Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 2070a-TH

THAILAND

STAFF APPRAISAL REPORT

OF A

FIFTH RAILWAY PROJECT

December 26, 1978

Transportation DivisionProject DepartmentEast Asia and Pacific Regional Office

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

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CURRENCY EQUIVALENTS

Currency Unit Baht (B) (1 Baht = 100 Satangs)US$0.0490 = B 1.00US$1.00 = B 20.45US$49,020 = B 1 million

SYSTEM OF WEIGHTS AND MEASURES

Metric British/US

1 centimeter (cm) 0.033 feet (ft)1 meter (m) = 3.2808 feet (ft)

1.0939 yard (y)L, kilometer (km) = 0.6214 miles (mi)i metric ton (ton) 0.9841 British long tons (lg tons)1 kilogram (kg) = 2.2 pounds (lb)

ABBREVIATIONS AND ACRONYMS

A - Amperec.i.f. - Cost, insurance, freightCPCS - Canadian Pacific Consulting Serviceshp - HorsepowerICB - International Competitive BiddingKV - KilovoltKW - Kilowattp.a. - per annumSRT - State Railway of ThailandV - Volt

FISCAL YEAR

October 1 to September 30

FOR OFFICIAL USE ONLY

THAILAND

STAFF APPRAISAL REPORT OF A FIFTH RAILWAY PROJECT

Table of Contents

Page No.

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

A. Transport System .... . . . . . . . . . . . . . . . 1B. Transport Demand .... . . . . . . . . . . . . . . . 3C. Transport Policy, Coordination and Investment. 4

II. RAILWAY SUBSECTOR .... . . . . . . . . . . . . . . .. 5

A. Background and Past Bank Group Assistance to theRailways .... . . . . . . . . . . . . . . . .. 5

B. SRT Organization .... . . . . . . . . . . . . .. 6C. Facilities .... . . . . . . . . . . . . . . . .. 7D. Traffic . .. . . . . . . . . . . . . . . . . . . 9E. Operations .... . . . . . . . . ...... . 12F. Tariffs and Costs .... . . . ...... . . . . . . 12G. Budget, Accounting and Audit . .. . . . . . . . . . . 13H. Revaluation of Assets .... . . ...... . . . . . 14I. Uneconomic Lines and Services . .. . . . . . . . . . . 14

III. INVESTMENT PLAN AND PROJECT ... . . . . . . . . . . . . . 16

A. Investment Plan .... . . . . . . . ...... . . . 16B. Project Definition and Loan . . .. . . . . . . . . . . 17C. Project Description .... . . . . . ....... . . 18D. Cost Estimates .... . . . . . . . ...... . . . 20E. Financing Plan . ........ ... . . . . . . .. . 21F. Project Implementation ... . . . . . ...... . . 21G. Action Plan .... . . . . . . . . ....... . . . 21H. Procurement .... . . . . . . . . * . ...... . . 23I. Disbursements . . .. . . . . . . . . . . . . . . . . . 23

IV. ECONOMIC EVALUATION .C.E.A.T.O.N. . ............ 24

A. SRT's'Transport Role . . . . . .. .. . .... . . . . 24B. Evaluation Summary .... . . . ..... . . . . . . 24C. Evaluation Details .... . . . ..... . . . . . . 25D. Sensitivity Analysis and Project Risks . . . . . . . . 26

This report was prepared by Messrs. C. Buratti (Engineer), 0. Murthy(Consultant), L. Seigel (Financial Analyst) and A. Weckerle (Economist).

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

Page No.

V. FINANCIAL EVALUATION . . . . . . . . . . . . . . . . . . . 27

A. General. . . . . . . . . . . . . . . . . . . . . . . . 27B. Past Financial Performance . . . . . . . . . . . . . . 28C. Assumptions for Financial Projections. . . . . . . . . 31D. Forecast Financial Performance . . . . . . . . . . . . 33E. Sensitivity Analysis and Financial Risks . . . . . . . 36

VI. AGREEMENTS AND RECOMMENDATIONS . . . . . . . . . . . . . . 37

ANNEXES

1. Past Bank Group-Financed Transport Projects 382. Selected Documents and Data Available in the Project File 40

TABLES

1. Estimated and Projected Public Passenger Traffic for 1976-912. Estimated and Projected Freight Traffic by Modes for 1968-913. Public Transport Investments during the Third and Fourth Five-Year

Development Plans4. Estimated Investment Requirements for Transport Infrastructure

in 1977-915. SRT Track and Infrastructure - Details as on September 30, 19776. Rails in Meter Gauge Line Tracks7. Inventory of SRT Motive Power and Rolling Stock as of

September 30, 19778. SRT Passenger Traffic from 1967-819. SRT Freight Traffic (CL) by Commodities for 1972-8110. Selected Operating Statistics 1972-7711. SRT Passenger Tariffs12. SRT Freight Tariffs (Car-Load Rates)13. SRT Income Accounts: 1974-8214A. SRT Investment Plan, 1977-8114B. SRT Investment Plan: Cash Requirements15. Project Composition and Cost16. Physical Content of the Project17. Acquisition of New Diesel Locomotives for Freight Service in

1977-8118. Replacement of Hitachi Locomotives with "Other" Diesel

Locomotives19. Diesel Locomotive Utilization20. Passenger Car Acquisition in 1977-8121 Requirements of Additional Passenger Cars in 1977-8122. Requirements of Freight Cars 1977-8123. Track and Bridge Rehabilitation Program, 1977-8124. Makkasan and Districts Workshops: Machinery and Equipment

Financed by the Loan25. Implementation Schedule, 1977-81

26. Procurement Schedule for Bank-financed Items27. Estimated Disbursement Schedule28. Economic Returns on 1979-81 Investments29. SRT Cash Flow Data: 1974-8230. Operating Revenues and Costs: Effects of Inflation, 1972-197731. SRT Balance Sheets: 1974-8232. Long-term Debt as of September 30, 1977

CHART

Chart No. 18916 - Organization Chart of State Railway of Thailand

MAPS

IBRD 13621 - Transport SystemIBRD 13622 - Track Rehabilitation and Signalling Improvement Schemes

I. TRANSPORT SECTOR

A. Transport System

General

1.01 Thailand's transport system is a mix of traditional and modernmodes, principally (in order of importance) roads, the railways and inlandwaterways. The highest concentration of traffic is over the main arteriesconstituted by national roads, railways and river navigation. National roadsgenerally run in close proximity to railway lines and, in the Chao Phyabasin extending north from Bangkok, all three principal modes are represented.Total length of the transport network is adequate for the next decade, butits quality, in particular that of secondary and tertiary roads, needs sub-stantial upgrading.

Roads

1.02 By traffic volume, network length and value of sunk investments,roads are the most important transport infrastructure. National highways,the primary road system, total nearly 13,000 km which is more than threetimes the length of the railways (about 3,800 km). Like the railway lines,they radiate from Bangkok to the national borders. More than 90% of nationalroads are paved.

1.03 Provincial roads, the secondary road system connecting provincialtowns and other major population centers with national roads, total more than22,000 km. Despite increasing traffic requirements, most provincial roads arein very poor condition. About 60% (13,000 km) are unimproved and often notpassable in rainy weather. Of the remaining 40% (9,000 km), half are pavedand half have graveled surfaces. National highways and provincial roadsprimarily serve the rural population, as do inland waterways and the railways.The responsibility for construction and maintenance of the national andprovincial road systems is vested in the Department of Highways in the Ministryof Communications. A program for upgrading secondary roads is underway.

1.04 Tertiary roads are defined as roads not classified as national,provincial or urban. They include cycle tracks and, in some cases, evenfootpaths. Estimates place their length at between 40,000-60,000 km, butinventory data are incomplete and sketchy. Although a few thousand km ofthese roads have been improved in recent years, maintenance has been limited.Regional coverage of these roads is not balanced. Tertiary roads connectvillages and hamlets with the primary and secondary road systems, railwaysand inland waterways. They are administered by a number of over-lappingnational, provincial and local agencies - a system which needs rationalizing.Appropriate steps for improving tertiary roads are under study (para. 1.14).

Inland Waterways

1.05 The inland waterways system consists of the rivers and canals inthe central plains and some sections of the Mekong river. Navigable waterwaysin the central plains comprise about 1,600 km in the rainy season and 1,100 km

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in the dry season. During the rainy season (July to December), barges up to80 tons and two meters draft can negotiate the waterways from the gulf ofThailand to Uttaradit (about 700 km). In the dry season (January to June),navigation is restricted to the section from Bangkok to Nakhon Sawan, halfwaybetween the capital and Uttaradit. The principal rivers in the waterwayssystem are the Chao Phya, which is navigable up to Nakhon Sawan; the NanRiver, linking Uttaradit to Nakhon Sawan; and the Pa Sak River betweenAyutthia (on the Chao Phya) and the Rama VI dam. Apart from a string oflanding places, built mainly for private use, no river port facilities exist.The fleet of mostly wooden barges numbers about 7,000, of which about 50%exceed 40 tons and 10% (steel barges) have a dead weight range of 100-300metric tons. Most of the fleet is privately owned. Public investmentin waterways transport has been very limited in the past; a project toimprove the system is currently under preparation (para. 1.14).

Sea Ports

1.06 There are some 35 sea ports in Thailand, which can be broadlydivided into two groups according to location, size and function. The firstgroup includes Bangkok, Si Racha and Sattahip - all of which are within 200km of the capital and serve as Thailand's principal external trade outlets.Bangkok, the country's most important port, dominates international waterbornetraffic, accounting for 90% of dry cargo imports and exports except bulkagricultural exports handled at deep water anchorage off Si Racha. Si Rachais the port of discharge for most oil imports, and Sattahip, built as amilitary facility, handles some containerized commercial cargo at present.However, the Government has decided to develop Sattahip as a major commercialdeep sea port, and the first investments are scheduled for the early eighties.The second group consists of the southern ports, which are scattered over750 km of the southern peninsular coast between its northern tip and Malaysia.These ports have primarily regional significance. About half of themserve, exclusively as fishing ports, while the other half combine coastaltransport, imports and exports and fishery functions. Songkhla and Pattanion the east coast of the peninsula and Phuket and Kan Tang on the west coastare the largest of the southern ports. Only Songkhla and Pattani have thepotential for deep sea port development. Domestic transport to, from-andwithin the southern peninsula is predominantly land based. Thus coastalshipping plays a limited role in the transport sector. The extent to whichcoastal ports can assume larger transport functions, is under review (para.1.14).

Civil Aviation

1.07 Thailand's international and domestic air traffic are centeredat Don Muang airport, in the vicinity of Bangkok, which serves as a jointcivilian and military facility. The feasibility of creating a second majorairport serving the capital has been studied for more than ten years.Outside Bangkok, there are about 40 air fields of various sizes; of these,close to half receive scheduled flights. Domestic air transport competeswith long distance road and rail passenger traffic and, though not comparablein volume to these modes, serves an essential transport function. Thedomestic air carrier, Thai Airways Co. Ltd., is owned by the Government and

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has a defacto monopoly on internal routes. Thai International Airline Co.Ltd., of which the Government is the principal shareholder, carries allinternational traffic.

B. Transport Demand

1.08 Roads are the dominant mode of transport for passengers and freightin Thailand (Tables 1 and 2). In 1976, combined public passenger trafficoutside Bangkok for railways and roads was about 40 billion passenger-km, ofwhich the roads' share was 85%. Combined freight traffic for rail, roads andinland waterways was estimated at about 50 million tons and over 13 billionton-km, of which the roads' share was about 70%. By tonnage carried, inlandwaterways (8.5 million tons) ranked above rail (5.4 million tons), while inton-km, the positions were reversed (2.5 versus 1.4 billion ton-km), reflectingthe longer haul traffic handled by the railways.

1.09 Freight traffic is concentrated in the corridor between the gulfarea around Bangkok and northern Thailand and, to a lesser extent, along thetransport axes radiating south and northeast from the capital to the nationalborders. Roads and railways share all trunkline traffic, and in the ChaoPhya basin inland waterways have captured a sizeable portion of this traffic.Direction and size of the flows reflect Bangkok's central location anddominance as a port and national consumption center, the rural character ofthe outlying provinces and the advanced agricultural development of thecentral plains. An estimated one-third to one-half of the country's total1976 freight was composed of agricultural products, of which approximately50% were exported. Imports (excluding those destined for Bangkok) andexports combined total about 40% of all tonnage moved in Thailand.

1.10 Annual growth over the last ten years for the combined freighttraffic of road, rail and inland waterways was about 9%, as compared to anaverage real growth in the GDP of 7%. Allowing for sustained growth of theeconomy and for aggregate freight traffic to continue to advance faster thanthe GDP, transport in Thailand can be expected to increase at about the samerate until the early 1990s. Provided sufficient capacity is made available,these growth rates would result in a tripling or quadrupling of traffic overthe next 15 years.

1.11 The distribution of freight traffic between roads, rail and water-ways over the 1980's can be expected to follow the general trend of the lastten years. Inland waterways and the railways will continue or complete theirtransformation into medium or long distance bulk carriers, and roads willincreasingly dominate short haul and low volume traffic. Inland waterwaystraffic, which is confined to the Chao Phya river basin, is projected togrow by about 2.5% p.a. during the 1980's. Railway freight traffic is expected

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to grow by about 4-5% p.a. over the same period, while rail passenger trafficis projected to experience somewhat slower growth. Roads would absorb thelargest part of freight transport because of the competitiveness and flex-ibility of the trucking industry, its ability to economically handle smallconsignments, and the continued dispersion, growth and diversification ofagriculture. While railways and inland waterways traffic would grow, theircombined share of freight transport would drop by about one half from thepresent 30%.

C. Transport Policy, Coordination and Investments

1.12 Enhanced by a steady supply of new transport infrastructure,passenger and freight transport growth have aided Thailand's economic andsocial development. The road transport industry is vigorous and competitive,the railways are operationally efficient, and inland waterways have retaineda significant share of the central plains' transport. While public passengertransport is regulated (e.g. the licensing of routes and the control ofschedules for road transport), freight transport is essentially unrestricted.There is no evidence of significant inter-modal distortions and regulatoryrestrictions. To verify this favorable conclusion, however, a study of roaduser charges will be undertaken under the Sixth Highway Project, and themarketing policy of the State Railway of Thailand (SRT) will be reviewedunder this project (para 4.02). A taxation policy for inland waterwaystransport will also be devised under the waterway improvement study includedin the Sixth Highway Project. To enable the transport sector's good perfor-mance in the economy to continue, future transport policies should be aimedat two principal objectives: maintaining the present sector arrangement,which is characterized by the parallel existence of efficient, competitiveand complementary modes; and providing transport capacities which are in linewith demand.

1.13 The Government currently is reviewing the size and composition ofinfrastructure investments for the ongoing Plan (1977-81, Table 3). Transportexpenditure targets during the last Plan period (1972-76) were about US$1.04billion equivalent, with 80% allocated to roads and 12% to railways. Transportaccounted for 20% of development expenditures. To accommodate the projectedgrowth in transport demand, and to support the Government policy of upgradingconditions in rural Thailand, future transport investments must be considerablyincreased. By tentative calculations, public expenditures under each of theFive-Year Plans 1977-81, 1982-86 and 1987-1991 should reach an average ofUS$ 1.9 billion equivalent (in 1977 prices, Table 4), an 80% increase over the1972-76 amount. Railways would receive US$120-150 million in each Planperiod, representing 11% of the combined public investment for rail, road andwaterways transport. By 1991, the railways' share should be about 17% forpublic passenger transport (rail and roads combined), and 10-12% for freighttransport (ton-km of rail, road and inland waterways traffic combined). SRT'sInvestment Program and the project is consistent with the railway's projectedmarket share of the transport sector.

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1.14 The Bank presently is involved in all transport modes, exceptcivil aviation, for which Thai development capabilities are adequate. TheBank is currently providing assistance under the Sixth Highway Project forthe upgrading of approximately 700 km of provincial roads, improving highwaymaintenance, and strengthening planning in the Department of Highways andthe Ministry of Communications (Transport Planning Unit). Studies areincluded in the same project for the preparation of rural roads, provincialroads, inland waterways and coastal ports projects. At the request of theGovernment, the Bank is also providing assistance for the preparation of aport development project at Sattahip.

