the rubber development program (para 5.11, Annex 3); and

(i) review and reorganization of the Fund's structure and procedures,with the assistance of a team of management consultants (para 5.12,Annex 3, Appendix 6).

C. Detailed Features

4.05 The Accelerated Program. The Fund's estimated activities in 1976through 1980 would include replanting 160,000 ha (of which 80,000 would beincremental), and continued development of about 120,000 ha replanted priorto 1976 as follows:

L - 13-

1976 1977 1978 1979------- '----000 ha----------

A. New Replantings 25 35 50 50

B. Completion and MaintenanceOngoing Replantings

Year after ReplantingSecond 23 /a 25 35 50Third 20 23 25 35Fourth 20 20 23 25Fifth 18 20 20 23Sixth 13 18 20 20Seventh 12 13 18 20Eight /b 11 12 13 18

Sub-total 117 131 154 191

…____ …000 holdings---

C. New Plantings 13 18 25 25Ongoing Plantings 71 79 88 112

Total 84 97 113 127

D. Area of Fund Nursery (ha) 250 315 415 415

E. Number of Main Field Staff (Surveyors,Inspectors, Processing Officers,Instructors) /c 644 747 778 851

/a Preliminary estimates.

/b Extension training in tapping techniques.

/c See Annex 3, Appendix 4.

4.06 Nurseries. The Government Rubber Estates Organization nurseriesTr.i11 q,lnrnlv aiequate amounts of good planting material to the Fund and

assurances to this effect were obtained during negotiations. By suitablearrangement, the nurseries of the Rubber Division of the MOAC and privatenurseries approved by the Rubber Division and the RRC would also provideplanting materials. 1/ Quality of planting material would be assured byRRC's certification. Delivery of planting material to the smallholder

1/ Private nurseries are owned and operated by estate owners and farmerse who produce planting material under contract arrangements with the Fund.

14 -

would be coordinated and arranged by the Fund field offices. It is antici-pated that some 75% of the planting material required for a 50,000 ha p.a.program could be produced by the Government Rubber Estates Organization'snurseries. 1/ During the project period, the total area of budded stumpsnursery will increase from about 250 to 400 ha (Annex 10, Appendices 1 to 3).

4.07 Land Clearing, Planting and Maintenance. Land clearing involvesfelling and burning of the old rubber stand and eradication of weed growth.This is followed by establishment of a leguminous cover crop in the avenuesbetween the rows to be planted with young rubber trees. So far most landclearing has been done by hand. This has resulted in labor shortages, de---lays and unfinished programs due to the very short (3-4 months) land clearingseason. It is important that nursery and field activities are coordinated sothat planting coincides with the wet season. To accelerate land clearing,the Fund would help further develop a system of contracting with private en-trepreneurs for chain saw felling (Annex 10, Appendices 4 to 6). Under thissystem individual smallholders would remain free to employ contractors orto use their own family labor and tools for manual felling. (Provision ofchain saws to individual smallholders would not be practicable). Afterplanting, maintenance would be routine, consisting mainly of timely appli-cation of fertilizer, weeding and disease control and would be closely super-vised by the Fund as in the past.

4.o8 Harvesting, Processing and Village Marketing. The main requirementin the production of high quality sheet rubber is cleanliness during tapping,collection, and processing. The technique is straightforward and wellunderstood by farmers. Trees are tapped in the morning at 2 or 3 day intervals.On this basis, one tapper is able to tap, collect and process latex intowet sheet (unsmoked sheet) from an area of 2-3 ha during a working aay ex-tending from about 6 a.m to 12 noon. The majority of unsmoked sheet producedwill continue to be marketed through present systems during the projectperiod (para 2.13). Following up the considerable RRC experience withGroup Marketing Organizations, the Fund would establish 400 new GMOs(Annex 2). With the planned increase in staffing, this target is feasible.Participating smallholders would improve the quality of their rubber andobtain about 10% increase in price as in the past.

4.09 Yield Stimulation. In the years preceding replanting, it is feasi-ble to maximize returns from low yielding holdings through ethrel stimulationand, ultimately, by slaughter-tapping. Ethrel stimulation increases yieldsof old trees by 50-100% for about three years (Annex 10, Appendix 7). Assmallholders would normally replant their holdings in stages (Annex 9), theadditional income derived from ethrel stimulation and modern methods ofslaughter tapping would help smallholders bridge the period of decreasedincome while only a part of their holding is productive. Therefore, inten-sification of tapping in the last years of the trees would add an incentiveto the timely replanting of over aged rubber trees.

1/ The balance by private nurseries

0 - 15 -

4.10 The Fund estimates that about 60% of old rubber holdings are suita-ble for intensified latex exploitation by tapping reserves of high-levelvirgin bark with the indicated techniques. Fund staff already instructreplanters in these techniques. To cope with the expanded program, thenumber of Fund instructors would be trebled by 1977. The Fund would makeprovisions to provide replanters with ethrel at cost.

4.11 Ecological Aspects. Replanting will be confined to flat or un-dulating lands containing soils of known suitability for tree crop development.The leguminous ground cover which will be sown immediately after clearingwill adequately safeguard against erosion and siltation, The project doesnot involve large scale centralized processing. Processing will continue tobe carried out on a small scale on individual farms and pollution would benegligible.

D. Cost Estimates

4.12 Estimated total costs during the period 1976 through 1980 aredetailed in Annex 5, Tables 1 to 5 and summarized in the table below:

.

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$ million US$ Million %Local Foreign Total Local Foreign Total F.E.

A. Field Establishment

Labor 900 - 900 45.0 - 45.0 -Planting 113 - 113 5.6 - 5.6 -Fertilizer 43 827 870 2.2 41.3 43.5 95Cover Crop Seeds 15 - 15 .8 - .8 -Chemicals 24 200 224 1.2 10.0 11.2 89

Sub-total 1,095 1,027 2,122 548 51.3 106.1

B. Project Administration

Field Staff 141 - 141 7.1 - 7.1Overhead and Operations 162 26 188 8.1 1.3 9.4Vehicles and Equipment 8 6 14 .4 .3 .7Nursery Establishment 16 2 18 .8 .1 .9Technical Assistance - 9 9 - .4 .4

Sub-total 327 43 370 16.4 2.1 18.5

Total Base Costs 1,422 1,070 2,492 71.2 53.4 124.6

Price Contingencies 298 169 467 14.9 8.5 23.4

GRAND TOTAL 1,720 1,239 2,959 86.1 61.9 148.0

4.13 Base costs are estimated at 1976 prices, on the basis of thepresent level and composition of grant payments. Provisions for expectedprice increases for fertilizers are based on the Bank projected priceindex for world commodity trade, and for all other inputs, on the projectedwholesale price index for Thailand. The rates of price increase forecastby these indices are as follows:

1976/77 1977/78 1978/79 1979/80 and after(% increase)

Fertilizers 9 8 7 7Others 10 8.5 7 6.5

No provision for physical contingencies has been made since the project com-prises a "time slice" of a large investment program where the major sourcesof uncertainty and risk do not lie in the estimates of the physical andadministrative requirements of implementation.

0

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E. Financing

4.14 Project costs from 1976-80 would be financed in the followingamounts and proportions:

Local Sources External Sources F.E. ofFund Government IBRD CDC UNDP Total Total

US$ Million 80.0 10.2 50.0 6.8 1.0 148.0 61.9

Percentage of Projectcost 54.0 6.9 33.8 4.6 .7 100.0 41.8

Outside funds would be made available to the Fund as grants. Bank-financedexpenditures are detailed in Annex 5, Table 6. CDC have agreed in principleto provide additional cofinancing of about US$8.0 million. Arrangements forCDC's participation in assisting the project were finalized duringnegotiations. UNDP would finance technical assistance to the project.

4.15 During the proposed project period, the Fund's projected cashresources would amount to only about US$80.0 million (Annex 6). Assuming

*Jk external financing of the program as proposed above, the Fund would stillface a deficit of US$10.2 million. This moderate deficit could be met fromGovernment budgetary allocations without undue difficulty, since the deficitwould amount to less than 5% of projected export taxes on rubber during thesame period. However, during the subsequent four-year period (1980-1983),the Fund's average yearly deficits are projected at US$30 million (Annex 6,Table 2).

4.16 in view of the above, the Government's commitment to finance theFund's impending deficits during and beyond the project period is crucialto the implementation of the accelerated replanting program. By controllingthe level of taxes and grant payments, as well as the allocation of taxesbetween the export tax and the replanting cess, the Government has consider-able flexibility in controlling the Fund's financial position. Options forfinancing the deficits include (i) raising the cess, (ii) budgetary alloc-ions, (iii) continuing recourse to external financing, or (iv) a combinationof these measures. During negotiations, assurances were obtained that theGovernment would (i) provide the Fund with the necessary funds to financethe deficits involved in carrying out the project and sustaining the programat a rate of 50,000 ha/year; (ii) at the request of the Bank review in con-sultation with the Bank and the Fund the financing requirements of the Fundto carry out the Project and thereafter to continue with the implementationof the Replanting Program. Assurances were also obtained that the Govern-ment would (i) consult with the Bank prior to changing the evel of taxesand duties on rubber production, marketing and export, as well as of theRubber Cess levied pursuant to Section 5 of the replanting act and (ii)e at the request of the Bank, review in consultation witn the Bank and theFund the rates of the Rubber Cess and of any other taxes or duties leviedon the production, marketing, and export of rubber.

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0F. Procurement

4.17 Fertilizers and chemicals (US$63.3 million) would be procured inbulk through international competitive bidding in accordance with Bank proce-dures and the usual preference would be granted to local manufacturers.Contracts for vehicles (US$0.9 million) would be awarded on the basis ofcompetitive bidding advertised locally and in accordance with the Fund'susual procurement procedures. Vehicles would be procured in small groupsand purchases would be scattered in time and place, hence internationalcompetitive bidding mould not be appropriate. Foreign manufacturers ofvehicles are well represented in Thailand. About 75% of the required plantingmaterial would be initially provided by the Government Rubber Estates Organization.Their nursery and private nurseries would supply planting material at competitiveprices. Cover crop seed would be purchased from private sources, mainlysmallholders. The remaining costs are direct Fund expenditures for grantcash payments and administration. The Finance Division of the Fund is responsiblefor all matters relating to procurement.

G. Disbursements

4.18 Disbursements are detailed in Annex 5, Table 7. The Bank woulddisburse:

(a) 60% of the c.i.f. costs of either directly impcrtedfertilizers and chemicals, or of the ex-factory priceif manufactured locally, or of local expenditures ex-storeif imported but procured locally,

(b) 100% of the c.i.f. cost of directly imported vehicles,or 100% of ex-factory price if locally manufactured, or65% of local expenditures ex-store for imported vehicles.

(c) 40% of the cost of planting materials released toreplanters, against the Fund's statement of expenditurebased on the reports of the field inspectors and certifiedby the Fund's Deputy Director for Administration and Finance,

(d) 21% of the first two installments of individual laborpayments to replanters, against the Fund's statementof expenditures as above in (c),

(e) 21% of salaries of field staff (that is field inspectors,instructors and GMO officers), against the Fund's statementof expenditures as certified by the Fund's DeputyDirector for Administration and Finance.

.

a -'19 -

(f) 100% of foreign currency costs or 85% of total costsof consultants.

4.19 Disbursements for items (c) and (d) would directly link disburse-ments to the progress of implementation. Disbursement requests would beprepared on the basis of field inspectors' certificates of delivery ofplanting materials and labor payments. (The first installment of the grantfor labor payments is released to farmers after the completion and inspec-tion of land-clearing and preparation; the second after the completion andinspection of planting (Annex 3, Attachment 3). Similarly, disbursementsfor field staff would link disbursements with the Fund's overall effort toprovide the required field services to the program. The documentation foritems (c), (d) and (e) would be retained by the Fund and be available forinspection by the Bank during project supervision.

H. Accounts and Auditing

4.20 The Fund would keep adequate records to reflect, in accordancewith sound accounting practices, their operations and financial condition.This would require, among other things, the reorganization and consolidation. of their accounts (para 3.16) into two main categories; i.e. planting andadministration. The Fund would have their accounts audited by the NationalAuditing Council at the end of every financial year on the basis of guide-lines agreed by the Bank (Annex 3, Appendix 7). Internal auditing ispresently carried out by the Finance Division. To ensure adequate financialcontrols, an Internal Audit unit would be established, directly responsibleto the Director. Assurances were obtained during negotiations that theFund would (i) maintain adequate records to reflect, in accordance withsound accounting practices, its financial operations, (ii) submit to theBank within 6 months of the end of the fiscal year, copies of its auditedfinancial statements and reports, and (iii) establish and staff an InternalAudit unit directly responsible to the Board, within six months of the loansigning.

V. PROJECT MANAGEMENT AND ORGANIZATION

5.01 The project would be executed by the Fund. The RRC, the UNDP/FAOteam and the management consultants would assist the Fund in the implementa-tion of the accelerated program. This assistance to project planning andimplementation and to training is required to increase the capability ofthe Fund to carry out the expanded program.

The Fund

5.02 Management. Competent management has been an important factorin the success of the Fund Program. Government intends to extend thepresent Director's contract through the end of 1977 when he must retire

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for reasons of age. The Director's replacement with an experienced andqualified individual is essential to the program. Assurances were obtainedduring negotiations that appointment of the Fund's Director and Deputy Direc-tors would be subject to consultation with the Bank.

5.03 In view of the increased program an additional Deputy Directoris required. Assurances were obtained that, in consultation with the Bankand within six months of loan signing, an experienced certified publicaccountant would be appointed to an additional Deputy Director post andcharged with the Fund's administrative and financial responsibilities.

5.04 Organizational Structure. The Fund's proposed organization chartis in Annex 3, Appendix 3. Changes in organizational structure are requiredby the Fund's expanded scope of activities and have been agreed to by theFund's management. The establishment and staffing of a new DevelopmentDivision would be the most important change. The Division would assumeheadquarters responsibility for field advisory and support activities in-cluding: extension work in relation to rubber establishment and production(with the exception of those duties assigned to the DAE), intercropping,ethrel stimulation, processing and marketing; staff and smallholder-training;establishment and operation of demonstration plots; and production of plant-ing material. The Provincial Offices would remain the key units in programimplementation with responsibility at field level for operation of the re-planting grant, according to the procedures detailed in Annex 3. The Pro-vincial Offices would also provide field extension services to smrallholders.The Replanting Division would remain responsible for the administrativeaspects of the replanting program, such as the processing of surveys, grantapplications and field inspection reports. At present, processing of grantapplications is dealt with by a Computer Section in the Replanting Division.This arrangement has been adequate so far. However, it will be necessary toexpand the Section's responsibilities, to include financial transactions andinventory controls, in which case the Section should be placed directly underthe responsibility of the Deputy Director for Administration and Finance.Assurances on the establishment and staffing of the Development Divisionand on the transfer of the Computer Section, within six months of loansigning, were obtained during negotiations.

5.05 Procedures for Processing Grant Applications. The Fund aims toapprove all valid grant applications in time for rubber to be planted withinone year of submitting an application. Computerization has greatly increasedthe rate of processing of grant applications at headquarters. However furtherimprovements in processing are needed, particularly in view of the expandedprogram. These and other organizational procedures would be reviewed by themanagement consultants (para 5.12) who would formulate recommendations forimprovement and implementation following consultation between the Fund and

the Bank.

5.06 There is considerable scope for increasing the number of land

surveys carried out and for distributing the survey work over a greater

part of the year. This would lead to a larger and more even flow of grantapplications for processing.

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5.07 Staff Requirements for Program Administration. The increase instaff numbers required for the expanded program would be almost completelyutilized in the field. The phasing of staff increases is detailed inAnnex 3, Appendix 4. Given the ready availability of agricultural schoolgraduates and the favorable terms and conditions of employment offeredby the Fund, there would be no difficulty in recruiting the 40% additionalstaff required.

5.08 Staff Training. The present training courses (Annex 3, Appendix 4)would be expanded to cope with the needs of the accelerated program.There are advantages in centralization of staff-training and an assurancewas obtained at negotiations that the Borrower would ensure that the facilitiesof MOAC's agricultural station at Kanthuli are available to the Fund.Staff would be trained by Fund and RRC instructors at Kanthuli in techniques ofnursery and field establishment, intercropping, maintenance, tapping,processing and marketing.

The Rubber Research Center and the UNDP/FAO TechnicalAssistance to the RRC and the Fund.

5.09 RRC's research program, which is assisted by an ongoing UNDP/FAO* project, would be modified to service the Fund's expanded replanting program

(Annex 4). The RRC has gained valuable experience in the promotion of GMO0'sand the training of rubber replanters. While these are not research activities,they were successfully initiated by RRC on a pilot scale. An assurance wasobtained during negotiation that RRC would expand and reorientate its activitiesin accordance with the requirements of the replanting program.

5.10 UNDP/FAO would assist the program by providing expatriate staffassistance as outlined below.

5.11 Staff Assistance would be provided through two teams serving theRRC and the Fund respectively for the period of the project. The first teamwould continue to assist the RRC research effort and would also backstopthe accelerated Fund program as required. The second team would comprise amongothers a Senior Technical Advisor, a Senior Development Officer and a SeniorEconomist who would assist the management of the Fund, with Fund executivesas counterparts. The first of these would be attached to the Fund's Director.The second would assist the Chief of the New Development Division primarilyin the implementation of the expanded programs for replantings, technicalassistance, nurseries and smallholder training courses. The third would helpestablish a Planning Unit, which would monitor project implementationparticularly with regard to the socio-economic impact of the program, smallholderincentives and participation, and consequent policy formulation (para 6.08).Assurances were obtained from the Fund during negotiations that this PlanningUnit would be created directly under the Fund's director and staffed within

v six months of loan signing.

- 22 - v

5.12 Consultant Services would be provided to the Fund and RRC. Man-agement consultants would be appointed to conduct a full review of the Fundsorganization structure, operating procedures, accounting systems, data pro-cessing and staffing. This is necessitated by the considerable expansionof the Fund program and the substantial increase in its operations. Certainobvious improvements needed have been described above in this Section. TheFund would select and appoint a firm of consultants, in consultation with theBank, with terms of reference (Annex 3, Appendix 6) satisfactory to the Bank,to review the Fund's organization and procedures, formulate recommendations,and assist with the implementation of such recommendations as would be agreedin consultation between the Fund and the Bank. The consultants would commencetheir assignment within 6 months of signing the loan agreement, would spendabout 6 months formulating their review and recommendations, and a subsequent12 months for implementing recommendations. The three consultants envisagedwould be appointed by an approved consulting firm and would work for about55 man-months at a cost of about US$4,200 per man-months. Assurances withrespect to the above were obtained during negotiations.

5.13 Promotional activities would be undertaken by the Fund. Promotionwould include increased publicity for the replanting program through multi-media mobile shows, which would also support the extension effort of the Fund'snewly created Development Division (para 5.04).

Technical Co-ordination

5.14 Co-ordination of technical services is essential to the successof the program. The Fund will rely heavily on technical services (coveringa wide-range of subject matter) from the RRC and UNDP/FAO team for both stafftraining and technical advice in the field. The Fund is responsible for ex-tension services to rubber replanters until the beginning of the second yearof tapping, after which the DAE assumes the responsibility for extension.There is clearly a need to ensure timely provision of technical assistanceto the program. Government would form, within the MOAC a Technical AssistanceCo-ordinating Committee, with the Undersecretary of MOAC as chairman, whichwould represent the Fund, the RRC and its FAO advisors and the DAE. ThisCommittee would (i) determine the activities in which the Fund requiredtechnical assistance from these institutions; (ii) monitor the implementationof this assistance; and (iii) resolve any problems which may arise. Assurancesto this effect were obtained during negotiations.

VI. YIELDS, MARKETING AND FINANCIAL BENEFITS

A. Yields and Production

6.01 Rubber would begin yielding in the sixth year after replantingwith budded stumps and in the seventh year when planted with seed at stake.At full maturity, from years 14 through 26, estimated yields are 1.8 tons

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of dry rubber per ha, declining thereafter (Annex 9, Table 11). Theseyield estimates are based on results obtained by smallholders usingimproved technology in Southern Thailand. They reflect the relativeabsence of serious yield limiting factors such as wind damage, rootdisease and brown bast. The estimates are in line with yields ofequivalent material in Mialaysia, under similar growing conditions and withgood smaliholder management; and are about 20% higher than yields expectedin Indonesia, where serious management problems prevail.

B. Marketing

6.02 Production increases from accelerating the replanting programwill not occur until the early eighties. Beyond 1980 the world demandfor natural rubber appears favorable. The demand for all rubber is estimatedto grow at 6% per annum between 1980-85 whereas the natural rubber supplyover the same period is projected to increase at only 3.7% per annum.There is, therefore, a strong probability of a shortfall of natural rubberin the eighties. Incremental production (Annex 6, Table 7) should beaccommodated in the world market without difficulty (Annex 8).

6.03 Local marketing systems are described in paras 2.13 to 2.1h.The project would contribute to the expansion of group marketing (para 4.08).

6.o4 Port capacity in the South is limited and although transhipmentthrough Malaysian ports could be expanded substantially, shortage of capacitycould adversely affect rubber export in the early 1980's. Assurances wereobtained during negotiations that Government would (i) present to the Bankproposals for expansion of port facilities in the South within 12 months ofloan signing and (ii) review the proposals in consultation with the Bankand thereafter implement an expansion program for port facilities in theproject region.

C. Farmer Benefits

6.05 Average yields of rubber in South Thailand are about 300 kg/ha.Mature yields under high technology rubber production are estimated tobe 1,800 kg/ha, or about six times the present average. Farmer benefitsare quantified for two distinct kinds of producers, smallholders usingtheir family labor (para 6.06) and commercial producers using hiredlabor (para 6.07).

6.o6 The income from rubber of a typical smallholder cultivating 15rai (2.4 ha) with family labor is shown in Annex 9, Table 4). His netfarm income would rise from the present level of about 0 7,000 per yearto about % 35,000/year, from the 20th year after the start of replanting untilabout the 35th year. However, because of the felling of old rubber trees and th

- 24-

long period of maturation, no significant increases of income would occuruntil 10 years after the start of replanting. The farm budget shows theimportance of the cash component of the grant in levelling the smallholder'sincome stream, assuming that holdings are replanted in three stages andintercropped over 7 years to minimize short-run decreases in income. Thecash component of the grant is sufficient to prevent a reduction of small-holder incomes, taking into account the added income from ethrel stimulationprior to felling, and from intercropping after replanting. This togetherwith the long run potential for a five-fold increase in net income providesadequate incentive for smallholders to replant.

6.07 The financial rate of return of replanting rubber on a commercialscale, with hired labor and with the assistance of the grant payment, isestimated at 40% after taxes (Annex 9, Tables 5 and 6).

6.08 An important policy issue permanently facing the Fund is thedetermination of the appropriate level of the grant payments. The argumentfor cash incentives under the grant applies differently to the above twocategories of producers, that is family operated smallholdings and largerunits using hired labor. With respect to the former, the aim of the cashincentive is to prevent a reduction of income after felling old rubber treesand during the subsequent years of immaturity. With respect to the latter,the incentives of the grant for replanting can be evaluated in terms of therate of return of investment. As shown above, the present level of grantpayments provides sufficient incentives on both considerations. However,because of the crucial importance of sufficient farmer incentives for theimplementation of the program, assurances were obtained during negotia-tions that (i) by Septeiuber 1, 1977, the Fund would submit forthe Bank's consideration a socio-economic survey of farmer-participation inthe replanting program, (ii) on the basis of this survey and thereafter yearlyfollowing similar surveys, the Fund would review the level of grant aid toensure that it provides adequate incentive for smallholders to replant, and(iii) that changes in the level and composition of the replanting grantwould only be made after consultation with the Bank.

6.09 Total grant payments each year are allocated 70% to smallholdingsup to 50 rais (8 ha), 20% to medium holdings up to 250 rais (40 ha) and 10%to plantations with more than 250 rais. While the intent of the law is toensure the priority of family size holdings under the program, the presentdata kept by the Fund does not allow for verification of compliance with thisstipulation. While information exists with respect to the distribution ofreplanting grants by size of lots replanted there are no data regarding thesize distribution of the total holdings of beneficiaries, or the number oflots replanted by the same owner. During negotiations, assurances were ob-tained that the Fund would maintain adequate records of farmer participationin the program by holding size and ownership.

6.10 While tenancy and landlessness are not significant in rubbergrowing areas, only a very small percentage of cultivators possess title deedsto their holdings (para 2.10). The issuance of title deeds to replace cus-tomary rights of cultivation and occupancy is desirable, and it is Government

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policy to expedite this process. During negotiations, assurances were ob-tained from Government that it would submit to the Bank for its commentsby January 1, 1977, proposals for coordinating the land surveys of the Fund(which are carried out prior to the approval of applications for a replant-ing grant), with the establishment of occupancy rights of rubber growers;and for the acceleration of the issuance of title deeds to participatingcultivators of rubber holdings in the Project Area.

D. Government Cash Flow and Cost Recovery

6.11 The fiscal implications of accelerating rubber replantings to50,000 ha/year (instead of maintaining these at the present level ofabout 20,000/ha) are detailed in Annex 6. The rate of return of theincremental consolidated government cash flow due to accelerating thereplanting program is estimated at 10% (in current prices and until 1999(Annex 6, Table 1)).

6.12 Net transfers from the rubber sector from an export tax of 1.9 %/kgand the replanting cess of 0.6 B/kg would be about US$25 million in 1975.(Tax receipts are expected to grow faster than production, because with the

present formula for taxing rubber (Annex 9, Table 9), increases in the pricelevel will increase the real rate of taxation (Annex 6, Table 6).)

6.13 Without accelerating the programs, the net resource transferfrom the rubber sector, in current terms, would grow at the rate of about30% between 1975 and 1979, as opposed to a lower 20% rate with the accel-erated replanting program. 1/ However, this still leaves an ample marginfor the supplementary financing of the Fund's expected deficit during theproject period (para 4.15).

6.14 The Government's rate of return on the grant payments incurred inreplanting one ha of rubber (and "repaid" by consolidated tax receipts)is estimated at 12% (in constant 1975 prices, and with the rate oftaxation constant at the 1975 level, see Annex 9, Table 5 and 9). As indicatedabove, this estimate is conservative, since the real rate of taxation wouldrise.

6.15 The above paragraphs deal with the consolidated Government cash-flow due to the replanting program. However, the Fund itself is conceivedas a self-financing revolving fund whose expenditures in the long run shouldbe financed from cess revenues. While rubber holdings planted with highyielding varieties would provide more than enough cess revenues over 30years (US$1,100/ha) to meet the cost of the grant (US$940/ha) the cessrevenues derived from holdings of average yields would only amount to aboutUS$230/ha over the same period. Therefore, although at present yields thegrant payment to farmers far exceeds their past contribution to the cessfund, the Fund would fully recover these costs through the lifecycle ofhigh-yielding rubber trees.

1/ Due to the investment flows from Government to the rubber sectorin the latter case

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6.16 Recovery of the replanting grant by the replanting cess duringthe transition from unselected to high-yielding varieties is illustratedbelow. The recovery ratio (cess revenues over grant payment) Is indicatedfor three cases:

(a) a holding replanted at the start of the Fund's operation(which had therefore not generated cess revenues prior toreplanting);

(b) a holding being replanted in 1976 which has been generatingcess revenues for half the life-cycle (15 years) of theunselected rubber trees; and

(c) a holding that will be replanted thirty years from thestart of the Fund's operation in 1960, having been plantedwith unselected seedlings at that time.

Ratio of Cess Revenues to Grant Payments

(a) 1961-1990 (b) 1961-2005 (c) 1961-2020(replanted 1961) (replanted 1976) (replanted 1990)Undiscounted Discounted Undiscounted Discounted Undiscounted Discounted

____ _ at 10%_ at 10%Z at 10%

1.37 0.28 1.76 0.75 1.96 2.22

6.17 The past and projected cashflow of the Fund (Annex 6) reflects thetransition in collecting ceases from a low-yielding to high-yielding rubberstand, as well as the steadily increasing participation of replanters in theprogram. While the relatively low participation of replanters during thestart-up phase of the program resulted in the accumulation of US$30 mil-lion in the Fund's reserves, the Fund will incur an average annual deficitof about US$25 million from 1975 to 1990, after which it will again oper-ate at surpluses until the end of the century (Annex 6).

VII. BENEFITS AND JUSTIFICATION

7.01 Accelerating the rubber replanting program would result in a fasterrate of growtb of incomes and production in South Thailand, fuller employmentin the region, and increased foreign exchange earnings for the economy. Theprogram would help establish the rubber industry on a sound agricultural andfinancial basis, improve the Fund's organization and capability, and set thebasis for a continuous replanting effort at optimum annual levels for theindefinite future. The establishment of G1M0's, which would also be accel-erated under the program, would improve rubber quality standards and furtherimprove farmers' incomes.

-27 -

7.02 Incremental production due to accelerating the program would reachabout 100,000 tons (10% of forecast production) by 1990 and about 400,000tons (20% of forecast production) by the year 2000. Incremental productionwould average about 190,000 tons/year between 1984 and 1999, Valued atthe f.o.b. price of US 65 £/kg, this would earn about US$120 million a yearof foreign exchange of the economy or about 6% of present foreign exchangeearnings. Assuming that in the absence of the acceleration of the program,rubber production would continue to grow at 6% between now and the end ofthe century, the annual incremental production due to accelerating theprogram would amount to about 20% of total Thai production by 1999 (fordetails see Annex 6, Table 1).

7.03 The economic analysis of the project is conducted in terms of thecosts and benefits of replanting one rai (0.16 ha) of land, and assuming that,in the absence of the replanting program, the overaged rubber holdings wouldeventually be replanted with unselected rubber seedlings and low technologytechniques would persist. The economic rate of return of the project thuscalculated is 20%. Details of the analysis are given in Annex 9.

7.04 The labor requirements of maintaining high technology rubber pro-duction are only marginally higher than the labor requirements of traditionalrubber production. However, the clearing and land preparation of an incre-mental 30,000 ha/year under the replanting program would create the samenumber of jobs per year as of 1978 (Annex 9). Thus, the acceleration of theprogram would contribute to a fuller utilization of both hired and familylabor in Southern Thailand. The program would not have a significant impacton income distribution (Annex 9). However, as rubber presently accountsfor about one-half of cash farm incomes in South Thailand, the five-foldincrease in rubber incomes would in the long run alone more than doubleagricultural cash incomes in the region. Rubber constitutes the principalsource of cash income for about 75% of rural households and income increasesdue to the program will be spread over the great majority of the rural popula-tion.

VIII. RECOMMENDATIONS

8.01 During negotiations the following assurances were obtained fromthe Government, that:

(a) within 6 months after loan signing it would takeaction necessary to ensure an adequate supply ofgood quality planting material to the Fund fromthe Government Rubber Estates Organization nursery(Para 4.06);

.

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(b) it would (i) provide the Fund with the necessary funds tofinance the deficits incurred in carrying out theproject and sustaining the replanting program at a rateof 50,000 ha/year and (ii) at the request of the Bankreview in consultation with the Bank and the Fundthe financing requirements of the Fund to carry out theProject and, thereafter, to continue the implementationof the Replanting Program (para 4.16);

(c) it would (i) consult with the Bank prior to changingthe rate structure of the rubber cess and the levels ofany other taxes or duties on rubber and (ii) atthe request of the Bank, review in consultation withthe Bank and the Fund the rates of the Rubber Cessand of any other taxes or duties levied on the pro-duction marketing and export of rubber (para 4.16);

(d) the appointment of the Fund's Director during the projectperiod would be subject to consultation with the Bank(Para 5.02);

(e) it would ensure that MOAC's facilities at the KhantuliAgricultural Station are available to the Fund fortraining purposes (para 5.08);

(f) RRC would expand and reorientate its activities inaccordanee with the requirements of the replantingprogram (Para 5.09);

(g) it would form a Technical Assistance CoordinatingCommittee within the Ministry of Agriculture com-prising representatives of the Fund, RRC, UNDP/FAOexperts and DAE, to coordinate technical assistanceunder the project (Para 5.14);

(h) it would (i) present to the Bank, proposals forexpansion of port facilities in line with proj-ect requirements, within 12 months of loansigning and (ii) review the proposals in con-sultation with the Bank and thereafter implementan expansion program for port facilities in theproject region (para 6.04); and

(i) it would, submit to the Bank for its comments,by January 1, 1977, proposals for coordinating

0

* - 29 -

the land surveys of the Fund with the establish-ment of occupancy rights of rubber growers andfor the acceleration of the issuance of titledeeds to participants of rubber holdings in theProject Area (Para 6.10).