II. RAILWAY SUBSECTOR

A. Background and Past Bank Group Assistance to the Railways

2.01 Since the early 1950's, the Bank has made four loans totallingUS$52 million to the State Railway of Thailand (SRT): 35-TH, signed inOctober 1950, for US$3 million; 128-TH signed in August 1955 for US$12 mil-lion; 280-TH signed in April 1961 for US$22 million; and 898-TH signed inJune 1973 for US$15 million. The Bank's objective in these railway projectswas to enable SRT to exploit its inherent advantages in long distance haul ofbulk traffic. After an initial phase of postwar rehabilitation under thefirst loan, SRT endeavored during 1962-71 to modernize its equipment andreplace its overaged assets. Assisted by the Bank's second loan, SRT acquired30 diesel locomotives and improved its telecommunications. The Bank's thirdloan enabled SRT to acquire 20 additional diesel locomotives and 1,650 freightcars, replace 600 km of track rails, and improve signalling and telecommuni-cations. The fourth loan (for rehabilitation of track and bridges, acqui-sition of rolling stock, and modernization of workshop facilities), emphasizedreduced operating costs through the elimination of steam traction.

2.02 The first two railway projects were completed on schedule. AboutUS$7.5 million of the third loan, earmarked for the purchase of 40 locomotives,was cancelled when the Borrower chose to purchase the locomotives throughprocedures which were not in conformance with Bank Group Guidelines. About80% of the fourth project was completed by the scheduled date (September 30,1976), but delays in procurement have deferred the manufacture of part of therolling stock and the replacement of about 200 km of track to the 1977-81investment program. US$14.5 million of the original US$15.0 million loanamount has been disbursed; the US$0.5 million balance, representing theretention money on disputed contracts together with the cost of two shuntinglocomotives, has been cancelled at the request of the Borrower. Cumbersomeprocurement procedures have been a prime cause of past delays in the aboveBank projects. Steps have been taken, or have been agreed to by SRT(para. 3.10), to prevent similar occurences in future.

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B. SRT Organization

Legislation

2.03 Under the State Railway of Thailand Act of June 5, 1951, SRT tookover the functions of the Ministry of Communications' Railway Department, and

became a separate legal entity. Two amending acts (June 11, 1959 and July 19,1966) introduced minor modifications to the 1951 Act. The 1959 amendmentgives overall supervisory power to the Minister of Communications, includingveto power over any action by SRT which is deemed inconsistent with Governmentpolicy. A Board of Commissioners (consisting of a chairman and four to six

members), appointed by the Council of Ministers, formulates policy and super-

vises the general affairs of SRT. The Council of Ministers approves thecapital budget, the construction or abandonment of railway lines, the sale

of immovable property, the borrowing of money, and the setting of standardrates and charges.

Management

2.04 The Board appoints, with approval of the Council of Ministers, a

General Manager who is responsible for the management and administration of

SRT and serves as an ex-officio Board member. Chart 18916 shows SRT'spresent organization, which generally is on a functional department basis.In 1976, top management was reorganized to place day-to-day operations undertwo Deputy General Managers reporting to the General Manager.

Staff

2.05 SRT staff training facilities, located at a Railway Training Centerin Bangkok, are generally adequate. For training in specialized fields, SRTsends a limited number of staff to local universities and foreign traininginstitutions. The number of supervisory staff trained in costing, marketingand planning has so far been critically low, but SRT is now making satisfac-tory arrangements to address this problem. In 1979, several railway officerswill be sent abroad for academic or professional training, and similartraining programs are planned for subsequent years.

2.06 SRT has competent officers and staff discipline is good. Staff sizewas 29,900 employees at the end of fiscal year 1977, including 28,500 permanentand 1,400 temporary (generally unskilled) employees. Productivity per manwas 287,000 traffic units (ton-km + passenger-km) in 1977, having increasedat an average of 8% per annum during the past five years; this comparesfavorably with the record of other railways in the region. Although totalstaff has decreased by about 4,000 employees since 1972, SRT will explorethe scope for further reductions in staffing levels.

2.07 Labor-management relations, which had been excellent up to 1973,were disturbed in 1974/75 by disputes over wage compensation for abnormalincrease in the cost of living. Liberalized allowances and a general pay

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raise restored satisfactory relations; further, a labor welfare divisionwas set up in the personnel department to deal with staff grievances.SRT salaries, which have kept pace with the consumer price index since 1972,are generally higher than those for corresponding grades in Governmentservice, but lower than those in private industry.

C. Facilities

The System

2.08 As of September 30, 1977, SRT operated about 3,800 route-km ofmeter gauge system (Table 5). Except for 90 km of double track betweenBangkok and Ban Pachi junction on the northern line, the route is singletrack. Four trunk lines radiate from Bangkok: north to Chiang Mai, northeastto the Laotian border, east to the border of Kampuchea, and south to theMalaysian border. The Maeklong line of 67 route-km serves the west side ofthe Bangkok area and is isolated from the main network. As of 1977, SRT had9 branch lines with a total route length of about 660 km, including part ofthe eastern and Maeklong lines (Map 13621); one of them (29 km route length),was closed down in 1978. The Government is considering construction, underits own financing, of a new 130 km line connecting Chacheongsao (a station61 km from Bangkok on the eastern line) to the deep sea port and proposedindustrial area of Sattahip. The merits of the rail line extension will bereviewed under a study of Thailand's eastern seaboard development, which isincluded in the Bangkok Traffic Management Project.

Track

2.09 Except for about 250 km near Chiang Mai, where the maximum gradientand the minimum curve radius are 2.6% and 180 m respectively, the main linesof SRT are laid with less than 1% gradient and curve radii greater than400 m. Curve length represents about 12% of total track on the system. Thereare 2,000 m of tunnels, and 2,467 bridges, of which 834 are wooden; SRT plansto gradually rebuild the latter with concrete structures, and to strengthenor replace weak steel bridges. Of the 3,920 km of main line track (including90 km of double track), 2,598 km are laid with 70 lb/yd rails, 393 km with80 lb/yd rails, and 732 km with 60 and 50 lb/yd rails. Table 6 detailsthe disposition and age of rails. SRT's plans to replace the 60 lb/yd railson the main line with 70/80 lb/yd rails. About 61% of the main line railsare welded of 42-144 m lengths. Welding of rail joints is being extended,and a few experimental rail lengths, continuous between stations, have alsobeen installed. Sleepers on the main running tracks (spaced 65 cm betweencenters) are 90% wooden, with or without tie plates; the balance which arefabricated from prestressed concrete are manufactured locally. The ballastconsists of crushed stone, 20 cm in depth. Maximum permissible axle load onthe main lines is now 14 tons, and maximum speed is 80 km/hr. However, thereare a large number of permanent speed restrictions due to weak bridges andsharp curves. The roadbed is generally stable, and track maintenance andriding quality are good.

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Signalling

2.10 Signalling and interlocking arrangements at SRT's 450 stations varyfrom modern, all-route-relay interlocking and color light signalling (in theBangkok area), to hand-operated points with no signals. Standard equipmentfor the main lines is mechanical interlocking with warner, home and startersemaphore signals. In the past five years, SRT has installed full interlockingat 85 stations and tokenless block instruments at 35 stations. Despite this,about 15% of the stations on the northern line and about 36% on the southernline are not fully interlocked, and many stations are worked only by hand-operated, key-locked points. SRT plans to further improve signalling andinterlocking under this project (para. 3.17).

Telecommunications

2.11 The SRT telecommunications network consists mainly of three-channelcarrier telephones at 13 dispatching offices and a telephone network. TheBangkok area also has a 300-line telephone exchange, which is more than25 years old. There are frequent breakdowns on the network, and spare partsare generally unavailable. Under the proposed project SRT plans to replacethe old telecommunications equipment with a 12-channel carrier telephonesystem and a 500-line telephone exchange (para 3.16).

Motive Power and Rolling Stock

2.12 Between 1972 and 1976, SRT withdrew 192 steam locomotives fromservice. As of September 30, 1977 (Table 7), its fleet consisted of 243diesel locomotives (203 main line, 40 shunters), 39 steam locomotives inemergency reserve, 102 rail cars (53 powered, 49 trailers), 1,052 passengercars (1,045 bogies, 7 four-wheelers) and 9,267 freight cars (6,621 four-wheelers, 2,646 bogies). SRT's 1977-81 investment program includes pro-curement of another 30 main line diesel locomotives, 130 passenger cars and273 freight cars (paras. 3.06-3.09). The freight and passenger cars willbe manufactured at SRT's Makkasan workshop.

2.13 Twenty-seven diesel locomotives (950 hp), supplied by the HitachiCompany of Japan, are more than 17 years old. Their performance and relia-bility are poor. After the manufacturer stopped production of the enginesome years ago, the old parts were locally repaired, resulting in furtherreduced performance. Such repairs are becoming increasingly difficult andan estimated 19 of the locomotives are being replaced under the project(para.3.06). About 39 passenger and 1,360 freight cars (about 20%) are 40or more years old. Under the project, the 39 passenger cars will be replaced.Together with the overaged freight cars and surplus steam locomotives (ex-cluding those in emergency reserve), they will be sold.

Workshops and Sheds

2.14 SRT's mechanical workshop facilities include a central workshop atMakkasan, which handles major overhauls of locomotives (including railcars) and rolling stock, together with the manufacture of passenger and

freight cars. There are three regional workshops at Uttaradit, Korat andThung Song. These handle some unscheduled repairs, as well as overflow heavyrepairs from the Makkasan workshop. With the increase of diesel locomotivesin SRT's fleet, the repair and overhaul facilities at Makkasan (whichoriginally serviced only steam locomotives) were organized on a makeshiftbasis to accomodate both steam and diesel engines. After the elimination ofsteam traction, a better arrangement of the work flow for diesel locomotiveoverhaul became possible. However, the building which was formerly used forsteam locomotive overhaul has recently been dismantled because it was unsafe;it will be replaced under the project by a new structure with overhaulfacilites for diesel locomotives, including new overhead travelling cranes(para. 3.18).

2.15 Daily maintenance of diesel locomotives is provided at four maindepots: Bang Sue, Uttaradit, Had Yai and Nakhon Ratchasima with the shop atBang Sue being the largest and best equipped. Annual maintenance of diesellocomotives, formerly undertaken at Makkasan, has been temporarily shifted tothe regional locomotive sheds. On the whole, facilities for the maintenanceand overhaul of motive power and rolling stock are well organized. With thenew building and some equipment additions included in the project, thefacilities will be adequate for some time to come.

Other Property

2.16 The major marshalling yard at Bang Sue has been modernized andequipped with mechanical retarders; the capacity of regional yards at SilaAt, Had Yai and Thung Song has been increased. The buildings, stations andoffices and general plant of the railway are well maintained.

D. Traffic

Passenger vs. Freight Traffic

2.17 Passenger transport traditionally has dominated SRT operations andrevenues. In 1977, it accounted for 56% (16.2 million) of total revenuetrain-km, with freight and mixed trains claiming 31% (8.9 million) and 13%(3.7 million) respectively. Passenger traffic also earned 54% of totalrevenues, while freight yielded 40% and other sources 6%. However, theseratios could gradually change in the future. Some passenger services appearvulnerable as road sections paralleling rail lines are nearing completion,and costs and tariffs of rail passenger services, on the average, place SRTin a tight competitive position. Freight traffic, by contrast, appears tohave an established market based on cost-advantages over competitors.Freight and passenger growth rates projected for 1977-81 reflect thisassessment (paras. 2.22 and 2.25). A profitability analysis of rail servicesis included in this project (para. 4.02) to provide SRT with a rational basisfor its future service and marketing policy.

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Passenger Traffic

2.18 From 1967-78, passenger traffic increased from about 46 millionpassengers and 3,600 million passenger-km to 59 million passengers and6,100 million passenger-km (Table 8). Growth was steady through 1974(passengers) or 1975 (passenger-km), but the number of passenger-km has beenstagnant between 1975 and 1977, and the number of passengers in these yearswas equal to or below the 1974 level. The main reason for this developmentwas a sharp tariff increase in 1975 (para. 2.28), the first in more than20 years. On average, passengers and passenger-km have increased since 1967by about 2% p.a. and 5% p.a. respectively.

2.19 Third class traffic represents 98% of the total number of passengersand 90% of passenger-km. First and second class traffic share the remainder.Average distance travelled by third class passengers is 90 km; the other twoclasses range from 500 to 800 km. Charges per passenger-km for second andthird class travel are approximately 64% and 40% respectively of the amountcharged for first class travel.

2.20 Urban Bangkok with its main railway terminal and Sam Sem, Bang Sueand Thon Buri stations generates about 12% of all passenger trips on SRT'snetwork. The Greater Bangkok area which includes urban Bangkok, about 90 kmof the northern line up to Ban Pachi, and the entire eastern line contributesabout 24% of total traffic (trips). The northern line, from Ban Pachinorthward generates 25% of all journeys; the northeastern line extending fromthe same station 21%; and the southern line 30%. Greater Bangkok generatesabout 33% of passengers-km, 80% of which originate in urban Bangkok. Thenorth-eastern line has 18%, the northern line 21%, and the southern line 28%.Thus, passenger transport is distributed fairly evenly over the networks'principal lines. SRT caters largely to the rural population: less than 7%of all trips on SRT can be classified as Bangkok urban and commuter traffic.In passenger-km, Bangkok urban and commuter traffic amounts to only 2%.

2.21 Passenger traffic in recent years has been determined by the steadyrise in the real incomes of the population, the progressive build-up of thenational and provincial road networks, the highly competitive bus transportsystem and the tariff policy of SRT. Railway tariffs have had the mostvisible effect. When raised in 1975 by a weighted average of about 26%, forthe first time in more than 20 years, the number of passengers fell byabout 7% the following year, and passenger-km growth levelled off.

2.22 Future passenger traffic will be conditioned by the same factorsnoted above. Over the 1977-81 Plan period, the network of national andprovincial roads running in proximity to the railways will be nearly completed.Rail tariffs will need periodic adjustment to meet financial and economictargets. For the remainder of the Plan period, therefore, the appraisal mis-sion projects an overall traffic growth of no more than 3-4.5% p.a. system-wide. Growth rates are expected to vary with travel classes, origins anddestinations, and the level of road competition. The aforementioned growthrates in overall passenger traffic are at variance with SRT's own estimate ofabout 6% p.a., which is based on the assumption that rates could be keptalmost constant in nominal terms implying a substantial decrease in real

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terms over the Plan period. In fact, there remains considerable uncertaintyabout the future rate of passenger traffic growth, and future rail trafficwill to a large measure depend on SRT's future marketing policy (para. 4.02)and ability to keep its cost in check. This project is designed to supportSRT in these undertakings.

Freight Traffic

2.23 SRT's carload traffic, representing about 95% of total freighttraffic, has grown from 4.7 million tons and 1,900 million ton-km in 1967 toabout 6.2 million tons and 2,800 million ton-km in 1978 (Table 9). Averagegrowth rates over the period have been 2.5% p.a. and 3.6% p.a. respectively,compared to a nationwide growth in transported goods of 9% p.a. over thesame period. Between 1972 and 1975, total transport stagnated due to thede-escalation of the Vietnam war, but a renewed rise began in 1976 and 1977.The 1978 traffic declined because of the economic effects of a severedrought, but growth is expected to be resumed from 1979 on.

2.24 Over the 1967-1978 period, petroleum products, cement/marl andrice have dominated SRT's freight traffic. While their combined share oftotal ton-km has remained constant (at slightly over 50%), their share oftotal tonnages has risen from 53% to about 69% over the period. Forestryand agricultural products, including rice, accounted for about 28% of total1978 ton-km; followed by petroleum products with 26%, and cement/marl with14%. In contrast to passenger traffic, which is more evenly distributedover the four principle rail lines, 66% of all freight traffic (in ton-km)was concentrated in 1976 on the northern line. The southern line followedwith 23%, and the northeastern line with 11%; the eastern line carried onlynegligible freight. Average haul for all goods transported is about 480 km:average distance for petroleum products is 470 km; for cement and marl,about 200 km; and for rice, about 750 km.