8.02 During negotiations the following assurances were obtained from theFund, that:

(a) it would (i) maintain adequate records to reflect, in accordancewith sound practices, its financial operations; and (ii) submitto the Bank within 6 months of the end of the fiscal year,copies of its audited financial statements and reports(Para 4.20);

(b) it would establish and staff an Internal Audit Unit directlyresponsible to the Board within 6 months of loan signing(Para 4.20);

(c) appointment of the Fund's Deputy Directors would be subjectto consultation with the Bank (Para 5.02);

(d) it would appoint, within 6 months of loan signing, anexperienced certified public accountant as additionalDeputy Director, charged with the Fund's administrativeand financial responsibilities (Para 5.03);

(e) it would establish and staff, within 6 months of loan signing,a new Development Division to assume all head quarters ad-visory and support functions (Para 5.04);

(f) transfer, within 6 months of loan signing, the computersection to the Deputy Director for Administration andFinance (Para 5.04);

(g) it would establish, within 6 months after loan signing, aPlanning Unit directly under the Fund's Director, responsiblefor the monitoring of project implementation, including theevaluation of the socio-economic impact of the replantingprogram, smallholder incentives and participation under theprogram, and consequent policy formulation (Para 5.11);

(h) within 6 months of loan signing, a firm of Consultantswould be selected by the Fund in consultation with the Bank,and within 6 months it would (i) review the Fund'sorganization, operating procedures, accounting systems, dataprocessing, and staffing; (ii) formulate recommendations toimprove the above, and (iii) subsequently and over a 12 monthperiod would assist the Fund in the implementation of suchrecommendations as would be agreed in consultation between theFund and the Bank (para 5.12);

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(i) (1) by Septeiber 1, 1977, it would submit for theBank's consideration a socio-economic survey of farmer-participation in the replanting program, and (ii) on thebasis of this survey and thereafter yearly following similarsurveys, it would review the level of grant aid to ensure thatit provides adequate incentive for smallholders to replant,and (iii) that changes in the level and composition of thereplanting grant would only be made after consultation withthe Bank (para 6.08); and

(j) it would maintain adequate records of the total rubber areareplanted by individual replanters under the Program, and of thetotal area of rubber holdings of such replanters, including thenature of their title to such holdings (Para 6.09).

8.03 On the above basis the program would be suitable for a Bank loanof US$50 million, repayable over 22 years and including 7 years of grace.The loan would be made to the Kingdom of Thailand.

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ANNEX 1Page 1

THAILAND

RUBBER REPLANTING PROJECT

Southern Thailand

1. Location and Area. Southern Thailand is defined as the southwestpeninsular region of the country, extending for approximately 600 km inlength between latitudes 6° to 11°N, with an average width of 120 km. Itborders on the west with Burma and the Andaman Sea, on the east with theGulf of Thailand, and on the south with Malaysia (Map 1). The peninsulahas an area of 7 million ha and comprises slightly more than one seventhof the whole country.

2. Climate, Topography, and Soils. The climate is basically tropicalmonsoon in type, and tropical rain forest exists to the south and west. Thenortheast monsoons bring heavy rains from November through February, but adistinct dry season follows from January through May. The southwest mon-soon July-October is the second wettest season of the year. Within thisframework, rainfall patterns differ according to several microclimates,rainfall averaging from 1800 to 2800 mm p.a., being heavy and concentratedin short periods (northwest) and more evenly distributed throughout the year(south). In summary, the climate is variable and has important implicationsfor the planting seasons within the region.

3. Southern Thailand is divided into three main types of land area(Maps 1 and 2):

(a) the western, central and southern mountain and hillranges, representing 45% of the area, with elevationsup to 2,000 mt and generally steep topography coveredby rain forests;

(b) the central and southern lowlands, representing about25% of the area, largely cultivated, especially in thesouth; and

(c) the eastern and western coastal plains, comprising 30%of the area.

4. There are large granitic intrusions in the mountain areas resultingin medium to fine textured gray and red/yellow podzolic soils. The lowlandsoils are mostly colluvial and shales are abundant. Those of the coastalbelts are largely sandy and shallow apart from the peat swamps. Few soilsof the peninsula can be classified as very fertile, but most are adequatefor tree crops (Map 2). Wind is only a constraint in the extreme north ofthe peninsula.

ANNEX 1Page 2

5. There are two main river basins in the south, the Tapi and theTrang both in the central lowlands, but smaller rivers and permanent streamsare widely distributed. Drainage is only a major problem in the peat swampsalong the coast.

6. Population. The population at about 4 million (57 inhabitants/km2)represents about 10% of the country's total population and is growing at 3.0%p.a. Originally settlement was concentrated along the eastern coastal belt,where rice and coconuts were grown. With increased population pressure,migration to the central and western areas set in, and this process con-tinued. Most of the migration is between rural areas and as a result only10% of the population is urban. The main urban centers are at Hatt Yai/Songkla, which together comprise the most active production/communicationcenters and growth poles of the region, and Trang (Map 1). Most of theinhabitants of the southernmost provinces are of Malaysian extraction andare Muslim.

7. Infrastructure. South Thailand was practically isolated from therest of the country until the 1920's when the railroad connecting it withBangkok was built. To remedy the continuing regional isolation, Governmentbuilt a main paved road from Bangkok to the Malaysian border in the 1960's(Map 1). This was followed by the construction of a major network of feederroads. Southern Thailand now has the greatest length of roads per km2. Themain ports are Songkla, Phuket and Pattani (Map 1), all of which are oper-ated by private interests at well below potential capacity, due to insuffi-cient port facilities and access canals. This will constitute a seriousproblem for expanded rubber exports in future and the S. Thailand RegionalStudy identified port expansion as a major requirement. There are allweather airfields in the main towns. Radio and telephone communicationsare adequate. The region is well served with schools and dispensaries.

8. Land Tenure and Cultural Practices. Most farmers occupy the landthey operate and tenancy is not a problem. Furthermore, most of the ruralfamilies have land due until recently, to the availability of virgin forestland. However, most of the forest lands are Government reserves, and thepresent settlers, while unlikely to be evicted, may have to pay nominalrents to Government in the future.

9. Occupancy rights in Thailand are of three major types:

(a) Sor Kor 1, comprising about 60% of the region'soccupied area, which protects those who possessedland before the promulgation of the Land Code of1954, and permits inheritance but not sale of theland;

(b) Nor-Sor 2 (20% of the area) which provides tem-porary rights to squatters, giving them the oppor-tunity to cultivate 75% of the plot area in threeyears, and thereafter, obtain

ANNEX 1Page 3

(c) Nor Sor 3 (20% of the area), certificates whichcan be turned into land titles as soon as cadastralsurveys are made.

A full cadastral survey appears improbable in the next 10 years. Thereappear to be no serious tenancy problems, since individual occupancy rightsare largely well known and undisturbed. For permanent tree crop develop-ment, the legal requirement is to have clear title to the trees and pro-duce to qualify for Government and financial and technical support. Thisis sufficient for participation in the replanting program. Issuance oftitle deeds rather than occupancy certificates would be preferable andduring negotiations arrangements would be explored for confirming landownership of participants in the replanting program.

10. Land is distributed approximately as follows: holdings between5 and 10 ha represent 32% of the number, and 50% of the area; holdingsbetween 1 and 5 ha, comprise 50% of the number, and 30% of the area; thesmall balance largely represents medium sized properties (up to 300 ha).There are no large estates of the Malaysian type.

11. Rubber (1.6 million ha) and forestry (2.2 million ha) are majorindustries in the Central Region of the peninsula, while on the coast, andto a lesser extent in the central lowlands, tin, rice (1 million ha) andcoconuts (150,000 ha) predominate. Yields of all crops are low, e.g. 1.2tons/ha for rice, 0.9 tons/ha for copra and 0.3 tons/ha from old, unimprovedrubber. Furthermore, yields of rubber and copra are generally declining dueto a combination of age and soil fertility levels. Virgin lands with ini-tially high fertility status are becoming increasingly scarce, and a con-certed effort is needed to improve the productivity of the existing cul-tivated areas. The rubber replanting program focuses on this problem and

would play a major role in upgrading productivity over about half of theexisting agricultural land in the southern Peninsula.

12. GRP and Family Incomes. The GRP of the south has increased atabout 6% p.a. in the last 6 years, which, allowing for population growth,has resulted in a net increase of 3.5% p.a. Family incomes and the impactof the replanting program are discussed in Annex 9.

Average incomes are relatively high compared with other regions of Thailandas shown below:

Region GDP p.c. % of Population(US$)

Central 480 30Southern 250 12Northern 180 18Northeast 120 40

ANNEX 1Page 4

This is due to: the ready availability of virgin lands (until recently);the relatively large size of smallholdings; the varied sources of ruralincome (and of foodstuffs), such as fishing, rice, coconut and rubberplanting, rubber tapping, and tin and forestry exploitation and trading.Underemployment is due not so much to lack of work opportunities as tolack of incentives resulting from relatively low remuneration. This isthe case with tapping of old low-yielding rubber trees. Labor mobilityis high, which helps to reduce intra-regional income differentials. Theonly markedly poorer sub-region is that comprising the three southernmostprovinces, where land is relatively scarce.

13. The main objectives of the rubber replanting program are: (i)to increase and maintain the income levels of the lowest 50% income groupthrough substantially increased rubber yields, and (ii) to ensure thatsmallholdings are viable economic units. Recently Government has paidmore attention to the Southern region, partly to integrate the regionfully within the national economy and partly to realize from theattractive opportunities available in the region for: (i) increasingincomes of the rural poor by bringing about substantial yield increasesof plantation crops at relatively low costs, e.g. rubber and coconuts;(ii) for crop diversification, e.g. oil palms; and (iii) for increasingexports.

14. At present the relative share of government revenues andexpenditures by regions is as follows:

Region Expenditures (%) Revenues

Center 74 92South 6 4North 9 2Northeast 11 2

Source: Hunting's Technical Services South ThailandRegional Planning Study 1974.

The share of public investments closely parallel the above pattern. Gov-ernment continues to give preferential attention to the poorest regions ofthe country. However, the Southern region's share of expenditure has risenby almost 2 percentage points (or by one third) since 1968. Most of theincrease has been concentrated on road building, schools and security. Theemphasis is expected to shift from infrastructure and social expendituresto agriculture with the initiation and further development of rubber andcoconut replantings.

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ANNEX 2Page 1

THAILAND

RUBBER REPLANTING PROJECT

The Thai Rubber Industry

1. Area Under Rubber. The area planted to rubber is given in theTable below:

TOTAL RUBBER PLANTINGS 1904-1972

Cumulative YieldPeriod New Plantings Plantings Kg/ha

('000 ha) ('000 ha)

1904-1917 17 17 ) 1001923-1928 124 142 )1934-1941 292 434 2501948-1952 197 631 )1955-1957 182 812 ) 5301958-1962 328. 1,140 )1963-1966 101 1,241_1967-1970 101 1,342/a ) 70 /b1971-1972 32 1,374-

/a A more recent survey estimated the total areaunder rubber at 1.6 million ha, with most ofthe increase recorded in plantings made since1948.

/b Immature rubber area included in this calculation.

Source: 1974 RRC Survey.

2. Rubber areas comprise about 10% of the area under cultivation inthe country. About 90% of the rubber is in Southern Thailand, the balancebeing planted in the Southeast, close to the Cambodian border.

3. Rubber was introduced to Southern Thailand with seedlings broughtfrom Malaysia by individual farmers. The substantial increase in plantingsin the thirties and from the late forties through the early sixties were dueto favorable prices and, more importantly, to new plantings made by farmerswho migrated in large numbers from the eastern coastal belt to the interior,where rubber trees were better adapted to prevailing soils and irregulartopography than the traditional crops, e.g. rice and coconuts. Migrationhas slowed down more recently as suitable virgin lands became scarce.0 Development of new land has always been spontaneous. Since the early1960's Government has been implementing an expanding program of replant-ing under the Rubber Replanting Aid Fund Board (Fund).

ANNEX 2Page 2

4. In Southern Thailand, rubber is the principal crop grown, coveringmore than 50% of the gross agricultural area and representing about 13% ofthe GRP 1/ and of rural employment. The prevalence of smallholdings is dueto:

(a) the absence of a sizeable large landowner class;

(b) the existence of public virgin lands which have beencleared and occupied by small spontaneous settlers foryears; and

(c) the advantages of rubber to the smallholder economy.

Rubber is tolerant of a wide range of soils and topography and of low rain-fall periods. The latex has a high value to weight and is easy to processinto sheets which do not deteriorate under rudimentary storage and transportconditions. Furthermore rubber trees suffer from few agronomic risks; latexexploitation and collection provides year round income and is readily orga-nized by a smallholder family.

5. Production and Yields. Production of rubber roughly doubledbetween 1966 to 1973 (400,000 mt). By 1981, an estimated 500,000 mt ofrubber will be produced in Thailand, making rubber the second largestsource of export earnings to the country after rice. Thailand exportedabout 380,000 mt in 1973 (or 11% of total world exports), and was thethird largest exporter of natural rubber after Malaysia (50%) andIndonesia (27%). The three countries provide at present about ninetenths of total world exports.

6. Tapping is carried out by rubber tree owners and by tappers on ashare cropping basis. Unimproved trees yield only about 300 kg/ha and theaverage tapper harvests only 0.75 kg/day. At prevailing prices this resultsin such low incomes for tappers that large areas go untapped at present. TheFund's replanting program Annex 3, aims at an annual entire replanting targetof 50,000 ha p.a. by 1979. At this rate the area presently under rubbercould be replanted within 30/35 years, which is roughly equivalent to atree's economic life. The resulting yields of up to 1,800 kg/ha at fullmaturity (six times higher than present averages) would increase net incomes,and would greatly increase the efficiency of land utilization in roughly onehalf of the agricultural area in the South.

7. Marketing Channels. Typically, smallholders sell ex-farm unsmokedsheet or scrap daily to thousands of local traders. The traders sell inturn to 800/1000 medium size wholesalers who transport the rubber to themain towns and sell it to a few large processors/exporters. Most of theexports are made in the form of RSS3 and RSS4 (Table 1).

1/ Fisheries: 13%; rice: 7%; livestock: 3%; coconuts: 1%; trade: 18%;manufacturing: 8%; services: 7%; mining: 5%; transportation.

ANNEX 2Page 3

8. Group Marketing Organizations (GMOs). During the last twenty years,several programs directed at improving rubber quality and the prices receivedfor unsmoked sheet, were carried out. In the mid-1950's fourteen co-opera-tive processing factories were set up to purchase smallholder liquid latexand process it into high quality RSS. However, these factories were allclosed by the late '50's following difficulties in management. Attemptswere also made to operate smaller, less sophisticated group processingcenters, the Department of Agriculture setting up some twenty-four units.These also failed and by 1968 only one unit remained in operation. Investi-gations revealed that farmers received no price advantage by using thesecenters and problems of supervision and management led to the decline ofthe centers. Eventually, the farmers reverted to using their own simplepressing, rolling and drying facilities on the farm. Most farmers, wheresufficient care was exercised were, in fact, able to produce clean firstgrade unsmoked sheet by air drying of coagulated field latex using theirown unsophisticated processing equipment. Furthermore, all farmers hadaccess to such equipment. Further investigation revealed that providedfarmers concentrated upon keeping the raw rubber clean on their own farms(i.e. by maintaining quality) price gains could be obtained by selling insufficient bulk quantities. These events led to the establishment duringthe last four years of some eighty GMOs which have proven to be very suc-cessful.

9. A GMO is based upon a grouping of neighboring farmers with pro-vision of technical advice and services. The objective is to encouragefarmers to weigh, grade and sell their rubber collectively in bulk to themiddle level buyer and to bypass the first level buyer. The system ofrecording is illustrated in Attachment 1. By arranging simultaneous weeklysales which provide sufficient bulk, members of GMOs have greatly improvedtheir bargaining position and have enabled the buyer to pay a premium onaccount of improved quality, and of bulk sales. Most of the produce ofCMOs can now be graded as RSS 1 or 2 and the farmers have received a priceadvantage of about 8%-12%. The emphasis, therefore, has moved decisivelyaway from Group Processing Centers to GMOs and there is now a need togreatly increase their number to increase their impact on Thailand's pro-duction. GMOs are simple to organize and operate and do not require capitalinvestment. It has been established therefore, on a scale sufficient toallow a large expansion of the program that selling, farmers can achievesatisfactory price increases.

10. The major constraint to the expansion of GMOs is one of availabletechnical advisory staff. An important component of the project would bestaff training for this purpose (Annex 3, Appendix 3). There are no tech-nical problems related to processing of smallholder latex into unsmokedsheet.

ANNEX 2Page 4

11. The method of setting up GMOs is well established and fully de-scribed by the RRC 1/. Experience has demonstrated that regular follow-upsupervision and advice is essential to the continuing viability of theseorganizations. With adequate follow up there has been a 92Z survival rateof the GMOs set up in the last few years. There are currently some 80 GMOs,which at maximum capacity of 15 tons/GHO/year, should be able to sell about1,000 tons of wet sheet per year. A reasonable objective during the courseof the project would be to expand the number of GMOs by about 400, witha throughput of 8,000 tons of wet sheet per year.

12. Block Rubber. Compared with Malaysia and Indonesia, the intro-duction of block rubber to Thailand has been slow, but there are now firmintentions on the part of rubber processors to set up sufficient blockrubber capacity to handle most of Thailand's production by the early1980's. The major concern will be to investigate how best the success-ful and expanding GMO program can be incorporated into this move towardsincreasing block rubber production, a question of considerable importance,since coagulum in the form of wet sheet is not, at the moment, the mostsuitable form or raw material for the block rubber process. However, wetsheet production (unsmoked sheet) is a long established and traditionalform of primary processing in Thailand and with this in mind, the RubberResearch Center is rightly concentrating upon investigation into the prac-ticability of conversion of unsmoked sheet into block rubber. The mostsuitable form oof raw material is liquid latex but the collection of thisproduct in sufficient volume and in satisfactory condition would not bepractical. A possible alternative to wet sheet is the assembly at fixedcenters, of field latex and the transportation of coagulated latex to theblock rubber factories within 24 hours. However, present crop volume mayrender this alternative impractical also. It is important that this ques-tion be economically resolved so that the block rubber producers utilizean ex farm product which can be readily produced by the smallholder.

13. Institutional Support for the Rubber Industry. Unlike theother major producing countries, rubber cultivation, processing and market-ing up to the point of export, lie within the jurisdiction of the Ministryof Agriculture. The Rubber Division and the Fund participate fully in theseveral international organizations which represent the interests of thenatural rubber producing countries. In particular the RRC Co-ordinatesits research with that of the other major rubber research centers inMalaysia and Indonesia. Details relating to the Fund and RRC are given inAnnexes 3 and 4 respectively. The functions of other institutions in therubber industry are outlined below.

14. The Rubber Division of the Department of Agriculture. The Divi-sion has long held the responsibility of implementing (now shared with theFund) regulating rubber cultivation, licensing dealers, recording statistics,

01/ Final Report of the Development Officer (Marketing) RRC, March 1974.

ANNEX 2Page 5

and operating rubber stations in most of the rubber growing provinces. TheDivision's rubber stations have acted as foci of extension for the rubberfarmers, and as sources of improved planting material.

15. The Department of Agricultural Extension (DAE). There is aDAES Rubber Officer in each rubber-producing province. He supplies theRubber Division with the statistical information required relating torubber planting, production and export. Most of the DAES officers postedto the rubber-producing provinces have been trained in specialized rubbertopics at RRC. However, as their multiple responsibilities and small staffdo not allow them to perform rubber extension duties adequately, this respon-sibility will be the Fund's exclusively in future, up to and including thesecond year of tapping. DAES staff will continue: to provide extensionservices from the third year of tapping onwards; to identify potential re-planters; and to advise rubber growers on general agricultural practices.

16. The Government Rubber Estates Organization. The Organizationoperates a substantial area of a former commercial rubber estate acquiredby Goverment during the thirties in Nakhon Sri Thammarat and subsequentlyexpanded. In addition to operating the estate and its processing factory,the Organization contracts to provide the Fund with an extremely largenumber of budded stumps for supply to replanters. It has what is cer-tainly the largest rubber nursery in the world, where about 1,000 peopleare employed as budders and field labour in producing about 14 millionbudded stumps annually. Additional requirements of about 2 millionbudded stumps are sub-contracted. The Fund is scheduled to manage thisnursery in future so as to better coordinate production of planting mate-rial with rubber replanting.

ANNEX 20

Table 1

RUBBER REPLANTING PROJECT

Exports of Rubber by Grade, 1961 - 73

Total ----- RSS by Grade (%) - -B rown crepeother

Year Exports RSS 1 RSS 2 RSS 3 RSS 4 RSS 5 rubbers andscrap

Tons

1961 184,588 1.1 6.2 42.2 24.3 6.7 10.5

1962 193,862 1.2 8.3 40.6 22.8 7.2 19.9

1963 186,729 1.0 7.7 44.6 21.6 4.3 20.8

1964 216,585 0.6 7.6 47.7 18.9 3.7 21.5

1965 211,405 0.8 12.5 52.1 12.4 2.8 19.4

1966 202,095 1.2 10.3 57.2 11.6 1.9 17.8

1967 209,176 1.2 7.2 55.7 16.0 4.0 15.0

1969 274,843 0.8 6.1 48.9 22.8 4.2 17.2

1970 279,163 0.5 4.7 48.1 24.8 4.2 17.7

1971 307,325 0.7 4.1 48.7 26.2 3.4 16.9

1972 324,L43 0.7 4.6 51.6 23.4 2.8 16.9

1973 387,'000a o.'8b 3.7 56.4 20.2 2.2 16.7

Mean 100% 0.9 7.0 19.6 20.5 3.9 18.1

-#eighted Mean 0.9

Source: Rubber Division,Department of Agriculture

a/ Provisional Total.b/ Percentage to May 1973 only.

THAILAND ANNU 2Attachment 1

RUBBER REPLANTING PROJECT

0 GM'S SALES FORM

Form GMD-1

Name of GNO ...........................

Village No. ........ Tambol ... . Amphoe .... Province c

Rubber sold is smoked/unsmoked Date.Moth.Year........

Owner Number Weight Price Return before Small change Actual ReturnName of member of of Sheet per deductions for

Tapper Sheet kg kg Bht Stg GM( Bht Stg

Total

Price of RSS date ............ / ....... Weight at buyer's shop ........... ....... Kg

RSS Grade I kg .................... Baht Total received from buyer .Baht

USS GMO Price kg .................... Baht Portion due to members Baht

Non-GMD price kg .................... Baht Addition or loss to MO .Baht

GMO price higher by kg .................... Baht Small change addition Baht

Total gain .................... Baht Total of G N0 central fund gain .Baht

Additional weight gain .................... Kg Previous central fund brought forward. Baht

Comme.n by processing assistan .. .................. Non-central fund total .Baht

. ................................................... Signature ................... President

Signature ...... Processing Assistant Signature ....... Record Keeper

ANNEX 3Page 1

THAILAND

RUBBER REPLANTING PROJECT

THE RUBBER REPLANTING AID FUND (THE FUND)

A. General

1. The Fund was established by an Act in 1960 (Appendix 1) as anindependent statutory body responsible for assisting the replanting of oldrubber. The Fund receives 95% of the proceeds of a rubber replanting cessof about 0.5 /Kg of rubber levied at the point of export (see Section 5of the Act). From this revenue the Fund administers replanting grants toindividual replanters, and also supervises the maintenance of plantingsthrough the immature period of the trees (Table 1).

2. The Fund enjoys day-to-day operational autonomy under the over-all supervision of the Ministry of Agriculture and Cooperatives (MOAC).The Act contains the Fund's basic legal and organizational structure andallows a wide latitude in day-to-day operations, operating procedures,and the allocation of management responsibilities.

B. Organization and Staffing

3. The Board's chairman is the Minister of MOAC. Board members com-prise five representatives of MOAC, and one representative each of the Min-istry of the Interior, Customs Department, National Economic and SocialDevelopment Board, Commerce Department, Budget Bureau and farmers, as wellas the Fund's Director and two members at large. Board members are appointedby the Council of Ministers for two-year terms, and can be reappointed. Quo-rum and decisions are reached with the attendance and vote of a simple major-ity of Board members, respectively.

4. The Board:

(a) sets policy;

(b) approves annual programs and budgets;

(c) determines the amounts of grants and the termsand conditions of grant payments;

(d) oversees the Fund's activities; and

(e) approves structural and procedural changes.

ANNEX 3Page 2

5. The Director is appointed by the Chairman with the approval of theCouncil of Ministers. He has traditionally exerted his powers fully. TheDirector represents the Fund in dealings with third parties. He may dele-gate any of his duties to individual subordinates with the Board's approval.The present Director is a highly capable and experienced administrator witha solid technical knowledge of rubber. The Deputy Director assists theDirector with day-to-day management of the Fund's operations and substi-tutes for the Director in his absence.

6. Overall Organization. The Fund's existing organizational structureis shown in Appendix 2 and the proposed new organization structure inAppendix 3. The organizational changes would result in the creation of aDevelopment Division at headquarters which would be responsible for theoverall support of field operations, including farmer ethrel stimulation,training, intercropping, demonstration plots, nursery management, and groupmarketing of rubber.

7. The responsibilities of the other headquarters' divisions wouldremain largely as at present, as follows: Secretary's, in charge of legaland personnel duties; Finance, responsible for all financial transactionsincluding, cess collection and the administration of grants; Inspectors,who act as internal supervisors of the Provincial Offices; and Replanting,which processes grant applications and submits them to the Board for ap-proval (Replanting Consideration Section); checks all land survey data andconsiders requests for adjustments of replanting areas (Survey Section);analyses field standards and evaluates progress of operations (Verificationand Assessment Section); keeps files of individual grants and issues indi-vidual farmer identification cards and booklets (Filing Section) and isresponsible for computer activities, which up to now have been limited tothe processing of grants (Computer Section).

8. The proposed organization structure is basically adequate forpresent and expected needs of the Fund. The mission recommends:

(a) creating an additional deputy-director post withoverall responsibility; placing all field opera-tions (Replanting and Development Divisions aswell as the Provincial Offices) under one deputy-director, and Finance/Administration under theother.

(b) making the Computer Section (now under theReplanting Division) an independent unit underthe Director as its operations are extended infuture to cover also financial transactions andinventory controls.

9. Staffing, Recruitment and Training. Fund staff numbered 1,151at the end of calendar 1974 and was distributed as follows:

ANNEX 3Page 3

Of which:Total Professionals

Units No. of Staff X and sub-Professionals

Headquarters

Director I - 1Deputy Director 1 - 1Secretaries 43 4 9Finance 95 8 12Inspectors 17 1 9Replanting 88 8 35

Subtotal 245 21 67Field Offices 906 79 634/a

Total 1,151 100 701 (60%)

/a Includes 17 office chiefs, 117 field surveyors, 466 field supervisors,and 34 accountants and bookkeepers.

Of the 466 field supervisors, about 20% were agronomist and 80% graduates ofagricultural vocational schools.' The present size and distribution of head-quarters and field staff are adequate to undertake the expanded volume ofoperations from 1976 through 1979 with the additions and improvements recom-mended under the project. Fund staff are recruited on the basis of merit.The quality of the field staff is adequate. A number of rubber smallholders'sons could be recruited and trained in the simplest extension tasks, such assupervision of plantings from the second through the fifth year; and inbudding and tapping techniques for further farmer training. Their employmentwould make supervision more acceptable in areas where outsiders are notwelcome.

10. In 1974 the Fund conducted two types of training programs:

(a) for new staff: (i) general training in rubber growing atthe rate of 20 staff for one monthcourses each year;

(ii) short specialized courses, such as (a)high level tapping (67 staff, given oneweek's training); (b) budding (5 staff,given one week's training; and (c) crownbudding (30 staff, given one week'straining); and

(b) for replanters: one-week sessions on tapping, sheetmaking and marketing given to 2,500farmers out of 6,000 eligible; fieldbudding: one-week sessions given to

ANNEX 3Page 4

817 out of 3,000 eligible replanters;high level tapping with ethrel applica-tion given to 200 farmers. Training isconducted by the staff of RRC (Annex 4).

11. Staff Remuneration. Fund basic salary categories compare roughlywith those of the civil service (Appendix 5) but Fund staff do not pay in-come taxes, which amount to 10% of salaries. Other Fund staff compensationsand benefits amount to 30% of basic salaries. Field staff receive hardshipallowances of up to 25% of basic salaries. There is no question that Fundremuneration levels, and the flexibility provided by the Fund for promotionsand transfers have been important factors in attracting high quality graduatestaff to the Fund.

C. Policies and Procedures

12. The Fund's basic objective is to undertake replantings of newrubber to replace over-aged trees throughout Thailand. To this end, theFund collects a cess levied on rubber exports and uses the proceeds tofinance the cost of replanting in the form of grants to individual re-planters (para 1). By law the Fund must strive to allocate annually0 about 70% of its available funds to smallholdings, which are legallydefined as having up to 8 ha each. (Appendix 1, Sections 3 and 19.)

13. To qualify, rubber farmers need to:

(a) have over-aged rubber trees at a minimum density of25 trees per rai (160 trees/ha);

(b) have appropriate soils, topography and climaticconditions for rubber tree growing; and

(c) have clear rights to the trees and their produce,as ascertained from neighbors and the villageheadman.

14. Fund extension agents visit would-be-replanters and after ascer-taining that they would qualify for grants, help them fill applicationforms (Attachment 1). Survey teams organized on the basis of three per day(100 days p.a.), visit the location and prepare fairly detailed reports(Attachment 2), including preliminary plotting of the areas to be replanted.Copies of the reports, including the surveyor's recommendations, are sentto the Replanting Consideration Section (Replanting Division) in Bangkok.These are subsequently submitted for approval by the Board and sent backto the Replanting Division for further processing through the ComputerUnit and filing in the Registration Section.

.

ANNEX 3Page 5

15. Next the headquarters' approval and the definitive plot surveys,are sent back to provincial offices. Provincial officers convene meetingsof planters to give:

(a) an explanation of thc rights and responsibilitiesof replanters;

(b) individual booklets cc.ltaining schedules of inputapplications, of supervision by Fund staff, and ofgrant cash and in-kind releases; and

(c) vouchers for picking up the first batch of materialinputs (mostly fertilisers and herbicides) at villagewarehouses according to the application schedules.Payments in cash are made to replanters every 10 daysat provincial headquarters to cover part of the laborexpenses incurred (the balance is contributed free byreplanters as family labor).

16. Field supervision visits are made by Fund staff at the time ofcompletion of land clearing, planting and cover crop establishment andat regular 3-4 month intervals thereafter during the 6-year period ofimmaturity. The approval of field inspectors is required for each phasebefore the following tranche of disbursements is authorized. When fieldstandards practised by replanters are not satisfactory they are given thenecessary help (if warranted) and a prudent time period to improve themprior to a second inspection. A field inspector makes about four visitsper day and handles a total of 300 holdings p.a. Field staff are providedwith motorbicycles and this, together with the availability of a good trunkand feeder road network in Southern Thailand, facilitates surveys and peri-odic inspections.

17. The above procedures are deemed essentially satisfactory. TheFund, however, could increase substantially its workload if needed by moreevenly distributing its business throughout the year.

D. Financial Position and Procedures

18. Sources of Funds. RRAFB has three sources of funds: the replant-ing cess; interest income on deposits and government subventions. Revenuefrom the replanting cess passes directly to the Fund. By law, 90% of cessrevenue is to be used for grant payments, 5% is set aside for administrativeexpenses and 5% is passed on to the Rubber Research Center.

19. The separation of administrative costs from grant payments issound financial practice, and while the present allocation of RRAFB's cessrevenue between administrative expenditures (5%) and grant payments (90%)is necessarily arbitrary, no change is envisioned.

ANNEX 3Page 6

20. Cash Position and Fund Structure. In the past, financial constraintshave not limited RRAFB's operations; on the contrary, it has been able to accu-mulate substantial reserves. The five main funds, and the main transactionsbetween these funds, are shown in Table 2. Combined cash reserves in thesefunds are estimated at 599 million Baht (US$30 million).

21. Due to the rapid accumulation of cash balances during the buildup period of the replanting program, interest income has been substantial.The Act (Section 18) specifies that interest income is to cover administra-tive expenses over and above the 5% allocation of cess revenues, and thatremaining balances are to be reallocated to the Replanting Fund. The lawalso states that the Government is to provide for additional operationalexpenses of RRAFB "as may be deemed necessary." This last phase is am-biguous, as in practice it has not meant the financing of administrativeexpenses over and above the 5% allocation from cess revenues plus the in-come from interest. The cash flow of Table 2 shows that interest incomewould have been more than sufficient to cover the shortfall of the admin-istrative 5% provision of the cess from actual administrative expenses.Nevertheless, the Government has contributed subventions to administra-tive expenditures totalling Baht 100 million between 1969 and 1974.

22. Substantial reserves from interest income have been allowed to beput into three reserve funds (Land and Buildings Fund, the Subsidiary Fundand the Unallocated Interest Reserve) in the administrative budget whosecash balances now amount to about Baht 174 million. Total allocationsfrom interest income to the replanting fund proper have only amountedBaht 50 million. There is no apparent rationale for the allocations ofinterest income to these various funds as they have taken place, or tothe "transactions" between these funds. A rational fund structure isrequired to define the Government's commitment to the financing of futuredeficits, both for administrative expenses and for the replanting proper.The management consultants terms of reference would include the rationali-zation of the Fund's statement.

23. The Subsidiary Fund. Table 3 shows grant payments to farmers incash and kind (see Para 3.03). In addition to these grant payments fromthe Replanting Fund proper, certain other cost of on-farm development,which are not nominally part of the grant but are equally real benefitsto the farmer, are financed from the Subsidiary Fund as part of the admin-istrative budget. 1974 and budgeted 1975 expenditures from the SubsidiaryFund are shown in Table 4. It appears that the Subsidiary Fund serves asa catchall for expenditures which could neither be classified as strictlyadministrative costs or were thought to be part of the grant. However,the inclusion of replanting costs benefits into administrative costs andthe accumulation of substantial reserves in the same fund have contributedto the illusionary inflation of administrative deficits for which govern-ment subventions have been obtained. With the increasing diversity of theFunds activities and the need for a clear definition of the Government'scommitment to finance deficits (Para 4.16) this procedure will no longerbe satisfactory. The Subsidiary Fund could be absorbed by other funds asfollows:

ANNEX 3Page 7

24. The Transport and Handling cost of materials which account formost of the expenditures from the Subsidiary Fund, are in fact standardcomponents of the grant, and there is no reason why the accounting ofthese costs should be considered and administrative cost rather than apart of grant payments.

25. The Fund has recently taken over Nursery Production from the RubberDivision (Para 4.06); hence it will no longer pay the service charges to theGovernment nurseries. Because of their importance and because they wouldbe the Fund's only production enterprise, nurseries would remain an inde-pendent accounting unit. Consistent with the required separation admin-istrative costs and grant payments, the mission recommends that the nur-series should supply the planting materials at direct cost to the replant-ing program, and that overhead costs be accounted as administrative expenses.Details of the enlarged nursery requirements, costs needed and schedules ofnursery activities are given in Annex 10, Appendices 1 to 3.

26. The development of Extension Services are properly part of admin-istrative expenses and there is no need to separate the associated costs inthe Subsidiary Fund.

27. Financial Administration of On Farm Development Costs. Paras 5.04and 5.05 describe the RRAFB's procedures in the administration of replantinggrants to farmers. This section deals with the financial aspects of theindividual grant payments and recommended changes in their administration.

28. The replanting grant has the dual objective of providing suffi-cient material inputs (mainly fertilizer) to reap the full benefits ofimproved rubber technology, and of contributing to the subsistence offarmers during the period of maturation, by financing part of labor costs.Accordingly the grant consists of material components which are deliveredto the farmer in kind, as well as cash payments. Both are received ininstallments over a period of about 5-1/2 years, as shown in Attachment 4.

29. The amount of the grant is determined by the Board of RRAFB. Inan effort to keep up with rising costs, the Fund raised the grant from aninitial level of 1500 Baht/rai from 1961 to 1966 to 1850 Baht/rai in 1966-67 and finally to 2000 Baht/rai since 1968. However, these '7authorized"amounts do not necessarily represent the actual cost of the grant sincematerial components of the grant are fixed in terms of quantities ratherthan in terms of money. The rapid rise of compound fertilizer prices byabout 140% between 1974 and 1975 resulted in an increase of about 900Baht in actual cost grant. While due to the unavailability of fertilizerduring the past year this has not yet resulted in a corresponding increasein the rate of disbursements, the replanters remain entitled to the deliveryof fertilizer in the amounts approved by the Board.

30. The proposed increase of grant to about Baht 3000 rai takes intoaccuunt changes in prices as well as recommended adjustments in materialiaputs is agreed upon between the Fund, RRC and the mission. The cashcomponent of tne grant is retained at the previous level.

ANNEX 3Page 8

31. On farm development costs under the program would either bestandard items financed by the grant, or non-standard items financed bythe individual farmers.

32. The proposed level of material components included in the grantcover the standard required amounts for replanting. If a farmer needs moreof certain materials e.g. fertilizer or herbicides, he can get these fromthe local merchant and his extra purchases are deducted from the cash com-ponent of the grant. Conversely, if he uses less than the standard amountsof materials (other than fertilizers), his account is credited and he re-ceives the cash equivalent together with his last installment.

33. Under this arrangement, which has its merits, it is clearly de-sirable to keep the number of material inputs at a minimum. The materialinputs should be strictly confined to the required amounts in order tominimize the misuse of the grants by farmers.

34. The proposed broadening of the Fund's scope of activity underthe newly created Development Division would also increase the number ofmaterial inputs procured by the Fund. These would principally includeethyrl (for HLT before felling), seeds for intercrops (including improvedrice seeds), and fertilizers for intercrops. As the grant only providesfor the replanting of rubber, no allowances would be made to include itemsnot directly required by rubber replanting into the grant. Moreover, asonly a minority of the farmers are expected to engage in HLT and inter-cropping, it would not be advisable to prescribe standard amounts of suchmaterials to farmers. However, as part of the RRAFB's extension activity,RRAFB proposes to make such materials available to farmers. Ethryl is alreadysold to farmers on short term credit and similar provisions would be made forinputs for intercropping. These materials would be available by local mer-chant for purchase by the farmer. If the sale of such items would be sub-sidized, the Government would finance these subsidies.

0

ANNEX 3Appendix 1Page 1

THAILAND

RUBBER REPLANTING PROJECT

RUBBER REPLANTING AID FUND ACT

B.E. 2503 (1960)

IN THE NAME OF HIS MAJESTY KING BHUMIBOL ADULYADEJ

SANGWAN

Regent

Given on the 25th day of August B.E. 2503,

Being the 15th Year of the Present Reign.

Whereas it is expedient to provide a Rubber Replanting Aid Fundfor helping rubber plantation owners in the improvement of rubber plantations;

Be it, therefore, enacted by the King, by and with the advice andconsent of the Constituent Assembly in the capacity of the National Assembly,as follows:

Section 1.

This Act is called the "Rubber Replanting Aid Fund Act, B.E. 2503."

ANNEX 3Appendix 1Page 2

Section 2.

This Act shall come into force after the expiration of ninety days from thedate of its publication in the Government Gazette. 1/

Section 3.

In this Act:

"rubber tree" means Hevea spp.;

"good quality rubber tree" means a rubber tree which yields greaterrubber substance than an ordinary rubber tree and which has beencertified as a good quality rubber tree by the Director General ofthe Department of Agriculture;

"frubber plantation" means an area where rubber trees are cultivatedof not less than 2 Rai, 2/ each Rai having not less than 10 rubbertrees and on the average there must not be less than 25 rubber treeseach Rai;

"small plantation" means a rubber plantation of not more than 50 Rai;

"medium plantation" means a rubber plantation of more than 50 Raibut less than 250 Rai;

"large plantation' means a rubber plantation of 250 Rai and upward;

"rubber plantation owner" means a rubber planter who has the rightto receive the produce from the rubber trees in his rubber planta-tion;

"rubber" means latex, rubber sheets, crepe rubber, lump rubber, scraprubber or other forms of rubber produced or derived from any partof a rubber tree but does not include products manufactured fromrubber;

1/ Government Gazette, Vol. 77, Part 73, dated 6th September B.E. 2503 (1960).

N.B. This translation differs in nomenclature from the certified correcttranslation issued from the Office of the Juridicial Council. In parti-cular, the Act was there described as the "Rubber Plantation Aid FundAct," the official translation used the term "substitute planting" for"replanting", and named what is now better known as "Rubber ReplantingAid Fund Board" as "Committee for Rubber Aid."

0 2/ Approximately one thousand and six hundred square meters.

ANNEX 3Appendix 1 Page 3

"replanting" means planting of good quality rubber trees or otherperenial trees replacing some or all of the old rubber trees;

"Aid Official" means a person appointed Aid Official by the Minister;

"Board" means the Board of the Rubber Replanting Aid Fund;

"Director" means the Director of the Office of Rubber ReplantingAid Fund Board;

"Minister" means the Minister having charge and control of theexecution of this Act.

Section 4.

A fund shall be established consisting of aid contribution under this Actcalled "Rubber Replanting Aid Fund" for financing the improvement of rubberplantations which give little yield.

The Rubber Replanting Aid Fund Board shall be a statutory body withthe objects of management of activities in aid of rubber replanting inaccordance with this Act and shall be empowered to do any act necessaryfor and supplementary to the said objects.

The Rubber Replanting Aid Fund Board shall have its head office inBangkok called the "Office of Rubber Replanting Aid Fund Board".

Section 5.

Persons who export rubber shall make aid contribution according to regula-tions and procedure prescribed in a Ministerial Regulation at a rate to bespecified by the Minister periodically in the Government Gazette on thebasis of the price of smoked rubber sheets (RSS), as follows:

(1) if the standard price of RSS does not exceed Bht 10 per kg, therate of aid contribution shall not exceed 50 stg per kg.

(2) if the standard price of RSS exceeds Bht 10 per kg, the rate ofaid contribution may not exceed 50 stg per kg or may exceed 50 stgper kg but the increase shall not exceed one-tenth of the incrementover the Bht 10 level.

The above-mentioned standard price of RSS means the transaction price withinthe country in conjunction with the transaction price abroad or the pricedetermined by the Director-General of the Customs Department under the lawon customs tariffs either severally or jointly.

ANNEX 3!Appendix 1Page 4

As for rubber other than RSS latex e.g., crepe rubber, lump rubber andscrap rubber, the Minister may determine the rate of aid contribution to bepaid specifically by the exporter, which may be lower or higher than thatto be paid by the exporter of RSS. In the case where the rate is determinedhigher, the increment shall not be more than 20% higher than the rate of aidcontribution for RSS. If the rate is not specifically determined an exportershall pay the aid contribution at the same rate as that to be paid for RSS.

The aid contribution to be paid by latex exporters shall be on the basisas follows:

(1) after deducting 65% of its weight, the field late shall beregarded as RSS;

(2) after deducting 40% of its weight, the concentrated latexshall be regarded as RSS.

No aid contribution is required for exportation as samples of rubberof not more than 5 kg of rubber or any weight exported by Ministries, Sub-Ministries or Departments for non-commercial purposes.

* Section 6.

The Minister shall have the power to suspend, by notification in theGovernment Gazette, the collection of aid contribution from rubber exporterswho are liable to pay under Section 5 for any specified period as deemedexpedient; provided that the collection may be suspended for all or onlycertain kinds of rubber.

Section 7.

The aid contribution collected under Section 5 shall be transferred to theRubber Replanting Aid Fund and used in the activities specially providedin this Act.

Section 8.

A person to benefit from the aid under this Act must be a rubber plantationowner with rubber trees over 25 yr old or decayed and damaged rubber trees orthose which give little yield.

The aid shall be in the form of replanting and may consist of otherforms of aid for the purpose of replanting, by means of distributing goodquality rubber seeds, perennial plant seeds, seed crops, fertilizers, toolsand equipment, or providing other services or paying cash to rubber planta-tion owners; provided that any form or forms of aid may be given.

ANNEX 3Appendix 1Page 5

Section 9.

There shall be a Board for conducting the activities of the Rubber ReplantingAid Fund called in abbreviation "RRAF" consisting of the Chairman, Director-General of the Department of Agriculture and the Director of the RubberDivision as ex officio members and not less than five but not more thaneleven other members.

The Council of Ministers shall appoint the Chairman and othermembers of the Board.

The Board may appoint a member or any other person its secretary.

Section 10.

The Chairman and members appointed by the Council of Ministers shall holdoffice for a term of two years. The Chairman and members who retirefrom office may be re-appointed by the Council of Ministers.

Section 11.

Apart from retirement upon expiration of the term of office under Section10, the Chairman and members appointed by the Council of Ministers vacatetheir office upon:

(1) death;(2) resignation;(3) being discharged by the resolution of the Council of Ministers;(4) being a bankrupt;(5) being an incompetent or quasi-incompetent person;(6) having been sentenced by a final judgement to a term of

imprisonment, except for petty offences or offences committedthrough negligence.

When the Chairman or member vacates office before the expiration ofthe term of office, the Council of Ministers may appoint another person toreplace the Chairman or member.

The Chairman or member appointed under the preceding paragraph shallhold office for the remaining term of the person he replaces.

Section 12.

At a meeting of the Board, an attendance of not less than one-half of thetotal number of members is required to constitute a quorum. If theChainran is absent or unable to perform his duty, the members present shallelect one among themselves to preside over the meeting.

ANNEX 3Appendix 1Page 6

The decision of the meeting shall be taken by a majority of votes.Each member shall have one vote. In case of an equality of votes, theperson who presides over the meeting shall have an additional vote as acasting vote.

Section 13.

The Board shall have the power and duty to control and supervise ingeneral the activities of the RRAFB and shall, in particular, have thepower and duty as follows:

(1) to conduct rubber replanting aid activities;(2) to prescribe rules or regulations concerning the administration

and finance for rubber replanting aid with the approval of theMinister;

(3) to prescribe rules, with the approval of the Minister, governingthe instatement, appointment, dismissal, increase in step ofsalary, salary cut, reduction in step of salary, and disciplineof officials as well as to prescribe number of posts, posts,salaries, wages, travelling expenses, allowances, house oraccommodation expenses, remuneration and other necessarypayments.

The Board may delegate any power and duty or powers and duties to theDirector by prescribing them in the rules or regulations under (2).

Section 14.

The Chairman, members and secretary of the Board may receive travellingexpenses, allowances, accommodation expenses, expenses and remunerationsor meeting allowances as prescribed by the Minister.

Section 15.

The Minister shall have the power to appoint and dismiss the Directorwith the approval of the Council of Ministers. The Director shallreceive remuneration in the form of salary at the rate to be determinedby the committee with the approval of the Minister and shall receiveother benefits receivable by the officials of the Office of RRAFB.

Section 16.

The Director shall have the power and duty to conduct activities inaccordance with resolutions of the Board and to supervise officialsof all posts.

ANNEX 3Appendix 1 Page 7

When the Director is unable to perform his duties, the Board shallappoint a person to act in his place.

The Acting Director shall have the same power and duty as the Directorexcept the power and duty of the Director as a member of the Board.

Section 17.

In dealing with outside persons, the Director shall be the representativeof the RRAFB and, for this purpose, he may delegate some of his authorityto any person with the approval of the Board.

Section 18.

The Board shall allocate the aid contribution collected under Section 5as follows:

(1) Five percent to be given by instalments as determined by theMinister to the Department of Agriculture for financingsesearch and experiments in connection with rubber activitiesfor the sole benefit of the rubber plantation owners. Theproceeds allocated to the-Department of Agriculture shall notbe regarded as revenue under the law on budgetary procedure.

(2) NOL more than 5% as operational expenses for the RRAFB. If theproceeds are insufficient for the said works, the Governmentshall provide for the additional expenses in the annual budget,as may be deemed necessary.

The balance after deduction of (1) and (2) is to be entirelyallocated towards the aid of rubber plantation owners underthis Act and may not be spent for any other purposes.

Section 19.

The aid contribution allocated for aid to the rubber plantation ownersunder Section 18 (3) shall be distributed each year to them accordingto the types of their plantations as follows:

Large plantations 10 per cent

Medium plantations 20 per cent

Small plantations 70 per cent

ANNEX 3Appendix 1Page 8

If the aid contribution expended to any type of plantation isless than the distributed amount, the Board shall have the power todistribute the balance of additional aid to the other types ofplantations. In this case, the rate of aid contribution specifiedabove shall not apply.

Owners of the same type of rubber plantations may receive unequalaid or may receive it at different times or may not receive it at all.For this purpose, the Board shall allocate according to the amount ofaid contribution available and to take into account the mutual benefitto be derived from the increased yield from rubber trees.

The fact that any rubber plantation owner has not received aidunder the preceding paragraph shall not deprive him of the right toreceive it in the following years.

Section 20.

Any rubber plantation owner who wishes to apply for aid under this Actshall make an application to the RRAFB Official of the locality wherethe rubber plantations are situated in accordance with the forms andprocedure prescribed in a Ministerial Regulation.

In the case where ,an applicant for aid is a rubber planter onleased land or on land belonging to someone else, the applicant mustsatisfy the RRAFB Official that the lessor or owner of the land hadgiven approval for the application for aid.

For the purpose of examination in the granting of aid by theBoard, the aid recipient must provide such facilities and comply withsuch orders of the Board or its Officials as may be necessary.

Section 21.

An owner of a rubber plantation of not more than 15 Rai may apply foraid to cultivate a new plantation of a size more than 15 Rai with goodquality rubber trees. In such case, the application shall be regardedas application for aid to replanting under this Act but the amount ofaid receivable shall be the same as that receivable for the plantationalready in existence.

Section 22.

If a rubber plantation owner receiving aid under this Act does not complywith or violates a Ministerial Regulation, rule, regulation or order ofthe Board or its Official under this Act, the Board has the power to

* order the suspension of the aid.

ANNEX 3Appendix 1Page 9

Section 23.

The aid contribution received by the rubber plantation owner under thisAct shall be exempted from taxes, duties and fees.

Section 24.

For the execution of this Act, the members of the Board, RRAFB Officialsand persons being authorized in writing by the Board shall have thepower as follows:

(1) to enter a rubber plantation where the owner applies for aidor land adjoining thereto for examination and survey;

(2) to summon the rubber plantation owner who applies for aid orany person supposed to be able to five any statement of factwhich is likely to be beneficial to the execution of this Actto give statement;

(3) to summon the person specified in (2) to furnish or produceany document supposed to be beneficial to the execution ofthis Act.

Section 25.

Within 120 days after the end of each calendar year, the committee shalldraw up a balance-sheet showing the financial statement certified by theAudit Council and shall submit a report on the results of its performanceof activities to the Minister.

The Minister shall have the balance-sheet and the report in thepreceding paragraph published in the Government Gazette without delay.

Section 26.

Any person who does any act in order to evade payment of aid contributionunder Section 5 or to pay less than the amount which should be paid,shall be liable to imprisonment for a term not exceeding 5 months orto a fine not exceeding ten times the aid contribution remained out-standing but not less than Bht 1000 or to both.

The fine under this Section shall be regarded as aid contributioncollected under Section 5 and shall be transferred to the RubberReplanting Aid Fund.

ANNEX 30 Appendix 1Page 10

Section 27.

A person who obstructs or does not provide facilities to a member ofthe Board, RRAFB Official or person authorized by the Board to actunder Section 24 (1), or does not comply with the summons issued bysuch persons under Section 24 (2) or (3), shall be liable toimprisonment for a term not exceeding 10 days or to a fine not exceedingBht 500 or to both.

Section 28.

The Minister of Agriculture shall have charge and control of theexecution of this Act and shall have the power to appoint aid officialsand issue Ministerial Regulations for the execution of this Act.

Such Ministerial Regulations shall come into force upon their publica-tion in the Government Gazette.

Countersigned by

Field Marshal S. DhanarajataPrime Minister

.

ANNEX 3Appendix 1Page 11

THAILAND

RUBBER REPLANTING AID FUND (No. 2)

B.E. 2505 (1962)

BHUMIBOL ADULYADEJ REX.

Given on the 23rd day of November B.E. 2505;

Being the 17th Year of the Present Reign.

His Majesty King Bhumibol Adulyadej is graciously pleased toproclaim that:

Whereas it is expedient to amend the law on rubber plantationaid fund;

Be it, therefore, enacted by the King, by and with the adviceand consent of the Constituent Assembly in the capacity of the NationalAssembly, as follows:

Section 1.

This Act is called the "Rubber Replanting Aid Fund Act (No. 2), B.E. 2505.

Section 2.

This Act shall come into force as from the day following the date of itspublication in the Government Gazette 1/.

Section 3.

The provisions of Section 3 of the Rubber Replanting Aid Fund Act, B.E. 2503shall be repealed and replaced by the following:

1/ Government Gazette, Vol 79, Part 105, dated 27th November B.E. 2505(1962).

ANNEX 3Appendix 1Page 12

"Section 3" In this Act:

"rubber tree" means Hevea spp.;

"good quality rubber tree" means a rubber tree of a varietywhich gives good yield as specified by the committee withthe advice of the Department of Agriculture;

"rubber plantation" means an area where rubber trees are cultivatedof not less than 2 Rai, each Rai having not less than 10 rubbertrees and on the average there must not be less than 25 rubber treeseach Rai;

"small plantation" means a rubber plantation of not more than 50 Rai;

"large plantation' means a rubber plantation of 250 Rai and upward;

"rubber plantation owner" means a rubber planter who has the rightto receive the produce from the rubber trees in his rubber planta-tion;

"rubber" means latex, rubber sheets, crepe rubber, lump rubber, scraprubber or other forms of rubber produced or derived from any partof a rubber tree but does not include products manufactured fromrubber;

"replanting" means planting of good quality rubber trees or otherperenial trees replacing some or all of the old rubber trees;

"Aid Year" means a period from 1st October of the year to 30thSeptember of the ensuing year and it shall be identified by theB.E. numerals for such ensuring year;

"Aid Official" means a person appointed Aid Official by the Minister;

"Board" means the Board of the Rubber Replanting Aid Fund;

"Director" means the Director of the Office of Rubber ReplantingAid Fund Board (RRAFB);

"Minister" means the Minister having charge and control of theexecution of this Act.

Section 4.

The provisions of Section 18 of the Rubber Replanting Aid Fund Act, B.E. 2503shall be repealed and replaced by the following:

ANNEX 3Appendix 1Page 13

"Section 18.

Every Aid Year, the RRAFB shall allocate the aid contribution collectedunder Section 5 as follows:

(1) Five percent to be given by instalments as determined by theMinister to the Department of Agriculture for financingresearch and experiments in connection with rubber activitiesfor the sole benefit of the rubber plantation owners. Theproceeds allocated to the Department of Agriculture shall notbe regarded as revenue under the law on budgetary procedure.

(2) Not more than 5% as operational expenses for the RRAFB. If theproceeds are insufficient for the said works, the Governmentshall provide for the additional expenses in the annual budget,as may be deemed necessary.

(3) The balance after deduction of (1) and (2) is to be entirelyallocated towards the aid of rubber plantation owners underthis Act and may not be spent for any other purposes.

If there is interest earned on the aid contribution collectedunder Section 5, the committee shall allocate it as operational expensesin addition to the amount already allocated under (2) as deemed necessary;the balance, if any, shall be added to the allocated amount of aid for therubber plantation owners in the ensuing Aid Year.

If any amount of the aid allocated to the rubber plantationowners under (3) is left over during any Aid Year, it shall be added to theallocated amount of aid for the rubber plantation owners under (3) in theensuing Aid Year.

Section 5.

The provisions of Section 21 of the Rubber Replanting Aid Fund Act, B.E. 2503shall be repealed and replaced by the following:

"Section 21.

An owner of a rubber plantation consisting of a single plot of land of notmore than 15 Rai or of plots or land of not more than 15 Rai altogether mayapply for aid in planting good quality rubber trees in a new plot of landof 15 Rai or upward instead of replanting the original plots, but the amountof aid to be given shall be equal to that to which the original plantationis entitled."

ANNEX 3is Appendix 1

Page 14

Section 6.

The provisions of Section 25 of the Rubber Replanting Aid Fund Act, B.E. 2503shall be repealed and replaced by the following:

"Section 25.

Within 120 days after the end of every Aid Year, the committee shall drawup a balance sheet showing the financial statement certified by the AuditCouncil and submit a report on the result of its performance of activitiesto the Ministers.

The Minister shall have the balance sheet and the report in thepreceding paragraph published in the Government Gazette without delay."

Countersigned by

Field Marshal S. DhanarajataPrime Minister

0

ANNEX 3Appendix 1Page 15

THAILAND

RUBBER REPLANTING AID FUND (No. 3)

B.E. 2518 (1975)

Section 1.

This Act is called the "Rubber Replanting Aid Fund Act (No. 3) B.E. 2518.

Section 2.

This Act shall come into force as from the day following the date of itspublication in the Government Gazette.

Section 3.

The definition of the word "Replanting" as in Section 3 of the RubberReplanting Aid Fund Act, B.E. 2503 is, hereby, repealed and replaced bythe following:

By "Replanting" is meant the act of planting rubber of high-yielding clones or perennial trees of significant economic value to replacesome or all of the old rubber trees standing or to replace some or all ofthe old perennial trees standing.

Section 4.

The provisions of Section 4 of the Rubber Replanting Aid Fund Act, B.E. 2503shall be repealed and replaced by the following:

Section 4:

A fund shall be established consisting of aid contribution in accordancedwith this Act to be named "Rubber Replanting Aid Fund: for financing theimprovement of rubber plantations which give a low yield.

The Rubber Replanting Aid Fund Board shall be a statutory bodywith its object to implement Rubber Replanting Aid according to this Actand to be empowered to undertake any necessary measures or to facilitateor to conduct any action in the implementation of Rubber or Perennial treesreplantings inclusive of the procedures of Rubber and Perennial Crops Culti-vation, Demonstration and Extension activities for the benefit of the Rubberor Economic Perennial Crops Replanting Aid as assigned by the Government.

* ANNEX 3Appendix 1Page 16

Section 5.

The following paragraph shall be added to Section 4 of this Act.

"Section 4. bis

Funds for financing the replanting of perennial trees under this Act shallcome separately from the Government's Budget or Agricultural Aid Fund underthe Agricultural Aid Fund Act.

The Rubber Replanting Aid Fund shall maintain its Head Office inthe City of Bangkok to be named "Office of Rubber Replanting Aid Fund."

Section 6.

The procedure of giving aid in replanting old perennial crops holdings withother perennial crops shall have to be implemented according to the rulesregulations and systems indicated by the Minister of Agriculture in accord-ance with the recommendations made by the Board of Directors.

* Section 7.

The Minister of Agriculture and Co-operatives shall assume charge and controlof the execution of this Act.

ANNEX 3Appendix 1Page 17

THAILAND

MINISTERIAL REGULATION -1

ISSUED UNDER THE RUBBER REPLANTING AID FUND ACT

B.E. 2503 (1960)

By virtue of Section 5, Section 20 and Section 28 of the RubberReplanting Aid Fund Act, B.E. 2503, the Minister of Agriculture herebyissues the Ministerial Regulation as follows:

Article 1.

Any person intending to export rubber shall file an application for paymentof aid contribution in form RRAFB 1 annexed hereto with the aid officialof the locality where the exporter engages in rubber business together with Wpayment thereof at the rate prescribed by the Minister.

Article 2.

Any rubber plantation owner intending to apply for aid for substituteplanting shall file an application in form RRAFB 2 annexed hereto with theaid official of the locality where the plantation is located within theperiod to be prescribed annually by the Committee.

After having considered the examination report for substitutereplanting of the aid official in Form RRAFB 3 annexed hereto, the Com-mittee shall notify the result of the consideration in writing to the aidapplicant.

Given on the 5th December B,E, 2503

General Surachit CharuseraniMinister of Agriculture

1/ Government Gazette, Vol 77, Part 99, Special Issue, dated 5thDecember, B.E. 2503 (1960).

THAILANDRUBBER REPLANTING PROJECT AN= 3

Presnt Organization Apperidix 2Chwrt of the Fund

RRAFB

DIRECTOR |

DEP. DIRECTOR

SECRETARY DIV. REPLANTING DI FINANCIAL DIV. FFICE OF INSPECTOR PROVINCIAL OFFEHOQ. HOQ. H O. I .Q. FIELD

Secretary Section Survey Section Cashier Section Central Chantaburi

Registration & RepI. Consideration Procurement Sect. Nakon Srithamarat RayongStatistic Section Section

RepI. Acct. Sect. Songkla BhuketPublicity Section Verification &

Assessment Section Adm. Acct. Sect. Krabee

Filing Section Trang

Technical Section Surathanee

Nakon Srithamarat

Path along

Songkla

Satool

Yala

Narathivat

World Bank-15127

THAI LANDRUBBER REPLANTING PROJECTProposed Fund Organizaton Chart

Board |

Deputy Director oDeputy Director forOperations Finance and Administration_

Replariting ~~~~~~~~~Provincial Off ice of Financial SecrtarialReplariting ~~~~Development Office Inspectors Division DivisonDivision iH.QU) Division (H.Q.) (Field) (H.Q.) (H.Q.H

Survey Section Training and Audio Chantaburi Central Cashier Section Secretarial SectionVisual Section Rayong Nakon Sri- Procurement Section Personnel SectionRepl. Consideratiore Technical Section Phuket thamarat Replanting Account

Section RepI. Development Krabee Songkla SectionVerification & Assess- Section Trang Adm. Acct. Section

ment Section Group Processing Surathanee Computer SectionReplanting Regis Section Nakon Srithamarat

tration Section Nursery Section PathalungMaterials Sectiorn Satool

SongklaMaterial Stores Yala- Nakon Srimhamarat Narathivat

Trang I,Songkla 52 W

World Bank- 15128

ANNEX 3Appendix 4Page 1

THAILAND

RUBBER REPLANTING PROJECT

Assumptions for Incremental Manpower Needs of the Fund

A. Fund Replanting and Field Maintenance Activities

1. These are divided into two main categories: (a) new replantings(160,000 ha) executed during 1976-79; and (b) continuation of developmenton existing replantings made prior to 1976 (about 120,000 ha) and of newreplanting carried out during 1976-78 (Table 1 and para 4.05 of text.)

B. Land Surveys

2. Surveys are conducted one year before replantings on the basisof one survey per day (100 days p.a.) by one surveyor and an assistant.With improved efficiency, the survey rate could be doubled and 180 daysp.a. spent surveying. By 1979 manpower requirements would be as follows:

Table 2: SURVEYS

1975 1976 1977 1978 1979

Number of holdings ('000) 12.0 12.5 17.5 25.0 25.0Surveys p.a. per team 120 150 220 300 360Surveyors 117 117 117 83 70Annual change - - - (34) (13)

With the proposed improvement in utilization of existing survey staff, therewould be no need to recruit additional surveyors and, from 1978 onwards,fewer would be required.