2.25 SRT freight traffic is dominated by bulk goods carried in carloadsover medium and long distances. This is appropriate, in view of the competi-tion from road transport over shorter distances, the capacity of waterwaytransport in the central plains, and SRT's economies of scale. Average railfreight costs including transshipment costs (B 0.24/ton-km) are well belowthose of road transport (B 0.33/ton-km). Over the 1977-81 period, SRTexpects to expand its total freight market by 6.5% (tons) p.a. and 4.7%(ton-km) p.a. Annual growth in petroleum products transport would be about5.8% (tons) and 9.5% (ton-km), and cement and marl tonnages would grow byabout 10.5% and 6.7% respectively (Table 9). These targets are realisticand reflect SRT's competitive strength and the successful work of itsMarketing Department established in 1975. To project freight traffic, SRTseparately analyzed each of the 12 most important commodities, which togetherrepresent 80% of all freight tonnage. Particular care was taken in theforecast of petroleum products and cement, which was based on projectedorigin - destination matrices. The results were consistent with the respec-tive industries' production targets.

2.26 The forecast beyond 1981 is for continued growth in SRT freighttransport even taking into account that the trunk road system along SRT'snorthern line (which carried 66% of all rail freight in 1976) will be

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completed in the early 1980s, and that inland waterway improvements arescheduled to be completed around the same time. Implementation of theproposed project will improve rail efficiency. Further impetus will comefrom the expanding role of SRT's Marketing Department.

E. Operations

2.27 Table 10 summarizes SRT operations for 1972-77. Operating effi-ciency has significantly improved since the completion of the dieseli-zation program in 1976. The average turnaround time for freight cars hasimproved from 9 days in 1975 to 7.3 days 1977. During the same period, theaverage load per car has increased from 12.4 tons to 13.0 tons. Further,net ton-km per available box car (four-wheeler), an important index ofefficiency, has also risen from 239,000 ton-km to 302,000 ton-km per annum.During 1972-77, the car-km per available car day has increased by 9% and 31%for freight and passenger cars respectively, and the average speed of freighttrains has improved by 27%. On the other hand, expected increases in theavailability of locomotives and freight cars have not wholly materialized:availability at 81% and 92.5% respectively, is lower than the feasible targetsof 85% and 95%. Better workshop and shed facilities, planned under thisproject, should improve the situation. Operational targets are given inpara. 3.23.

F. Tariffs and Costs

2.28 Tariffs are uniform throughout the entire railway system. Thetariffs consist of standard rates plus variations from these standard rates.Changes in standard rates require Cabinet approval, while Section 39 ofthe State Railway of Thailand Act of 1975 vests the authority for certainstandard rates variations in SRT's Board of Commissioners. However, in prac-tice all tariff changes require the approval of SRT's Board of Commissioners,the Minister of Communications, various Government agencies, and the Cabinet.This lengthy rate change procedure together with Government's concern for theinflationary impact of rate increases had resulted in tariffs remaininglargely unchanged for twenty years until November 1975, when standard rateswere substantially increased. Freight rates will again be increased inJanuary 1979.

2.29 Details of the October/November 1975 and January 1979 tariff in-creases are set forth in Tables 11 and 12. The fiscal 1976 tariff changesyielded a 26% increase in revenue/pass-km and an 18% increase in revenue/ton-km in 1977 relative to fiscal 1975. The resulting incremental revenue of 270million Baht in 1977 enabled SRT to return to profitability after three con-secutive years of operating deficits (Table 13). The January 1979 tariff in-creases represent an approximately 9.5% average increase in revenue/ton-km ofgeneral freight together with an estimated B 40 million increase in petroleumrevenue in fiscal 1979. Further tariff increases will be necessary to fullyrestore and maintain SRT's financial viability (para. 5.08).

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2.30 Due to improved operating efficiency, SRT costs per traffic unithave decreased in real term by 25% over the past five years (para. 5.04). Ananalysis of the average fixed and variable costs of transporting passengerand freight traffic in fiscal 1976 was completed by SRT with the assistanceof consultants in December 1977. Unit variable costs extracted from thisstudy are presented below together with unit revenue comparisons.

Passenger Freight(per pass-km) (per ton-km)

Unit revenues 0.139 0.203

Unit variable costs(ex-depreciation) 0.091 0.134

Variable costs as % ofrevenue 65% 66%

As can be seen, the relative cash profitability of moving additional passengersand additional freight are approximately equal. Applying historical alloca-tions of the fixed costs to passenger and freight traffic, average fullydistributed costs in 1976 (including depreciation on an historic basis andexcluding interest charges) were approximately equal to corresponding revenues.Concerning freight services, there appears to be scope for substantial profit-ability in that unit costs for railway freight traffic are well below thosefor trucking. Using bus tariffs as a proxy for costs, it appears that thecost advantage of rail passenger over bus traffic is more limited. However,SRT's passenger traffic is comprised of a wide spectrum of profitabilitylevels. Therefore, to obtain a proper understanding of its profit structure,SRT has agreed to undertake a profitability analysis of its services underthe project (para. 4.02).

G. Budget, Accounting and Audit

Budgets

2.31 SRT prepares detailed annual operating and capital budgets. Whilethe capital budget has to be approved by the Cabinet, the operating budgetrequires approval of SRT's Board of Commissioners and is submitted to theCabinet for information only. There is reasonable flexibility in subsequentlyreallocating funds among existing items in the capital budget; however,management has limited flexibility with regard to the addition of items notalready included in the Cabinet-approved capital program. Capital expend-itures are carefully controlled in relation to the approved program by theBureau of the Budget.

Accounting

2.32 The accounting system follows commercial accounting practice, andthe staff in the Accounting Department is experienced and qualified.Depreciation of fixed assets is based on original cost and estimated useful

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life; the cost of rail replacements is charged to a renewals fund which ismaintained on a satisfactory basis. Manual accounting procedures are beingreplaced successfully by computer processing.

2.33 Final annual accounts are prepared within three months of the endof the fiscal year. For more timely financial and traffic information, SRTmanagement receives a monthly report termed the Quick Report. Assembling theinformation takes about 32 days from the end of the period covered. Toincrease its usefulness in controlling SRT's operations, SRT will shortenits production time to three weeks.

Audit

2.34 External auditing is the responsibility of the Government's AuditCouncil whose staff conducts a continuous audit of SRT's annual financialperformance. Section 5.02(a) of the Loan Agreement of Loan 898-TH requiresSRT to furnish the Bank with audited financial statements within five monthsof the end of each fiscal year. The period has been extended to six monthsunder this project to allow for additional time, which proved necessary in thepast.

H. Revaluation of Assets

2.35 Since SRT's assets have not been revalued for about 25 years, thepresent depreciation charges distort SRT's financial results. Accordingly,SRT has agreed to revalue its assets not later than March 31, 1980 and everyfour years thereafter.

I. Uneconomic Lines and Services

2.36 As of mid-1978, SRT operated eight branch lines with a total lengthof about 630 km (mostly on the southern line), including part of the easternand Maeklong lines. As the profitability of operating these branch lines wasseriously in doubt, technical assistance was provided under Loan 898-TH toidentify uneconomic services, establish a methodology for evaluating losses,and estimate losses on two typical branch lines. The consultants (CPCS)established the required methodology and estimated 1975 losses on the Nang PlaDuk-Nam Tok and Bangkok-Aranyaprathat lines. The methodology will enable SRTto determine losses on the other branch lines, and to approach the Governmentregarding compensation for operating those branch lines to be retained forsocial and political reasons. In fact, the Government has approved, in prin-ciple, a subsidy of approximately 210 million Baht for losses on uneconomicbranch lines over the 1977-81 Plan period. SRT has (i) reaffirmed Section3.05(b) of the Loan Agreement of Loan 898-TH requiring it to make arrangementswith the Government for adequate compensation for operating uneconomic branchlines, and (ii) agreed to complete the analysis of the remaining six branchlines by the end of fiscal 1979 to expedite such compensation. In turn, theGovernment has agreed to establish a procedure under which SRT will be promptlyreimbursed for branch line losses.

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2.37 The Cabinet has directed the National Economic and Social Develop-ment Board, together with the Ministry of Communications and SRT, to studyin detail the costs and benefits of discontinuing each of the existinguneconomic branch lines. The study will include recommendations relating toalternative methods of providing services handled by such uneconomic branchlines. Studies on individual branch lines will be forwarded to the Bank forits information and comments.

2.38 Under the technical assistance provided under Loan 898-TH, theconsultants examined also the question of consolidating freight bookingstations, taking note of the recent closing of a few stations by SRT. Theyconcluded that, for less than car loads, consolidating stations might notresult in significant economies while depriving customers at remote andwayside stations of a useful service. Regarding carload traffic, they recom-mended consolidation of freight booking points to reduce uneconomic operationwhere road and trucking facilities are available. Accordingly, SRT isreviewing the scope for further traffic consolidation.

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III. INVESTMENT PLAN AND PROJECT

A. Investment Plan

3.01 SRT's 1972-76 Investment Plan sought to achieve the completedieselization of the locomotive fleet, the strengthening of track, and theexpansion of SRT's capacity to meet expected traffic increases. Theseobjectives were largely accomplished. The 1977-81 Investment Plan willfurther improve operational efficiency by replacing worn out and obsoleteassets and expanding transport capacity in line with projected demand.

3.02 The 1977-81 Investment Plan was carefully designed by SRT andjointly reviewed by SRT and the appraisal mission. Composition and sizewere tentatively agreed during appraisal, and subsequently finalized toreflect most recent data changes. The Plan is well justified and withinSRT's implementation capabilities. It will be financed jointly by SRT, theGovernment, the Bank and bilateral sources. During the Plan period, SRTwill also strengthen planning and marketing as an important complement tophysical and operational improvements. The 1977-81 Investment Plan issummarized below, and a year-by-year breakdown is given in Tables 14A and14B.

Summary of SRT 1977-81 Investment Plan

Local Foreign Total Local Foreign Total % of totalBaht Million ---- ---- US$ Million ---- expenditure

Acquisition of motive powerand rolling stock 279.96 881.19 1,161.15 13.69 43.09 56.78 50

Track rehabilitation 348.76 365.55 714.31 17.05 17.88 34.93 30

Improvement of tele-communication andsignalling 23.10 81.61 104.72 1.13 3.99 5.12 4

Workshop improvement 35.27 30.92 66.19 1.73 1.51 3.24 3

Other investment items 117.79 - 117.79 5.76 - 5.76 5

Subtotal 804.88 1,359.27 2,164.15 39.36 66.47 105.83 92

Contingencies 115.40 66.84 182.24 5.64 3.27 8.91 8

Total 920.28 1,426.11 2,346.39 45.00 69.74 114.74 100

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B. Project Definition and Loan

3.03 The project consists of the last three years of SRT's 1977-81 In-vestment Plan; its estimated cost, including contingencies, is about US$101million equivalent with a foreign exchange component of about US$63 millionequivalent or 63%.

3.04 The loan will cover the foreign currency cost of: new materials forthe production of passenger coaches; procurement of monoblock concrete tiesand of fasteners for two block concrete ties; replacement and strengthenifigof steel bridges; and improvement of telecommunications, signalling andworkshops. The remaining foreign currency cost, principally for rail andlocomotives will be financed through Government funds and bilateral sources.

3.05 Cost of the total project and the items included in the loanare summarized below. Details are given in Table 15 and the physicalcontent of the project is described in Table 16.

Project Cost and Loan Summary

Total project costLocal Foreign Total Loan /a-- ------- -- US$ million…

Acquisition of motive power 6.25 32.44 38.69 -

Acquisition of rolling stock 4.50 6.29 10.79 3.60

Track rehabilitation 13.47 15.82 29.29 4.30

Improvement of tele-communication andsignalling 0.94 3.99 4.93 4.00

Workshop improvement 1.68 1.51 3.19 1.50

Other investment items 5.07 - 5.07 -

Contingencies 5.64 3.28 8.91 3.30

Total 37.55 63.32 100.87 16.70

/a Figures are rounded.

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C. Project Description

(a) Acquisition of Motive Power and Rolling Stock

Locomotives

3.06 The project provides for the acquisition of 30 1,800 hp locomotives.Concurrently about 19 Hitachi locomotives, whose engines can no longer berepaired, will be withdrawn from service. After these locomotives are retired,SRT will redeploy the existing motive power; of the new locomotives, 26 willbe utilized on freight and 4 on passenger trains. Table 17 shows the calcula-tion of the number of locomotives required to carry the projected freighttraffic. Tables 18 and 19 show how the Hitachi locomotives will be replacedand the disposition of all locomotives in 1981.

Passenger Cars

3.07 SRT's investment program 1977-81 includes the manufacture of130 passenger cars. Of these, 59 third class coaches, 8 second classsleepers and 12 second class air conditioned cars form part of the project.Some materials procured under the 1972-76 Plan, are already in stock, andthe required balance of US$3.6 million will be imported under the project.

3.08 The breakdown of the passenger car acquisitions in replacementsand additions are shown in Table 20. The stock to be retired is old andrepairs are not possible without complete rebuilding at the cost of newcars. Table 21 gives the composition of rolling stock capacity to meet1977-81 traffic growth. In addition to new car construction, new rollingstock capacity will be generated through redeployment of cars from surplusdistricts, and conversion of first and second into third class cars.Acquisition of second class air conditioned and sleeper coaches included inthe project is a means of improving SRT's service quality.

Freight Cars

3.09 The 1977-1981 investment program includes the manufacture of273 freight cars for handling additional traffic. Of these, 30 oil tankand 73 cement hopper cars are included in the project; in both cases, SRTprovides only bogie flat chassis, and the tanks are supplied by the oil andcement companies. Table 22 shows car requirements for 1981.

3.10 Because of earlier overbuying, SRT has sufficient materials in stockfor the manufacture of all freight cars up to 1981, and even thereafter,there will be a small surplus of steel channels, plates and sheets. During1978, procurement procedures have been sufficiently streamlined to safeguardagainst similar overstocking while speeding up procurement. In addition, SRThas agreed to effect any further measures, which may prove necessary, toensure timely availability of material and adequate material control. Theratio of inventories to annual material use will be gradually reduced duringthe project implementation years.

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(b) Track Rehabilitation (Table 23; Map 13622)

Rail Replacement

3.11 This project item covers rail replacement or rehabilitation of919 km of track. Details are given in Table 23. The principal investmentbenefits are reduced track maintenance and wear of rolling stock and increasedtrack capacity. Two hundred and thirteen km on the southern and 203 km onthe northern line will receive new rails. Renewal on the southern line wasjustified under Loan 898-TH, but deferred to the 1977-81 Plan because ofdelays due to the diversion of funds for the procurement of rolling stockmaterial and to prolonged procurement procedures. The new rails have alreadybeen ordered and are being financed by the Government.

Sleeper Renewal

3.12 Replacement of deteriorated wooden sleepers to avoid track dete-rioration is a continuous operation. Because wooden sleepers are becomingincreasingly expensive and scarce, the project provides for manufacture bySRT of 150,000 two block prestressed concrete sleepers and purchase of125,000 monoblock concrete sleepers. The life of concrete sleepers is 40years as compared to 10 years for wooden sleepers.

Bridge Rehabilitation

3.13 Train speed is severely restricted on 176 steel bridges which donot have sufficient carrying capacity to cope with the 13.75 ton axle load ofSRT's new diesel locomotives at the line speed limit. Sixty-nine of thebridges with a combined length of 2,875 meters are included in the 1977-81Investment Program, and 60 of the bridges form part of the project; theremaining bridges will be strengthened in the next Plan.

3.14 SRT has 834 timber bridges with speed restrictions because of trainsafety. Their replacement with reinforced concrete slabs or girders is part ofan ongoing program which is carefully coordinated with the other elements oftrack rehabilitation and signalling. The project provides for rehabilitating118 of the high priority timber bridges with a combined length of 4,482 meters.

Equipment for Track Maintenance

3.15 Seven motor trolleys and 18 trailers will be acquired for quickermovement of track maintenance equipment, material and men.

(c) Improvement of Telecommunications and Signalling

Telecommunications

3.16 SRT's telecommunications system, which consists of a carriertelephone network and teleprinter facilities, is over 20 years old andinadequate for the growing needs of administration and train operation.

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SRT's 300-line telephone exchange at Bangkok is 25 years old and spare partsare unavailable. Consequently, there are frequent communications breakdowns.The project provides for the installation of a 12-channel carrier telephonenetwork, 51 sets of teleprinter equipment and a 500-line telephone exchangeat Bangkok, to replace the existing old equipment.

Signalling

3.17 Only 220 of SRT's stations have mechanical interlocking withadequate signalling. On 60 stations (7 on northern and 53 on southernline), interlocking is achieved through hand-operated key locked points andconsequently train operations are slow and unsafe. Installation of fullmechanical interlocking at 15 stations and tokenless block instrumentsand color light signals at 30 stations are included in the project. As aresult, there will be an average gain of two minutes per station in trainpassing where tokenless block instruments are installed, and time gains willbe even greater where mechanical interlocking is introduced.

(d) Workshop Improvement

3.18 This item consists of (a) reconstruction of the old steam locomotiveshop (at Makkasan), dismantled in 1977 because it was unsafe; and (b) procure-ment of two new 25-ton capacity overhead cranes and other essential equipmentfor diesel locomotive overhaul (Table 24). Investments under (a) and (b) areexpected to reduce the time for major locomotive overhaul from the present23 days to 18 days and to improve locomotive availability from 81% to 84%.

(e) Other Investment Items

3.19 The principal component under this investment category is earthfilling for a second major passenger terminal at Bangkok. The existing mainstation is used close to capacity and cannot be expanded. The main works onthe new terminal will be undertaken under the 1982-86 Plan. Other, minorinvestment items are installation of barriers at 62 road crossings as apublic safety measure, construction of staff quarters, provision of officesand purchase of office cars.

D. Cost Estimates

3.20 Project costs (Table 15) are based on estimated quantities and pricesas of June 1978, adjusted for inflation and physical contingencies. Physicalcontingencies of 10% were included for all items, except for locomotives, andnew 80 lb/yd rails (for which contracts have been awarded). Most project items(rolling stock manufacture, rail renewals, two block concrete sleeper manufac-ture and bridge rehabilitation) have been undertaken by SRT in the past; costsand quantities, therefore, are well-controlled. Price contingencies have beenincluded for all items, except new 80 lb/yd rails, locomotives, and materialin stock for the manufacture of rolling stock. Assumed annual price increasesfor local currency expenditures are 7.5% in 1978 and 1979, and 7% in 1980 and1981.

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For foreign. currency expenditures the assumed increases are 6.5% in 1978 and1979, and 6% in 1980 and 1981. Physical and price contingencies on all itemstotal about 9% of project cost.

E. Financing Plan

3.21 P'roposed financing of project cost, estimated at US$100.9 millionequivalent, will be as follows:

Amount including contingencies(US$ million)

IBRD loan 16.7Bilateral financing (locomotives) 32.4Government 34.2SRT 17.6

Total 100.9

F. Project Implementation

3.22 SRT will be responsible for implementing the project. Table 25shows the project execution schedule and Table 26, a detailed procurementplan. Rolling stock will be manufactured in SRT's workshop with importedmaterial and components; manufacturing costs, including local taxes, willbe, on average, about 25% lower than c.i.f. costs of imported stock.Monoblock concrete sleepers will be manufactured by local contractors,while SRT will produce the two block concrete ties, for which they haveadequate production capacity and expertise.

G. Action Plan

3.23 Locomotive and rolling stock requirements during the InvestmentPlan period (1977-1981) are based on traffic forecasts in Tables 8 and 9, andon the following operational targets:

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Actual Forecast (end)1977 1979 1980 1981

(1) Average availability (%)1800 hp main line diesel locomotives 82 83 85 85Other main line diesel locomotives 81 82 83 83Diesel railcars 93 90/a 91/a 93Passenger cars 87 90 91 93Freight cars (box and tank cars) 92.5 93 94 95

(2) Net ton-km per annum of available1800 hp freight locomotive (million)New acquisitions - - - 65Existing locomotives 65 65 65 65/b

(3) Locomotive-km per annum peravailable locomotive (000)

Freight service 132 136 140 144Passenger service 242 245 245 245

(4) Net ton-km per train-km 1800 hplocomotive 400 410 416 422

(5) Passenger car-km per availablepassenger car per annum (000) 190 195 200 204

(6) Net ton-km per serviceable boxcar available (4-wheeler equivalent)per annum (000) 395 405 415 424

(7) Net ton-km per serviceable oil tankcar available per annum (000) 680 710 750 795

(8) Turnaround of freight cars (days) 7.3 7.1 6.8 6.5

/a Overdue heavy overhauls will be carried out in 1979-80 with an average ofthree sets always under repair; consequently, railcar availability willdecrease in this period.

/b Because of redeployment of locomotives and traffic flows, new 1800 hplocomotives may produce less than 65 million net ton-km p.a.

During negotiations, SRT agreed to draw up an action plan which will be thebasis for achieving the operational forecasts indtcated above. Measures tobe included in such plan are:

(a) Reduction of locomotive accident rate from actual 6% of tne fleetto less than 3% in 1981 through:

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(i) strictly enforcing train working regulation;

(ii) training new staff and retraining permanent staff on accidentprevention;

(iii) increasing inspections of Traffic Department Officers ridingtrains to control services in line, stations and yards; and

(iv) installing barriers in level crossings that record higheraccident frequency following the agreed program (62 gradecrossing barriers in the 1979-81 period).

(b) Iiiprovement of service efficiency through:

(i) decreasing mixed trains services from 3.6 million km in 1977to less than 3 million in 1981;

(ii) analyzing factors that influence service efficiency beginningwith trains for major commodities and introducing rules thatassure sufficient flexibility to modify train formation, time-tables, locomotive rosters so as to adapt services to marketfluctuations; and

(iii) improving average speed of passenger and freight trains throughthe implementation of the track rehabilitation program co-ordinated with bridge strengthening, signalling and telecommuni-cation improvement in major sections of the northern line.

H. Procurement

3.24 All items to be procured under the loan except monoblockconcrete sleepers and associated machinery and minor items not exceedingUS$5,000 inL value each, will be subject to international competitive bidding(ICB), in accordance with Bank guidelines. In bid evaluation, Thai equipmentmanufacturers will be allowed a preferential margin of 15% of c.i.f. cost ofcompeting imports or the relevant prevailing level of customs duties, which-ever is lower. Because of high ocean transport costs, concrete monoblocksleepers will be procured under local competitive bidding procedures accept-able to the Bank. Imported machinery and materials required to manufacturethese sleepers will be purchased through negotiation with qualified suppliersto assure quality and safety of the sleepers. Together, loan financing ofmonoblock sleepers will amount to US$2.2 million. Purchase of minor items notexceeding US$5,000 each and US$250,000 in the aggregate will be carried out inaccordance with local procedures.

I. Disbursements

3.25 Disbursements will be made on the following basis:

(a) 100% of the foreign exchange cost of imported equipmentand material;

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(b) 100% of ex-factory cost of locally manufactured equipmentand material if local bidders are successful in ICB; and

(c) 65% of total expenditures for items procured locally.

Bank disbursements are expected to be completed by June 30, 1982. Anestimated quarterly schedule of disbursements is given in Table 27.

4. ECONOMIC EVALUATION

A. SRT's Transport Role

4.01 Over the last 20 to 30 years road transport has become the leadingmode in Thailand. Its dominance is expected to increase during the 1980s onaccount of its cost and service characteristics and the continued growth anddispersion of agriculture. Railways (and inland waterways transport) willalso continue to expand but at a slower pace. The railway's best prospectsare in bulk and trunkline freight traffic. The development of future railpassenger transport is more uncertain in view of the road sectors competitivestrength. Until a few years ago, SRT provided monopoly passenger servicein several transport corridors, but the competitive situation has sincechanged. Irrespective, however, of the precise nature of future developmentsin transport markets, the railway will remain a vital component of Thailand'stransport system, and SRT's 1977-81 Investment Plan has been defined on thispremise.

4.02 To reduce the uncertainty about future transport markets and toassure a rational service and marketing policy, SRT has agreed to: undertakenot later than December 31, 1979, a profitability study of its services; andimplement the study's recommendations in agreement with the Bank. The studywill include an examination of the profitability of each of the 12 commoditieswith the largest yearly tonnages by line, distance, class and car and trainload transport. The analysis of passenger traffic will distinguish betweenmixed, ordinary rapid and express trains, and between lines and distances.

B. Evaluation Summary

4.03 The 1977-1981 Investment Plan is well prepared, justified andwithin SRT's implementation capabilities. About 55% of the Plan focuseson rehabilitation or replacement of assets - track infrastructure, telecommuni-cations, signalling, workshops, rolling stock and locomotives. The remaining45% of investments are primarily for acquisition of rolling stock andlocomotives to accommodate traffic increases. Because of Plan's composition,and the care taken in traffic estimation, the investments are well shieldedagainst potential variations in traffic growth.

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4.04 Economic returns on the Investment Plan were computed for thefiscal years 1979-81, the project period. All costs used in the economicanalysis are financial costs less taxes. The overall return for the evaluateditems, representing about 73% of the 1979-81 program (paras. 4.04, 4.07 and4.08) is 17% with a range of 11 - 64% for major components (Table 28).Traffic projections were discussed earlier and details of the economicevaluation are given below.

C. Evaluation Details

Acquisition of Motive Power and Rolling Stock

4.05 Thirty locomotives will be procured under the project. Eightwill replace intermediary locomotives (Table 18), which, in turn, will beshifted to passenger and mixed trains run primarily on branch lines. Sincethese lines are recognized as uneconomic and the Government is committed toreimburse SRT for losses incurred in their operation, no economic returnhas been computed for these 8 locomotives. An economic evaluation has beenmade, however, for the remaining 22 units (paras. 4.05 and 4.06); three ofthem will replace existing freight haulage capacity, 15 will meet freight and4 passenger traffic growth.

4.06 Benefits from investments in passenger trains were calculated onprojected rail fare receipts and corresponding Long Run Marginal Costs(LRMC). For example, fare receipts are about B 0.14 (1977) per passenger-kmon the average, and LRMC are about 70% of fares. Receipts and LRMC vary withtravel classes, train categories and services. By comparison, travel chargesfor ordinary intercity buses are B 0.11 (1977) per passenger-km, and forairconditiorted buses, tariffs are about B 0.20. Bus fares are thought tofollow closely bus costs. A twenty year investment life was assumed for themotive power and rolling stock. On the basis of these data, the overalleconomic returns are 36% for replacement investments in coaches, and 15% forthe investments (4 locomotives and rolling stock) to accomodate new traffic.The high ret:urns for replacement investments (coaches) are achieved throughthe use of existing motive power.

4.07 Calculation of economic returns for investments in freight locomo-tives and wagons was based on a comparison of road and rail haulage costs.Average economic cost of moving freight by rail (1977) is about B 0.24per ton-km, including capital cost of rolling stock and motive power.Comparative road transport costs about B 0.33 per ton-km, including truckinvestments. A 20-year life was again assumed for rail investments. Forthe 3 new replacement locomotives, the rate of return is 20%; for new trafficcarrying capacity (15 locomotives and freight wagons), the return is 19%.

Track RehabiLlitation

4.08 Track rehabilitation under the project consists of replacing andreconditioning rails, substitution of concrete for wooden sleepers and the

- 26 -

strengthening or replacement of timber and steel bridges. Investmentsin new rails on the southern line are carried over from the previous Plan;these were found justified under the Fourth Railway Project and have beenexcluded fromn the present economic analysis. Quantified benefits from trackrehabilitation are savings in infrastructure maintenance cost, increasedtrack capacity and faster operations resulting in reduced rolling stockrequirements. Nonquantified benefits, excluded from the calculation, aresafer train movements. The overall return is 12%; with returns for theprincipal components in this investment category ranging from 11% to 13%.

Improvement of Telecommunication

4.09 SRT's present telecommunications equipment was installed over20 years ago and has frequent breakdowns. Administrative action is oftendelayed by inadequate communication, and train movements are occasionallyhindered. A new telecommunications system, therefore, is amply justified.

Improvement of Signalling

4.10 Introduction of new signalling will increase operational safety andline capacity, resulting in reduced locomotive and rolling stock requirements.Sections where the new system will be installed presently carry 30 trains perday; installation will save about 40 train-hours per day. Without quantifyingincreased train safety, the economic return on the investment is 27%.

Workshop Improvements

4.11 Workshop improvements consist of two distinct investments:(a) reconstruction of the central workshop building and installation of newcranes at Makkasan; and (b) purchase of new equipment for overhaulinglocomotives. Benefits of both (a) and (b) derive from increased availabilityof locomotives, estimated at about 2% and 1% respectively for the entirefleet. Rates of return are 64% and 48% respectively.

D. Sensitivity Analyses and Project Risks

4.12 Costs of SRT's planned investments are unlikely to deviate bymore than 10% from estimates for each major investment category. Costvariation, in turn, would have only a minor effect on economic returns.Unit benefits have an expected confidence range of 10%, except for thosebenefits derived from investments to increase or maintain freight capacity.in this case, benefits could vary up to 20% or 30%, due to a correspondingvariation in road haulage costs; the economic returns, however, would notfall lower than 10%. Thus, a benefit reduction of 20% coupled with a costincrease of 10% is a reasonable measure of the project's riskiness. On thisbasis, the overall return would fall from 17% to 11%, indicating that theinvestments have a low risk factor in addition to a good expected return.

- 27 -

V. FINANCIAL EVALUATION

A. General

5.01 During the 1972-76 period, SRT's operating costs per traffic unitdecreased in real terms as a result of improved operations. However, dueto insufficient tariff relief, SRT's increased operating costs in these yearsoutpaced revenues, with resulting operating deficits in each of the fiscalyears 1974-76. Further, overbuying of materials for the construction offreight/passenger cars (para. 5.05) and delayed Government subsidy foroperating deficits (para. 5.03) resulted in a rapid deterioration of SRT'sliquidity thereby impairing current operations. More recently, SRT, assistedby tariff increases and limited wage awards, has returned to profitability.There has also been an improvement in SRT's liquidity as a result of thereceipt in 1977/78 of Government funds for past operating deficits. SRT'sfinancial health may be further improved through a program of tariff adjust-ments and timely injection of Government funds as discussed in para. 5.11.The projected cash flow will then be sufficient to service debt, financecurrent operations, and make a meaningful contribution to the InvestmentPlan.

- 28 -

B. Past Financial Performance

5.02 The profit and loss statements for the fiscal years 1974-77, are setforth in Table 13 and summarized below. The financial ratios reflect theearnings of that period:

1974 1975 1976 1977-------- Baht million -----------…

Total Operating Revenue 1,088 1,178 1,403 1,567

Less: Working Expenses 1,040 1,280 1,345 1,306Depreciation 123 135 158 163

Total Operating Expenses 1,163 1,415 1,503 1,469

Operating Surplus (Deficit) (75) (237) (100) 98

Interest Charge 39 65 76 74

Other Revenue/Expenses 31 16 6 -

Net Revenue Surplus (Deficit) (83) (286) (170) 24

Ratios: Operating 107 121 107 94Times Interest Earned (1.9x) (3.6x) (1.3x) 1.3xDebt Service Coverage 0.6x (0.7x) 0.3x 1.2xReturn on Net Fixed Assets (1.2%) (3.6%) (1.5%) 1.5%

Ratios required under Loan 898-TH:

Debt Service Limitation 1.5 1.5 1.5 1.5Return on Net Fixed Assets 2% 2% 2% 2%

Financial performance in 1974-76 was substantially weaker than the appraisalforecast of the Loan 898, and the returns on fixed assets in use were consistentlyless than the 2% required under Section 5.05 of the Loan Agreement for Loan898. SRT's unsatisfactory financial experience in these years can be largelyexplained by the Government's failure to increase tariffs sufficiently tooffset increases in operating expenses. From 1973-75, revenues followed traffic

- 29 -

closely, while working expenses increased about 66% due primarily to theimpact of inflation, with fuel expense increases of 129% and staff expenseincreases of 59%. As a result SRT incurred operating deficits in 1974-76.The loss in fiscal year 1976 includes non-recurring costs of certain heavyrepairs to passenger coaches. Although the health of SRT's operating financeswas substantially restored through the November 1975 tariff increase andlimited wage awards, the financial ratios for fiscal 1977 (Tables 13 and 29)need further improvement. Appropriate steps to further strengthen and maintainSRT's financial position are discussed in paras. 5.08 and 5.12.