C. Field Supervision

3. An increase in the number of field inspectors would be made on thebasis of existing averages during the first project year, e.g. each inspec-tor would visit each holding four times a year and would make three visitsper day, 200 days p.a. for a total of 150 holdings p.a., increasing pro-gressively thereafter with improvements in organization.

0

ANNEX 3Appendix 4Page 2

Table 3: FIELD SUPERVISION

1975 1976 1977 1978 1979

No. of holdings ('000) /a 74 81 96 109 124Holdings per inspector 150 170 190 195 195Field inspectors 466 466 513 560 656 /bAnnual increases - - 47 47 96Accumulated - - 47 94 190Field clerks (accumulated) 233 233 24 47 100

/a includes new replantings and replantings made prior to 1976through the full immature period.

/b includes 30 front-line supervisors.

About 75% of the recruits for field inspection would be vocational schoolgraduates earning $ 2,500 per month in basic salary, plus 50% of this inother remuneration and benefits, amounting to $ 45,000 per man p.a. Fieldclerks would be required on the basis of one clerk per two iinspectors.Total remuneration would be $ 30,000 per clerk p.a.

D. Training

5. The Basic Program for new Fund Staff would be expanded from one tothret iionths and would include the curricula of the existing shorter, spe-cialized courses, e.g. budding, high level tapping. Instructors (agronomyplatht pathology and processing) would continue to be RRC and Fund staff ona part-time basis, teaching one course per year through 1977. They wouldteach full time beginning in 1978, when two groups of 45 students each p.a.would be handled. Instructors would also handle shorter specialized andrefresher courses for older staff. Training would be transferred from theRRC at Hat Yai to the MOAC agricultural station at Kanthuli, (which has alarger field area). Assurances would be obtained during negotiations thatthe MOAC facilities at Kanthuli would be made available to the Fund, withinthree months of signing the loan agreement. Additional investments in hous-ing during 1975 are estimated at R 150,000. No incremental costs would beincurred under the project.

6. The Complete Replanters(tapping, sheet making, basic marketing)course would be continued at the centers in Yala, Hat Yai and Wang Tang,and started at Phang Nga in 1975. Under the project, however, strongoxnphasis would be placed on sending instructors to tihe villages in orderto reaclh :.cre replanters and to reduce costs (e.g. student per diems andtransportation). Each instructor, as at present, would teach groups of10 replanters in one-week courses during 40 weeks p.a. for an average ofone instructor per 400 replanters p.a. About one-fourth of eligible re-planters would be trained as at present, each of these in turn would train3 others. Future requirements of instructors would be as follows:

ANNEX 3Appendix 4Page 3

Table 4: TRAINING OF COMPLETED REPLANTERS

1975 1976 1977 1978 1979

Number of replanters inyears 7 and 8 fromplanting ('000) 19 23 25 31 38

of which to be trained ('000) 5 6 6 8 10Number of instructors 12 15 15 20 25Annual Incremental - 3 - 5 5Accumulated - 3 3 8 13

Total remuneration of instructors would be t 45,000 per instructor p.a.

7. Field Budding. The Fund will carry on with budded stump andfield budding programs. Training will be given as at present e.g. onebudder per 5 trainees in one-week courses for 15 weeks, p.a. for a totalof 75 trainees per instructor. A progressively diminishing percentage ofeligible replanters would be trained by the Fund, since further trainingof new replanters, (for a fee) by previous trainees, who have receivedtheir Fund approval certificates, would take up a progressively largershare of the total, as shown below.

Table 5: FIELD BUDDING

1975 1976 1977 1978 1979

No. of replanters ('000) 12 12.5 17.5 25.0 25.0of whom field budders

('000) 4.8 5.0 7.9 12.5 12.5(%) 40 40 45 50 50

No. of replanters takingtraining ('000) 1.2 1.2 1.6 1.8 1.8

(%) 25 25 20 15 15No. of instructors 16 16 21 24 24Annual incremental - - 5 3 -

Accumulated - - 5 8 8

Training would be given at Fund-controlled nurseries in Phuket, Krabi andSongkhla, but also in private nurseries to be established. Total remunera-tion would be i 45,000 per instructor p.a.

8. High Level Tapping and Yield Stimulation. Typically replantingsare made in one half to two-thirds of the individual rubber plot areas,leaving a balance of old rubber trees to maintain a source of ready cash,albeit substantially reduced, to the smallholders during the immatureperiod of the new rubber. High level tapping (HLT), together with ethrelstimulation on the trees to be felled and on old trees, would increaseS yields and incomes in a critical phase for smallholder families. The

ANNEX 3Appendix 4Page 4

Fund vill continue to train smallholders in these techniques and after atransition period, would provide the training beginning in 1977 for 3years of high level tapping and stimulation program to be carried out(instead of one year as at present) prior to land clearing. Eachinstructor can train and supervise groups of 30 smallholders for 3months, 3 times a year. Those trained represent about 15% of thewould-be replanters and each in turn would train on average, sevenother smallholders. The manpower requirements would be as follows:

Table 6: HIGH LEVEL TAPPING

1975 1976 1977 1978 1979

No. of replanters ('000) 12 12.5 17.5 25,0 25.0Eligible for training('000) 1.9 2.6 (3.8 (3.8 3.8

(2.0 (1.8No. of instructors 21 29 64 62 42Annual incremental - 8 35 (2) (20)Accumulated 8 43 41 21

The Fund would have 40 available staff for this training component, whichwould fill part of the annual requirements up to 1979. The balance ofmanpower needed would be allocated temporarily from other act'vities, andtherefore, no incremental manpower would be hired. Ethrel would be pro-vided at cost by the Fund on the basis of a short term revolving fundmechanism, following the technical specifications of Annex 10, Appendix 2.

9. Group Marketing Organizations. The Fund would expand its train-ing and support activities for GKOs consisting of small groupings of neigh-bouring replanters who are taught how to follow daily rubber prices, makeclean, thin and uniform rubber sheet, and bargain for the sale of theiroutput. These have resulted in 8 to 12% producer price increases (Annex 2).Manpower requirements would be as follows on the basis of GMOs producing15 mt p.a. and comprising from 5 to 10 farmers each:

Table 7: GMO

1975 1976 1977 1978 1979

On-going GMO 60 80 180 480 1000No. of processing officers 3 4 9 24 50Incremental - 1 5 15 26Accumulated - 1 6 21 47

New GMO 20 20 60 140 180No. of processing officers 2 10 10 10 10Total no. of new processingofficers - 9 15 29 34

Total remuneration would be i 52,000 per officer p.a.

ANNEX 3Appendix 4Page 5

10. Staff Facilities and Vehicles. Each professional staff memberwould be provided as at present with a motorbyke, and 10 jeeps wou. "purchased for supervisors of Fund staff based on the timetable below.Each jeep is costed at $ 20,000. Additional office space was calculatedon the basis off unused space at present, plus additional needs.

Table 8: STAFF VEHICLES

1976 1977 1978 1979 Total

No. of incremental accumulatedprofessional staff 20 112 92 127 351

No. of jeeps 1 3 2 4 10No. of motobykes 19 109 90 123 341

ANNEX 3Appendix 5

THAILAND

RUBBER REPLANTING PROJECT

Fund Salary Structure(- per month)

Job Classification Fund Civil Service

Special Grade 5,175 - 10,900Division Chief and above 5,450 - 15,000

Division Chief or FirstGrade 3,420 - 7,660

Section Chief 3,155 - 6,600

Section Chief or SecondGrade 1,860 - 4,335

Section Staff 1,850 - 4,405

Clerks 850 - 3,340 750 - 2,100 0

Note: The above are basic salaries. Fund staff do not pay incometaxes (as do Civil Servants) and obtain additional benefits,e.g. housing, education, health and transportation allowancesamounting to about 30% of basic salaries.

.

ANNEX 3Appendix 6Page 1

THAILAND

RUBBER REPLANTING PROJECT

Management Consultants

Terms of Reference

A. Background. The Fund's organization and procedures are basicallyadequate but have evolved without the benefit of external evaluation. Withthe proposed expansion of Fund operations, a review of the Fund is neededto enable it to correct present or possible future weaknesses to ensurethat it can bear the burden of its increased responsibilities through 1979.Accordingly the services of management consultants are required to reviewthe present organization and to make recommendations for the future.

B. Terms of Reference. The management consultants would:-

(1) conduct a detailed teview of the present Fund managementstructure, of its manpower resources and operatingprocedures;

(2) formulate detailed recommendations for an effectiveorganizational and management structure; for staffingrequirements; and for the organization of operations.The detailed recommendations would include themanagement information systems necessary for thesuccessful execution of the Fund's activities, suchas budgetary, accounting, annual financial planningand control, inventory control, internal audit,program control and reporting systems;

(3) assist the Fund in developing methods of planning andImplementation of major agricultural activities i.e.work method analysis of nursery operations, clearingof old rubber, planting of rubber seed/stumps, inter-cropping, field maintenance and crop harvesting;

(4) assist the Fund with the design of staff training andcareer development programs in relation to the needs ofthe expanded replanting targets;

(5) make recommendations as to the operating methods of a0 new monitoring and evaluation unit to be set up withinthe Fund, but independent of the operating divisions.This unit would:

ANNEX 3Appendix 6Page 2

(i) Coordinate its technical inspection with thefinancial inspection by the internal auditand accounts divisions; and

(ii) Analyze the activities of the Fund to identifyany uneconomic operating, agricultural, processingor marketing practices.

(6) assist in the implementation of those recommendationsunder (2) and (5) above which are agreed by the Fundand the Bank.

C. 1. Criteria for Consideration in Formulating Recommendations. Themanagement structure and organization proposed must be appropriate to theexpanding program. Any necessary modifications in the present structureand organization would be implemented at a pace which would allow forsuccessful execution. It should be appreciated that reorganization isan evolving process related to the continually changing demands of thesituation.

2. There would be varying degrees of centralization depending uponthe needs for economies of scale in activities such as planning, procure-ment, personnel training and services on the one hand and the need forrapid and effective action in field operations at provincial level on theother.

3. The management structure, responsibilities and procedures shouldhave sufficient precision so that accountability is clearly defined, with-out losing basic flexibility to permit speedy implementation where necessary.

D. 1. Consultant Staff Requirements. The management consultants wouldbe a three-man-team. The Team Leader would be responsible for overall man-agement, organizational structure and operating procedures. A FinancialAnalyst would introduce the required changes in the structure of accountingpractices and set up an internal audit unit. A computer specialist wouldpropose and implement recommendations regarding the computerization ofselected accounting and administrative operations. He would also delineatethe future role of computer services in the organization.

2. The consultancy would be in two phases: (i) review and formula-tion of recommendations, and (ii) implementation. The initial period wouldbe for six months and the subsequent implementation would take one year.The total period of both phases would be about 55 man months. Some 12months after completion of implementation, consultants would re-visit FundHeadquarters for about 3 weeks to review progress and assist in any furtherstreamlining of Fund procedures.

ANNEX 3Appendix 6Page 3

E. Fund Participation. The Fund's management would give its fullsupport to the consultants and all Fund and UNDP/FAO staff directly concernedwould participate actively in this endeavor.

F. Timing. The Consultants would commence field work within six monthsof signing of the loan agreement.

ANNEX 3Appendix 7Page 1

TIALAND

RUBBER REPLANTING PROJECT

Guidelines for the External Auditing of the Fund

1. The Auditors are to submit both form and long form reports.

2. These reports should be addressed to the Board.

3. The audit would be carried out in conformity with generallyaccepted auditing standards which include, in addition to adherence toaccounting principles which are generally accepted, standards of preparation,standards of field and office records, standards of supervision, review, re-porting and disclosure. In case generally accepted standards could not befollowed, the auditors should expressly state so, indicating specificallythe circumstances.

4. Verification of assets and liabilities should cover:

(a) cash and bank balances

(b) replanting materials, stocks and other inventories

(c) provident fund loans (receivable) and other receivables

(d) fixed assets - buildings, equipment, vehicles, etc.

(e) provident and pension fund liabilities

(f) creditors

(g) other assets and liabilities, including contingent liabilities.

Verification should include physical examination and test checks; examina-tion of records and expenditure; obtaining of certificates independentlyfrom banks and other custodians of assets, contractors, suppliers, debtorsand creditors; ascertaining that the Fund is being administered accordingto its rules. Particular attention should be paid to the implementationof Section 19 of the Rubber Replanting Aid Fund Act of 1960 and of Section18 of the 1962 Amendments to the Act.

5. The short form report refers to the normal audit certificate givenby the Auditors at the end of each audit.

ANNEX 3

0 Appendix 7Page 2

6. If a qualified opinion is given by the auditors, the certificateor report should be modified in such a manner to clarify the nature of thequalification. Reference should be made specifically to the subject ofthe qualification and of the effect on the financial position and resultsof operation, if reasonably determinable.

7. The long form report is an extension of the short form report.Appropriate details (analyses, summaries, explanations and comments) ofitems in the various certified financial statements should be included inthe long form report.

8. Certified statements would include:

(a) a balance sheet for the Fund;

(b) income and expenditure account for the Fund;

(c) income and expenditure accounts for each activity of the Fund;

(d) fixed assets showing additions, disposals, depreciation andbalance sheet values;

(e) non-recurring expenses;

(f) miscellaneous income and expenditure;

(g) age classification of debtors and creditors;

(h) details of payments in advance to suppliers with comments onthe basis of payment and verification that the Services havebeen performed subsequently. Arrears of loan repayments(including interest);

(i) adequacy of pension and provident fund balances;

(j) sources and application of funds.

Statements should, where practicable, show comparative figures for thepreceding year.

9. Comments and recommendations in the long form report wouldinclude:

(a) implementation of recommendation by the state auditorsin the previous year;

* (b) management and organization;

(c) budgetary control;

ANNEX 3Appendix 7Page 3

(d) prices and unit costs;

(e) financial and field controls; procurement procedures;

(f) payroll, pension and provident funds;

(g) inventory controls and stock levels;

(h) control over loans receivable;

(i) adherence to sound accounting standards;

(j) efficacy of the internal audit procedures;

(k) events after the date of the balance sheet significantlyaffecting the financial position of the fund.

0

0

THAIL41D

RUBBER REPLANTING PROJECT

Fund's Cash Flow and Fund Structure, 1961-1974

(Millions of Bat)

Total1961-70 Jji 1972 1973 1974 1961-74

A. SUMMARY OF CASH FLOW

Sources: 95% of Cess 906 147 150 174 203 1580Interest 186 37 38 39 40 340Government Subvention 35 11 13 23 18 100

Total 1127 195 201 236 261 2020

Uses: Administrative Expenditure 130 24 28 37 48 267Grant Payments 1/ 466 125 150 189 224 1154

Total 596 149 178 226 272 1421

Net, Yearly 531 46 23 10 (11) 599Cumulative Balance 531 577 600 610 (11)

B. FUND STRUCTURE: CASUFLOW AND INTERNAL TRANSACTIONS

ADMINISTRATIVE BUDGET

Administrative Fund

Sources: 5% of Cess 47 8 8 9 11 83Government Subvention 35 11 13 23 18 100

Transfers:from Interest Incone 57 9 12 9 23 110from Land and Buildings Fund 4 1 - 2 - 7

Total 143 29 33 43 52 300

Uses:Expenditure:

Personnel and Office Expenditures 100 21 25 30 40 216Capital Expenditures 2/ 14 1 1 4 2 22Contributions to Government 3/ 9 - - - - 9

Trans fars:to Pension and Provident Funds 4/ 7 2 2 3 6 20to Subsidiary Fund 20 3 - - - 23

Total 150 27 28 37 48 290

Net, Yearly (7) 2 5 6 4 10Cumulative Balance (7) (5) 0 6 10

Subaidiary Fund

Sources: Allocation from Interest Income 40 9 12 15 - 76Allocation from Administrative Fund 20 3 - - - 23

Total 60 12 12 15 - 99

Ufes: Expenditures 5/ 19 7 5 9 9 49

Net, Yearly 41 5 7 6 (9) 50Cumulative Balance 41 46 53 59 50

Land and Buildings Fund

Sources: Allocations from Interest Income 32 - - 4 21 57

Uses: Transfer to Administrative Fund 4 1 _ 2 - 7

Net, Yearly 28 (1) - 2 21 50Cumulative Balance 28 27 27 29 50

Interest and Reserve Fund

Interest Income 186 37 38 39 40 340

Transfers to Other Funds 6/ 140 40 35 28 50 293

Net, Yearly 46 (3) 3 11 (10) 47Cumulative Balance 46 43 46 57 47

REPLANTING BUDGET

Replanting FundSources: 907, of Cess 859 139 142 165 192 1497

Allocations froe In,trest Inon 11 22 11 - 6 50

Total 870 161 153 165 198 1547

Uses: Grant Payets 447 118 145 180 215 1105

Net, Yearly 423 43 8 (15) (17) 442Cumulative Balance 423 466 474 459 442

1/ Including expenditures from the Subsldiary Fund, see below.2/ Include Baht 6 million for acquisition of land.j/ Babt 7 million for improvements in the buildings and facilities of the Ministry of Agriculture, which are shared by the Board, end

Baht 2 million contribution to the capital of Government fertilicer company.4/ Of the Bait 20 million allocated to the Pension and Provident Funds, about 803ht 18 million remain unexpended,5 For details see Pare6/ Equals the Sum of transfers to the Administrative Fund, Subhidiary Fund, Land and Buildings Fund, and Replanting Fund. Of the

balance of Baht 47 million at the end of 1974, Baht 17 million and Baht 11 million have been allocated in advance to theAdministrative and the Subsidiary Funds respectively for the 1975 bhdget.

ANNEX 3_THAILAND Table 2

RUBBER REPLANTING PROJECT

Expenditures of the Subsidiary Fund

1974 1975Budget

On Farm Development CostsTransportation of stump killer 300 340Transport of Fertilizer 2,820 3,000Handling Costs for Planting Material

Materials 1/ 3,960 3,960

Pesticides 2/ 100 500

Natural Disaster Relief 410 700

Extension Development 220 1,000

Expenditures from Revolving Funds

Field Equipment Rental 350 500Loss on Seeds of Cover Crops 3/ 440

Nursery Establishment Trials 180

Others 630 -

TOTAL 9,410 10,000

1/ Service payments to the Government-owned nursery

2/ Items not included in the grant.

3/ Cover-crop seeds are bough from farmers at'15 Baht/kg andsold back at 10 Baht/kg.

0

ANNEX 3Table 3

THAILAND

RUBBER REPLANTING PROJECT

Area ReDlanted 1961-75

Year Replanted Cumulative Total(ha) (ha)

1962 3,900 _

1963 4,100 8,000

1963 (storm) 8,100 b/ 16,100

1964 3,600 19,700

1965 5,900 25,600

1966 4,900 30,500

1967 3,900 34,400

1968 6,100 40, 00

1969 11,000 51,500

1970 12,300 63,800

1971 12,900 76,700

1972 18,400 95,100

1973 20,00O 11,100

1974 20,500 135,600

1975 23,000 158,600

a/ of applications approved in the previous year.

bJ grants to victims of severe cyclone damage in 1962.

/ preliminary estimates.

0

ANNEX 3Table 4

THAILAND

RUBBER REPLANTING PROJECT

Replanting Grant Payments Made to Farmers, 1961-1974 -/

Fiscal Year Cash Kind Total

---------------Baht '000------------------------

1961

1962 2,674 437 3,111

1963 14,872 2,614 17,486

1964 42,809 3,596 46,405

1965 36,692 5,071 41,763

1966 34,480 24,898 59,378

1967 25,856 22,296 48,152

1968 29,072 27,530 56,602

1969 39,372 34,243 73,615

1970 55,250 44,979 100,229

1971 67,299 51,036 118,335

1972 83,441 61,774 145,215

1973 101,550 78,412 179,862

1974 114,863 99,781 214,644

TOTAL 648,230 456,667 1,104,897

1/ Payments in kind are for material used in given fiscal year;these payments are made in advance to the suppliers.

Source: RRAFB, Finance Division

ANNEX 3THAILAND Attachment 1

_ _ ~~~~~~~~~~~TAILAND Page 1

RUBBER REPLANTING PROJECT

Grant Application Form

B. E. 2503

Receipt No ........Date .... / .../ ...Recipient .........

Date . B.E.

I.. .. . .... age .years, Nationality ...(in case of an alien, Alien Identification Card No ......... issued at Amphoe orPolice Station ......... Changwat ...... ) Residence No . ............. Road_.... .... Commune No . ........ Tambon .... Amphoe .... Changwat .apply for aid for replanting to the RRAFD Official of Amphoe .......................Changwat .. ... as follows:

( rubber plantation owner1. I, in the capacity of ( lesee or occupier of ................. .........

( representative of ........... **...**.. ...........

according to Rubber Replanting Register of the Rubber Division, Department of Agric.ture, No ..... which is in Tambon ........... Amphoe .Changwat .. ..... having the boundaries as follows :

North . . Senl/ .. . Wa2/ long adjoining the land of .South ... Sen .. . Wa long adjoining the land of .East ....... Sen .... Wa long adjoining the land of .V-est ..... Sen .. . W long adjoining the land of .

At present there are ..... ......... rubber trees on an area of ..

Rai ... Ngan 3/ ..... square Wa 4/ of which ... .Rubb Rubbeertrees in an area of ........ Rai.............. Ngan .................... Square Wa aremore than 25 years old, and .rubber trees in an area of ........ .. Rai

. ..... Ngan .. square Wa have been decayed or damaged and .rubber trees in an area of ....... ...... Rai . Ngan .. squareWa give little yield.

1/ approximately 40 m. 2 2/ approximately 2m21/ approximately 40 m. 2/ approximately 2m2

ANN4EX 3Attachment 1

Page 2

2. I hereby submit evidence of the plot of rubber plantation for which aidis requested, evidence relating to the right to utilize this rubber plantationor letter of consent from the lessor or person who allows the occupancy toreceive aid, as follows: (other evidence to be submitted shall also be specified)

(1) .............................. I..........................................(2) .........................................................................

(3) ........................................................................(4 .................................................. I.......................().........................................................................

3. I intend to apply for aid for substitute replanting as follaws:

(1) to replant with rubber trees in an area of ................................. Raii........... Na .......... ...... Na., ... square Wa.

(2) to substitute with perennial trees in an area of .................................. Rai........ .. Ngan ................ square Wa.

(3) to replant with rubber trees in a new plot under Section 21 in an area of ........ Rai ........ Ngan. ......... square Wa in commune .......... No .. . . . .. Tambon ....Amhe................A ph e ............. .......... ..Cnangwat ........... according to land documents .................... submittedtogether with this application.

4. I hereby affirm that the statement given above is true in every respectand that I shall use the money or everything received from the Rubber ReplantingAid Rind for replanting in the area in respect of which aid is given and shallcomply with the advices of the RRAFB Official concerning replanting in allrespects.

(3igned) ..................... . . Applicant

(Signed) ..................... . . Witness

(Signed) . . . .................... I tness

(5).~~~~~

ANNEX 3_xAttachment 1Page 3

For Official

I have examined the matter and have recorded the appointment forsurvey and inspection of this land to be held on ........ B. E......

(signed) ................ RRAFB Official

( .. . . . . . . )

Date ..... /..../....

Receipt and Appointment for Survey and Inspection

I have received an application for aid for substitute replanting from...... .. ReceiPt No ......... .. dated..... 0. ..B. E ... .... and have made appointment for survey and inspection of theland to be held on .... B..B. ......B. . at . ....... -o'clock.

(Signed) ...... RRAFB Official

( ..... . )

oate r.o o w i

Note: Cross out what is not :requiidd

ANNEX 3Attachment 2 -

THAILAND Page 1

RBuBER REPLANTING PROJECT

Specimen Report on Survey and Inspection for ReplantingUnder the Fabber Replanting Aid Fund Act,

B.E. 2503

Date . B. E.

Application under Receipt No . ....... dated ...... / ..Xmphoe .............. Changwat .. .... ... ..

Name of applicant ................. Reaidence No. ....Road ................... Commune No .. ............ Tambon ...... . AmphoeChangwat ..........................

I have surveyed and inspected this land which has a total of .................. .... rubber trees in an area of ............... Ri....... Ra i .. .

Ngan .......... square Wa and out of which:

(1) there are ......... rubber trees in an area of .. ...... ..... Raia.... Nga...... ... . square Wa which are more than 25 years old.

(2) there are ... . rubber trees in an area of ................. Rai.... .,Nan. ....... o square Wa which have been decayed ordamaged.

(3) there are ......... rubber trees in an area of .................". ..... ... ..... Na square Wa which give little yield. Total

number of rubber trees which should be planted in substitution is ...... oin an area of .......... Rai ... ... Ngan .. .. .... .square ¶a.

A. Condition of the Land Applied for Replanting

1. DescriPtion of the soilclay, loose soil, sandy, .........................la;terite.................

2. Topographflat, hilly, lowland, ................drainable ....................

3. Lalang grass in the plantationthick everywhere, thick in patches, .......................little, none ......................

ANNEX 3Attachment 2Page 2

4. Other weedsthick everywhere, thick in patches,little, none .............

5. Plant spacingspacing interval ...................average number of trees each Rai ....

B. Recommendation of the RRAFB Official

1. Land

Is land suitable for rubber trees ....... .................planting? and why? ..........................

. 2. Destruction of rubber trees

(1) What method should be used? and why?......y.............

(2) Lll the rubber plantation owner doit himself or have another to do it?*..............................

3. Fencing

Is it necessary? and why? .............................

4. Drainage

Is it necessary? and why? ................ ............

5. Prevention of erosionkhat kind of planting should be done to

prevent erosion (e.g., planting alonggrades or levels, making dikes and ditchesto control waterflow, planting groundcover crops, etc.) ...... ..........

Attachment 2Page 3

6. Variety of Rubber Trees and SpacingInterval for Replanting

(1) Seedlings or grafting .................

(2) Does the rubber plantation ownerhave the plants ready? If so,what variety and where will it beobtained?

(3) that should the spacing intervalbe? .......................

(4) Should the rows of rubber treeoran along or against the sun?and why? ............................

7. Planting Between the Rows of RabberTrees

(1) Viat plants should be used? and why?..........................

(2) How should the plants be spaced? .............................

8. Only Perennial Trees should be planted

(1) What perennial trees should beplanted? and why? .......................

(2) where wil the plants be obtained? ...........................

(3) How should the plants be spaced? .........................

(4) What is the reason why perennialtrees should be planted?

C. Map

Attached.

s ~~~~~~~~~~~~~ANNE 3Attachment 2Page 4

Signed .......... RRAFB Official

Whereas the official had carried out the survey and inspectionand submitted the above report, I have read it thoroughly and I agree/do not agree therewith.

(Signed) ........ Applicant

Date ..../..../...

Recommendation of the RRAFB Official

I have examined the application for aid and the report on thesurvey and inspection of land for replanting and I hereby recommendthat................................................................

3 .~.............. ......................................................

Date...../..../..

Decision of the Board

The cominttee had considered the application for aid and thereport on the survey and inspection of the land and passed a resolutionthat ..................... I............................................. 6.......

(Signed) ........ Director

Date ......... /

Nr,tej >-csl out what is not requited

IEAUID

RCBBE8 -lPLANTiNa PNOJGcTANNI;X 3_

The ibbs Reelantiee Aid 1wACI ohesd

Replenting Activitiec , SBhedule or Grant In-a-lleents and Inepection

Tlis 1. evlaintir4 with budded AtVmsU (-s at February 1975)

lnotalast. Field requirements Popeents in cash acd kind per rsi Sehedeles of inepeetione Rm-.r

1 at. 1. Zrediosts weds especially CGoh nspetion by ReplantinglelWng before felling .11 FredicUtion of Weeds WAd poiong Officer Sftr oo-plstionrubbr tres. all rubber tr-e or etv;ps 320 Beht of werk

Appliectien of 2,4,5,-T 30Holing nd repartiom of

load for replsntiug S

Tetal 400e

2. Pi an fd ell ell rubbr treson th. hldig inlvding olearing!

3. Boling. Dig 50SO+SO cs. h-l s,Bp-cing .. Mrding to r co_ndtionof Iblanti g rio r.

P. re-planting fertiliser application Cuh or Kindend planting of cover crepe. 2,4,5.T (8 It) 70 bhbt

(CGsh given in e of f.lling byboildes ra)

Kind

Pro-plmating fortilieer for rubberend cower crop 17.6 Kg.Co-er crep esded 1.5 Kg.

2 d. 1. Plnting budded tUspJ CGsb Fir-t inspection shall be cede

2. Replenting of iseing pointe. Eradieotion of eeds 130 baht two sonthe ofter pleating,3. Undergroth bet-een pla.ting rows Plenting of clsel steeps 5 sond ieetion sh be

to b clashed beek to grand Plenting ad sentsnen sd.s 5 *sothe after planting,locel in ceo. of iea`.of cover of cover crepe 30 * nd third inspecticn hall be

crops, s~~~~~~~~~~~~~~~~amd. eigh,t soothe afterMP.. Total 210 planting.

L. Along the p nting ro-e 200 ows. wid Cash or kindstrip - weding .ust be einteind. Cl-nl etusp 160 Beht

5. Cler e1 leleog ow the area Clonsl stuspe fo,replanted. elsing points hC

6. Nnoring of the young robber with Total 200fertill-er forsula 1 or 3 after planting Kind

2 oothe 120 gss/tree _ 5 soothe 120 gee/tree Pert li-er 33.6 Kg.8 uonth- 1 80 ge/tree

(Drainage, contnor terracing and fsncingto be dooe if necesar. )..)

.rd 1 .rdot _ed end 1. Gash ._.___

3 1 rd. 1. Ergdi.ut. wd. snd luluag C__ First insp-etion shall be sode

2. Repl.etlog of missing points Erdication of weeds nd leng 12 sothe ater planting3 Mintin over crp P plnting of miseing points 100 Bhbt Seond insepetion hall be ced 15

4.. Pruning ainteose of cover rrp 20 * sthi after Plantlng!. Manuring of the poeeg rubber Ttd 120 18 intpe cter pl hti cg

with fertili-er forsula 1 or 3 t Nothe f p tafter plauting CGh or Kind Note ust D lop .nt of robber trees

clou.1 stumps -~~~~cot relet to estisated12 soothe 2hC gas/tree n p devS'lopsent for ege15 soothe 7hO gee/tree lind'8 snthe 21.c ges/tree foer orop eseds 0.5 Kg.

Pertili-er 57.6 Kg.

1, th 1. FredisLot Sted and laleng Cesh First inepeotion shall be sads2. Mintain coer crop Kred1ioatbn of weads and laefs 24 sOothe after piating

Proninug ocht Second insp-ction shall be eadeb. Manuring of the yong rubber witbh Ninteonac of oer crops 20 30 soothe after pleting

fertiliNer foreolu 1 or after planting Total 100 Ncto. D.crllps .t of rubber

21. conths 36' gesetree Kind trees soet relate toPertiliser 57.6 Kg. estineted developnent

for age

5 th -P.adits weeds and lelng Guoh FirPt in-p-ction shall be .otet erodleete erg teteroropo'sintain coWr coop grNdir tion of-soda d eds 36 sonths after planting -e,d plrnt cover -rop

rowing 0nd Thinning SO Debt Secoad in.p otion shall i iedietely. onrig of the eoung rubber with Naintemanoe rS of er crop 20 e be sods 52 soothe after planting

frtilie-r formula 1 or 3 after Ttel 70 N Mote, DelopReat of robberpletig 6 enths 720 £pe , trees ct det to

.etinshad develap .estParsilie-r 1b6.0 Kg. for M.