5.03 Section 43 of the State Railway of Thailand Act of 1951 specifiesthat the Government will subsidize any annual operating deficit incurred bySRT. However, during the period 1974-76, the aggregate operating deficit asdefined by the Act was 412 million Baht, while the matching Government subsidypaid during the period was only 105 million Baht, thereby contributing toSRT's diminishing cash balances (para. 5.05). The aforementioned differencebetween the operating deficit and the actual subsidy paid is due to a delay ofup to two years between the end of a fiscal year and receipt of the Governmentsubsidy. The delay is largely caused by SRT's inability to meet the deadlinefor submission of operating deficit information to the national budget becauseof the Government's requirement that such information must first be verifiedby an audit. Therefore, to expedite compensation for any future operatingdeficits, the Government has agreed to accept SRT's estimate of operatingdeficits for the purposes of presentation in the national budget; appropriateadjustments would be made thereafter upon receipt of SRT's year-end audit.

5.04 Tab:Le 30 depicts the impact of inflation on costs and revenues.Working expenses per traffic unit increased nominally from 11.6 satang in 1972to 15.3 Satang in 1977, but decreased in real terms to 8.8 satang in 1977.The reduction resulted from improved operations due primarily to SRT's transitionfrom steam to diesel motive power, which was one of the main objectives ofLoan 898-TH. Average revenue per ton-km and per passenger-km, although enjoy-ing the benef:its of the fiscal 1976 tariff adjustments, decreased in realterms by 38% and 27% respectively over the 1972-77 period.

5.05 Balance sheet data for fiscal years 1974-77 are presented in Table 31and summarized below:

- 30 -

1974 1975 f976 1977- ---------- - -----Baht million-------…---

Current Assets 1,065 848 766 861Net Fixed Assets 6,318 6,777 6,980 6,962Investments and Other Assets 915 867 882 904

Total Assets 8,298 8,492 8,628 8,727

Current Liabilities 266 292 371 220Long-Term Debt 964 1,270 1,304 1,188Reserves and Other Liabilities 1,047 1,057 1,113 1,160Net Equity 6,021 5,873 5,840 6,159

Total Liabilities and Equity 8,298 8,492 8,628 8,727

Ratios: Liquid 2.Ox 0.7x 0.4x l.lxCurrent 4.Ox 2.9x 2.1x 3.9xDebt/Equity 14/86 18/82 18/82 16/84

Although the current ratio remained in the satisfactory range of 2.1x - 4.0x,the liquidity ratio diminished sharply over the 1974-76 period, from 2.Ox to0.4x, reflecting a deterioration of the cash account from 391 million Bahtin 1974 to 25 million Baht in 1976. (The ratio improved to 1.lx in 1977 asa result of SRT's receipt of Government compensation for past operatingdeficits.) The diminution in cash was paralleled by an unhealthy growth inthe material purchased for the construction of freight/passenger cars, pri-marily accounted for by procurement difficulties referred to in para. 3.10.Cash resources were further strained by an increase of about 20% in operatinginventories over the 1974-76 period. Steps to ensure appropriate levels ofliquidity through streamlining procurement procedures, limiting inventoriesand maintaining adequate minimum cash balances are discussed in paras. 3.10and 5.11.

5.06 Although SRT's long term debt increased about 25% from 1974 to 1977,the debt/equity ratio remained modest, rising from 14/86 in 1974 to only 16/84in 1977. The increase in the outstanding debt was largely due to the drawingdown of loans already negotiated, such as Bank Loan 898-TH and loans related tothe purchase of locomotives. The total debt outstanding at the end of 1977is set forth in detail in Table 32 and summarized below:

- 31 -

Source of Loan Amount (Baht million)

USAID 16IBRP loans 387Exim Bank (Japan) 142Government and commercial Banks (Germany) 110Government and commercial Banks (France) 477GDvernment and commercial Banks (Thailand) 126

Total 1,258

5.07 A detailed cash flow for 1974-76 is presented in Table 29. Asshown, insufficient tariff relief over the period prevented SRT from makinga contribution to the investment program from its internal resources.Similarly, aggregate net revenues in 1974-76 could only marginally contributeto aggregate debt service. For SRT to have met, on average, the target rateof return of 2% over the period, tariffs would have needed an additionalincrease of about 22% commencing in fiscal 1974. Such an increase wouldhave allowed SRT to finance approximately 25% of the investment plan frominternal resources. The net revenues in 1977, enhanced by the fiscal 1976tariff increase, covered debt service 1.2x.

C. Assumptions for Financial Projections

5.08 Freight tariffs will be increased by an average of 9.5% (Table 12)as of January 1, 1979. However, if SRT is to achieve an adequate financialposition not later than fiscal 1980 as well as generate sufficient fundsinternally to make a meaningful contribution to the 1977-81 Investment Plan,further tariff increases are essential. The need for tariff increases isreinforced by the requirement that revenues cover marginal costs on grounds ofsectoral efficiency. The tariff increases assumed by the Bank in developingthe financial forecasts are presented below:

Assumed tariff increases /a Passenger Freight

September 30, 1979 15% 12%September 30, 1980 7% 7%September 30, 1981 5% 5%

/a Forecasts include effect of January 1979 tariff increase.

These tariff increases are meant to be illustrative of the order of magnitudeof rate adjustments which would be required to achieve the agreed annualrates of return in 1980 and thereafter (para. 5.12). The above schedule oftariffs is strongly dependent upon the traffic and working expense assumptionsdiscussed in para. 5.09. The resulting forecasts which provide a soundfinancial profile are set forth in Tables 13, 29 and 31 and discussed inparas. 5.10 -. 5.13.

- 32 -

5.09 The methodology, principal bases and other assumptions underlyingthe forecasts are presented below:

(a) Income Accounts:

(i) Revenues: Passenger revenues are based on the Bank's passengertraffic forecasts (Table 8). Freight revenue projectionsare based on agreed commodity by commodity traffic forecasts(Table 9). Revenues are computed by applying the average1977 revenues per ton-km for each commodity and the average1977 revenues per pass-km. Adjustments are made to includethe effect of the proposed tariff increases.

(ii) Working Expenses: Forecasts of working expenses are based on adetailed costing exercise undertaken by SRT with consultativeassistance. The study separated major working expense categoriesinto fixed and traffic-dependent costs. Labor costs assumethat the staff level will remain unchanged throughout theforecast period. The increase in working expenses in nominalterms has been projected on the basis of an 8% annual inflationin 1979-1982.

(iii) Depreciation is calculated on original cost at 3.3% of theannual value of gross assets, excluding land and rails.The cost of rail replacements is charged to a renewal fund at2.9% of original cost.

(iv) Interest Charges were projected on the basis of: existing debt,the new Bank loan at 7.35% p.a. (repayable over 20 years,including 5 years grace) and two sources of foreign debt at 2%p.a. and 7.5% p.a. to finance the purchase of locomotives(repayable over 30 years, 10 years grace and 10 years, no gracerespectively).

(b) Balance Sheets

(i) Receivables are proportional to freight traffic;

(ii) Inventories which represented approximately two years of"other materials" in 1977 expense are assumed to diminishover the forecast period to 1.6 years of "other materials"expense in 1981;

- 33 -

(iii) Accounts payable vary with working expenses; and

(iv) A minimum cash requirement of approximately one month ofworking expenses plus debt service expenses is assumed.

(c) Cash Flow

The cash flow is based on the above assumptions together with theschedule of annual Government funding presented in Table 29.

D. Forecast Financial Performance

5.10 The 1978-81 income account forecast is set forth in Table 13and summarized below:

Estimated Forecast1978 1979 1980 1981

(Baht million)

Operating Revenues 1,601 1,780 2,119 2,352Operating Expenses 1,518 1,753 1,931 2,113

Operating Surplus 83 27 188 239

Interest Charge 72 82 90 96Interest Earned 15 15 11 12

Net Revenue Surplus (Deficit) 26 (40) 109 155

Operating Ratio 95 98 91 90Times Interest Earned 1.2x 0.3x 2.1x 2.5xDebt Service Coverage 1.1x O.9x 1.7x 1.9x

The financiaL ratios which are marginal in 1978 are projected to weakenmeasurably in 1979 due to an expected increase in salaries and wages of morethan 15%; thereafter, following the assumed schedule of tariff increases(para. 5.08), the operating ratio would improve from 98 in 1979 to 90 by1981; the interest coverage ratio would rise from 0.3x in 1979 to a satis-factory 2.5x in 1981; and the debt service coverage ratio would strengthenfrom 0.9x in 1979 to l.9x in 1981. SRT has reaffirmed Section 5.04 of theLoan Agreement for Loan 898-TH, which requires SRT not to incur additionaldebt if its met revenue is less than 1.5 times the maximum debt servicerequirements.

- 34 -

5.11 The estimated balance sheet summaries for 1979-81 are presented inTable 31. The debt/equity ratio remains modest throughout the forecastperiod. The scheduled investment of Government funds (Table 29) enablesthe current ratio and liquid ratio to maintain ample levels in excess of 3.7xand 1.lx respectively throughout the forecast period. Thus the forecastcurrent position is favorable, with working capital more than adequate tofinance current operations. The Government has agreed to supply sufficientfunds to enable the sum of SRT's cash balance and short-term deposits to begreater than 8% of the prior year's combined working expenses and debtservice requirements.

5.12 The rates of return on SRT's average net fixed assets in use asprojected by the Bank are 0.4% in fiscal 1979, 2.5% in fiscal 1980, and 3.0%in fiscal 1981. SRT has agreed, in light of its projections, that it shallearn not less than 1% in fiscal 1979, 2.5% in fiscal 1980, and 3.0% thereafter.For purposes of the rate of return computation, net fixed assets are to bedefined relative to the existing asset base as presently valued plus subsequentadditions. Following SRT's revaluation of assets (para. 2.35), the scheduleof required annual rates of return would be appropriately adjusted in a manneragreeable to SRT and the Bank. The rate of return of 1% in fiscal 1979represents a compromise between divergent viewpoints of SRT and the Bank.While SRT is confident it will achieve a rate of return well in excess of1%, the Bank, primarily due to its lower projections of passenger trafficcombined with its higher working expenses expectations, has forecasted only0.4%. The resulting projected shortfall in achieving a 1% return in fiscal1979 is less than 2.5% of expected revenues. The agreement on a 1% rate ofreturn in 1979 respects SRT's confidence in its capability to attract addi-tional traffic and to limit expenses. Should SRT's projections prove optimis-tic as fiscal 1979 evolves, SRT is committed to undertake all measures,including the adjustment of tariffs, necessary to achieve the agreed 1% annualrate of return in 1979. Also, to assist in attaining the target rates ofreturn, SRT has agreed to carry out an annual review of its tariffs commencingin fiscal 1979 and to submit such reviews for the Bank's information andcomments. Further, the Government has reaffirmed Section 3.03 of the GuaranteeAgreement of Loan 898-TH, which requires it to take all necessary action toset and maintain tariffs at appropriate levels. The agreed rates of returnreflect a balance between the Government's policy of inflation control andSRT's requirement for an adequate cash flow (para. 5.13).

5.13 Overall, the projected cash position of SRT is healthy. A detailedcash flow for the 1977-1981 period is presented in Table 29 and summarizedbelow:

- 35 -

(Baht million) %

Cash Required

Proposed Investment (1977-81) 2,284Increase in Cash Balance 190Increase in Working Capital 303Payment to Spiecial Funds 8

2,785 100

Cash Available

Internally Generated Cash 1,765Less: Debt Siervice 1,137Internal Cash Availablefor Investment 628 23

Loans 1,022 37Government Funds 135 40

2,785 100

According to the financing plan for 1977-81, SRT would be able to finance asatisfactory 23% of its investment from internally generated funds. Most ofthe net cash 'will be generated in the final two years of the Plan (Table 29)as SRT's earning power improves; during the early years (fiscal 1977-79),SRT will contribute only modestly (10%) to the 1977-79 investment cost andwill rely heavily on government funds (56%) and foreign borrowing (34%).The adequacy of SRT's cash flow is based on the assumption that its capitalexpenditures will not exceed the planned program. Accordingly, SRT has agreedto limit its capital expenditures on items outside the Investment Plan towithin 20 million Baht annually.

- 36 -

E. Sensitivity Analysis and Financial Risks

5.14 The financial projections were tested for sensitivity to changes inthe values of these key variables: freight/passenger traffic, staff size,inventory levels, and tariffs (timing and levels). The various alternativesare defined below. In each of the alternatives, a single variable hasbeen altered from the base case assumptions with all other factors remainingunchanged. The changes in the key variables examined do not representexpected deviations from forecast levels and are used only for the purpose ofthe sensitivity exercise.

Alternative 1: 50% reduction in freight traffic growth over the1979-81 period;

Alternative 2: Passenger traffic is assumed to remain constant atthe 1978 level (base case assumption: 3% p.a. growth rate);

Alternative 3: Labor force growth rate of 1.0% p.a. in 1979-81(base case assumption: staff level remains unchanged);

Alternative 4: Inventory levels rise from the 1977 level of abouttwo years to 2.5 years of "other materials" in 1981 (base caseassumption: steady decline to 1.6 years of "other materials" in1981);

Alternative 5: Freight tariffs are not increased in fiscal 1980;tariffs for fiscal 1981 are as presented in para. 5.08; passengertariffs are increased by 10% on September 30, 1979 (base caseassumption: freight tariff increase of 12%; passenger tariffincrease of 15%); and

Alternative 6: Six month delay in each year in effective date ofassumed tariff increases (para. 5.08).

The effect of these alternatives on cash requirements is illustrated intabular form below:

Total1979 1980 1981 1979-81-------- Baht million-------

Additional Government Funds NeededOver Base Case

Alternative 1 17 40 66 123Alternative 2 22 42 63 127Alternative 3 9 19 33 61Alternative 4 117 149 180 446Alternative 5 - 153 167 320

Alternative 6 - 119 72 191

- 37 -

The foregoing analysis indicates that under Alternatives 1-3, SRT would stillbe able to service debt and make a significant contribution to the InvestmentPlan. However, expanding inventories as described in Alternative 4 could posean excessive drain on SRT's resources, reinforcing the need for SRT to controlinventory levels over the Plan period. Alternatives 5 and 6 emphasize theimportance of adequate tariff action.

VI. AGREEMENTS AND RECOMMENDATIONS

6.01 Under agreements reached with the Bank at negotiations, SRT will,inter alia:

(a) in reaffirmation of Section 3.05(b) of the Loan Agreement of Loan898-TH, make arrangements with the Government for adequatecompensation for operating uneconomic branch lines; and completethe analysis of all uneconomic branch lines by the end of fiscal1979 (paras. 2.36 and 2.37);

(b) revalue its assets not later than March 31, 1980 and every fouryeairs thereafter (para. 2.35); and

(c) take all required measures, including tariff adjustments, to earnan annual return on net fixed assets of not less than 1% in fiscal19793, 2.5% in fiscal 1980 and 3% thereafter (para. 5.12).

6.02 Undtsr agreements reached with the Bank at negotiations, the Govern-ment will:

(a) take all necessary measures under which SRT will be promptlyreimbursed for branch line losses (para. 2.36);

(b) supply sufficient funds to allow the sum of SRT's cash balance andshort term deposits to be no less than 8% of the prior year'scombined working expenses and debt service requirements (para.5.1L); and

(c) enable SRT to meet its rate of return requirements (para. 5.12);

6.03 The project is suitable for a Bank loan of US$16.7 million equivalentto SRT for a l:erm of 20 years, including a grace period of 5 years.