6 th 1 Erdicate costs end laboog Cssh First ad .ecend inopetien2, eenreng of the rubber with Erudic-tion of .eede and 1o.ng shall be cade 48 nd Sh seethe

fertili.er fors-la 2 r 4 after bo Babt fter planting respetively.planting 1.8 -othe 1 Kg/tree Xind Note, G-vebop.-et of rubber

!Prtili-er 61 Kg tree coot relate toestimated developsetfor age.

7 th 1. Eradiate .ede a d la.ng Cinh First end 60cnd i6epo6tice

2. Menuring of the robber sltb shal he asd 60 and 66fert.liser fennel. 2 or 1 after Eradioation of w.ee. end alelng sethe after planting

planting do coetho 1 ~~25 Bait reePati-ely.P-Iti. 60mots IKg/tree Kind Note, Gavepogeet of robber

trees cost relate toPertiliser 61. Kg. estisoted developseot

forag _ e0

R/ Bplenting with seed *t steke ie sisiler with the -eptin that rubber mmdlinga budded in the field.

ANNEX 4Page 1

THAILAND

RUBBER REPLANTING PROJECT

The Rubber Research Center

1. The RRC was founded in 1965 and today employs more than 60professional staff. RRC's budget (US$0.75 million in 1974) is derivedfrom 5% of the rubber cess proceeds and from MOAC budget allocations.Since 1965 a rubber development project, jointly sponsored by the Govern-ment and UNDP and operated by the Rubber Division and FAO, has helpeddevelop RRC activities and facilities at Hat Yai, to service the Thaiindustry. The RRC was originally intended to undertake research in bothagricultural and technological aspects, to develop research findings foruse by the industry and to provide a comprehensive extension service todisseminate available know-how to producers and processors of rubber. Thefirst two objectives are being actively pursued and the third has beendiminished in relative importance by a policy decision in 1968 which placedresponsibility for all agricultural extension under the MOAC's Departmentof Agricultural Extension Services (DAES). The different areas of res-ponsibility have now been defined and are described in Annex 2.

2. In line with the recommendations of the mid-term review missionof the rubber development project. The RRC in future will be involved withextension liaison and only to a diminishing extent in providing field exten-sion service to growers, as the Fund and DAES will assume this responsibility.Having developed promising research advances, and tested these by experi-mentation, their most important function will then be to demonstrate theinnovations in the field in key areas of Thailand. Successful innovationswill then be disseminated to farmer level by the Fund and DAE.

3. The RRC has:

(a) provided training courses and refresher courses forofficers of the DAE and the Fund.

(b) on behalf of the Fund, provided training courses forfarmers who have completed replanting; and

(c) supervised the supply of planting material. This entailsregular inspection and licensing of all official andcommercial nurseries that provide budwood or buddedstumps for planting by Thai rubber growers; not onlydoes the RRC ensure that the material is true to label,it also advises on future trends in the breeding and0 selection program so that timely supplies of plantingmaterial are made.

ANNEX 4Page 2

4. The RRC also investigates rubber processing and other technologicalproblems, and advises rubber processors as necessary. It acts as thenational regulatory body for the Thai Tested Rubber (TTR) Scheme, providesanalytical services for rubber specification testing, and supervises testinglaboratories operated privately by industry.

5. Priorities for Future Research. The main priorities should be thefollowing:

(1) research into methods leading to reduction of theimmature non-productive period;

(2) research into increasing yields; and

(3) research into reduction of operating costs.

6. The following principle should be emphasized in planning researchprograms for Thailand. The majority of Thai rubber is grown by small farmersand research should be directed towards the needs of these farmers, in par-ticular, their requirement for income during the immature phase. New tech-niques should be such that their application on the small farm is simpleand effective. A further important principle arises from the ecologicalconditions in Southern Thailand being fairly similar to those of northern 0peninsular Malaysia. Many of the practices used in Malaysia can be directlyintroduced into Thailand reducing the scope of the research effort at thepresent time when availability of experienced staff is limited and allowingconcentration on the major priorities.

7. Spheres of Applied Research. The spheres of applied researchwhich should be given priority are: (a) breeding and selection; (b)Agronomy; and (c) Processing.

8. Breeding and Selection. The main clones in use in Thailand werebred and selected in Indonesia and in Malaysia. There is a need for a muchgreater effort in testing the wide range of clones which have been producedin Indonesia, Malaysia, Sri Lanka, Vietnam and Cambodia. During 1970/71,the RRC established some 12 ha of clone trials, but since that time therehas been no further planting of such trials. This program, therefore, isconsiderably in arrears and should be given highest priority in the future.

9. Field Planting. Further research is needed to investigate ttheagronomic and economic advantages of different types of planting materialunder Thai conditions. Experiments and investigations should center onthe use of polybag planting material of a wide range of ages; 7 to 8 monthold budded stumps; 12 to 18 month old budded stumps; and large stump bud-dings produced by the well-known Craigielea technique. RRC plans to in-vestigate the use of small stump buddings cut back at about one meterheight. This fairly advanced material is about 12 months old after thebudding stage, travels well and has been used successfully in Cambodia.Research should also be conducted into various methods of field budding.A particular investigation which the RRC intends to carry out is to compare

ANNEX 4Page 3

the budding of seedling stumps planted in the field, with the budding ofseed at stake and with budded stumps.

10. Crown Budding. There is an urgent need for a large crown buddingtrial, this being most important in relation to the need in future to growhigh yielding trunks with Phytopthora tolerant or resistant crowns.

11. Inter-Cropping. Inter-cropping investigations are required duringthe first three years of rubber growth and should center on:

(i) effects of inter-cropping on the growth and yield ofrubber;

(ii) the inter-cropping fertilizer requirements;

(iii) management and labor requirements;

(iv) economics and marketing of inter-crops.

12. Exploitation. Research into tapping and yield stimulation shouldconcentrate upon appropriate reduction of tapping intensity (i.e., length

* of tapping cut) and frequency, so that where possible, a family can tap itsown rubber. In conjunction with these experiments on tapping systems, thereshould be trials of yield stimulation of rubber at all ages.

13. Nutrition. Fertilizer recommendations are presently largely basedon experience in Malaysia which is understandable, in view of the very longterm nature of such experimentation. However, the RRC has a very wellequipped analytical laboratory and there is need for considerable expan-sion of the present relatively modest program of field experiments.

14. Pathology. Research should continue on Phytopthora botryosa leafdisease, the principal approach being the testing of suitable three parttree combinations and on Phytophthora black stripe panel disease. Researchinto the latter disease and other panel diseases should consist of investiga-tion into the cost effectiveness and application techniques of the range ofchemicals available. In view of the low incidence of Rigidoporus lignosus(white root disease), research into inexpensive and effective preventionand control techniques is essential.

15. Processing. As production of good quality wet sheet is a well-established tradition, research should concentrate upon development ofeconomic methods of converting this product into block rubber.

16. Staffing of the RRC. Successful execution of the applied researchprograms outlined above is essential to the provision of a modern technolog-ical base for a high yielding, rapidly expanding rubber industry. The con-

* tinuation of the present UNDP/FAO support for the RRC is considered vitalduring the remainder of the 1970's.

THAILAND ANNEXRL_ER REPLANTING PROJECT

ORGAMZATIN CH4ARIT OF THE R.R.C.

DIRECTOR GENERALOF AGRICULTURE

(MOAC)

I

DIRECTORRUBBER DIVISION

X ,DCRECTOR RRC

ASSISTANT IASSISTANTIjDIR ECTOR DlIRECTOR_ADMINISTRATION TECHNICAL

!FlIELDSTATIONS (17)

ECONOMICS AGRONOM SOIL SCIENCE| TECHNOLOGY| DEVELOPMEN

FIELD SERVICES TRAINING TECHNICAL SERVICESAND NURSERIES [ I AND DEMONSTRATION

World Bank-15129

THAIL

RUBBER REPLANTING PROJECT

Project Costs

(Million 8)

TOTAL UB$

1976 1977 1978 1979 f000000)°) PF Local

FIELD ESTABLISHMENT

Labor: Grants Approved in 1974 and Beforel/ 70 40 20 10 140 7.0 - 70

Grants Approved in 1974 and After 2/ 94 156 239 271 760 38.0 - 38.0

Total Labor 164 196 259 281 900 45.0 - 45.0

Contingencies 9 30 38 97 174 8.7 - 8.7

Sub-total 173 226 297 378 1074 53.7 - 53.1

Planting Materials 2/ 21 27 29 36 113 5.6 _ 5.6

Contingencies 2 5 8 13 28 1.4 _ 1.4

Sub-total 23 32 37 49 141 7.0 - 7.0

Fertilizers 3/ 228 222 224 196 870 43.5 41.3 2.2

Contingencies - 19 39 52 110 5.5 5.2 .3

Sub-total 228 241 263 248 980 49.0 46.5 2.5

Cover-Crop Seed 2/ 2 3 5 5 15 .8 - .8

Contingencies - 1 1 2 4 .2 - .2

Sub-total 2 4 6 7 19 1.0 - 1.0

Chemicals 2/ 28 46 66 84 224 11.2 10.0 1.2

Contingencies 3 9 17 32 61 3.1 2.8 .3

Sub-total 31 55 83 116 285 14.3 12.8 15

Total 443 494 583 602 2122 106.1 51.3 54.8

Price Contingencies 14 64 103 196 377 18.9 8.0 10.9

TOTAL 503 606 739 848 2499 125.0 59.3 65.7

PROJECT ADIINISTELATION

Field Staff 29 34 37 41 141 7.1 - 7.1

Overhead and Operations 48 42 47 51 188 9.4 1.3 8.1

Vehicles and Equipment 1 3 4 6 14 .7 .3 .4

Nursery Establishment 8 10 - - 18 .9 .1 .8

Technical Assistance 3 4 1 1 9 .4 .4 -

Total 89 93 89 99 370 18.5 2.1 16.4

Price Contingencies 8 18 25 39 90 4.5 .5 4.0

TOTAL 97 111 114 138 460 23.0 2.6 20.4

GRAND TOTAL 532 587 672 701 249Z 124.6 53.4 71.2

GRAND TOTAL-PRICE CONTINGENCIES-/ 22 82 128 235 467 23.4 e.5 14.9

GRAND TOTAL 600 717 853 982 2959 148.0 61.9 86.1.

1/ see Arnex 5, Table 2, rounded to the nearest ten million baht. No price contingency was

applied to labor payments on grants approved in 1974 or before.

2/ see Annex 5, Table 3, Part C.

3/ see Annex 5, Tables 2 and 4. Assumptions for fertilizer prices are shown in Annex 9,

Table 8. Costs include loc-l handling charges and delivery to farmers. *

4/ see Annex 5f Table 5c

5/ Provisions for contingencies are based on the assgumption in Para 4.13 of the main text.

Table 2TlAlJIIAD

RUBBfR REPLANTING P9OJRT

pMwptiona for Calculation of Disbursements, of Outstaoding Granta

A. OUTSqTA% 11COI*T1.NT OF GRANT PAYlIENTS (B3ht 000.000) as of end 1974

(1) (2) (3) (4) ()(6)Approved-Less Less-Not ((t-(2)) Of which ((3)-(4)) ((4) t 1.6)Disbursement Isplsrented TO be FertilizerVl Of which Cost of(until end of (10% of Disbursed Cash Fertilizer

Yew of Approval 19741/) approvals) 1975 and Payments at 4 Baht/kg.After _ _ _ ___ _ _ _ _

65 - 68 25 i 10 8 (84) 2 1369 34 13 19 16 (94) 32670 50 16 34 27 (30) 7 43

71zr 96year 23 73 53 (r73) 20 8572 229 36 193 129 (67) 64 273 313 40 273 161 (.59) 112 25874 226 23 201 70 (6 35) 131 112

Total 23008[D0 7103 464 339 743

S. DISB80RSIUT PATTEZI 0' INDIVIDUAL GRANT PAY80IT (eBat)

Yest I Year 2 year 3 Year 4 Year 5 Year 6

Fertilizer 98 119 119 95 132 132other 893 175 100 70 40 25

Total 993 294 2191 165 172 157

Cuwpajtive Backwards (fwr the CalcuLatina of Disburgamant pattern of outataknding Grant la9m5ut) Cutalative backwards

Total 2000 1007 713 494 329 157Fertilizer 695 597 479 359 264 132

7.Fertilizer 35 59 67 73 SO 84

C. K3 DIJs mT PATTrIN OF OtTSTANDING GRAM PAinTS_isakt O0.UO) 0(Yearly Percencagen in Pareutheois Deri_vd frin "'1 ,^ .

Year of Approval 1975 1976 1977 1978 1979 1980 TOTAL

65 - 68 13 2669 26 4370 22 (50) 21 (50) 4371 22 (26) 32 (37) 31 (37) 8572 52 (25) 41 (20) 57 (27) 56 (27) 20673 52 (20) 52 (20) 40 (15) 57 (22) 57 (22) 25874 16 (14) 19 (17) 19 (17) 16 (14) 21 (19) 21 (19) 112

Total 203 165 147 129 78 21 743

QUantites (000 tons) 51 41 38 32 20 5

Cost ti Constant 1975 Prices Z42 196 156 l11 62 16Coat in Current Prices 242 196 170 139 79 22

Contingency - 14 21 17 6

II, Other Grant Pava

gr_ ~~ ~~2 269 3 370 4 (62) 3 (38) 771 10 (52) 6 (30) 4 (18) 2072 28 (43) 19 (30) 11 (17) 6 (10) 6473 48 (43) 27 (24) 19 (17) 11 (10) 7 (6) 11274 i9s(6) 18(14) 11 (8) 1 (5) 4 (3) 2 (2) 131

Total 184 73 44 24 11 2 339

I/ 8ource: RIAF8.2/ Pers-ewtges r. derived by cvumlating, (bok,4) We fertilleer c_snt of the grint inPart J of the Table

ANNEX 5

THAILAND Table

RUBBER REPIANTINC PROJECT

Disbursement of Items Other Than Fertilizers 1976 - 1980

C 000.000)

Year I Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

A. Individual Grant Payments (* per rai)

Average Labor Payment 600 1.60 100 70 40 25 25Chemicals (Weedkiller & Dalapon) 180 45Cover Crop Seed 15

Sub-total 795 205 100 70 40 25 25

Planting Material: For Type I Replanting 190For Type TI Replanting 40

B. Price Index 109.7 119.0 127.4 135.7

C. Project Costs 1976 - 1979 1976 1977 1978 1979

I. Labor

1976 Approvals 94 25 16 111977 131 35 221978 188 501979 " _ _ _ 188

Total Constant 1975 Prices 94 156 239 271

Price Contingency 9 30 38 37

Total 103 186 277 368

II. Chemicala 28 7

1975 Approvals 39 101976 56 141977 561978 56

Total Constant 1975 Prices 28 46 66 84

Price Contingency 3 9 17 30

Total 31 55 83 114

III. Cover Crop Seed 2 3 5 5

Price Contingency - I I 2

Total 2 4 6 7

IV. Planting Materials 1978 _979

Budding Stumps 18 23 23 30Rud.o-d 3 4 6 6

Total 21 27 29 36

Price Contingency 2 5 8 13

23 32 37 49

Total in Current Prices 159 277 403 540

THAILAND

RUBBER REPLANTING PROJECT

Fertilizer Requicement and Cost of the Program

(g 000,000)

1976 1977 1978 1979 1980 1981 1982 1983 and9fiter

Compound Fertilizer Requirements (Tons) /

1975 Approvals 5470 6330 6840 6640 8750 8750 87501976 " 7660 8860 9570 9300 12250 12250 122501977 10940 12660 13670 13280 17500 17500 175001978 " 10940 12660 13670 13280 17500 175001979 10940 12660 13670 13280 175001980 " 10940 12660 13670 132801981 10940 12660 136701982 10940 126601983 10940

Total (Tons) 5470 13990 26640 39810 55320 71550 89050 97800 103050

Price Forecast ($/kg, 1975 prices) 4.76 4.24 3.66 3.20 3.04 3.04 3.04 3.04 3.04

Price Forecast ($/kg, Current prices) 4.76 4.62 4.30 4.04 4.14 4.42 4.73 5.06 5.41

Total Cost in Constant 1975 Prices (000 %) 26040 59320 97500 127390 168170 217510 270710 297310 313270

Total Cost in Current Prices (000 d) 26040 64630 114550 160830 229020 316250 421210 494870 557500

Rode Phosphate Requirements (Tons) -/ 2810 3940 5630 5630 5630 5630 5630 5630 5630

Price Forecast ($/Kg, 1975 prices) 2.0 1.6 1.4 1.2 1.2 1.2 1.2 1.2 1.2

Price Forecast (I/kg, Current prices) 2.0 1.74 1.64 1.52 1.62 1.73 1.85 1.98 2.1

Total Cost in Constant 1975 Prices (000 g) 5620 6300 7880 6760 6760 6760 6760 6760 6760

Total Cost in Current Prices (000 d) 5620 6860 9230 8560 9120 9740 10415 11147 11823

Total Fertilizer Costs, Constant 1975 Prices (000 j) 31660 65620 105380 134150 174930 224270 277470 304070 320060

Total Fertilizer Costs, Current Prices (000 ^) 31660 71490 123780 169390 238140 325990 431625 506017 569323

a/ See Schedule of Fertilizer Requirements per rai, Annex 9, Table 7.

.r

*' -~~~~~~~

ANNEX 5Table 5

THAILAND

RUBBER REPLANTING PROJECT

Project Administration Costs

(# 000,000)

1976 1977 1978 1979 Total

Field Staff / 29.3 34.4 36.9 41 .1 141 .6

Overhead and Operations / 1±1.8 . 51.0 187.6

Vehicles and EquipmentJeeps (0i 120,000) .1 .4 .2 .5 1.2Motorbikes (@ $ 20,000) .4 2.2 1.8 2.5 6.9Office equipment and other .4 .6 1.6 3.3 5-9

Sub-total .9 3.2 3.6 6.3 14.0

* Nursery EstablishmentBudded stumps 6.1 9.4 - - 1 1Budwood 2.0 - - -

Sub-total 8.1 9.4 - - 17.5

Management Consultants 1.5 3.0 - - 4.5

UNDP Technical Assistance to Fund 1w..2 1.2 1.3 1.3 5.0

TOTAL 88.5 92.9 89.1 99.7 370.2

1/ Based on the total number of surveyors, field inspectors, instructors, and GMOofficers, see Annex 7, Appendix 4.

2 Including the cost of RRC's research and support activities, estimated at M 15million per annum.

THAILAND

RUBBER REPLANTING PROJECT

IBRD Financed Expenditures

(US$ 000,000)

1976/77 1977/78 1978/79 1979/80 Total. FX Local

Fertilizers 6.5 6.9 7.5 7.0 27.6 27.9

Chemicals .8 1.5 2.3 3.1 7.7 7.7

Planting Materials .5 .6 .7. 1.0 2.8 - 2.8

Labour Payments 1.1 2.0 3.0 3.4 9.5 - 9.5

Salaries of Field Staff .4 .4 .4 .5 1.7 - 1.7

Vehicles - .1 .1 .2 .4 .4

ConsultRnts ~ .2 .1 _ .3 3

TOTAL 9.3 11.5 14.o 15.2 50.o 36.0 14.o

- - _

Table 7

RUBER REPLSNTING PROJECT

IIBRD Qfurmet4

IEERD Fiscal Year Disbursement Cumulativeand Semester i Semester Disbursement

1st (July-Dec. 1976) 3.8 3.82nd (Jan.-June 1977) 5.3 9.1

i278ist 4.9 14.02nd 6.8 20.8

1979

1 at 5.4 26.22nd 8.6 34.8

i280

lst 5.7 40.52nd 9.5 50.0

ANNEX 6Page 1

THAILAND

RUBBER REPTAN 7ING PROJECT

Fiscal Implications of the Project

1. *This Annex examines the fiscal implications of accelerating thereplanting program to a rate of 50,000 ha per year, from the presentlevel of 20,000 ha per year. Table 1 projects resource transfer from therubber sector to the Government, and Table 2 shows the corresponding cashflowsof the Fund. Both tables show projected cash flows with and without acceler-ating the program.

2. Crucial assumptions underlying the cost and revenue forecastrelate to the assumption of a significant drop in the real price of fer-tilizers (Annex 9, Table 8), to the price forecast for rubber (Annex 9,Table 9), and to forecast rates of international and domestic inflation.The projections also reflect present Government policy regarding thetaxation of rubber and the division of tax receipts between the Fund andTreasury, 1/ and also regarding the level of grant payments to farmers. L/By their regulation, the Government has considerable flexibility in con-trolling both the resource transfer from the rubber sector, and also theFund's financial position. Thus the projections are sensitive not only tounforeseen price changes but also to Government policy regarding taxationand grant payments.

3. With or without the accelerated replanting program, the Fund wouldincur deficits during the next five years (Table 2). These deficits willhave to be financed either by raising the cess, by supplementary Governmentfinancing, or by external financing. However, in each case the rubbersector will continue to transfer resources on a net basis to the rest of theeconomy. Net transfers from the rubber sector are estimated at aboutUS$25 million for 1975.

1/ Including the monthly determination of the "gazetted price,, on whichtaxes on rubber are based, according to the following formulae:

Replanting cess = (Gazetted Price - 10 A/k) .1 + .5Export Duty = (Gazetted Price - 5.8 $/kg) .

2/ The projections assume that the cash component of the grant will beadjusted to remain constant in real terms. Howdver, the mission dienot accept the preparation report's proposal that the cash componentof the grant should be increased. Under separate cover, the Financialand Economic Analysis of the Project shows that present levels of the 0grant provide sufficient incentives for replanting.

ANNEX 6Page 2

Tax receipts will grow faster than production, because with the presentformula for taxing rubber, increases in the price level will increase thereal rate of taxation (see footnote, page 1). Without accelerating theprogram, the net resource transfer from the rubber sector, in currentterms, would grow at the rate of about 30% between 1975 and 1979, asopposed to a lower 20% rate with the accelerated replanting program.However, this reduced resource transfer still leaves an ample marginfor the supplementary financing of the Fund's expected deficits duringthe project period.

4. Subject to the above provisos, during the period 1976-1979, whichis the proposed project period, the Fund would have a financial gap of about$68.0 million over its expected cess revenues and reserves:

RRAFB Financing Requirement

Bhat (000,000)------ ----US$ (000,000)-------1975 1976-1979 Total 1975 1976-1979 Total

Expenditures 490 2,960 3,450 24.5 148.0 172.5

Cess Revenues 240 1,300 1,540 12 65.0 77.0Reserves /a 250 300 550 12.5 15.0 27.5

Financing Gap - 1,360 1,360 - 68.0 68.0

/a Assumes that present reserves of B 550 million are entirely drawndown. Ilowever, if external financing in the amount proposed isprovided, the Fund would continue to earn interest income ofabout US$5 million through 1976-79.

Assuming external financing of around US$60 million during 1976-1979, theGovernment's financial contribution during the same period (in excess ofthe Fund's normal cess revenue) would be easily manageable as it wouldamount to less than 10% of forecast export taxes of about US$250 millionduring the same period. However, during the subsequent five year period(1980-1984) the Fund would face heavy deficits of about US$30 million peryear to sustain replantings at 50,000 ha/yr. Therefore, the Governmentshould be asked to consider how it intends, in due course, to sustainthe program and finance these deficits. Options again include raisingthe cess, financing the deficit through budgetary allocations, continuingrecourse to external financing, reducing (moderately) the individual grantsin real terms, or a combination of these measures.

0 (0/9 77(

-9 'Wv WIC .1C ml SCSI ft, OS (.1) (m) (.95) (S.1) (m) (C.) (S.) (..C) 0o9(Sl944 94994009 0 C9)9990449909904444099 1

.11, -Z9 ftl. VZ" olm C-1 -1 C~~~~~~~~~~S' CC -I WU MCI CISI994904'9I99-090990 9)99909 999/

-IC .11Z .,CZ KOM OW'll ~~~~~~~~~~~~"S .1. -I -I .11. -I -C C- -1 Wl~~~~~~~~~~~~~~ - .1,I II S4 9494'4 90990WC

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Tl- u-c-~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~9-0 ( )999 49999 4

-C .11. W11Z -1Z ~~~~~~~~~~~~11 K.C .91 So" MI~~~~~~~~~~~ -C -C S"Z W. -1 COI ". 0'00999990 0 99 00499-9999-9-0

09909 94490 R99E 019999 0900 0990 0469-1 01991 99409 049 S994 MR09 0409 409V- 0404 0909 009 099 004 U014 040 099 440m 096 0449 0

0994 0490 0969 900 00 99 009 009 004 90 00 0049S l I " ~ l - S 090 0004 094 44 09 49 04 09 04 0 0991 ~ W W . 049 00M4-99I9999994~4

0999 66W 0999 0999 0090 6617 6617 66W 9090 6W 6W 6W 6W 907 6W 99094-999~~~F 62- w- Tq- W Tu- 5FF 1T - 1

WC ~~~~~~~~~15 W, MC - - - ~ ~ 94999999 ~09999444999999 -

00990 09000 00999 09999 0949 09999 09949 09049 04094 094 - 4049 0040 0949 0949 0004 904 0994 0494 0999 4009 0404 0094 9999 0999 0094 49499--9

0099 0099 0999 0094 0009 0940 0094 0999 000! 0901 0409 0944 0999 4944 0404 009 000 000 099 099 014 090 400 099 S 040 t

0004 0940 0949 0009 0994 0999 0494 0909 9009 6W 6W 6690 6W 677 667 9090 60/90 6W 677 667 6W 6W 6W 6W 6790 (9994044.) 0? 09909994 9994009990 9999 0 W

U-~~~~~~~~~~~~~~~~/ 049

090 ~ 049 000 99 09 09 0099I rc F 94 0904 0494 0990l 0(94 0040 4)0 400 004 009 000 004 000 00 0)4 4)04 Oo6 4004-

RUBBER REPLANTING PROJECT

8 s Coohflow wader Alternative Rpaeltium Progrom

(8 000.000)

(Current Prices)

1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1988 1897 1998 1999

Altertative I1 Replactins Progrm at R Rate of 20,000 ha/vr

Outflovs 480 480 5W 490 480 440 510 570 620 650 680 720 770 820 870 930 990 1050 1130 1200 1280 13p0) 1450 1540 1640I lov 95% of Ce.. Revecue 20 260 - 300 360 390 470 540 640 730 840 960 1090 1310 1470 1640 1840 2250 2580 2950 3360 3800 4290 *5 5560 6340

Yearly Sorplee (Deficit) (230) (220) (200) (130) ( 90) 30 30 70 110 190 280 370 540 650 770 910 1260 1530 1820 2160 2520 2930 3510 4020 4700

C,._ultive Surpl.s (Deficit) 320 100 (100) (230) (320) (290) (260) (190) (SO) 110 390 760 1300 1950 2720 3630 4890 6420 8240 10400 12920 15850 19340 23380 28080

Alterstive II: Accelerated Rclaotisag Propre.

Outflo-s 490 520 660 830 910 960 1110 1290 1420 1550 1650 1760 1870 1990 2120 2260 2410 2560 2730 2900 3100 3300 3510 3740 3980l.flo 95% of Cess Revesue 250 I/ 250 300 360 390 470 540 640 730 850 990 1140 1380 1600 1800 2070 2580 3040 3500 4080 4660 5330 6190 6960 8010

(ai Ca.hf-ow without Nxt6crnl rino_

Yearly Serplus (Deficit) (240) (300) (360) (470) (520) (490) (570) (650) (690) (700) (660) (620) (490) (390) (320) (190) 170 480 770 1180 1560 2030 2680 3220 4030

Corulative Surplus (Dnficit) 310 10 (350) (820) (1340) (1830) (2400) (3050) (3740) (4440) (5100) (5720) (6210) (6600) (6920) (7110) (6940) (6460) (5690) (4510) (2950) (920) 1760 4980 9010

(b) C-hflos vith E.ternal Fiesecain

Loans (Approai_-t.) 220 260 300 350Lan Iepanca _ - ( 30) (60) (70!) t,90) (90) (90) (130) (130) (130) (130) (130) (130) (130) (130) (13 (130) (130) (130) (130) "30)

Yearly SOrplu. (Deficit) (& 6b) b / (240) (80) (130) (230) (240) (580) (660) (740) (820) (830) (790) (750) (620) (520) (450) (320) 40 350 640 - 1050 1430 1900 2550 3220 4030

Comolati'e Sorplug (Deficit) 310 230 100 (130) (370) (950) (1610) (2350) (3170) (4000) (4790) (5540) (6160) (6680) (7130) (7450) (7410) (7060) (6420) (5370) (3940) (2040) 510 3730 7760

SOURCE: Table lof thi- A--s.

1/ Iscludieg fatr-st incoe. It u .bseud that a st.rting reourve of1 550 million is octirely dro dan.

2/ Eacluding ictereet ipccoe after 1975. E-teroal finusciag would clotd-e the depletion of the Feed's reaectre, dding en icf2t 0! obout1 100 rillion. The external Ions would be repaid by Gover-neot ratherthac the Food, hence the yearly surplus (deficit) shove the consolidatedG-oerneent/Fund surplus fro- the finencial operotion of the Fnd.

RUBBER REPLANTING PROJECT

i'ertilizer Requirements and Costs with a Replanting Rate of 20,000 h/vr,.

76 _77_ 728- -792 80 81 2and r

Coqpound Fertilizer Rwruirements (tonx)

1975 Approvals 4,380 5,060 5,470 5,310 7,000 7,000 7,0001975 I 4,380 5,060 5,470 5,310 7,000 7,0001976 " 14,380 5,060 5,470 5,310 7,0001977 " 4,380 5,060 5,470 5,3101978 " 4,380 5,060 5,4701979 " 4,380 5,061980 " _ 4.3O0

TOTAL, (tons) 4,380 9,440 14,910 20,220 27,220 34,220 41,220

Price Forecast ($/kg, 1975 prices) 4.76 4.24 3.66 3.20 3.04 3.04 3-.4Price Forecast (X/kg, current prices) 4.76 4.62 4.30 4.04 4.14 4.42 4.73

TOTAL, Current Prices (0'000) 20,850 43,610 64,110 81,690 112,690 151,250 194,970.n.n.. ... .. .. _ _.. .. Mw .a --- . ....... a . a .....

Rook Phosphate Requirements (tons) 2,250 2,250 2,250 2,250 2,250 2,250 2,250

Price Forecast (#/kg, 1975 prices) 2.0 1.6 1.4 1.2 1.2 1.2 1.2Price Forecast (s/kg, ourrent prices) 2.0 1.74 1.64 1.52 1.62 1.73 1.85

TOTAL,Current Prices (E'000) 4,500 3,915 3,690 3,420 3,660 3,920 4,190sin. . ....... . ....... ... .. ..... . ..--- ..... f..... .....

TOTAL Fertilizer Costs, Ciurrent Prices 25,350 47,525 67,800 85,110 116,350 155,170 199,160(X '000) ...... ... ..... .... ....

See Schedule of Fertilizer Requirements per rai: Annex 9, *e7.

THAILAND

RUBBER REPLANTING PROJECT

Disbursement of Grant Payments Other than Fertilizerwith a Replanting Program of 20,000 ha/yr.

(000,000 g)

1976 1977 1978 1979 1980 1981 1982-- anc ater

1975 Approvals 1II 28 13 9 5 3 3

1976 111 28 13 9 5 3

1977 111 28 13 9 51978 111 28 13 9

1979 111 28 13

1980 111 28

1981 111

Total in 1975 Prices 111 139 152 161 166 169 172

Price Index 109.7 119.0 127.4 135.7 144.5 153.9 163.9

Total in Current Prices 122 165 194 218 240 260 280

Based on Individual Disbursement Schedules as below:

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Bhat/rai 890 225 100 70 40 25 25

I ID

-r a

TUAILANDACCELJIUTED RU'lBIUR 1EPLANTING PROGRAM

Disbursement of Grant Paynents Othier than Fertilizerfor the Accelerated Progr

A 000,000)

1976 1977 1978 1979 1980 1981 1982 1983 anO Vter

1975 Approvals 139530 35160 15630 10940 6250 3910 39101976 " 195340 49220 21880 15310 8750 5470 54701977 " 279060 70310 31250 21880 12500 7810 78101978 " 279060 70310 31250 21880 12500 78101979 279060 70310 31250 21880 125001980 '~279060 70310 31250 218801980 tt BOX DETAILED IN ANNEX 5, TABLE 61981 279060 703-10 312501982

279060 703101983

279060

Total (Constant 1975 Prices) 139530 230500 343910 382190 462180 415160 424380 428280 430620

Price Index 100 109.7 119.0 127.4 135.7 144.5 6.5 153.9 163.9 174.5 185.9

Total in Current Pr'ices 153060 274300 438140 518630 581150 638930 695560 747350 800520

Based on the average disbursement schedule of individual grant payments,Annex 6, Table 4. The small discrepancies in the "box" between thisTable and Part C of Annex 5, Table 3 are due to the different cost ofplanting materials for replanting with budded stumps and budwoodrespectively. - - - --- d -n b -o

IJiOo- a.. . ..~~~~4

THAILAND

RUBBER REPLANTING PROJECT(l3hats)

Computation of Tax Rate/kg of RSS3 Rubber,in Current Prices

f.o.b. price Uazetted Price Fg) Export Tax Cess Intermediate Farm-gate'witf h ~ir fT' tion ) Co9ts Price

f.o.b. 1.5g- 2.82 (g- 5. 8 0).4 (g- 10).1 + .5

1975 13.1 10.6 1.9 .6 1.6 9.01976 14.0 11.2 2.2 .6 1.7 9.51977 15.0 11.9 2.4 .7 1.8 10.11978 16.0 12.5 2.7 .8 2.0 10.51979 17.2 13.3 3.0 .8 2.1 11.31980 18.4 14.1 3.3 .9 2.2 12.01981 19.7 15.0 3.7 1.0 2.4 12.61982 21.0 15.9 4.0 1.1 2.6 13.31983 22.5 16.9 4.4 1.2 2.7 14.21984 24.1 17.9 4.9 1.3 2.9 15.01985 25.8 19.1 5.4 1.4 3.1 15.91986 27.6 20.3 5.8 1.5 3.4 16.91987 29.5 21.5 6.3 1.7 3.6 17.91988 31.6 22.9 6.8 1.8 3.9 19.01989 33.8 24.4 7.4 1.9 4.1 20.31990 36.1 25.9 8.0 2.0 4.4 21.51991 38.6 27.6 8.7 2.3 4.7 22.91992 41.4 29.5 9.5 2.5 5.0 24.51993 44.3 31.4 10.2 2.7 5.4 26.01994 47.4 33.5 11.1 2.9 5.8 27.71995 50.7 35.7 12.0 3.1 6.2 29.51996 54.2 38.0 12.9 3.3 6.6 31.41997 58.0 40.5 13.9 3.6 7.1 33.41998 62.1 43.3 15.0 3.8 7.6 35.71999 66.4 46.1 16.1 4.1 8.1 38.02000 71.1 49.3 17.4 4.4 8.7 40.6

- t ,-ax 9 -ornul -e, see footnotc , page 1 of this Annex.

THAILAND

RUBBER REPLAITING PROJECT

Incremental Production Attributable to AcceleratinR Replantin to 50.0O0/ha/year over Replanting atthe Rtate of 20.000 hayear I

(000 Tons)

1983 1984 1985 1986 1987 1988 1989 1990 1929 1992 1993 1299Incremental 5,000 ha planted in t75 2 2 2 3 4 5 5 6 6 6 6 6

15,000 ha 1 '76 5 5 6 9 12 14 15 17 17 17 1730,000 ha n '77 9 9 11 19 24 28 30 34 34 34

'78 9 9 11 19 24 28 30 34 34'79 9 9 11 19 24 28 30 34'80 9 9 11 19 24 28 30

nf n ' 81 9 9 11 19 24 28n n'n 8 82 9 9 11 19 24

'83 9 9 11 19'8n4 9 11' 9 985'86 etc.- - -

2 7 16 27 42 65 91 121 153 187 221 255

1/ Year l Year 2 Year 3 Year Year 5 Year 6 Year a Year and After

Incremental Production (kg/rai) 50 50 60 100 130 150 160 180

See also the Economic Analysis, Annex 9, Table 5.

* *

hI w La{~ .0 a. . T!R ]2

i~~0 g ! og>, * a,

0 J 0F ' ^ 0 e 0

>* o n 2 ° 0 3 .~ X06

is a

. . ~I :: . .. .. . .-K 1

ill I I~~~~~~~~~~~~~~~~~~~~~ . . .U, ....