- 38 - ANNEX 1Page 1

THAILAND

FIFTH RAILWAY PROJECT

Past Bank Group-Financed Transport Projects

1.01 The Bank Group has financed 13 previous transportation projects inThailand. Four loans have been for railways: 35-TH, signed in October 1950,for US$3 million (First); 128-TH, signed in August 1955, for US$12 million(Second); 280-TH, signed in April 1961, for US$22 million (Third) and 898-TH,signed in June 1973, for US$15 million (Fourth). There have been three loansfor ports: 37-TH, signed in October 1950, for US$4.4 million (First); 151-TH,signed in October 1956, for US$3.4 million (Second); and 702-TH, signed inAugust 1970, for US$12.5 million (Third). The six highway loans were:341-TH, signed in June 1963, for US$35 million, (First); 455-TH, signed inJune 1966, for US$36 million (Second); 535-TH, signed in May 1968, for US$29million (Third); 626-TH, signed in June 1969,, for US$23 million (Fourth);870-TH, signed in December 1972, for US$28.6 million (Fifth); and 1619-TH,signed in March 1978, for US$110 million (Sixth).

1.02 All four railway projects were completed satisfactorily, but aboutUS$7.5 million of the loan amount for the Third Project was cancelled inrespect of equipment which the Borrower preferred to purchase through proced-ures which did not conform to the Bank Group Guidelines. The first two portprojects were completed on schedule, and the third project was completed inMay 1976, over two years behind schedule largely because of delays in awardingcivil works contracts.

1.03 The first four highway projects were satisfactorily completed andwith substantial savings in cost compared with the estimates. In the caseof the First Highway Project about US$13.1 million of the loan amount wascancelled at the Government's request when some road sections were removedfrom the project. On the Second Highway Project US$4.9 million was cancelledas most of the contingency allowances were not needed; however, the closingdate was extended 22 months as construction of some road sections anddetailed engineering of one road took longer than scheduled. On the ThirdHighway Project US$6.1 million was cancelled as the bid prices were substan-tially lower than estimated, probably because of intense competition amongcontractors at the time; the closing date was extended by six months mainlybecause of construction delay on one road section caused by flood. On theFourth Highway Project, US$6.2 million was cancelled, again because of lowbid prices and general price stability prior to the bidding and while mostof the construction was carried out; however, the closing date was extendedby 21 months to complete work on one road where construction conditions wereexceptionally difficult. On the Fifth Highway Project, the bid prices, andcontracts awarded in late 1971 through mid-1973, were in line with the costestimates. However, the sharp price rise for petroleum products in 1973-75,accompanied by general inflation, led to disputes with the contractors and avirtual stoppage of work over several months. The Government eventuallyoffered increased payments to partially offset higher costs of the alterna-tive of terminating the contracts. The offer was accepted on three contracts,

- 39- ANNEX 1Page 2

while on four contracts the contractors elected to terminate. The remainingtwo contracts had already been completed at that time. Rebidding producedrelatively little interest from foreign firms, and new contracts for theuncompleted wor7-s were awarded to domestic firms, at approximately doublethe original prices. As a result, there will be a cost overrun of about 30%on the entire project. The project is now expected to be completed by aboutmid-1979 with a delay of about 18 months. The Sixth Highway Project becameeffective in June 1978, and construction works, the main project component,are in progress on 8 of the 11 project roads.

- 40 -

ANNEX 2

THAILAND

FIFTH RAILWAY PROJECT

Selected Documents and Data Available in the Project File

A. Recent Reports and Studies

A-1 Report by CPCS on the final stages of dieselization of SRT(1974).

A-2 Follow-up report by CPCS on Selected Topics (1977).

B. Working Papers

B-1 Unit prices for project items.

B-2 Back-up documentation for economic analysis of project items

(including benefit and cost streams).

41 -

Table 1

THAILAND

FIFTH RAILWAY PROJECT

Estimated and Projected Public Passenger Traffic for 1976-91

Share of

Year Rail /a Road (bus) /b Total roads (x)

A. Passengers (million)

1976 571981 631986 701991 77

B. Passenger-km (million)

1976 5,600 33,300 38,900 861981 6,200 36,800 43,0001986 6,800 40,600 47,4001991 7,500 44,800 52,300 86

/a 1976 figures are actuals. Assumed growth rate from 1976 onwardwere 2% p.a.

/b Bus traffic projections were based on conservative growth rate of

2% p.a. Actual rates are likely to be higher.

Source: Thailand - Outline of a Transport Development Plan for 1977-91(World Bank Draft), March 1978.

December 1978

- 42 -

Table 2

THAILAND

FIFTH RAILWAY PROJECT

Estimated and Projected Freight Traffic by Modes for 1968-91

Inland Share ofYear Rail /a Road waterways Total roads (%)

A. Tons (million)

1968 5.0 13.5 8.0 26.5 511973 5.0 25.0 8.0 38.0 661976 5.4 37.0 8.5 50.9 731981 7.1 59.4 - 66.4 8.5 75.0 - 82.0 79 - 811986 9.1 90.9 - 112.9 10.0 110.0 - 132.0 83 - 861991 11.6 138.9 - 189.9 11.5 162.0 - 213.0 86 - 89

B. Ton-km (million)

1968 2,000 3,500 1,300 6,800 511973 2,000 6,500 1,300 9,800 661976 2,500 9,700 1,400 13,600 711981 3,400 15,200 - 17,100 1,400 20,000 - 21,900 76 - 781986 4,300 23,400 - 29,300 1,700 29,400 - 35,300 80 - 831991 5,500 35,600 - 49,300 2,000 43,100 - 56,800 83 - 87

/a 1968-1976 figurs are actuals. Assumed growth rates thereafterwere about 5% p.a. on the average.

Source: Thailand - Outline of a Transport Development Plan for1977-91 (World Bank Draft), March 1978

December 1978

- 43 -

Table 3

THAILAND

FIFTH RAILWAY PROJECT

Public Transport Investments during the Thirdand Fourth Five-Year Development Plans

(US$ million)

Third FourthDevelopment Plan Development Plan

Mode 1972-76 1977-81

RoadsNational 402 435Provincial 333 553Local 78 105

Subtotal 813 1,093

Railways 121 193

Inland waterways & ports 45 79

Civil aviation(incl airports) 44 140

Total 1,023 1,505

Transport as percentage ofdevelopmenit expenditures 20 12

Source: Department of Highways, Thailand.

December 1978

- 44 -

Table 4

THAILAND

FIFTH RAILWAY PROJECT

Estimated Investment Requirements for TransportInfrastructure in 1977-91

(US$ million at 1977 prices)

AnnualMode 1977-81 1982-86 1987-91 1977-91 Average

Rail 120 150 130 400 27

Roads

(a) Tertiary 250 250 250 750 50(b) National and pro-

vincial

(i) Upgrading 1,250 1,250 1,250 3,750 200(ii) Rehabilitation 200 200 200 600 40

Subtotal Roads 1,700 1,700 1,700 5,100 340

Inland Waterways 15 20 5 40 3

Sea Ports

(a) Primary (deep-sea) 75 125 100 300 20(b) Secondary (coastal) 10 20 20 50 3

Subtotal Sea Ports 85 145 120 350 23

Overall Total 1,920 2,015 1,955 5,890 393

Source: Thailand - Outline of a Transport Development Plan for 1977-91(World Bank Draft), March 1978.

December 1978

45 - Table 5

TRAILAND

FIFTH RAILWAY PROJECT

SRT Track and Infrastructure - Details as on September 30. 1977(Meter - Gauge Lines)

M1ini. TotalRoute Maximum curve curve Maximum Maximum Sleeper type

Line length gradient radius length axle load speed Wood Concrete Remarks(ka) (Z) (a) (km) (tons) (km/hr) (S) (1)

I. Northern LineA. Main Line

1. Bangkok-Ban Phechi 90 0.6 600 6 15 80 98 2 Double track.

2. Ban Phachi-Sila At 398 0.83 300 22 15 80 71 293. Sila At-Chiang Kai 263 0.60 180 77 15 80 99.9 0.5

B. Branch Line1. Ban Dara-Sawankhalok 29 0.5 400 5 15 55 100 -

II. Eastern LineA. Main Line

1. Bangkok-Aranyaprathet 255 1.00 400 7 15 80 99.9 0.1

B. Branch Line1. Makkasan-Mae Nam 5 0.6 600 1 15 50 100 -

III. Northeastern LineA. Main Line

1. Ban Phachi-Kaerg Kai 35 0.7 700 3 15 80 100 -

2. Kaeng Koi-Bua lai 250 1.24 400 41 15 80 100 -

3. Eaeng Itoi-Nakorn Ratchasima 139 2.40 200 24 15 80 100 -

4. Nakorn Ratchasima-UbonRatchathani 311 1.00 900 7 15 80 100 -

5. Thanon Chira-Ncrng Khai 358 1.02 300 26 15 80 100 -

IV. Southern LineA Main Line

1. Bang Sue-Taling Chan 15 0.55 400 3 15 70 94 6

2. Thon Buri-Thung Song 756 1.00 300 70 15 70 95 5

3. Thung Song-Hat Yai 172 1.95 300 17 15 70 76 244. Hat Yai-Sungai Kolok 214 1.48 500 29 15 70 48 525. Hat Yai-Padang Besar 45 1.00 800 6 15 80 - 100

B. Branch Line1. Suphan Buri 77 0.3 500 4 15 50 100 -

2. Kanchana Buri 130 3.20 160 27 15 60 100 -

3. Rhiri Ratthanilom 31 1.00 1,000 3 15 60 100 -

4. Kantang 93 1.00 500 14 15 60 100 -

5. Nakhon Si Thamsarat 35 0.7 400 3 15 60 100 -

6. Songkhla (Closed as of Jul.78) 29 1.00 800 4 15 60 100 -

V. Maeklong Line 67 0.5 400 5 15 60 100 -

Total 3,797

Source: SRT and Bank Staff.

December 1978

- 465 - Table 6

THAILAND

FIFTH RAILWAY PROJECT

Rails in Keter Gauge Line tracks /a(End of 1977)

yRail weight (lb/) and age (years)80 Ib/y 74-75_Ib/ 70 lb/y 60 lb/y 0l/

leos than less than more than more than GrandYears 10 21-30 10 11-20 21-30 Total 11-20 21-30 30 Total 30 Total

I. Northern LineA. Main Line

1. Bangkok-ban Phachi 4 - - - 176 176 - - _1802. Ban Phachi-Sila At - - - 308 90 398 - - _ _ _ 3983. Sila At-Chiang Mai - - - 263 - 263 - - - - - 263

S. Branch Line1. Ban Dara-Sawankhalok - - - - - - - - - - - 29

II. Eastern LineA. Main Line

1. Bangkok-Aranyaprathet - - 61 - - 61 - 100 - 100 94 255

S. Branch Line1. Makkasan-Mae Narn - - - 5 - 5 - - - - 5

III. lortheastern LineA. Main Line

1. Ban Phachi-Kaeng Koi 35 - - - - - - - - - 352. Kaeng Koi-8ua Yai - - - 250 - 250 - - - - - 2503. Kaeng Koi-Nakorn Ratchasima 66 - - 16 - 73 - - - - - 1394. Nakorn Ratchasima-Ubon - - - 311 - 311 - - - - - 311

Ratchathani5. Thanon Chira-Nong Khai - - - 303 55 358 - - - - - 358

IV. Southern LineA. Main Line

1. Bang Sue-Taling Chan - - - 15 - 15 - - - - 152. Thon Ruri-Thung Song - - 42 502 - 544 - - 212 212 - 7563. Thung Song-Rat Yai 73 - - 99 - 99- 1724. Hat Yai-Sungai Kolok 214 - - - - - 2145. Hat Yai-Padang Baser - - - 45 - 45 - - - - -45

B. Branch Line1. Suphan Buri - - - - - - - 77 - 77 - 772. Kanchana Buri - 130 -- - - 1303. Khiri Ratthanikom - - - - - - 31 - - 31 - jl4. Kantang - - - - - - - - - - 93 93

5. Nakhon Si Thaarat - 35 - - - - - - - -- .356. Songkhla (closed as of July '78) - - - - - - - - 24 24 5 29

V. Kaeklong Line - - - - - - - 33 - 33 34 o7

Total 392 165 160 2,117 321 2,598 31 210 236 477 255 3.887

Ia Quantities in track-km.

Source: SRT and Bank Staff.

December 1978

- 47 - Table 7

TNAILAiD

FIFTH RAILWAY PROJECT

Inventory of SRT Motive Power and Rolling Stock as of September 30. 1977 /a

Steam locomotives Diesel locomotives Diesel railcars Passenger cars Freight careMainline Shunting Mainline Shunting Powered Trailers 4-wheelers Bogies 4-wheelers llg.

Total in fleet (on book)Units serviceable 39 - 203 40 53 49 7 1,045 6,621 2,t

Subtotal 39 _ 165 32 50 47 6 911 5 699 2,4

Percentage 100 - 81 80 94 96 86 87 86

Out of serviceUnder repair - - 26 5 3 2 - 91 326 1]Awaicing repair - - 12 3 - - - 9 84Awaiting scrapping at Kakkasan

workshop - - - - - 1 34 512 4

Subtotal - - 38 8 3 2 1 134 922 19

Percentage - - 19 20 6 4 14 13 14

ConditionGood - - 54 - - - - 504 551 1.19;Fair 39 - 109 33 46 42 - 495 4,U45 1,352Poor - - 40 7 7 7 7 46 2,025 97

AgeSteam locos

less than 20 yearsBetween 21 and 25 years -Between 26 and 30 years 29Over 31 years 10

Diesel locosLass than 5 years 54Between 6 and 10 years 31 -Between 11 and 15 years 78 5Between 16 and 20 years 25 -Over 21 years 15 35

Diesel railcarsLess than 5 yearsBetween 6 and 10 years 46 42Over 11 years 7 7

Passenger and freight carslAss than 10 years - 499 552 1.197Between 11 and 20 years 1 211 2,U71 998Between 21 and 30 years 2 289 1,974 329Between 31 and 40 years - 6 799 25Over 41 years 4 40 1,226 97

Carrying capacity of freighic carsLess than 10 tons 421 1Between 11 and 13.5 tons 4,137 -Between 14 and 19 tons 2.063 1,060Between 20 to 25 tons - 356

Over 26 tons - 1,229

/a Excluding Mae Elong Line.

Source: SRT and Bank Staff.

December 1978

- 48 -

Table 8

THAILAND

FIFTH RAILWAY PROJECT

SRT Passenger Traffic from 1967-81 /a

Passengers (million) Passenger-km (million)Year Class I-II Class III Total Class I-II Class III Total

1967 550 3,064 3,6141972 1.1 50.9 52.0 554 3,858 4,4121973 1.1 54.4 55.5 570 4,124 4,6941974 1.1 60.3 61.4 594 4,782 5,3761975 1.1 60.5 61.6 618 5,022 5,6401976 1.1 56.1 57.2 658 4,970 5,6281977 1.1 56.9 58.0 600 5,050 5,6501978/b 1.2 57.9 59.1 650 5,450 6,1001979 1.3 60.5 61.8 675 5,700 6,3751980 1.3 62.3 63.6 700 5,870 6,5701981 1.3 64.2 65.5 720 6,040 6,760

/a Actuals for 1967 and 1972-78, projections for 1979-81.

/b Breakdown of number of passengers into classes according to1977 ratio. Passenger-km based on 11-months actuals.

Growth rates for all type of traffics: 4.5% p.a. for 1978-793% p.a. for 1979-81.

Average distance travelled (1977): Class I-II: 496 kmClass III: 89 kmAverage: 98 km

Source: SRT and Bank staff.

December 1978

THAILAND

FIFTH RAILWAY PROJECT

SRT Freight Traffic (CL) by Comodities for 1972-81(Actuals for 1972-78, forecast for 1979-81)

T 0 N S ('000) T 0 N - K I L 0 M E T E R S ('000.)