I . . ~ ~~. . -

I~~~~~~~~~~~~s .

* ~~~ ~ ~~. ... E . . . . .. . ......

* | l * . | j .

*~~~~F'.: .I.:.

TUU

ANNEX 8Page 1

ThILAND

RUBBER REPLANTING PROJECT

World Market Prospects for Rubber

1. During the post-war period, the world 1/ market for both naturaland synthetic rubbers - expanded at an average rate of about 6.2% per annum.The slower demand expansion in two major consuming countries - the UnitedStates and the United Kingdom - was more than offset by an above averagerate of growth in all other countries. Natural rubber supply increased byonly 2.5% per annum between 1950-52 and 1970-72, but synthetic rubber pro-duction grew more than four times faster (at about 10.5% per annum). Conse-quently, the share of natural rubber in the market for new rubbers outsidethe centrally planned countries declined from 65% in 1950-52 to 33% in1970-72. The market share of natural rubber declined faster in the UnitedStates than in any other consuming area, but the advances of syntheticrubbers were comon to all developed and developing consuming countries.In 1972, synthetic rubbers net 78% of the market demand for all elastomersin the United States, 65% of the total in Japan, 64% in Western Europe and27% in India.

2. The bulk of rubber is used in the manufacture of tires and otherautomobile parts. In all developed countries, demand for rubber in theseend-uses expanded much faster than available supply of natural rubber. Thegap was met by synthetic rubbers: first styrene-butadiene rubber and thenpolybutadienw and polyisoprene. Styrene-butadiene rubber has been by farthe most important substitute for natural rubber. It accounts for about60% of total synthetic rubber production and 65% of total world estimatedsynthetic rubber capacity. Polybutadiene is the second most important typeof synthetic rubber, followed by polyisoprene. Polyisoprene is the closestman-eade approximation of the natural elastomer.

3. Synthetic rubbers, a derivative of the rapidly expanding petro-chemical industry, compete with natural rubbers at two levels: availa-bility and price. In the post-war period, synthetic rubber producerswere not only able to rapidly increase their supplies to meet the grow-ing market needs, but were also able to progressively reduce the produc-tion costs and price of their products. Technological innovations andscale economies played a considerable role in making synthetic rubbersless expensive to produce. However, the key to the success of the in-dustry was the seemingly unlimited availability of chemical monomers atcontinuously declining prices. Synthetic rubber prices declined sharply

1/ Excluding the centrally planned countries.

ANNEX 8Page 2

(by over 40%) during the sixties and natural rubber prices followed suit,although fluctuations around this declining trend were wider in the caseof natural rubber. This different behavior largely reflected the differ-ent supply elasticities of natural and synthetic rubber; the supply ofnatural rubber is more price inelastic in the short run than that ofsynthetic rubbers. Demand for all elastomers, which is by nature aderived demand, is quite insensitive to price changes, but very sensi-tive to changes in aggregate economic activity. The speed at whichsynthetic rubber producers can adjust their supplies to variations inmarket demand (through capacity expansion and/or higher utilization ofexisting capacity) is much greater than that of natural rubber producerswho cannot so easily transfer resources in and out of rubber production.Although no clear consensus exists on the actual area of competition betweennatural and synthetic rubber, it is nevertheless, evident that changes inrelative prices do encourage substitution of one type of rubber for another. 1/

4. In the past two years, natural rubber prices have been fluctuatingfairly rapidly and have been characterized by two separate sets of circuui-stances. The first rise, in 1972-73 was the result of the simultaneouseconomic boom conditions all over the world, a boom which began to taperoff in the second half of 1973. World consumption of natural rubber in-0 cre"aed by 4% in 1972. Net exports of natural rubber, however, remainedat the same level as in 1971. Increased utilization in developed countrieswas not matched by an increase in imports, as stocks were heavily dramupon. The stagnation of import demand kept prices down throughout mostof the year, until stock replenishments and anticipatory buying, fosteredby monetary uncertainties, caused a sudden reversal of the trend in theclosing months of 1972. The price rise continued throughout most of 1973.The upturn in industrial production in developed countries created a strongdemand for rubber and speculative buying also continued in 1973. Naturalrubber prices - in terms of RSSI, cif Now York - increased from 16.5 A/lb.in April 1972 to about 44 1/lb. in July 1973.

5. Towards the end of 1973, when the slowdown in industrial activityin developed countries was beginning to affect demand for all elastomersand prices of natural rubber were weakening, the availability of chemicalfeedstocks for synthetic rubber was severely curtailed by the oil crisis.Synthetic rubbers became scarce, their prices increased sharply andnatural rubber prices rebounded to new post-war peaks. RSSI, cif NewYork, averaged at 55.5 A/lb in January 1974. These prices reflectedthe scarcity of all elastomers, but also the expectation that the oilcrisis would drastically increase the cost and price of synthetic rubber.Heavy speculations came to characterize the natural rubber market.

1/ Statistical analysis shows that the elasticity of substitution betweennatural and synthetic rubber is of the order of 0.3. The estimate,however, may be biased because reliable series of prices of syntheticrubber are not available.

ANNEX 8Page 3

6. During 1974, with crude oil becoming progressively more availa-ble and chemical feedstocks again in adequate supply, the real dimensionsof the oil crisis and it effects on synthetic rubbers began to becomeclearer. The production costs of the basic type of synthetic rubber -SBR 1500 - increased from 12-13 g/lb. to about 23 ct./lb. and its marketprice from 17 i/lb. to 32-33 /lb. The very high price differentialbetween natural rubber and general purpose synthetic rubber could nolonger be maintained and natural rubber prices - in terms of RSSI, cifNew York - declined to 40 ct./lb. in June 1974.

7. The economic slowdown in most developed countries, coupled withthe actual decline of real QIP in the United States and Japan, severelyhurt world demand for all elastomers during 1974. Car production inWestern Europe, Japan and the United States was badly affected. Conse-quently, consumption of rubber in tires and other automobile parts de-clined substantially. Preliminary estimates for 1974 show that, on aworld basis, consumption of all elastomers remained at the same level asin 1973. During the course of the year the supply-demand situation com-pletely reversed itself: from one of excess demand at the beginning ofthe year to one of excess supply during the last 3-4 months of 1974.Prices of general purpose synthetic rubbers declined by 10-15 percentin the second half of 1974 and natural rubber prices continued to slidedownard to about 30 i/lb. in December, despite some attempts to supportthe market through production cutbacks and stockpiling by the MalaysianGovernment.

8. The short-term price outlook for natural rubber does not appearto be very bright. Demand for all elastomers is expected in 1975 toincrease only marginally above 1974 levels and substantial over-capacityin the synthetic rubber industry is likely to keep general purpose syn-thetic rubber prices at depressed levels. Natural rubber, however, willmarginally benefit from the above-average growth of some end-uses in whichit has a relative advantage over synthetic rubbers - heavy truck and farmequipment tires - and from the growth of radial car tires, where the pro-portion of natural rubber is greater than in crossply tires. Demand fornatural rubbers is, therefore, expected to increase moderately above 1974levels. Natural rubber prices are anticipated to recover somewhat fromthe low levels of December 1974 and to average at about 33 U/lb. (RSSI,cif New York).

9. World consumption of all rubbers is projected to grow at anaverage annua rate of 5.4% between 1973 and 1980 (as compared with 6.2%per a*aum registered between 1960-62 and 1970-72). 1/ Over the same period,

1/ Projected on the basis of the relationship between total elastomersconsumption and industrial production. Regression analysis showsthat a 1% increase in industrial production in OECD countries isassociated with a 1.18% increase in the desn.d for all elastomers.About 98Z of the variation in elastomer consumption is explained bythe growth in industrial production.

ANNEX 8Page 4

world supply of natural rubber is forecast to grow at some 5.6% per annumat a considerably faster rate than in the sixties. 1/ Improvements inyields are expected to account for most of the growth in rubber output inthe seventies. Production capacity of synthetic rubbers is forecast to bearound 8.8 million tons by 1977. 2/ Extrapolation of the trend would putcapacity at 10.0 million tons by the end of the seventies. To arrive atthe actual production necessary to meet total elastomers demand by 1980,the utilization to capacity ratio in the industry would have to rise toabout 85%. The normal level of production in the synthetic rubber industryhas been in the past around 75% of total rated capacity. It can, therefore,be expected that in the latter part of the seventies, synthetic rubberswill remain in tighter supply than in the sixties and early seventies.Natural rubber producers are then unlikely to encounter serious difficul-ties in disposing of their supplies. In fact, a larger than expectedincrease in natural rubber output - for example, through a more extensiveuse of Ethrel - could possibly allow natural rubber to marginally increaseits share of world total rubber consumption.

10. Excluding that eventuality, consumption of natural rubber out-side the centrally planned countries is forecast to be growing during therest of the seventies at an average of 5.8% per annum. A reduction in therate of growth of natural rubber utilization in centrally planned countriesis anticipated to increase availabilities for the rest of the world. Ac-cording to this forecast, synthetic rubber consumption would increase at5.2% between 1973 and 1980 and natural rubber would, therefore, maintainabout 32% of the world market for all elastomers. World net exports ofnatural rubber are expected to grow during this period of time at 4.9%per annum, an increase of about 1% in their average rate of expansionwith respect to the sixties.

11. Analysis of the relationship between crude oil, basic chemicalsand general purpose synthetic rubber costs indicates that if one assumesthat crude oil prices will be in 1980 about $8.65 per barrel in 1974constant dollars, SBR prices should be between 29 and 34 I/lb. Corre-spondingly, RSSI, cif New York, should be selling at 31 to 36 U/lb. in1974 constant dollar terms. In 1980 dollar terms, the price of naturalrubber is expected to be between 51 and 59 /lb.

12. Beyond 1980, the prospects of natural rubber still appear to bequite favorable on the demand side. Total demand for all rubbers canbe forecast to grow at about 6% per annum between 1980 and 1985. Poten-tial supply of natural rubber - with existing acreage and available pro-duction technology is, on the contrary, projected to grow during this

1/ Between 1960-62 and 1970-72 world production of natural rubber* increased at an average rate of 3.9% a year.

2/ See C.F. Ruebensaal, The Rubber Industry Statistical Report, 1974,Appendix A, Table 9.

ANNEX 8Page 5

period at a much slower rate than in the seventies - at 3.7% per annumbetween 1980 and 1985. This implies that the 1985 market share of naturalrubber outside the centrally planned countries would decrease to about 29%because of insufficient supplies. To maintain 32% of the market - a feasibleobjective in terms of the technical-economic potential of natural rubber -producers should increase their output at 5.5% per annum between 1980 and1985. The likely shortfall in natural rubber availability in the 1980'spoints to the need of increasing natural rubber supplies beyond what appearsto be possible under present expansion plans.

13. From the point of view of future prices, the prospect of naturalrubber appear to be favorable, if one assumes that crude oil prices willremain at $8.65 per barrel, in constant 1974 dollar terms, and that nomajor shift in the location of the petrochemical industry away from devel-oped countries and in the direction of the basic raw material source - oil -

will take place in the 1980s. A drop in the price of oil would again makethe synthetic rubber feedstocks cheaper and increase the relative competi-tiveness of general purpose synthetic rubbers. Similarly, a large, unco-ordinated expansion of production capacity for petrochemicals in oil pro-ducing countries would increase the supply of these products and - otherthings being equal - depress their prices to the advantage of syntheticrubber manufacturers. To allow for the possibility of lower chemicalprices in the 1980s, the long run equilibrium price of natural rubberis forecast to be around 33 U lb. in 1974 constant dollar terms.

0

* ANNEX 9Page 1

THAILAND

RUBBER REPLANTING PROJECT

A. Financial and Economic Analysis

1. Financial Returns. Tables 1 and 2 illustrate on-farm developmentcosts and benefits at market prices under two different alternatives. Alter-native I (Table 1) shows costs and benefits assuming that the farmer replantswith unselected seedlings. This alternative in effect illustrates the returnsto rubber replanting as they would be in the absence of the replanting pro-gram. (New rubber planting with unselected seedlings is still widespread.)Alternative II (Table 2) shows costs and benefits under the replanting pro-gram, replanting with budded stumps.

2. The financial return on investment (or the "return at marketprices") of planting rubber with high yielding varieties is estimated at21% (Table 2). In this calculation the consolidated return of Governmentand farmers are set against costs at market prices, including labor. Thiscalculation simulates the return of a private entrepreneur in a tax-freeindustry, and shows that the planting of rubber under the proposed tech-nology is financially viable. Additional benefits can be derived fromintercropping as detailed in Tables 3 and 4.

3. Under the grant program, rubber growers and the Government sharethe investment cost as well as the returns from rubber production. Returnson investments, both for the farmer and the Government, are shown in Table5, Part I. Financial returns to farmers are shown both with hired laborand without taking labor into account. The latter return is relevant tosmall holdings using family labor, the former for larger holdings usinghired labor.

4. If family labor is used, the grant exceeds the cash outlay forinputs; there is no net financial investmeat, and the farmer's rate ofreturn is infinite. Hence, net present values are used to compare alter-natives. With hired labor, the replanter's rate of return would exceed40%. (The sensitivity of rates of return to cost increases and benefitdecreases is shown in Table 6 and the assumptions relating to the levelof the grant, and price projections for fertilizers and rubber are shownin Tables 7 to 9.)

5. The Government's rate of return on investment would be about 12%,which is lower than the cost of capital for government investment, estimatedat 15%. This assumes that the real rate of taxation remains constant, which0 is the most conservative assumption. According to the present formula fortaxing rubber (see Table 9), the real rate of taxation would rise with theprice level. Assuming no change in the application of the formula and aninflation rate of 7% the rate of return would be significantly higher.

ANNEX 9Page 2

6. *Ypical Farm Budget. Average yields of rubber in South Thailandare about 50 kg/ha. Mature yields under high technology rubber cultivationare estimated at 290 kg/rai or about six times the present average. Theincome from rubber of a typical smallholder cultivating 15 rai is shownin Table 4. His net farm income would rise from the present level of about% 7,000 per year to about 9 35,000/year during the full maturity of therubber trees, that is from the 20th year from replanting until about the35th year. However, because of the long period of maturation, no signifi-cant increase of income occurs until the 10th year after replanting. Thefarm budget shows the role of the cash component of the grant in eveningout the smallholder's income stream from rubber, assuming that he replantshis holding in successive stages to minimize short-run decreases in income.

Stages

7. Phased Replanting. Replanting a holding in one stage would nor-mally impose undue financial hardships for a small farmer who depends en-tirely on rubber for livelihood. Also, the development of the holding inone stage underutilizes the productive capacity both of land and of avail-able family labor. Family labor would be underutilized in Years 2-7 whenthe labor requirement of maintaining the immature rubber averages only about4 man-days per rai. Similarly, land that could be intercropped would lieidle, since family labor is not sufficient to intercrop more than about 2rais of rice (Table 3).

8. However, the staggered development of holdings evens out bothresource use and cash flow during the maturation of the young trees. Itwould enable farmers to maintain a higher income both from intercroppingand from ethrel stimulation and slaughter-tapping their overaged rubbertrees. 1/ In addition, the grants would help supplement incomes duringthe entire phase of immaturity.

9. Incremenca. costs of intercropping with other crops (e.g. pine-apples, soybeans, groundnuts) in addition or in lieu of rice raises thereturns from intercr!Wpping substantially above the conservative assumptionsin the Table 3. However, as these returns would in large measure depend onfavorable local conditions, and only a minority of farmers can be expectedto benefit from such opportunities.

10. Incentives under the Project. The grant not only provides thetechnical inputs for high technology cultivation but also contributes acash component towards the financing of labor costs. The appropriatelevel of grant paym'-nts, and in particular of the cash component, hasbeen a matter of controversy and will remain an important policy issue

1/ Incremental inco.aes by local stimulation could double incomes fromoveraged rubber, but not taken into account in Table 5 since onlyabout half of smallholders are expected to use stimulation.

ANNEX 9Page 3

facing the Fund (para 6.08 in the main text). The justification for cashincentives under the grant applies differently to family operated small-holdings and larger units operating with hired labor. With respect to thesmallholdings the aim of the cash incentive is to prevent a reduction ofincome while only part of the rubber holding is productive. With respectto the latter, the incentive of the grant can be evaluated in terms of therate of return on investment. As shown below, the present level of grantpayments provides sufficient incentives on both counts.

11. The typical smallholder's income from rubber stagnates for about10 years after the start of the replanting cycle. The cash component of thegrant through year 9 constitutes only 20% of the replanters net income fromrubber. Taking into account subsistence income from the typical smallholder'ssubsidiary rice plot, his potential off farm income and income from ethrelstimulation grant payments as a percentage of total smallholder's incomewould be even lower. Therefore the real incentive of the program remainsthe dramatic increase in productivity after the commencing after about the10th year after the start of the replanting cycle rather than the cashpayment under the grant. While the increases in grant payments would pro-portionately increase the Fund's expenditures they only have a marginaleffect on the replanter's financial situation. In the short run the cashincentive can be considered adequate if it prevents abrupt fall in incomesat the same time when famlly labor is required for land clearing and plant-ing. This is now the case.

12. The commercial producer's financial rate of return from replantingrubber with hired labor is summarized in Table 6. With the grant the re-planter's rate of return would be about 41%. 1/ Without the grant (i.e.assuming that the replant finances all the costs of replantings, the rateof return would be only 18%; 1/ which can only be considered marginal inview of significant risk due to market fluctuations, the high sensitivityof returns to costs (also indicated in Table 6), the long maturation ofthe investment, and the high foregone income on capital invested (shortterm interest rates charged by local money-lenders range about 25% perannum). Thus, while the cash component of the grant is an effectiveincentive for encouraging commercial replanting, the present level ofthe grant appears sufficient.

Economic Return

13. The net benefits of the project are evaluated on the assumptionthat in the absence of the program, the now overaged rubber holdings wouldbe replanted with unselected rubber seedlings. This is the most likelyalternative to the high technology replanting under the program. The in-cremental cost and benefit streams are shown in Part 2 of Table 6.

1. Foregone net income from cut-down trees is not included in these cal-culations, as they would be insignificant for commercial producerswho have to hire labor for tapping overaged trees.

ANNEX 9Page 4

14. The economic rate of return on the incremental net benefit streamof high technology replanting is estimated at 20% (see Table 6). The Fund'sadministrative costs are to about 15% of grant payments and are included incosts.

15. Since there are no marked seasonal fluctuations in the projectarea and since there is no evidence of agricultural unemployment, a wagerate of 20 Baht/man-day (representing the lower end of the wage scale forunskilled labor) has been taken to reflect the opportunity cost of labor.Sensitivity of returns to a higher wages is indicated in Table 6.

16. Domestic costs and benefits are given a weight of .9 relativeto foreign exchange costs and benefits, implying a shadow price of foreignexchange of 1.1 relative to domestic funds. This raises the rate of returnby about half a percent. Shadow pricing foreign exchange does not materi-ally affect returns since benefits as well as the costs consist mainly offoreign exchange (Table 7 Part B).

17. The fact that the transfer payments under the grant convert "un-committed government funds" into consumption should, according to Bankguidelines for economic analysis, somewhat lower the economic rate ofreturn of the Project. This effect has not been quantified.

B. Impact of the Project on Agricultural Incomesin South Thailand and on Income Distribution

18. The Importance of Rubber in the Economy of Southern Thailand. Thefollowing paragraphs are an effort to piece together the role of rubber inthe economy of South Thailand from the incomplete and often contradictorydata.

19. Rubber is by far the most important cash-crop in Southern Thailand.About half of cash income of all agricultural households derives from rubber:

ANNEX 9Page 5

Average Cash Farm Income per Household by Crop

Amount Percentage(Baht)

Rice 300 9Fibres 520 16Vegetables and Fruits 340 11Livestock 520 16Rubber 1,520 47Others 30 1

TOTAL 3,230 100

Source: Farm Household Survey, 1970.

20. Assuming a planted area of about 10 million rais (RRC estimate)and an average holding of 17 rais (1963 Agricultural Census), it wouldappear that about 600,000 households are rubber cultivators. At sixheads per household, this would imply that about 90% of 4 million ruralpopulation of Southern Thailand are engaged in the rubber sector, whichprobably is an overestimate of the proportion of the population engaged

0Y in the rubber industry. On the other hand, if only half of agriculturalhouseholds produce rubber (as estimated by the Agricultural Census of 1963)the average rubber holding would appear to be about 30 rais. This is prob-ably an overestimate of the average holding size. If the truth is some-where in the middle, it seems safe to assume that there are about 500,000rubber holdings in South Thailand, averaging about 20 rais each, and en-gaging about 75% of the rural population. 1/

21. Rubber Production in Relation to Other Crops. The two principalcrops in Southern Thailand are rubber and rice. Distribution of holdingsand the average area planted with rubber and rice in each category (asestimated by the 1963 census) are shown in Table 10. The census alsoestimated that about 80% of all holdings grow rice. If 75% of holdingsalso cultivate rubber, this implies that there is a significant overlapof rubber and rice production on the same holdings. Unfortunately thecensus did not try to estimate the incidence of monoculture versus diver-sified farming. However, it appears that most rubber holders have at leastsubsidiary rice plots to meet their subsistence needs. An imputed value of3000 Baht/household which is roughly equivalent to the cash value of enoughrice to support a family (Table 3) appears realistic for South Thailand.

1/ All of the foregoing assumes one household per holding, and no landlessrural households. These assumptions appear realistic in the case of46 Southern Thailand. At the same time, wage labor and share-tappingare quite common, as smallholders frequently earn cash income on big-ger holdings (see Table 10, Part B3).

ANNEX 9Page 6

22. Based on the data in Para 19, and on the further assumption thatcash incomes of rubber holdings are similar to cash incomes of non-rubberholdings, it would appear that rubber smallholdings derive about one-thirdof their cash farm income from income other than rubber:

Cash FarmCash Farm Income From Other PercentageIncome from Crops and Live- of TotalRubber (50% Stock (50% of Cash

of Total Cash Incomes) Total Cash Incomes) Income

Rubber Cultivators(75% of Households) 50 25 75

Non-Rubber Cultivators(25% of Rural Households) - 25 25

Total % 50 50 100

23. Income Distribution Within Agricultural Households. Based on theabove one can hypothesize cash farm incomes from rubber by size of holding.Table 10 Part Bi shows this hypothetical distribution assuming an averageyield of 50 kg/rai. Comparing the hypothetical incomes and income distri-bution with the results of a sample survey of rural households in 1970(Table 10 Part B3), one finds that: (a) distribution of gross cash farmincome by size of farm is more equal than the hypothetical distribution;and (b) that income distribution by size of farm is even more even.

24. In fact quite unexpectedly, ownership of land appears only slightlycorrelated with household income. (This does not necessarily mean that in-come distribution is even in South Thailand, just that land ownership isa poor predictor of income, see Table 10 part C3.) Another noteworthyfeature of the data is that large holdings appear to be less productivethan small holdings. This can be verified by the falling proportion ofincome to average holding as the sized holding increases; note that thehypothetical distribution conforms to the actual distribution of grossfarm incomes by size of holdings Part B3 up to the 30-45 rai category,but not beyond. This impression is further substantiated in the Prepara-tion Report for the Project.

25. Income distribution data from another source (NSO 1969) are shownin Part Cl of Table 10. It seems reasonable to assume that the bulk of therural population with cash incomes less than 6,000 Baht (54%) are comprisedof the households with less than 30 rais (64%). Since about 30% of all rub-ber holdings are below 15 rais, there would be a high concentration of thelowest forty percent of income-earners in South Thailand in this category.(However, the statistics also imply that there are significant variationsof income within each category of holding size.) Under the replanting pro-gram, long-run net incomes derived from such small holdings would increaseto about $ 2,300/rai under rubber.

ANNEX 9Page 7

26. Rubber replanting grants are available to all rubber producers.If incomes were strongly related to size of holdings, a random distributionof grants would have no effect on income distribution in the rubber sector.However, as it appears, income in South Thailand is only weakly related tolandholding (Para 24). To the extent that increases in income would occurin proportion to landholding, income distribution of land is more uneventhan the distribution of income, and assuming no other changes in thepresent pattern of income distribution, income distribution would becomeless even.) This is verified by inspecting income distribution by size ofholding, as it would appear after full implementation of replanting oldtrees. Assuming no change in this distribution, and that all cultivatorsparticipate in the program, the hypothetical distribution of incomes afterthe maturation of replanted rubber trees would appear as in Table 10, Part B.This income distribution appears more uneven than present income distribution(Table 10, Part Cl), or the present distribution of farm incomes according tosize of farm (Table 10, Part B3).

27. This should not obscure the impact of rubber replanting on abso-lute levels of income. As rubber presently accounts for about one-halfof cash farm incomes in South Thailand, the five-fold increase in rubberincomes alone would, in the long run, triple agricultural cash incomes inthe region. Rubber constitutes the principal source of cash income for9 about 75% of rural households and income increases due to the projectwill be spread over the great majority of the rural population.

28. Impact on Income Disparity. Only about 10% of the populationof South Thailand live in urban areas. Disparity between urban and ruralcash incomes is shown in Table 10, Part C. However, if a subsistence in-come of about 3,000 Baht is imputed to rural households regardless of sizeof holding, and considering that rural households do not pay rent, ruralincomes as shown by the Table could more or less be moved up one incomebracket, and income disparities would appear much less severe than indi-cated by the Table. With the replanting program growth of incomes in theagricultural sector could keep pace with urban income growth. However,without the replanting program incomes in the rubber sector would soonstagnate and this would indeed aggravate the not very dramatic rural-urban income disparity as it now exists in South Thailand.

29. Impact on Regional Income Disparities. Within the agriculturesector, cash incomes by region were estimated by the 1970 Farm HouseholdSurvey as follows:

Region Cash Income Index

Central 7,154 100South 3,954 55North 3,761 53Northeast 1,986 28

As the South is in about the middle of this distribution; the project appearsneutral with respect to interregional distribution within the agriculturesector.

ANNEX 9Page 8

30. Employment. By lifting the financial constraints of the presentreplanting program, the project will make possible the clearing of an incre-mental 30,000 ha/year. At about 200 man/day ha for clearing and land prepara-tion, this would mean about 30,000 extra jobs due to the acceleration of thereplanting program. In addition, the somewhat more intensive maintenancerequirements of replanted rubber holdings relative to old holdings wouldresult in a fuller utilization of family labor as well as some incrementalhiring of labor.

TU&LA1kD

UXUBER REPL&NTTih PERJC

On Fa1xT Oests and Beuen1ts of Developinz One Rai of 1.bbet:r

Alternative I. Replanting with Unselected Seedlings

COSTS 1 2 3 b 5 6 7 8 9 10 11-32

Labor (man-days)

Clearing and land Preparation 25 - - - _ _ _ _ _ _Maintenance 2.5 3.5 1.$ 1.5 1.5 1 1 1 1 1 1Tapping, Collection, i4anufRacture,

Repairs - - -- 24

Total (mra-days) 27.5 3.5 1.5 1. 5' 1.5 1 i IA 25 25 25

Labor Cost (at 20 Bht/man-day) 550 70 30 30 30 20 20 320 5o0 500 500

T-ls and ontipmert, (Bhts) - 150 16 16

TOTAI COST X ,70 ,, 30 30 L3 20 20 4 Z16 a6a

BE5F;TS

Production !kg/rat) - - - - - - - 30 80 110 110

Benefit (at 11.5 Bht/kg) - -350 920 1-270 1.270

!I

THAILAND

RUBBER REPLANTINi8 PROJECT

On F.rn Cost. and Benefits of D-valopina One Rai of Rubber

Alternative I., Repoleting with Budded StumPsCOBTS

1 2 3 4 5 6 7 8 9 10 11 12 13 14 '-15-27 28-30i 31 32L.bor (mn-days) Year of Clearing

Clearing 15Lend prepa.ation toCover-crop pl..ting 1Planting (budded stuwVS) 2.5Supplying .5Pruning .5 .5 - - - - - ---- ------Fertiliser applicationC .5 1.5 1.0 1.0 .5 .5 5 .5 .5 .5 .5 .5 .5 .55 - --WFeding 4.0 6.0 3.0 4.0 3.0 2.0 2.0 1.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0Pest. and diase.es .5 .5 .5 .5 .5 .5 .5 .5 .5 .5 5 .5 5 5 5 5Marking trae.; fixing enPy,

hbager., spouts - - - - - - - 2.0 2.0 2.0 2.0 2.0 2 0 2.0 2.0 2.0 2.0 2.0Tapping, collection, sheet

Tpnufin tute - -e t h -t12 0 23 0 23.0 23.0 23.0 23.0 23.0 23.0 23.5 23.5 23.5Repairs, etc. - - - - - - 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0 1.0

Total Labor RNquire-ents(nan-daya) 34.5 8.5 4.5 5.5 4.0 3.0 3.0 11.0 29.0 29.0 29.0 29.0 2 9.0 2 ' 2 9.0 29. 0 29.0 79 n

Labor Cost (at ZO SBC/day) 690 170 90 110 so 60 60 360 540 540 540 540 540 540 540 540 540 540

Materials (Bht)

Grant Componeet. DeliveredI. Kind

Budded StoWp 187 - - - _ - - _ _ _ _ _ _ _ _ _Covet Crop Seed 15Dalapon 90 45 - - - - - - - _ - _ _ _ _ _ _Stuapkillor 88 - . - - - . - - - - - - - - - - -Rook Phosphate 20 - - - - - - - - - _ _ _ _Pertilizer for Cover Crop 16Compound Pertilioer 167 172 166 136 170 170 179 1;01 170 170 170 170 170 170 170 170 10 111

Of Crant 583 217 166 136 17Q 170 130 too 170 170 170 170 170 170 170 170 110 170

Other Materiel.Root tieeaeControl - 40 40 40 40 40 40 40Tol. nd gquipnt - - - - - - - 150 16 16

br l - - - - - - - - ' - - - - ' - 120 120 120

Subtotal _ 40 40 40 40 40 4( 190 16 16 - - _ 120 1O 120

Total Material Cost 583 257 206 176 21- 210 210 300 186 186 170 170 170 170 170 120 170 120

TOTAL CO8T - 1273 427 296 286 290 270 270 720 726 726 710 710 710 710 710 660 660 660

5AbITS

_ _ - - 80 130 170 210 240 260 270 290 360 340 330Production (k,g/tel) - - 920 1500 1960 2420 2760 2990 3110 3540 4140 3910 3810Benefit (.t 11.5 Beht/ki)

Rate of Return of Inve-stent at Market Prices, 21%

Nlet Present Value of Invets_ent et Market Pi.ces. Baht 2565 at 15% and

*~~~~~~~~~~Bh O67 at25

0 ANNEX 9Table 3

RUBBER REPLANTING PROJECT

Costs and Benefits of Replanting One Rai of Rubber

Incremental Costs and Benefits of Intercropping with Rice _

Year I Year2 Year3 Year aCOSTS

Incremental Labor (man-days)

Land Preparation 1/ 1.5 1.5 1.5Planting 1.5 1.5 1.5 1.5Weeding and Fertilizing 2.0 2.0 2.0 2.0Harvesting 3.0 3.0 300 3.0Cover-crop Planting (1.0) - - -

Total (man-days) 5.5 8.0 8.0 8.0

(Baht) 110 160 160 160

Material Input

Seedsl/ 20 21 21 21FertilizerW 80 80 80 80Rock Phosphate for Cover-crop (16) - - -

Total 84 100 100 100

TOTAL COST 194 260 260 260

BENEFITS

Unhusked Rice (kg/rai) 170 170 170 170

Net Revenue with Family Labor 206 190 190 190Net Revenue with Hired Labor 96 30 30 30

# Assumes that stumps remain in the ground, and that therefore only 50% of the rubberarea can be intercropped.

J Included in land preparation for rubber planting.

I/ 7kg of seed/Baht 0 3 Baht/kg.

L/ 20kg of compound fertilizer at an average price of 4 Baht/kg.

TRAItA5LD

RUBBER REPLANTING P110310

Fat . Sadat. 15 Ri.4 Devaltead La Thtee St-&-.(# and 8a-day.)

Year 0 V*ea 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 1.0 Year 11. Ye.r 12 Year 13 Year 14 Year 15 Year 16 Y..r 17 Year 18 Year 19 Year baler 11 teat 22-55

Free Tepiag O erae ]Wbb.r V 6750 4500 4500 4500 2250 2250 2250 2250Prm IOerrpi~ 1450 1450 1450 1450 1450 1450 1450 1450 1450 1450Fre-Rbe Sl.1 -- -- -- -- -- -- -- 3600 5650 7650 13000 166.50 19350 21600 27450 30600 32850 35550 36900 37800 38250 39150caeh Reteipt. fam Grat t 3030 600 500 3400 B00 625 475 3250 725 625 350 200 125 125

Toatl 6750 9000 6330 6450 7100 4500 4325 4175 8300 8025 725 33550 1650 1975 215 270 380 380 350 560 188 20590

HaterIel Coatlot ... rtppoe# 2 194 260 260 194 260 260 194 260 260R.bbar Rap1artig 21 200 200 200 400 400 4320 2001. 033 1330 2850 1980 1980 1900 3500 2750 2750 2550 2550 2550 2550 2550

Toale -- 194 460 460 394 660 660 594 2260 1590 1330 2850 1980 1980 1900 3500 2730 2750 2550 2550 2550 2550 0550

Rat Pae- I..e. 6750 8806 60D90 5990 6706 3840 3665 3581 6040 6435 8395 1.0500 14870 17495 19825 23950 27870 30120 33000 34350 35250 35830 36600

Laber Reqalrmat (Sla-day.)

Tapping Or-rgad Tre.. 375.0 250.0 250.0 250.0 125.0 125.0 125.0 125.0Iati.rarppi.g 2.' 27.:5 40.0 40.0 27.1 40.0 40.0 40.0 27.5 40.0 40.0

R46bcr Rapl.atig 1/St.Sa I 1.72.5 42.0 22.5 27.5 20.0 15.0 15.0 90.0 133.0 135.0 1.55.0 1351.0 135.0 135.0 135.0 133.0 135.0 135.0 133.0 135.0 131.0 135.0St::: II 172.1 42.5 22.5 27.5 20.0 15.0 15.0 90.0 135.0 135.0 135.0 155.0 135.0 1.35.0 135.0 135.0 133.0 155.0 11550

Sta III 172.5 42.1 12.5 7. 20.0 15.0 15.0 90.0 135.0 135.0 135.0 1.35.0 1.55.0 135.0 155.0

Total 375.0 450.0 332.5 312.5 312.5 227.5 202.1 207.5 310.0 232.5 212.5 252.5 290.0 285.0 295.0 360.0 405.0 405.0 405.0 405.0 405.0 405.0 405.0

itAeeaogg a 3ai.ld of 10 kg/tai, .0atd athr.1 ati-Itlatt.

2/ See Ann". 9 Table 3./See Ataea 9 Table 7.

THAILAND

RUBBER REPLANTING PROJRC

Financial and Econo=iec Anaalvsis aS On-ljar. DevelopFent

PART ONE: Fare Budget and Governsent Carhflo af Rubber Re.lantinr. One Ri

FARM BUD8 ET Alternative I: REpisting with Unselected Seedlings Di8seunted Disnre Raed

1 2O 7 8 9 1 I1 12 13 14 15-27 28-30 31 2Z Present Presn aso

A. With Fanily Labor Value at V.lse st Rets.

_15% 25-

Insanze - - - - - - - 273 718 990 990 990 990 990 990 990 990 990

Expenditure, Materiat s - - - - - - - 150 16 16 - - - - - -

Net I_ess_: Rubber Sales 123 702 974 990 990 990 990 990 990 990 990 340 (800) 00

B. With Hired Lab-r

Labor Cast 550 70 30 30 30 20 20 320 500 500 500 500 500 500 500 500 500 500

Net Incane (500) (70) (30) (30) (30) (20) (20) (197) 202 474 490 490 490 490 490 490 490 490 260 (390) 17.5

GOVERNMRNT CASH FLOW

EBpenditares: nilRevenues: Replanting Ceus 18 46 64 64 64 64 64 64 64 64 64

gxport Tan - - - - - - - 59 156 216 216 216 216 216 216 216 216 216

Total 77 202 280 280 280 280 280 280 280 280 680 236 oC

FARM BUDGET Alternative lI: I planting with Budded Stu-ps sith the Grant

A. With Fanily Labur

Insarne:Ca.h Greet 610 120 100 70 40 25 25 - - - - - - - -_ - - -Rubber Sales - - - - - - - 718 1170 1529 1888 2153 2332 2425 2605 3229 3049 2964

Eipenditures:Materials _ 40 40 40 40 40 40 360 186 186 170 170 170 170 170 120 120 120

Net Incune 610 80 60 30 0 (15) (15) 358 984 1343 1716 1983 2162 2255 2435 3109 2929 7844 5670 2297 00

Incre=ental Saunas 610 80 60 30 0 (1:) (15) 235 282 369 728 993 1172 1265 1445 2119 1939 1854 3330 1497 00

(aver Alternative IA)

B. With Hired Labor

Lab-r Cast: 601: 170 90 110 80 60 60 360 540 540 540 540 540 540 540 540 540 540

Net Incot e (E(l) (90) (30) (80) (80) (75) (75) i2) 444 803 1178 1443 1622 1715 1895 2569 2389 2304 3148 763 41.3

tnereLeutn1 I ease 420 (20) 0 (50) (50) (55) (55) (195) 242 329 688 953 1132 1225 1405 2079 1899 1814 2888 1153

(ever Alternative IB)

GOVERNM5ENT CASH FLOW

Reven.e.: Replanting Ceus _ - - - - - 46 75 98 121 138 150 156 167 207 196 190

Expert Te - 156 255 333 411 469 508 529 568 704 665 646

T.tel- --1 202 330 431 332 577 658 685 735 911 861 836

E.peaditaree: Cash Pay-eate 610 120 100 70 40 25 25 - - - - - - - - - - -

MaterSale 583 217 166 136 170 170 170Total 1193 337 266 204 10 195 195

Net Cash Flaw: (1193) (337) (266) (206) (210) (195) (195) 202 330 431 532 577 658 685 735 911 861 836 (582) (1434) 12i4

Inara=ental Cauh Flow: (1193) (337) (266) (206) (210) (195) (195) 125 128 151 252 297 378 405 455 631 581 556 (1262) (1670)

(ever Alternative I)

PART IWO: Etan.eir Analysis; In-re-ental Casts and Benefits af .lternariwe II over Alternative I, One Ri

INCBREIIZTAL BENEFITS

Benefit (at 11.5 Bht/hR) -75 573 690 1150 1495 1725 1840 2070 2875 2645 .530

Produrtion (kR rai) - - - - - - - 50 Sc 160 100 130 150 160 180 250 23C 220

INCR8MNTAL COSTS

Lab-r: (Bht/rai) 140 100 60 80 40 40 "O 40 40 40 40 40 40 40 40 40 40 40 (Iseludee edioieretiva

(M.a-days/rai) 7 5 3 4 2 2 2 2 2 2 2 2 2 2 2 2 2 2 costpn t of grantpapoents) -

material Costs 583 257 206 176 210 210 210 210 170 170 170 170 170 170 170 120 120 120 rLoaI 140 26 21 18 21 21 21 21 17 L7 17 17 17 17 17 2 12 12

Foreige E-uhange 343 231 185 158 189 189 189 189 153 153 153 153 - 153 153 153 100 108 10I

rt os ... . 0

U, .N .< . I

- l " *0 - 0

za°g eO COfi1

.0 I * e.

i~~ ~ U 9~ 0, 0. w ,

i ~ ~~~~~ 2, 1

S~~ ~~~ ,> |. ^ S *j

2 6 ~~~~~~~~~~~~a

c aci

U.--..-i * - ,

g c,, Z 3 3 X ... U.

ANZNh 9,

Table 7

RUB= RE NO PROJECT

IndliridaGrant Psi na Is Farmersltaht, 1975 Prices)

Type I Type II(BQdded Stu DS) (Seed at Stake)

Installmental/ Items pAh Quantitv Baht Quantity

1at Stumpkillar 88 8 it 88 8 ltRock Phosphate 20 10kg 20 10kgCover Crop Seed 15 1kg 15 lkgRock Phosphate for

Cover Crop 16 Bkg 16 8kgDalapon 45 1kg 45 11kgCash 00 _ OO -

Totsa 584 584

2nd Planting Material 187 2 125p¢ lo0/ -Compound Fertilizer 167 35kg 209 44kgDalApon 45 1kg 45 1kgCash 210 - 185 -

Total 609 449

3rd Compound Fertilizer 193 40.5kg 193 40.5kgSupplies Budwood - - -Dalapon 45 1kg 45 1kgCash 120 - 200 -

* Total 358 480

'4th Compound Fertilizer 208 43.8kg 208 43.8kgCash 100 - 100 -

Total 308 308

5th Compound Fertilizer 202 42.5kg 202 42.5kgCash 70 - 70

Total 272 272

6th Compound Fertilizer 267 56kg 267 56kgCash 440 40

Total 307 307

7th Compound Fertilizer 267 56kg 267 56kgCash 25 - 25 -

Total 292 292

8th Compound Fertilizer 267 5 6 kg 267 56kgCash 25 - 25 -

Total 292 292

Materials 2032 - 1939 -

Cash 990 - 1045 -

TOTAL 3022 2984

--

j/ The first two installments are disbursed in year 1; thereafter there is oneinstallment per year

3 Includes supplying.

/ Germinated seeds.

ANIlE 9

ThiAIIAND Table 8

RUBBER REPLAINING PROJECT

Price Forecast For Cowound Fertiiizer(In Constant 1975 Prices)

1975 1976 1977 1978 1979 1980

A. Price of Nutrients (US$)

Price of Nitrogen from Ammonium Sulphate

Urea f.o.b. 300Q1 257 213 158 128 127Nitrogen (407.) 652 558 463 343 278 276Transport (35/.21) 170 170 170 170 170 170

Total 8202/ 730 630 510 450 450

Price of P2 05 from DAP

P20S 490 380 280 230 240 240Transport 60 60 60 60 60 60

Total 550 440 340 290 300 300

Price of K20 from Muriate of Potash

Muriate of Potash, f.o.b. 71 73 67 63 62 62K20 (607.) 120 120 110 110 100 100Transport (50/.5) 80 80 80 80 80 80

Total 2003/ 200 190 190 180 180

Price of MaO from Kieserite-4/

Kieserite 160 150 140 130 120 120Mgo (267) 620 580 540 500 460 460

B. Price of Nutrient per Ton of TypicalCompound Fertilizer

a. In Constant'75 prices5/

12% N 98 88 76 61 54 5414.5% P205 80 64 49 42 42 4277 K20 14 14 13 13 13 132.5% MgO 16 16 15 14 13 12

Sub-total 208 182 153 130 122 121

Compounding + Local Transport 30 30 30 30 30 30

Total, US$ 238 212 183 160 152 152Baht 4760 4240 3660 3200 3040 3040

b. Current Prices

Price Index 100 108.9 117.6 126.5 136.0 145.5

us$ 238 231 215 202 207 221Baht 4760 4620 4300 4040 4140 4420

V/ quoted Price for Urea, March 1975, Malaysia, about US$350/m. ton.2/ March 1975, Quoted Price for Ammonium Sulphate, Malaysia, M$453/m. ton, approximately US$880/m. ton of nitrogen.3/ March 1975, Quoted Price for Muriate of Potash, Malaysia, M$390, or approximately US$265/m. ton of K20.4/ Based on Quoted Price for Kieserite, March 1975, Malaysia, M$400/m. ton, or about US$160.

3/ Composition based on RRC recommendations.

ANNEX 9Table 9

THAILAND

RUBBER REPLANTING PROJECT

Rubber Price Projection(in terms of constant 1975 price level)

(USe/kg)

c.i.f. New York 82Freight and Insurance 5

f.o.b. price 77

(Baht/kg)

f.o.b. price, RSS1, Malaysia 15.4less 15% for TSS3, Thailand 13.1

Export Tax 1.9Replanting Cess .6

1/Gazetted Price 10.6

Exporter-Packers' Cost 1.0

Village Dealer's Cost 2/ .3Deduction for Moisture Content - .3

Farm-Gate Price 9.0

% of Taxes/Farm Gate Price 28%

Net Benefit 11.5

1/ assuming that the gazetted price simulates the f.o.b. price lesstaxes. Thus the gazetted price is calculated by the followingformula:

f.o.b. price - Gazetted Price + Export Duty + Replanting Cess= G + (G-5.80) .4) + ((G-10) .1 + 5)= 1.5G - 2.82

2/ of the unsmoked sheet.

THAILAND

RUBBER REPLANTING PROJECT

Distribution of Land and Income

Size of Holding (rais) Under 6 6-15 15-30 30-45 45-60 60-140 140+

A: DISTRIBUTION OF HOLDINGS WIIH RUBBER AND RICE196 A;r cu ttural Census

Percent of Rubber Holdings 6 25 33 18 9 9 1

Average Area in Rubber 3 6 11 19 28 47 165Average Area In Rice 3 6 1D 13 14 15 21

B: INOQNE DISTRIBUTION BY SIZE OF HOLDINGS

1) Hypothetical Distribution of Income by sizeof Holding, assuming:

Rubber (50 kg/rai at 5W/kg , 1970 price) 750 1,500 2,750 4,750 7,000 11,750 4t,250Other Cash Income: 1/2 of Rubber Income 375 750 1,375 2,375 3,000 3,000 3,000

Total Cash Income 1,125 2,250 4,125 7,125 10,000 14,750 44,250

Imputed Subsistence Income 3,000 3.000 3,000 3,000 3,000 3,000 3,000

Total Income 4,125 5,250 7,125 10,125 13,000 17,750 47,250

2) Longrun Impact of Replanting or Inicomes ofRuber Holdings, assuming:

Incremental Prodhction of 20bk /rai for 7.125 11,250 18,125 29,125 41,000 64,750 212,250each holding size

3) Farm Household Money Income

(1970 Household Survey)

Gross Farm Income 1,390 2,260 3,130 4,500 4,280 11,550 n.a.Net Farm Income 370 1,270 1,750 1,960 2,300 8,700 n.a.Not Total Income 1/ 3,580 3,360 3,220 5,130 4,310 11,000 n.a.

7. of Holdings 13.4 28.1 34.8 13.4 5.7 4.5 .1

C: DISTRIBUTION OF CASH INCOME

Income Bracket (000 Baht) Under 3 3-6 6-12 12-18 18-30 Over 30

1) NSO Survey of 1969Rural 16.6 37.2 22.5 17.1 6.6 n.a.Urban .9 6.3 27.5 21.8 23.5 20.0

2) According to B3 2/ - - 100 - - -

3) According to 82 3/ 31 33 18 19

1/ Including off farm income.

2/ Ilhe concentration oi incomes in the 6-12 bracket as per B3, together wit', the much greater variation in income distribution_ i,ndicated as per C, imply thdt there must be significant "within group" v tiriaion of incomes in each category of holding size.

Assuming no variation of income witi.in groups of land ownership.

* ANNEX 9Table 11

THAILAND

RUBBER REPLANTING PROJECT

Rubber Yield Prospects

1. Yields are based on information available for the clones recommendedunder the project: GT 1, PR 107, RRIM 600 and PB 5/51 (Annex 10, Appendixla). (Annex 7, Appendix 1, d). They would be as follows:

Year from Planting / Ta ping Year Kg/ha /

7 1 5008 2 8109 3 1,06010 4 1,31011 5 1,50012 6 1,600

41 13 7 1,70014-26 8-20 1,80027-29 21-23 1,65030-35 24-29 1,000

/1 Year zero is year of planting.

/2 Assumes regular fertilizer application and 140tappings per tree with S2D2.

2. No yield increases from stimulation are taken into account. Ethrelapplication would be developed by the Fund and adapted to smallholder useunder the project. This would result in considerably higher yields in years27 to 35.

ANNEX 10Appendix 1Page 1

THAILAND

RUBBER REPLANTING PROJECT

NURSERY REQUIREMENTS

A. Incremental Nursery Capacity

1. The technical specifications for nurseries and time schedules foroperations are given in Annex 10, Appendix la. The Fund will continue itspresent practice of supplying planting material in the form of seed andbudsticks for field budding, and of budded stumps. Each of these systemshas its advantages and disadvantages. Ideally, supplies should be made inthe form of budded stumps because this saves the farmer between 6 and 9months and shortens the immaturity period during which he derives no incomefrom the new rubber. However, field budding offers the advantages of ahigher rate of successful establishment, and therefore more uniform treegrowth and lower replacement expenditures. Due to centralization of bud- Swood nurseries, transport of budded stump often takes more than 3 days.This coupled with improper handling often leads to poor establishment.

2. The Fund will therefore increase progressively the new replantingarea to be field budded from 40% now to 50% by 1979. Once the maximum levelof 50,000 ha of replantings p.a. is reached and consolidated by 1979, theFund will be able to give more attention and resources to budded stump pro-duction. The Fund will also investigate the use of polybag budded stumpsand methods of planting older stumps which would further increase efficiencyof planting and reduce the immature period.

3. Incremental capacity for budded stump nurseries is based on theFund targets, and on a ratio of 1 ha of nursery per 60 ha of field plantings.Nursery capacity expansion would be made one year ahead of field plantings.

0

ANNEX 10Appendix 1Page 2

Table 1: BUDDED STUMP NURSERIES

1975 1976 1977 1978 1979('000 ha)

Area under new replantings 20 25 35 50 50of which under buddedstumps (No.) 12 15 19 25 25

(%) 60 60 55 50 50(ha)

Required nursery capacity 250 315 415 415 415Incremental 50 65 100 - -Accumulated 50 115 215 215 215

The average establishment cost per ha is t 94,350 (Annex 10, Appendix lb).

4. Budwood nurseries would produce budsticks for both field buddingand budded stumps. Capacity would be expanded on the basis of 1 ha ofnursery per 300 ha of plantings; expansion taking place 2 years ahead offield plantings.

Table 1: BUDWOOD NURSERIES

1975 1976 1977 1978 1979

Area under new replantings('000 ha) 20 25 35 50 50

Required nursery capacity(ha) 117 166 166 166 166Incremental 33 49 - - -Accumulated 33 82 82 82 82

The average establishment cost per ha would be i 40,230.

B. Technical Specifications for Nurseries

5. Planting Material. Planting material would consist of selectedclones approved by the RRC as being sufficiently tested to ensure satisfac-tory growth, yield and resistance to Phytophthora disease. For the period1975-80 these clones are likely to be mainly GTI, RRIM 600, PR 107, PB 5/51and PB 28/59. GTI would be the only suitable clone for regions in which theserious Phytophthora disease occurs. Selection of clones for use on Fundsupported replantings would be the responsibility of a special Fund plantingmaterials committee which would include members from the RRC. The objectivesof the committee would be:

ANNEX 10Appendix 1Page 3

(i) Selection and distribution of clones for plantingincluding decision as to whether stumps or seedat stake should be used in any area;

(ii) Determination of the current availability ofplanting material and planning of a multiplica-tion program in accordance with the futurereplanting program;

(iii) Allocation of responsibility for the multiplicationprogram to particular organizations and nurseries;

(iv) Co-ordination of the multiplication program inrelation to quantity of material produced, clonesused and timing.

6. RRC would ensure the use of selected clones, multiplication ofbudwood and supply of budsticks to the replanting offices and registeredprivate nurseries.

7. Establishment of budwood and budded stump nurseries

(i) Collection of stock seed

Seed would generally be harvested during peak seedfall periods (August - September) when seeds are mostviable, with high germination capacity. Stock seedfor budding in the nursery or in the field would becollected from:

(a) polyclone plantings of improved clones;

(b) monoclone plantings of improved clones;

(c) unselected seedling areas.

The major requirement is that the stock seed provide arootstock with a vigorous stem and a straight tap root.

(ii) At the commencement of the seed collection season, allseed, old and new, should ideally be collected, used ordiscarded, so that future weekly collections are offresh seed only.

ANNEX 10Appendix 1Page 4

(iii) Seed storage

The viability of rubber seed declines rapidly in storage.If storage is necessary for 3-4 months, seed may bestored in sealed polythene bags at 4°C. For short

periods, seed may be stored in moist sawdust at ambienttemperatures.

(iv) Seed germination

Ungerminated seed would not be nursery planted, the severaldisadvantages to this practice being:

(a) lack of control of inter-plant spacing.

(b) if spacing is manipulated to allow even spacingbetween plants, weak plants are frequently notrogued out and hence the standard of stock seedlingselection is poor.

(c) it is very wasteful of good stock seed, requiringsome 300,000 seeds/ha.

Seeds would be germinated in raised beds about 15 cmhigh and 1 metre wide containing a loose sandy mediumor well-matured sawdust. (Self-sown seedlings mustnot be used for stock nurseries.) Coconut or othersuitable fronds would be placed about 2 metres abovethe beds to provide complete overhead shade. Thebeds would be near to a water source and protectedby a fence. The seed would be planted 1 cm apartwith micropyles facing downwards and the seed halfimmersed in the medium. Approximately 1,000 seedwould occupy 1 square metre. Beds would be wateredmorning and evening for six days after planting;the beds should be examined daily, germinated seedbeing picked out. Seeds germinating later than 21days after placement in the beds would be discardedin view of their poor vigour.

(v) Stock nursery

The site for the nursery must be selected:

(a) on fertile, free draining soil;

(b) on terrain as flat as possible;

(c) near to an adequate water supply;

ANNEX 10Appendix 1Page 5

(d) with easy road ae4szs;

(e) in a central position within each rubbergrowing area.

(vi) The future nursery area should be ploughed andharrowed to a fine tilth to remove all weeds,stumps, roots and rotting timbers. During thefinal harrowing, there should be incorporatedinto the soil 100 Kg/rai of rock phosphate andwhere necessary, 40 Kg/rai of ground magnesiumlimestone. The nursery should be securely fencedto prevent animal interference.

(vii) In stock nurseries, germinated seed should be plantedat 2 metres x 1 metre, omitting rows as necessary, tomark off beds of different clones. Allowing for roadsthere would be about 4,500 points/ha. To save time,future budwood nurseries can, alternatively, be plantedwith budded stumps.

(viii) Stock nurseries intended for production of buddedstumps, should be planted with germinated seed indouble rows to allow easy access for budding, witha spacing of 60 cm x 30 cm x 25 cm. Density wouldbe about 88,000 points/ha. About 15% additionalarea should be allowed for roads and buildings.

(ix) One germinated seed would be planted per point,the seed being planted flat side downwards, rootpointing downwards, the surface of the seed beingabout 1 cm below the soil surface of the seed beingabout 1 cm below the soil surface. Vacancies wouldbe supplied as soon as they occur.

(x) All double shoots growing from one seed would bepruned leaving one shoot per seed. About 1 monthafter planting, all genetic yellows, runts, poorlygrown plants and twisted seedlings would be removed.The same operation would be repeated at 2 and 3months after planting. The total number of plantsthinned out or unbuddable would normally approximateto 20%.

(xi) Nurseries would be clean weeded using herbidices andby manual means. Linuron would be applied immediatelyafter planting of germinated seeds; up to the startof the dry season, further weeding would be manualfollowed by immediate application of diuron. During

ANNEX 10Appendix 1Page 6

the wet season and at budding time paraquat would beapplied. At 2, 3 and 4 months after seed planting,fertilizer would be applied. The mixture used wouldconsist of 3 parts sulphate of ammonia and 1 partmuriate of potash at 100 gm per running metre, broad-cast between the two narrow rows.

(xii) Nurseries should be irrigated by inexpensive sprinklersystems during the dry season, when a desirable rate ofwater application by sprinkler is approximately 1 cm perday.

(xiii) Budwood nurseries

Budwood nurseries should last for at least 10 years.The beds may be of any convenient length and the fourcorners would be marked with hardwood or cement posts.The identity of the clone would be marked on theseposts. Several copies of a detailed plan of thenursery would be prepared showing rows and pointsbudded with each clone.

(xiv) Only one clone would be budded in each bed. Thiswould be done at 5-8 months after seed planting,during favourable weather conditions, where irriga-tion facilities do not exist. Particular care wouldbe taken to ensure that the budwood used was authentic.To avoid confusion, clones would be budded one at atime. Failures would be re-budded until a fullcomplement of successful buddings was obtained.

(xv) Cutting back would be done when a full stand ofsuccessful buddings had been completed, prefer-ably in wet weather. Any seedling plants remain-ing would be removed after cutting back the buddedplants.

(xvi) Pruning rounds would be carried out every 2 weeksto remove green scion shoots and side shoots fromthe scion. Only one scion shoot would be allowedto develop. Weeding would be manual or using MSMAand Diuron. Fertilizer would be applied at approxi-mately 2, 3 and 8 months after cutting back, withadjustments for the local dry season. When bud-shoots are 90 - 120 cm high, a 5 cm broad band ofpaint would be applied 20 cm above the union toverify correctness of the budshoot followinginspection by a trained clone inspector. Allclonal bed markings would be regularly checked

ANNEX 1 0Appendix 1Page 7

before cutting each crop of budsticks. Anyshoots which had survived and could be mistakenfor budwood would be eradicated. For productionof green budsticks, multiple branching is encour-aged by thumb nail pruning of the terminal budwhen the scion is 2 - 2-1/2 metres high. In thefirst year of budstick production (second yearafter budded stump planting) the scion would beterminally pruned as described for the firstharvest of budsticks and cut back on two furtheroccasions for production of the second and thirdharvest. In the second year, two scions would beallowed to grow from each stock.

(xvii) Harvesting of budsticks

Green budsticks would be harvested from sourcebushes carrying fully expanded foliage approachingcomplete hardness. The number of usable buds pershoot would be increased by pruning off basalleaves at least 10 days prior to harvesting bud-sticks. In the first year of budstick productionthe yield of buds per source bush would be 3 har- _vests x 3 budsticks per harvest x 2 buds per stick1 18 buds. In the third and following years, 6

budsticks would be obtained per harvest giving36 buds/bush per year. The production of budwoodin a stand of 4,500 bushes/ha is estimated to be:

Year 1 (planting) nil nil

Year 2 18 buds/bush 81,000 buds/ha

Year 3 onwards 36 buds/bush 162,000 buds/ha

(xviii) Packing budwood

Budsticks from source bushes would be wrapped indamp gunny sacks for transport over short dis-tances. For long distances budwood would bepacked between layers of damp mature sawdust.Transportation should occur at night. Forstorage over 2 days, the ends of the budstickswould be dipped for a few moments in moltenwax. The maximum storage period is 4 days.

0 ANNEX 10Appendix 1Page 8

Budded stump nurseries

(xix) Seedling stock would be green budded at 4-8 monthsafter seed sowing, at which time, stem diameterat budding height should be 1.0-1.5 cm. Stockswith viable buds would be cut back (not in thedry season) 4 weeks after budding and shootingshould occur 7-10 days later. It is inadvisableto leave buddings more than 90 days after budding,before cutting back.

(xx) After stump pulling, the taproot would be trimmed,where possible, to 30 cm and lateral roots to 10 cm.Stumps would be laid in layers of damp lalang inwooden crates, labelled with the clone number andholding 300-400 stumps per crate.

(xxi) Budwood and budded stump requirements for field planting

The following ratios and numbers apply:

0 Per ha ofRatio field planting

Total seed for germination (100)/a 200 2500Poor/non-germinators (50%) 100 1250Germinated seed planted (50%) 100 1250Stocks unbuddable/failures

(20% of germ seed) 80Stocks successfully budded

(72% of germ. seed) 72Plantable budded stumps (60%

of germ. seed)(required to plant 625/ha) 60 750No. of budsticks at 1-1/2 sticks!

plantable stump 40 500No. of mature source bushes at

36 budsticks per bush/year 15

/a There are approximately 220 ungerminated seed/kg.

0

ANNEX I 0Appendix 1Page 9

(xxii) One hectare of mature source bushes (4,500 bushes)would supply budsticks sufficient for 300 ha offield, planted with budded stumps.

(xxiii) One hectare of plantable budded stumps (52,800plants) would provide material sufficient for60 ha of field planting, if an approximate 15%allowance is made for nursery roads and buildings.

0

*THAILAND

RUBBER REPLANTING PROJECTTimetable for Stock Nursery Activities (for budded stumps)

Order for Nursery Chemicals

Order for Stock Seed

Order for Budwood

Nursery Site Selection - Stock Nursery

Demarcation of Nursery Boundaries and AlignimentNursery Access Road, Clearing Access Road

Nursery Area Clearing

Construction of Water Facilities

Construction Seed Germination Beds

Lining Stock Seedling Beds

Delivery of Seed

Germination of Seed

Planting of Germinated Seed toT Stocks _

Maintenance of Stock Nursery

Delivery of Budwood

Budding of Stocks --

Cutting Back

Transplanting Budded Stumps to Field

M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Months

Songkhla, Yala, Narathiwat-- Phuket, Pangnga

World Bank-15124 'p

THAILANDRUBBER REPLANTING PROJECT

Timetable for Activities for Budwood Multiplication Nursery

Order fot Nursery Chemicals -

Order for Budded Stumps _

Nursery Site Selection

Demarcation of Nursery Boundaries,Alignment and Clearing Nursery AccessRoad

Nursery Area Clearing and Clone BedDemarcation n -a

Coristruction of Watering Facilities -

Lining Beds for Budwood Multiplication

Planting of Budded Stumps ,

Maintenance of Nursery - -, , , _ _ _ _ _

Harvesting of Budwood

Removal of Rogues _ -I I I I z_

M J J A S O N D J F M A M J J A S O N D J F M A M J J A S O N D

Months > Ili

Pe Pg

Songkhla, Yala, Narathiwat _

__- Phuket, PangngaWorld Bank-15125

*, 1 .,\

THAILANDRUBBER REPLANTING PROJECT

Timetable for Major Nursery and Field Activities

Nursery Land Preparation _ -T --

Stock Nursery Planting -|

Nursery Maintenance -- C,- _ . _ , _ -

Field Clearing - -- _- -

'Rice Soya BeanPlanting Inter-crop - - _ _

Planting Rubber in Field I l Ll J SA N D J F M A M J J A S O N D J F M A M J J A S O N D

Month CnL>-o Songkhla, Yala, Narathiwat, etc.-_---Phuket, Pangnga, etc. :

World Bank-15123 m | 0

ANNEX 10Appendix 2Page 1

THAILAND

RUBBER REPLANTING PROJECT

Establishment Costs per Ha - Budded Stump Nursery

Budded Stump Nursery Costsper hectare Man-days

Labour

(1) Survey, layout, land clearing, 145Add 20% for road construction 15

(2) Preparation of nursery beds(3) Planting germinated seed

(2) + (3) 360(4) Weeding 380

(5) Fertilizer application 35

(6) Pest and disease control 50

(7) Thinning 10

(8) Sprinkler operation 20

(9) Budding 370(10) Opening(11) Cutting back(12) Stump pulling

(10 + 11 + 12) 70

(13) Packing(14) Transport

(13 + 14) 35

(15) Tractor operations 10

Total man-days 1,500at 30 baht/man day, cost 45,150

Materials(16) Germinated seed 5,000

(17) Budsticks 11,000(18) Fertilizer 12,000

(19) Budding equipment, fungicides, herbicides 2,500

(20) Sprinkle equipment 4,100

(21) Packing materials 3,800

(22) Tractor 1,200(23) Fencing(24) Overhead costs 9,600

Total costs 94,350(27) Cost per plantable budded stump

(assuming 53,000 stumps) 1.78

ANNEX 10Appendix 2Page 2

Production of Budded Stumps - Notes and Assumptions

Comment

Detailed records of the operations of the G.E.O. nurseries were not availa-ble. The only source of data was Document No. 52 of the RRC, November 74,"Estimation of Cost of Production of Budded Stumps at Klong Thom RubberStation." It is noted in the document that overall losses were high at41% plantable budded stumps obtained from planted germinated seed. Innormal conditions the figure should be about 60% and the analysis in Table

assumes this latter level of efficiency. It is further noted thatthe data are neither highly accurate nor detailed and should be taken as aguideline only. The 1973/74 costs are adhered to in this analysis, withthe exception of fertilizer which is taken at February 1975 prices andwages which were treated similarly. All costs were rounded off. The costper budded stump is about 1.50 baht. With improved management and controlof nursery operations, this figure should be reduced. It is proposed thatnursery records be maintained in future with detailed breakdown of eachactivity.

* Notes

Labour

(1) Clearing old rubber at 50 trees/rai(2) Ploughing, harrowing and levelling by tractor.(3) Spacing - double rows with a spacing of 25x30x60 cm. to give a

density of 88,000 points/ha. excluding roads.(4) Pre-emergent herbidice application and manual weeding for 2-3

months after effect of herbicides has worn off and beforenursery canopy closes.

(5) Assumes broadcast application at time of ploughing and harvestingand 3 applications at 2, 3 and 4 months after seed planting. Aftercutting back fertilizer applications are made at 2.5 & 8 months.

(6) Contingency for thrips, mites, mealy bugs and birds eye spot.(7) At 1, 2 and 3 months after seed planting.(8) Operated during the dry season (4 months).(9) 400 buds per man day. 80% of stand of 88,000 buddable = 70,400

points.(10). (11), (12) Assumes 72% of stand of 88,000 successfully budded =

63,360 points.(13) Assumes 60% of stand of 88,000 are plantable budded stumps =

52,800 points.

Materials

(16) Based on Klong Thom costs for germination beds. Germinated seedat 88,000 per ha (Labour at 25 baht/day).

ANNEX 10Appendix 2Page 3

(17) Ditto. 1-1/2 successful budded stumps should be produced perbudstick. Therefore for 52,800 plants the number of budsticksrequired is 35,200. Labour cost unchanged from 18 baht/day aspotential budwood sales could have been 50% greater.

(18) Approximate fertilizer usage at Klong Thom was 1,600 Kg/ha.Pre-planting application should auount to 625 Kg rock phosphate and250 Kg magnesium limestone/ha. Applications at 2, 3 and 4 monthsafter seed planting should be 100 gm per running metre, broadcastbetween the two narrow rows, of a mixture of 3 parts sulphate asmoniaand 1 part muriate of potash. Fertilizer applicatione after cuttingback would conform with those used for secd at stake plantings.

(19) In the Klong Thom estimation all costs were charged to manual weeding.Linuron (1,550 cc of a.i. in 500 litree/ha) should be appliedimmediately after planting of seed.

(20) Based on Klong Thom costs.(21) 2,900 baht/ha of nursery for boxes; 150 baht/ha for straw.(22) Ditto. For a total of 10 hours operation per hectare. Depreciation

at 2,800 baht/ha.(23) No provision made in the Klong Thom estimation.(24) Based on Klong Thom estimates.(25) 60% success (plantable budded stumps: germinated seed) is assumed.

Adjustments in cost are-not made for the higher level of success(actual success at Klong Thom was 41%) as the total cost difference h

would be minor.

ANNEX 10Appendix 3Page 1

THAILAND

RUBBER REPLANTING PROJECT

Establishment Costs per Ha - Budwood Nurseries(Production Costs of Budsticks - Assumptions)

Labor

1. Clearing old rubber at 50 trees/rai2. Ploughing, harrowing and leveling by tractors. Lining and holing

at 2x x lm = 4,500 points/hectare.3. Planting budded stumps at 4,500 points/hectare.4. Labor for supplying included in (3). Assume maximum losses of 20%.5. Manual weeding. Labor for (7), (8), and (9) included. Assumes

one man permanently employed in the nursery, per hectare.6. Assumes 6 rounds fertilizer application per year.

Materials

10. Budded stumps are assumed to cost 1.5 baht each. With 20% suppliesrequirement is approximately 5,600 stumps.

11. 2,400 kg/ha compound fertilizer per year at 6.2 baht/kg.12. Assume laborers provide own weeding and pruning tools. Tractor

costs as for budded stump nursery.13. Fencing. No provision made in Klong Thom estimates.14. Overhead costs charged to budded stump nursery as at Klong Thom.15. One year's production from a mature (year 3 after planting and onwards).

1.0 ha budstick nursery is sufficient to provide for one 5.0 habudded stump nursery. Establishment and maintenance costs for thefirst 3 years are 85, 740 baht. Therefore, the cost of budaticksfor 1.0 ha of budded stump nursery would be approximately 17,000 baht

per ha 85,740 for the first two years of budwood production5

(year 2 and 3), there being no production in year 1). This is anapproximation as budstick production in year 2 is about 50% of thatof year 3 and onwards. However, the figure is adequate for estimationpurposes.

0s

ANNEX 10Appendix 3 TPage 2

THAILAND

RUBBER REPLANTING PROJECT

Establishment Costs per ha - Budwood Nurseries

(%)Year 1

Labor man-days

(1) Survey, layout, land clearing 145Add 10% for roads 15

(2) Preparation of nursery beds 65

(3) Planting budded stumps 100

(4) Supplying vacancies -

(5) Weeding 300

(6) Fertilizer application 15

(7) Pest and disease control -

(8) Pruning(9) Cutting budwood -

Total man-days 640

Materials Baht

(10) Budded stumps 8400

(11) Fertilizer 14880(12) Tools 950

(13) Fencing -

(14) Overhead costs -

Total material cost 24230

(15) Total Costs - Labor 16000- Materials 24230

TOTAL 40230

ANNEX 10Appendix 4Page 1

THAILAND

RUBBER REPLANTING PROJECT

On-Farm Technical Specifications

1. Land clearing, year 0. The initial step in land preparation forreplanting would be the survey of the proposed area, carried out by fieldstaff of the RRAFB. The survey would result in demarcation of the peri-meter boundary of the area, a broad classification of the soil and adescription of drainage and topographical conditions. Clearing of theold rubber stand will either be carried out by chain saw contractors orby the smallholder using either chainsaw or axe. To allow the smallholdersufficient time to continue tapping other areas of old rubber and to inter-crop and to allow a "clean start" to the replanting operation, it is con-sidered advisable (where family labor supply is limiting) that the taskof underbrushing (where relevant), felling and cutting up the rubbertimber, be undertaken by contractors with chainsaws. This should save112 man days of smailholder time per hectare. Timber would be cut into2-3 metre lengths and where possible sold by the smallholder for firewood,charcoal or box making. In certain instances, the smallholder may sellthe old timber in return for the operation of land clearing being done bya contractor. Generally the cost of clearing where the timber is surren-dered to the contractor would amount to 200 baht/rai. The remaining brush-wood would be heaped and burned.

2. Stump poisoning. Old stumps would be painted in a 40 cm band witha solution of 5%, 245-T tree killer, immediately after felling as a preven-tive measure against root disease.

3. Land preparation. Where de-stumping is done, contract ploughingand harrowing (twice for each operation) could be arranged, so that thefirst dry rice intercrop could be sown at the start of the wet season,following completion of lining. Intercropping is also possible withoutdestumping, but the area for exploitation would be reduced. Intercropswould not be planted closer than 1 metre to the center of the plantingrow.

4. Lining and holing. With the assistance of the RRAFB fieldinspectors, smallholders would line and peg their areas. Where slopesare over 120, the inspectors would also assist with contour lining andterracing. Smallholders tapping their own rubber would plant at aspacing of 8.0 x 2.0 metres = 625 trees/ha whereas estates employing0 labour would plant at 8.0 x 2.25 metres = 555 trees/ha. These higherdensities will lead to higher yields and will provide a measure ofinsurance against yield limitation by root disease. Planting holeswould be 50 x 50 x 50 cm.

ANNEX 10Appendix 4Page 2

5. Planting

(i) Budded stumps. Each smallholder would receive 750budded stumps (including 125 supplies) per hectarein year 0, for planting during the recognized plantingseason. Those near to nurseries could receive supplieswithin 2 months of planting; those more distant wouldplant the supply plants in polybags, 20 x 50 cm lay-flat. At planting, 120 gm rock phosphate would beplaced in the planting hole. Stumps would be firmlyplanted with the bottom of the bud patch about 5 - 10 cmabove the soil surface. After planting the smallholdershould inspect the success of plant establishment atmonthly intervals for 3-4 months. Failures can beidentified within 1 month of planting and the firstand only round of supply planting would be carriedout within two months of initial planting. (20% ofsupplies is anticipated to be the maximum.)

(ii) Seed at stake. Following pre-holing, refelling andapplication of 120 gm tock phosphate, four germinatedseed at stake would be planted at each planting pointfor subsequent budding. Planting would be done fromdawn to 10.30 a.m. at the latest and from 3.30 p.m.until night fall. Seeds would be planted in thesame manner as in nurseries, but in a square withthe points 30 cm. apart. The surface layer of soil(1 cm) over the seed should not be firmly packed.Field budding would be carried out 4-8 months afterplanting seed at stake and stocks budded as surplusplants would be used as supplies and for sale toneighbouring farmers through the RRAFB.

6. Fertilizer. The attached schedule of fertilizer quantities wouldbe used subject to minor modifications.

7. Weeding. Imperata cylindrica (lalang), the most dangerous weedon smallholdings, if present at time of land preparation, would be killedusing dalapon in one of its commercial formulations (1.6 Kg a.i. per raito be repeated 3 weeks later - in 100 - 120 litres of water per rai); ifnecessary at a later stage, clumps of lalang would be eradicated withdalapon but smallholders and inspectors would pay particular attentionto preventing a resurgence of lalang. Otherwise weeding would be manualand would consist of monthly clean weeding in years 0-3, of 2 metre widetree rows and forking out of woody growths in the tree avenues, in partic-ular Eupatorium (Siam Weed) and Melastoma (Straits Rhododendron).

8. Cover crops. At the end of year 3 in intercropped areas (or inxrrce/Jnon-intercropped areas from the outset) leguminous covers con-

.isting of Calapogonium muconoides, Pueraria phaseoloides and Centrosema

ANNEX 10Appendix 4Page 3

pubescens, would be sown at a rate of up to 8 Kg/hectare. (Seed are readilyavailable at low cost.)

9. Routine Maintenance of Rubber Trees. Adventitious shoots wouldbe removed from the stock and side shoots of the scion, to a height of 2.5metres (i.e. the reach of a smallholder without causing the tree to bendover) so as to provide an uninterrupted trunk for tapping. With certaintrees of clone PRIM 600, branch induction will be necessary and this oper-ation would be done under guidance of RRAFB staff.

10. Disease and pest control

(i) The major disease, present mainly in the western part ofSouthern Thailand, is Phytopthora botryosa leaf disease.Another important disease is Phytopthora spp. (blackstripe panel disease). Phytopthora botryosa is found onboth crown and panel, whereas Phytopthora palmivora is onlyencountered on the panel. It is not known whether botryosaor palmivora are both casual organisms of black stripe orwhether only one of the species is casual. Young buddingswith Phytopthora leaf disease in the first year of growth

_ should be treated with copper oxychloride. Treatment oflater plantings is expensive. The most effective preventa-tive measure is to use the disease tolerant clone GTI (allother clones used in Thailand are more susceptible) andin the few Phytopthora susceptible areas where RRIM 600 hasbeen planted, to crown budd. RRC considers this policy safein that the number of non-crown budded RRIM 600 plantsremaining in the overall tree population of a region wouldbe low. Phytopthora (black stripe) is treated by applicationof captafol (difolatan).

(ii) It is fortunate that there is a relatively low incidenceof Rigidiporus lignosus (white root disease) in Thailand.This disease is a major yield limiting factor in Malaysiaand Sumatra and the RRAFB and the RRC should make everyeffort to limit the spread of the disease. With increasedreplanting, the incidence of the disease is likely to in-crease. All cases encountered would be reported automati-cally to the RRAFB and the RRC and the latter organizationwould advise upon treatment.

(iii) Other disease and pests requiring attention are Corticiumsalmonicolor (pink disease), Ceratocystis fimbriata (mouldyrot) and Coptotermis (white ants). In areas where the leafdisease Oidium heveae is prevalent, the clone PB 5/51 would4 not be planted.

ANNEX 1 0Appendix 4Page 4

11. Inter-cropping. The program would largely concern upland riceand soya beans. In de-stumped areas, approximately 75% of the land surfacecan be inter-cropped; where the stumps remain, the area would be about 50%.The present dry rice varieties require a 5 month season and would on theaverage be planted at the start of the heavy rains in September for harvestin February. Soya beans (either for home consumption or for seed suppliesto N. Thailand) would be sown in May when the rains start and harvested inAugust. Alternatively mung beans (3 months season) or sweet corns (2-1/2month season) could be grown. It is important that inter-cropping is prac-tised in the May-August season, otherwise a heavy weed population will in-vade the area prior to rice planting. RRAFB and the RRC would producetechnical leaflets on inter-cropping and would make arrangements for seedof high yielding varieties to be available.

THAI LANDRUBBER REPLANTING PROJECT

Timetable for Field Operations

Survey (Jan. - July of year before planting)

Notification of Approval of Replanter'sApplication

Clearing _ - -

Lining and Clearing Planting Points

RicePlanting Intercrop --- r __- ' J _

Maintenance of Intercrop _ ,_ -_ - - -*

Planting (of budded stumps) __ _ _ r

Planting (of seed at stake) . _ _

Harvesting Intercrop 6 - ,

Budding Field Stocks

Cutting Back

S O N D J F M A M J J A S 0 N C J F M A M J J A S

MonthSSongkhla, Yala, Narathiwat

---- Phuket, Pangnga o

World Bank-15126 PrJ: -

-A XO7

ANNEX 10Appendix 5Page 1

THAIIAND

RUBBER REPLANTING PROJECT

Cost of Chain Saw Felling

1. In the Hat Yai/Sadao area of Songkhla Province there are a fewchain saw operators. Most of these are employed in felling and cuttingup rubber trees.

2. Capital Cost and Depreciation. One 2 h.p. chain saw costs $ 10,000.The life of a saw is 3-4 years, at 4 months usage per year amounting to 768hours per year or a life of approximately 3,000 hours. (4 years x 4 months,1 year x 24 days/month x 8 hours/day.)

3. Operating Costs: Labor. Number of man days required to fell,cut into lengths, 150-200 trees (3-4 rai) using both axes and chain saws- 10 m.d. Each saw is operated by 2-3 men who with one saw can fell150-200 trees (3-4 rai) in 1 day of 8 hours = 2-3 m.d. A further 7-8 m.d.is required to cut off branches, and cut the trunk and main branches intolengths. Cost per man day - 70 baht. Therefore the labor cost of felling_and cutting up is 700 baht to produce about 75-100 tons green wood. (7-10baht per ton.)

Fuel

15 litres petrol/day1-1/2 litres engine oil/day

Spares and Saw

(M)Cost of spares (excluding chains) and repairs per season - 2,500Cost of chains (life of a chain is 14 days) at 315 baht

each. Approximately 8 chiains per season - 2,520

Total spares, chains and repairs per year - 5,020

4. Contract Cost. Cost of clearing by chain saw is $ 400/rai (approx.25 tons green wood). The labor cost to the contractors of felling and cut-ting up is approximately 10 m.d = 3 m.d. per rai at $ 70/man day - ^ 210/rai.

3-1/2 raiAssuming that with one chain saw, the rubber wood from I rai can be felledand cut up in a period of 1 day (3 men in 10 man days with 1 saw fell and

ANNEX 10Appendix 5Page 2

cut up 3-4 rai) then with one chain saw operating 96 days per year, 100 raican be dealt with by 1 saw in one year. Therefore considering depreciation,labor and operating costs combined, the contract cost of chain saw clearingis not excessive.

ANNEX 10Appendix 6 9Page 1

THAILAND

RUBBER REPLANTING PROJECT

Intercropping Possibilities

1. Background. Intercropping can be carried out in young rubberfor a period of 3 - 3-1/2 years, during which, it could be possible togrow 6 - 7 successive intercrops. The objective of intercropping fromthe national viewpoint is maximization of land productivity. The advan-tage to the smallholder is the generation of income to compensate forloss of revenue following rubber replanting and during the long non-productive period.

2. At present, intercropping is done on about one third of the youngimmature rubber areas in Thailand. The major intercrops are upland rice,sweetcorns, groundnuts, sweet potatoes, chillies, watermelon, tobacco,pineapples and bananas. Soya bean has considerable potential for thefuture. All rubber land is not suitable for intercropping and it isestimated that unsuitable topography and soil type would reduce thepotential area for intercropping to 60% of the area for replanting.Intercrops cannot be grown closer than 0.5 meters from the rubber treesin years 1 and 2 and 0.75 meters in years 3 - 3-1/2. Within any rubberarea suitable for intercropping, therefore, 75% of the land can be inter-cropped in years 1 and 2 and 60% in years 3 - 3-1/2. The potential areafor intercropping would, therefore, be reduced to about 40% of the areafor replanting.

3. Although it is very desirable that smallholders are encouragedto intercrop (subject to agronomic and economic limitations), there arecurrently several major constraints to this practice in Thailand.

4. The constraints are:

(i) Although there is a lack of information on farm size,cropping patterns and labor availabiliby, it is knownthat many rubber farmers have their own paddy landand that rubber production is but one of several farmactivities. The general situation in the past has beena relative abundance of land and scarcity of labor.Therefore, there is considerable doubt as to whetherintercropping could be carried out on more than thepresent 33% of area for replanting. (With the imple-mentation of HLTS programs in the final years of pro-duction, even less labor would be available for inter-cropping than before.)

ANNEX 10Appendix 6Page 2

(ii) Efficient intensive intercropping is only possible wheretrees are destumped and the land is thoroughly cultivated.Unless this work can be done mechanically, farmers willgenerally be unable to intercrop efficiently. Insufficientfamily or hired labor is available to perform this opera-tion manually. (General experience in Southeast Asia isthat the average smallholder family with two work unitscan only manually clear, plant and intercrop one hectareof rubber in one year.) The program, however, envisagesan average individual replanting of 2 hectares at a time.

(iii) During periods of low rubber prices, hired sharetappers havelittle incentive and, consequently, at such times the burdenof tapping would fall on the family.

(iv) There are considerable technological problems, in thatyields of intercrops are poor, agronomic techniques arenot well developed, fertilizer is rarely used and expen-sive, and high yielding seed, even of upland rice, arenot readily available.

(v) There is little information on suitable crop rotations,but several successive crops would have to be taken tojustify initial clearing costs.

(vi) Apart from rice, there is little knowledge of marketingoutlets and further marketing studies are required.

(vii) Financial incentives for intercropping are generallyinsufficient.

5. The above constraints apply to a lesser extent in the case ofpineapples and bananas, but these are crops for specialized markets witha limited total requirement. Had organized land clearing services andhigh yielding rice and soya bean seed been widely available, then therewould have been strong justification, in the case of farmers withoutpaddy land and with adequate labor, having assistance in at least thefirst year of the grant to clear and to grow two intercrops. (Wherelabor is short, it would be dangerous in terms of standards of rubbercultivation, to encourage smallholders to intercrop.)

6. During the course of the project, development work could beusefully carried out by a new RRAFB intercropping unit in cooperationwith the RRC, into tree disposal and land clearing techniques and intothe many aspects of intercropping in rubber areas.

7. Present costs of mechanical clean clearing and land cultivationare prohibitive at 830 baht per rai. The RRAFB intercropping unit could

is focus initially on smallholders with small rubber lots (less than 15 rai)and no outside paddy land and whose rubber wood is cleared and sold but

ANNEX 10Appendix 6Page 3

not destumped. These smallholders should be able to plant and maintainup to 12 rai of replanted rubber, with intercrops over 50% of the areaplanted to rubber. (A further 25% of rubber land is unavailable due tothe presence of the old rubber stumps (para 2.7)). The cost of rice andsoya bean seed for the first year of intercropping would be 50 baht/raiand fertilizer (60 kg/rai) would cost 180 baht/rai. The RRAFB couldprovide this seed and fertilizer to such farmers at cost.

;9

ANNEX 10Appendix 7Page 1

THAILAND

RUBBER REPLANTING PROJECT

High Level Tapping and Ethrel Applications

1. High Level Stimulation Tapping Before Replanting. Most of the oldseedling rubber in Thailand has been tapped repeatedly and the renewed barkis thin and unproductive. However, there are considerable and worthwhilereserves of virgin bark higher up the tree. In most of these areas, yieldscould be raised by 50-100% for a period of several years through high-leveltapping and ethrel (2-1/2/5%) stimulation of the virgin bark (HLTS). High-level tapping on one cut per tree is easily carried out using the "longhandled V-shaped gouge." During the last year of tapping, slaughter tap-ping would be introduced on two upwards cuts per tree.

(i) Program of HLTS. Following a survey of the suitabilityof areas for HLTS, the RRAFB would organize a zonal HLTSprogram limited to a program of replanting. Typicaltapping schedules would be:

(a) For well-grown trees with a 3-6 year period ofexploitation before replanting: S/3 d/2 withstimulation monthly for eight months per year.

(b) For trees to be replanted in 1-2 years. S/2 d/2witt monthly stimulation for eight months per year.

(c) For trees to be felled in less than one year(slaughter tapping): 2S/3 d/2 with cuts separatedby 75 cm with stimulation monthly. During the final3-6 months tapping would become daily.

2. Tapping in Replanted Areas

(i) Tappers would receive instruction in marking and openingof panels, tapping, tree hygiene including panel diseasecontrol and cleaning of tapping knives, spouts and cupsand in preparation of crop for despatch to the purchaser.Trees would be opened at 150 cm above the bud union when60% of the stand has reached a girth of 50 cm and barkconsumption on alternate daily tapping would not exceed25 cm per year.

(ii) Tapping would normally commence at the end of the dryseason at 6-3/4-7 years after planting with a task of500 trees and 300 tappable trees per ha. During this

ANNEX 10Appendix 7Page 2 9

period the yield has been assumed to be 500 kg/ha; inyear-3 of tapping a full stand of 500 trees/ha should bein tapping.

(iii) With the exception of certain clones on panel A, the halfspiral alternate daily stytem S/2, d/2 would be used onpanels A, B. C, and D. Trees would be rested for 1-2 monthsduring the dry season. It is assumed there will be 280tapping days in a year and 140 tappings on each tree;

(iv) Tapping standards would be periodically examined by theRRAFB staff to ensure that the objectives of good tappingare being obtained. These are to apply tapping systemswhich obtain high yields while:

(a) using as little bark as possible;

(b) permitting satisfactory tree growth and barkrenewal;

(c) preventing bark disorders such as brown bast.

(v) Excessive bark consumption rates and a high incidence ofwounding can be considered as reliable evidence of poortapping standards. Excessive bark consumption can be theresult of too thick a shaving of bark being excised pertapping or too high a frequency of tapping. Wounding isdue to tapping being too deep and causing damage to thecambium layer. Where tapping standards are poor, furthertraining of smallholders will be necessary.

(vi) Tappers would be instructed to deal with the serious paneldisease, Phytophtora (black stripe) by the RRAFB and the RRC.

(vii) Where feasible, an incentive system would be introduced topromote improved tapping by hired tappers.

3. Yield Stimulation. The HLTS program involves ethrel stimulation.The requirements of ethrel are attached. When ethrel application is bymeans of bark scraping, a concentration of 2-1/2% is optimum. Howevermost smallholders prefer application by painting. With this method, theoptimum concentration is 5%.

4. Yield Projections. The yield projections used are those predictedby the RRC for areas planted at 500 trees/ha, tapped S2d2 on 140 days/yearand receiving regular and adequate fertilizer. For reasons of conservativeestimation, the mission would have reduced these yields by 10% each year.However, planting density and tappable stand will be increased to 625trees/ha and 500 trees/ha respectively in year 3-4 of tapping. This *

ANNEX 10Appendix 7Page 3

increase should raise yields above the RRC predictions and on this basisthe RRC projections were considered satisfactory for the new tree densi-ties which are proposed. Without stimulation, it is estimated that yieldswill reach 1,800 kg/ha in year 7-8 of tapping. Yields on commercial estatesin N. Malaysia in similar climatic and environmental conditions, using similarplanting material, would be estimated to reach 2,200-2,500 kg/ha at the samestage. Where smallholders have taken advantage of a satisfactorily supportedplanting program, the yields obtained should not be less than those of com-mercial estates. In fact, yields may be larger, in view of higher densitiesand more intensive family tapping. The major smallholder yield problem willbe related to rate of bark consumption, which if not controlled to reasonablelevels will lead to early exhaustion of bark reserves. An important part ofthe project will be to guide tappers in the conservation of bark. Fortunatelythe standard of tapping in terms of wounding is generally good. The yieldprojections assume good husbandry, adequate fertilizer in both immature andmature phases and improving standards of bark consumption and take accountof the remarkably low incidence compared with Malaysia and Indonesia of im-portant yield limiting factors, wind damage, root disease and brown bast.The large yields per ha already being achieved by successful smallholdersare also considered in these yield projections. It will be important todemonstrate the benefit of fertilizer application in mature rubber. Arecent RRIM survey showed that on average, yields from fertilized small-0 holdings were some 30% larger than unfertilized, measured over 14 yearstapping. Over 25 years tapping, particularly where stimulant is used,this difference could well reach 40%.

S

THAILAND ANNrEX 10 9Ali5'e-nd-ix 7

RUBBER REPLANTING PROJECT Attaclrienit

Requirements of Ethrel for Replanting Programme('000 ha)

Years 1975 1976 1977 1978 1979

(1) Area for Replanting 20 25 35 50 50

(2) Suitability for HLTS (60%) 12 15 21 30 30

(3) Slaughter Tapping 2.4 6.o 12o6 24 2(20 - 40 - 60 - 80%) 2h601, 42

1 5÷21 21+30 30+30 30+30 30+30(4) HLTS on S/2 7 d/2 20% 40O 60% 80% 80%/G

___________ _ _ _ _________________ 7.2 20.4 36 48 48

30+30+30 30+30+30 30+30+30 30+30+30 30+30+30(5) HLTS on S/3 2 d/2 20% 40% 607 80% 80%

18 36 54 72 72

(a) Total ha at 6 kg/year (3)+(4) 9.6 26.4 48.6 72

(a) Total Ethrel 2.5% (3)+(4) 57.6 158,4 291o6 432 432

(b) Total ha at 4 kg/year (5) 18 36 54 72 72

(b) Total Ethrel 2G5% (5) 72 144 216 288 288

GRAMD TOTAL Ethrel 2.5% (Tons) 130 302 508 720 720

50% - 2.5% 16.25 37.75 63.5 90 90(7) equivalent in corneraial

product 10% (tons)50% - 5% 32.50 75.50 127 180 180

Total Commercial Product (10%) 48.75 113.25 190.5 270 270

Quantity of Palm Oil (10%) 81.25 188.75 317.50 450 450

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