Commoditiese 1972 1973 1974 1975 1976 1977 1..7. . . 979 980 ;981 1972 1973 1974 1975 :976 1977 ? 978/a !979 1980 1981

Petroleum products 1,465 1,468 1,080 1,188 1,203 1,324 1,327 1.452 1,542 1,657 783,462 758,626 595,549 620,371 594,340 646,788 655,172 732,205 778,968 930,969

Cement 918 955 883 852 1,026 1,456 1,465 1,784 1,847 2,578 297,612 252,449 210,702 206,908 208,735 326,254 295,881 410,094 434,084 445,500

Marl 594 555 553 583 447 551 553 500 500 500 61,716 59,829 61,458 63,873 52,253 58,824 61,135 55,000 55,000 55,000

Gypsum 74 76 152 119 94 153 242 258 267 309 17,698 17,519 39,678 31,890 20,887 38,705 60,696 61,920 64,080 75,216

Lignite - - 34 82 83 68 15 - - - - - 20,552 50,354 50,487 41,632 8,936 - - -

Kanganese 8 8 11 11 32 51 53 50 50 50 4,504 4,702 8,501 7,762 24,328 38,184 40,697 37,000 37,000 37,000

Fluorspar 140 103 103 78 45 94 97 120 120 120 100,334 73,593 75,768 58,434 34,116 69,105 63,129 88,200 88,200 88,200

Barite - - 1 19 13 12 9 13 13 13 - - 988 11,739 8,161 6,482 5,494 8,161 8,161 8,161

Metalwares 27 26 30 22 30 35 23 36 38 40 9,917 8,121 13,662 15,130 19,745 18,971 21,570 23,220 24,510 25,800

Vehicle & parts 18 16 17 16 17 17 13 19 20 21 10,694 11,157 11,903 10,420 11,110 12,525 9,479 12,635 13,300 13,965

Constructionmaterials 53 48 51 63 80 67 48 101 109 118 27,794 24,706 27,180 37,285 44,098 40,392 32,001 55,550 59,950 64,900

Household effects 20 29 32 32 22 39 38 48 49 50 13,744 23,655 24,241 24,470 16,730 29,054 25,131 35,520 36,260 37,000

Beverage 7 14 16 17 21 23 44 28 31 34 5,332 10,860 13,336 13,420 16,607 19,593 31,391 22,400 24,800 27,200

Sugar 13 7 20 45 67 75 85 86 92 98 7,656 5,076 16,037 39,408 55,485 59,610 71,552 68,800 73,600 78,400

Rice products 454 272 424 473 470 569 328 563 580 597 264,309 163,963 287,113 361,646 374,986 428,549 258,134 427,880 440,800 453,720

Maize 215 132 213 136 190 192 104 215 230 245 105,750 85,224 126,615 95,834 158,141 157,058 106,372 163,400 174,800 186,200

Lumber & logs 272 254 289 281 316 369 226 240 250 250 164,599 150,922 176,079 169,513 183,753 216,898 136,326 140,880 146,750 146,750

Jute & kenaf 39 28 56 23 19 11 7 20 20 20 21,324 14,525 30,102 11,443 8,916 5,162 3,390 9,300 9,300 9,300

Rubber 39 55 75 52 63 80 73 80 85 90 20,640 27,635 35,168 26,441 27,350 30,970 28,609 32,000 34,000 36,000

Coconut 36 48 47 38 55 53 49 66 69 72 29,562 39,946 39,107 30,289 45,218 44,142 34,899 54,780 57,270 59,760

Garden products 47 45 94 49 55 54 41 64 67 70 32,248 36,340 82,580 45,339 54,431 52,381 41,387 63,360 66,330 69,300

Nuts 10 11 14 12 16 33 28 19 20 21 5,827 7,132 11,372 10,893 16,562 29,679 26,233 19,380 20,400 21,420

Charcoal 64 35 38 51 41 35 35 35 35 35 34,743 21,474 17,810 22,750 18,117 15,713 15,473 15,400 15,400 15,400

Salt 17 17 47 61 68 48 38 56 59 62 11,744 12,006 36,759 47,825 41,458 35,310 27,223 41,440 43,660 45,880

Fertilizer 60 66 59 60 37 42 48 55 55 55 21,608 20,084 24,125 28,486 18,683 20,997 28,970 28,050 28,050 28,050

Fish products 37 39 50 32 36 53 50 57 59 61 25,632 27,854 33,459 24,646 26,454 38,238 34,568 43,840 44,840 46,360

Livestock 19 19 15 11 28 41 47 30 30 30 7,792 8,384 5,175 3,879 9,036 13,152 15,907 9,600 9,600 9,600

Military effects 100 86 77 54 62 63 57 93 96 99 32,011 28,588 28,045 21,894 25,041 27,076 24,885 37,200 38,400 39,600

Freight forwarder'sgoods 89 130 145 185 241 255 189 279 293 308 47,301 98,900 108,945 139,732 189,975 198,330 160,296 217,620 228,540 240,240

Miscellaneous 173 161 209 174 279 279 294 273 287 301 77,264 77,467 134,344 121,190 149,381 192,221 206,574 188,370 198,030 207,690

Total 4,988 4,703 4,835 4,819 5,156 6,142 5,630 6,640 6a90 7,904 2,242,817 2,069,737 2,296,353 2,353,264 2,504,584 2,911,995 2,531,510 3,103,205 3,254,083 3,502,581

/a II-months actuals. Estimated 1978 traffic is about 6.2 million tons and 2,800 million ton-km.

Source: SRT and Bank Staff.December 1978

- 50 - Table 10

THAILAND

FIFTH RAILWAY PROJECT

Selected Operating Statistics 1972-77

1972 1973 1974 1975 1976 1977

SystemTotal route (km) 3,765 3,765 3,765 3,765 3,765 3,765Total staff 34,000 33,000 32,000 30,000 31,000 29,900

TrafficPassengers - total (M) 51.9 55.5 61.4 61.6 57.2 58.0Metropolitan (M) 4.5 4.8 5.1 5.0 5.9 6.3Nonmetropolitan (M) 47.4 50.7 56.3 56.6 51.3 52.0Total passenger-km (M) 4,412 4,694 5,376 5,640 5,628 5,649

Average journey (km) 85 85 88 92 98 98Net paying tons (M) 5.2 5.0 4.9 4.8 5.2 6.1Net paying ton-km (M) 2,410 2,231 2,332 2356 2,507 2,923Average haul (km) 463 446 476 491 482 479Total gross ton-km (M) 10,320 10,084 10,920 11,366 11,519 12,203Loaded freight car km (M)(1) 194.02 179.08 176.44 176.48 168.20 156.70Empty freight car-km (M) 134.60 121.38 112.09 129.41 121.03 119.15Traffic units (Pass-km & 6,928 6,910 7,817 8,132 7,974 8,670NT km)(M)

Traffic DensityPass-km/route km (M) 1.2 12.0 1.4 1.5 1.5 1.5Freight - net ton-km/

route km (M) 0.6 0.6 0.6 0.6 0.7 0.8

OperationsTrain-km (M)

Passengers 16.2 16.8 17.0 17.8 18.3 18.5Freight 10.7 9.9 9.3 9.4 9.6 10.2Total 26.9 26.7 26.8 27.2 27.9 28.7

Loco-km (M)(2)Steam 7.3 7.2 7.5 4.0 0.8 0.08Diesel 26.2 25.8 25.4 28.5 31.2 26.0Diesel/loco-day available(mainline) 437 465 467 345 396 431

Railcar-km/railcar-day available 436 402 422 449 423 467

Operating EfficiencyGross ton-km/train-km

(freight) 414 413 445 463 457 600Net ton-km/train-km 265 265 283 311 332 335Net ton-km/loaded car-km 12.4 12.5 12.5 12.4 12.9 12.95Freight car-km (4-wheel

equiv/day) 106 93 85 89 86 85Net ton-km/freight car available

(4-wheel equiv '000 p.a.) 251 223 237 239 262 302Car turnaround time (days) 7.6 8.3 8.8 9.0 8.4 7.3Average speed (km/h) frt train 26 29 29 30 31 33Pass-vehicle-km/vehicle-dayavailable (bogie equiv/km) 457 463 478 530 588 598

Pass-km/train-km (persons) 324 330 373 381 358 350Traffic units-employee ('000) 201 207 237 275 266 287

Availability (%)Diesel locomotives 84 78 69 74 81 81Diesel railcars 89 87 88 86 90 93Freight cars 89 86 83 84 87 92.5Passenger cars 89 86 83 84 87 87

(1) Excluding less than car load car-km.

(2) Excluding shunting and work trains.

Source: SRT & Bank Staff.

December 1978

- 51 -Table 11

THAILAND

FIFTH RAILWAY PROJECT

SRT Passenger Tariffs

Old Fares (Satang per km.) Present Fares (Satang per km.)(effective from Feb. 15, 1955) (effective from Nov. 20, 1975)

kn Class 3 2 1 km class 3 2 1

1-250 10 20 40 1-100 15 26 45

251-500 9 ;£ 36 101-200 12 23 41

500+ 8 16 32 201-300 10 20 38

301+ 9 18 36

Percentage of Increase of Actual Fares

Distance of Travel % Increase

(km.) 3 2 1

100 50 30 12

150 40 25 9

200 35 22 8

250 28 18 5

300 25 17 5

400 20 13 4

500 16 11 3

Source: SRT

December 1978

- 52 -

Table 12

THAILAND

FIFTH RAILWAY PROJECT

SRT Freight Tariffs (Car-load Rates)

Rates Effective June 1, 1952 (Satang per ton-km)

km Class 2 3 4 5 6 7 8

1-100 35 33 28 21 18 18 13101-200 30 24 20 18 15 12 13201-400 20 15 12 12 10 9 13401-600 15 12 10 10 9 8 13600+ 12 11 9 9 8 7 13

Rates Effective October 1, 1975 (Satang per ton-km)

km Class 2 3 4 5 6

1-100 38 33 28 25 24101-200 31 29 23 21 20201-400 25 23 19 17 16401-600 20 18 15 13 13600+ 19 17 14 12 12

Rates Effective January 1, 1979 (Satang per ton-km)

km Class 3 4 5

1-100 35 29 26101-200 30 25 22201-400 25 21 19401-600 21 18 16600+ 21 17 16

Source: SRT

December 1978

THAILAND

FIFSm RAli--AY PKuJEUT

SRT Income Accounts: 1974-82(Baht Million)

Actual Estimated Forecast1974 1975 1976 1977 1978 1979 1980 1981 1982

Operating Revenues

Passenger 627 678 780 845 908 942 1,110 1,216 1,306Freight 401 430 543 619 589 728 889 1,011 1,100Other 60 70 80 103 104 110 120 125 130Total Operating Revenue 1,088 1,178 1,403 1,567 1,601 1,780 2,119 2,352 2,536

Operating Expenses

Salaries and Wages 631 754 752 765 786 920 994 1,073 1,159Fuel 190 227 201 225 236 255 286 324 362Other Materials 219 299 392 316 325 390 442 495 547Total Working Expenses 1,040 1,280 1,345 1,306 1,347 1,565 1,722 1,892 2,068Depreciation 123 135 158 163 171 188 209 221 228Total Operating Expenses 1,163 1,415 1,503 1,469 1,518 1,753 1,931 2,113 2,296

Operating Surplus (Deficit) (75) (237) (100)/a 98 83 27 188 239 240

Interest Earned - - - - 15 15 11 12 20Interest Charge 39 65 76 74 72 82 90 96 92

Other Revenue/Expenses 31 16 6 - - - - - -

Net Revenue Surplus (Deficit) (83) (286) (170) 24 26 (40) 109 155 168

Ratios: Operating 107 121 107 94 95 98 91 90 91Times Interest Earned (1.9x) (3.6x) (1.3x) 1.3x 1.2x 0.3x 2.lx 2.5x 2.6x

/a Includes non-recurring expense of approximately 90 million Baht

Source: SRT and Bank Staff

December 1978

TAILA4I)

STAFF APPRAISAL REPORT

FPFTH RILWAY POJIECT

IRT Ina at.nt Plan. 1971-81

_ _ _ . _ . . _ _ _ _ _ __ _ __ _____ _1977 1978 1979 1980 _9_ .local FertIleD Tonal Loyal PotIgo3 Total Local Foreignt Total Local Ponalg Total Local Foreign Total Local Forelgt Total Local Foreign Tatai--------- *b.t- ---------- ----- US do1l- - ------- ---------- B.ht - ---------- - -------- B.htf ----- ----- ---------- D.ht - ---------- ----- ---- 8i L-s ---------- -- ------ - AhtI - ---------

1. Acoolsltloo of Ratios Poaeaand UHlIR Stank1.1 Laoneotloet (30) 111.600 634.300 745.900 5.457 31.017 16.474 - - - 0.100 - 0.100 0.260 403.000 401.260 111.141 233.300 344.540 - - -1.: pot otloeole 16.270 29.030 45.300 0.796 1.420 2.216 -- - - - - - 1~6.170 29.030 45. 300-L Sp. gfr aat ( 1114.5361 135.427 240.395R 5.600 6.622 12.222 10.650 11.669 22.319 26.793 28.443 55.236 24.494 30.540 55.034 19.901 29.139 45.030 32.693 39.646 72.3391.4 Frtlgt cart (273) 37.556 82.432 119.988 1.836 4.031 5.867 6.380 14.719 21.099 16.200 34.340 SO.S40 3.000 7.105 10.105 11.976 26.268 38.244 - -

Total foe Category 1 279.957 881.189 1161.146 13.689 43.090 56.779 17.030 26.388 43.418 43.093 62.783 105.876 27.754 438.645 466.399 159.387 313.727 473.114 32.693 39.646 72.339

2. Track RnhbaiitatIae

2.1 Mali spla-atn nt1ithnat nails (80 1b/yd)

borth 40.583 152.249 192.832 1.984 7.445 9.429 -- - - 16.650 137.021 153.671 23.933 15.228 39.161 _ _South 56.360 125.000 181.360 2.756 6.112 8.868 - - - 12.229 42.000 54.229 44.131 83.000 127.131 - - _

2.2 Rai1 r.e-eI aith oldraila 4 rail Jolnt-eidioi 22.918 - 22.918 1.121 - 1.121 0.350 - 0.350 2.918 2.918 2.600 - 2.600 2.500 2.500 14.550 14.5502.3 Proraea-ti and layingcoannnate lanporaincleding fianenera 48.382 67.183 115.565 2.366 3.285 5.651 - - 15.951 - 15.951 6.593 67.183 73.776 12.919 12.919 12.919 12.9192.4 laidge rkhabilltatln 171.267 21.119 192.386 8.375 1.033 9.408 21.630 - 21.630 20.268 - 20.268 45.514 16.432 61.946 42.121 4.687 46.808 41.734 - 41.7342.5 iqelp-ent for track

9.252 - 9.252 0.452 - 0.452 - - - - - 9.252 - 9.252 - - -Total r 2 348.762 365.551 714.313 17.054 17.876 34.930 21.980 _ 21.980 51.366 42.000 93.366 124.740 3013636 428.376 81.473 19.915 10(1.388 69.203 - 69.203

3. L. rooerot of Teieco_.nira-aloe and Slnataiiso3.1 Talar o eNI. anloo 0.889 64.263 65.152 0.044 3.142 3.186 0.400 - 0.400 - - - 18.303 18.303 0.319 45.960 46.279 0.1)0 0.1703.2 S1InallIng 22.215 17.351 39.566 1.086 0.849 1.935 .000 1.000 2.499 - 2.499 - 17.351 17.351 9.863 - 9.863 8.853 - 8.853

Total toe CanSory 3 23.104 81.614 104.718 1.110 3.991 5.121 ._400 - 1.400 2.499 - 2.499 35.654 35.654 10.182 45.960 56.142 9.023 - 9.023

4. Worka iseroneat(Rakka san and ttatal rWorkshops) 15.266 30.920 66.186 1.124 1.512 3.236 - - 0.879 - 0.879 34.387 30.920 65.307 _ -

5. Onhn Inntei- ens Isa 117.788 - 117.788 5.760 - 5.760 4.471 - 3.471 10.597 10.597 32.152 - 32.152 43.068 - 43.068 28.500 - 28.5006. Total Rata Cotn 804.877 959.274 .164d.15L 39.357 66.469 105.826 43.881 26.388 70.269 108.434 104.783 213.217 219.033 8618.855 1 0 2 7

.888 294.110 179.602 673.712 139.419 39.646 179.065

7. PhyaLcal Loositat /a 45.636 35.854 81.490 2.232 1.753 3.985 - - - - 15.800 18.783 34.583 15.894 13.107 29.001 11.942 3.964 17.9068. Total of (6_7) 850 513 139518 2 245.641 41.589 68.222 109.811 43.881 26.388 7 0.269 108.434 104.783 13-2117 234 27-633 1f062 .471 310.004 392.709 7 02.713 153.361 43.610 196.971

9. Price Cootiny /b 69.764 30.987 100.751 3.412 1.515 4.927 - - - - - 13.034 12.085 25.115 22.991 10.812 33.803 33.739 8.090 41.82910. Total tvesateolt (8t91 /c I 20 7 1 46.IA 2.346.192 45.001 69.137 114.738 43.881 26.310 70.269 108.434 104.783 213.217 247.861 839.723 I087 .598 332.995 403.521 136.51b, 171.100 51.700 238.800

Ia Physical .n..inRancy e-ciodas tapanditlra aiceady Incurred Io 1977 aod 1978, loco1--t-s and boec 35,000 ions ot -alia Lea abIch ardent heen e I-aced.

/h Price toot Ingonoy e.. Idns 1977 and 1978 spod- inae, .satera Iin a.cc 6l ocatlot. and ra-1 ordarod 0t f in prints.

In 1,e 1977-81 Plan o-ladas soe - eotans fasa tha 1972-76 Plan shioh acer tersinated In 1977. Cot ol the 1977-81 Plan Ioldes -t ol sarlal in a-ock

Soe-e SRT and Bank staff.

Des...t .,1978

- 55 -

Table 14 B

THAILAND

FIFTH RAILWAY PROJECT

SRT Investment Plan: Cash Requirements(Baht Million)

Actual Estimated Forecast1977 1978 1979 1980 1981 1982

Investment (Table 14A) 70 213 1,088 737 239 200

Less: Materials from stock (26) (63) (24) (29) - -

charges to operating account - - (1) (14) (7) -

rail renewal expenditures - - (280) (27) (3) -

Total 44 /a 150 783 667 229 200

/a Capital inrestment in fiscal 1977 excludes 101 million baht of investmentscarried over from the 1972-76 plan.

Source: SRT and Bank staff.

December 1978

- 56 - Table 15

THAILAND

FIFTH RAILWAY PROJECT

Project Composition and Cost(Millions)

Local Foreign Total Local Foreign Total Proposed loan-- -Bahts US dollars ---- US$

1. Acquisition of Motive Powerand Rolling Stock1.1 Locomotives 111.500 634.300 745.800 5.452 31.017 36.4691.2 Spare parts for

locomotives 16.270 29.030 45.300 0.796 1.420 2.2161.3 Passenger cars 77.088 95.315 172.403 3.769 4.661 8.430 3.60 /a1.4 Freight cars 14.976 33.373 48.349 0.732 1.632 2.364

Total for Category I 219.834 792.018 1,011.852 10.749 38.730 49.479

2. Track Rehabilitation2.1 Rail replacement with

new rails (80 lb/yd)a) Northern line 40.583 152.249 192.832 1.985 7.444 9.429b) Southern line 44.131 83.000 127.131 2.158 4.059 6.217-

2.2 Rail renewals with oldrails & rail welding 19.650 - 19.650 0.961 - 0.961

2.3 Procurement and layingconcrete sleepers 32.431 67.183 99.614 1.586 3.285 4.871 3.30

2.4 Bridge rehabilitation 129.369 21.119 150.488 6.326 1.033 7.359 1.002.5 Equipment for track

maintenance 9.252 - 9.252 0.452 - 0.452

Total for Category 2 275.416 323.551 598.967 13.468 15.821 29.289

3. Improvement of Telecommunica-tion and Signalling3.1 Telecommunication 0.489 64.263 64.752 0.024 3.142 3.166 3.103.2 Signalling 18.716 17.351 36.067 0.915 0.848 1.764 0.90

Total for Category 3 19.205 81.614 100.819 0.939 3.991 4.930

4. Workshop improvement(Makkasan and DistrictWorkshops) 34.387 30.920 65.307 1.682 1.512 3.194 1.50

5. Other Investment Items 103.720 - 103.720 5.072 - 5.072

6. Total Base Cost 652.562 1,228.103 1,880.665 31.910 60.054 91.964 13.40

7. Physical Contingency 45.636 35.854 81.490 2.232 1.753 3.985 1.80

8. Total of (6 + 7) 698.198 1,263.957 1,962.155 34.142 61.807 95.949 15.20

9. Price Contingency 69.764 30.987 100.751 3.411 1.515 4.926 1.50

Total 767.962 1,294.944 2,062.906 37.553 63.322 100.875 16.70

/a Balance of US$1.061 million (4.661-3.60) of foreign exchange is covered by imported material alreadyin stock.

Source: SRT and Bank Staff.December 1978

- 57 -Table 16

THAILAND

FIFTH RAILWAY PROJECT

Physical Content of the Project

1. Acquisition of Motive Power and Rolling Stock

(a) Locomotives - 30 diesel locomotives of 1,800 hp with spare parts(b) Passenger cars - Manufacture of 79 passenger cars consisting of

59 third-class, 8 second-class sleepers and 12 second-classair-conditioned cars

(c) Freight cars - Manufacture of 30 oil tank cars and 73 hopper cars

2. Track Rehabilitation

(a) Renewal of 416 km of 70 lb/yd rails wit new 80 lb/yd rails, 203 onNorthern line and 213 on Southern line

(b) RerLewal of 40 km of 70 lb/yd rails with reconditioned 70 lb/ydrails with welded joints

(c) Renewal of 193 km of 50 lb/yd rails with reconditioned 60 lb/ydrails with welded joints

(d) Welding rail joints on 270 km of track to form continuous railsbetween stations

(e) Acquisition and placing in track of 275,000 concrete sleepers

(f) Rebuilding 118 wooden bridges and strengthening 62 steel bridges

(g) Acquisition of 7 motor trolleys and 18 trailers for trackma:Lntenance

3. Improvement of Telecommunications and Signalling

(a) TeLecommunications: Replacement of existing three channelcarrier telephone equipment with12 channel equipment;

- Replacement of 51 life expired teleprintersand 300 line old telephone exchanges with500 line exchanges.

(b) Signalling: Installation of mechanical interlocking at15 stations, tokenless block instrumentsand color light signals at 30 stations.

-58-

Table 16

4. Workshop Improvement

(Makkasan and District - Modernizing the Makkasan workshopworkshops) through rebuilding the old steam

locomotive overhaul structure(dismantled due to unsafe foundations)and providing overhead cranes and otherfacilities and equipment (includingequipment for district maintenanceworkshops).

5. Other Investment Items - Miscellaneous items, including siding exten-sion, barriers installation at 62 road crossings,construction of staff quarters and offices, earthfilling works for a second passenger station inBangkok, and acquisition of office cars.

Loan financial items are:l(b), 2e, 2f (steel bridges)3(a)-(b) and 4.

December 1978

THAILAND

FIFTH RAILWTTAY PROJEnT

Acquisition of New Diesel Locomotives for Freight Service in 1977-81(excluding work and mixed trains)

Forecast ForecastFreight freight increase Freight traffic carried by locomotives in service (net ton-km million)traffic traffic freight Total freightin 1977 in 1981 traffic Alsthom /a Hitachi /b Other diesel /b New 1800 HP loco /c traffic carriednet ton-km net ton-km net ton-km 1977 1981 1977 1981 1977 1981 1977 1981 1977 1981

(million) (million) (million) 19 loco. 19 loco. 3 loco. nil 41 loco. 31 loco. nil 22 loco. /d 63 loco. 72 loco.

2,660 3,350 590 1,235 1,235 98 - 1,340 1,015 - 1,100 2,660 3,350

Ia According to SRT, each Alsthom locomotive hauled in 1977 on an average 65 million net ton-km, i.e. 19 locomotiveshauled 65 x 19 - 1,235 million net ton-km.

/b Excluding 10 work train locomotives, other diesel locomotives (44) hauled 1,435 (2,670 - 1,235) million net ton-km per annum; thuson the average each locomotive hauled 1,435 t 44 - 32.7 million net ton-km per annum; 3 Hitachi hauled 3 x 32.7 - 98 million netton-km per annum; 41 other locomotives hauled 41 x 32.7 - 1,340 million net ton-km per annum.

/c Most of the new 1,800 hp locomotives will be used on assignments, which will not permit formation of long-distance block trains.An annual output of 50 million net ton-km per locomotive has therefore been assumed in this calculation.

/d 22 new locomotives in service require 26 locomotives in fleet (22 - 0.85 (availability ratio)].

Source: SRT and Bank Staff.December 1978

P3

a.

I.--4

THAILAND

FIFTH RAILWAY PROJECT

Replacement of Hitachi Locomotives with "Other" Diesel Locomotives

"Other" diesels /b 1800 hp locomotivesrequired to replace equivalent of "other"

Service on Hitachi (1977) to be replaced Hitachi locomotives diesel locomotiveswhich Hitachi Avail- Avail- Avail-locomotives ability ability abilityare in use Inservice In fleet ratio Inservice In fleet ratio Inservice In fleet ratio

(%) (%) (%)(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)

C'

Passenger andmixed trains 10 14 70 10 13 83 7 8 85

Freight trains /a 3 5 60 3 4 83 2 3 /c 85

Total 13 19 13 17 9 11

/a Freight trains hauled by Hitachi and "other" locomotives have an annual output per train of 32.7 millionnet ton-km. Freight trains powered by 1800 hp locomotives carry 50 million net ton-km per annum.

/b "Other" diesels are manufactured by General Electric, Krupp, Henschel, and Davenport.

/c Rounded.

Source: SRT and Bank staff.

December 1978(D

THAILAND

FIFTH RAILWAY PROJECT

Diesel Locomotive Utilization /a /b

LocomotivesPassenger and in fleet

Class of locomotive mixed trains Freight trains Work trains Total in 19811977 1981 1977 1981 1977 1981 1977 1981 by class

Alsthom, 1800 HP 28 28 19 19 - - 47 47 54

Hitachi class 15 5 3 - - - 18 5 8

Other classes 48 58 41 31 10 10 99 99 122

New acquisition,1800 HP - 4 - 22 - - - 26 30

Total locomotivesin service 91 95 63 72 10 10 164 177 -

Total locomotivesin fleet 214

/a Locomotives in service = locomotives in fleet less locomotives under repair.

/b Average availability: Average all classes 81% in 1977 and 83% in 1981New locomotives 85%Alsthom 85%Hitachi class 67%

Source: SRT and Bank staff.

December 1978I-

- 62 -

Table 20

THAILAND

FIFTH RAILWAY PROJECT

Passenger Car Acquisition in 1977-81 /a

Additions Replacement Total

Third-class cars 35 40 75Second-class sleepers 8 - 8Second-class air-conditioned cars 12 12Bogie guard's vans 19 19

Total 55 59 /b 114

/a Sixteen cars were manufactured during 1977 and together with 114 scheduledfor 1978-81 make a total of 130 cars included in SRT's 1977-81 program.

/b Total number of 59 includes 39 old cars, which cannot be repaired withoutcomplete rebuilding, and 20 third-class cars needed to form two reliefrakes to service cars on 12 long distance trains used intensively for20-22 hours a day. These 20 cars do not add to existing seat capacityand have been counted as replacements.

Source: SRT and Bank Staff

December 1978

THAILAND

FIFTH RAILWAY PROJECT

Requirements of Additional Passenger Cars in 1977-81(million)

Traffic (passenger-km) Capacity (passenger-ku) provided byRedeployment /a of Conversion /a of Acquisition /b Acquisition Ic

Acquisition /a equivalent of 43 28 surplus first of 8 second of 12 second1977 1981 of 35 third third class cars & second into class sleeper class air con-

(actual) (projected) Increase class cars (from surplus dist.) third class cars cars ditioned cars Total

5,650 6,760 1,110 333 410 267 34 61 1,105

/a Passenger - km per car per annum number of seats (72) x occupancy ratio (0.65) x average distance run per day (600 km) x 365 xavailability ratio (0.93) - 9.53 million.

/b Passenger km per car per annum (second class sleeper car) - Number of seats (32) x occupancy ratio (0.65) x average distance runper day (600 km) x 365 x availability ratio (0.93) - 4.24 million.

/c Passenger - km per car per annum (second class air conditioned car) - number of seats (44) x occupancy ratio (0.65) x averagedistance run per day (650 km) x 365 x availability ratio (0.75) - 5.09 million.

Source: SRT and Bank Staff.December 1978

- 64 - Table 22

THAILAND

FIFTH RAILWAY PROJECT

Requirement of Freight Cars 1977-81

Unit 1977 1981 Increase

Traffic DevelopmentPetroleum traffic net ton-km (mill) 647 931 284Cement traffic 326 446 120Other traffic carried in:

(a) covered gen purposefreight cars 1,720 1,951 231

(b) special purpose cars 218 175 (43)

Total net ton-km (mill) 2,911 3,503 592

Petroleum TrafficCars in fleet bogies 1,035/a 1,085 50Availability ratio % 92.5 95Cars in service bogies 957 1,030Output p/car in service net ton-km ('000)p.a. 678 900/boutput of cars in service net ton-km (mill)p.a. 647 931 284

Cement Traffic /cCars in fleet hopper cars 73Availability ratio Z 92.5Cars in service 67Output p/car in service net ton-km ('000)p.a. 1,800Output of cars in service net ton-km (mill)p.a. 120

Other Traffic /d (covered gen. purpose freight cars)Cars in fleet 4-wheelers 4,711/e 4,971 260

bogies (equivalent) 100/fAvailability ratio Z 92.5 95Cars in service 4-wheelers 4,358 4,605 247

bogies (equivalent)Output p/car in service /8 net ton-km ('000)p.a. 395 424Output of cars in service/g net ton-km (mill)p.a. 1,720 1,951 231

/a A small number (100) four-wheel cars are excluded; 20 cars built in 1977 areincluded.

/b Improvement over 1977 expected from pay load increase and reduction in turn-around time of existing fleet. Further, the pay-load of new bogie tank carsis 31 tons, as compared with 27 tons for existing cars.

/c Car output based on unit train operations between specific loading and deliverypoints.

Id Excluding less-than-car load traffic.

Ie Total includes cars put into service in 1977.

/f The pay-load of a four-wheeler is 13.9 tons and that of a bogie, 36 tons.The conversion factor is therefore 13.9/36 - 0.386.

l Four-wheelers.

Source: SRT and Bank Staff.

December 1978

- 65 - Table 23

THAILAND

FIFTH RAILWAY PROJECT

Track and Bridge Rehabilitation Program 1977-81 (Map 13622)

Total 1977-81 Projectquantities 1977 1978 quantities 1979 1980 1981

Rail Relace ent (km)70 lb/yd rail recondittoning (shop welding) on:

Udon Thani-Nong Kai (Northonst) 40 - - 40 40

70 lb/yd in-track rail weldinag onsRatsisa-Rar Thani (Northeast) 280 180 100 - - - -Thanon Chirs-Ildon thani (Northaast) 335 - 65 270 90 90 90

60 lb/yd replacement vith reconditioned & welded rails on;Tung Song-Kantang (SoAtb) 93 - - 93 - - 93Kabin Buri-Aranyapratet (eet) 100 - - 100 - 100

80 lb/yd replacement with new rails on:Bang Sue-Lopburi (North) 203 - - 203 - 100 103Taliag Chang-Hlua Bio (South) 213 - - 213 113 100 -

Total track rehab}litation 1.264 180 165 919 243 290 386

Concrete Ties-Laeine ('O°°)R.S. two-blocks ties on:

18 km Ban Pachi-Ban Mo (North) 25 - - 25 - - 2590 km Pak Tho-Rum Ein (South) 125 - 32 93 40 40 13

Monolithic ties on:28 km Bangken-Klong Psngs.t 42 _ - 42 42 - -36 km Ayuthaye-Ban Pachi 53 40 5320 km Bang Sue-Chiang Rek 30 - - 30 - - 30

Total con( reetA 275 - 32 243 85 80 78Repl.ac!ent of Timber Bridges la

SoutherntL,!.Tine ,,r218(988) 40(221) 60(234) 118(533) 40(185) 40(184) 38(164)Northeastern Line 17(38) 17(39)Eastern Line 28(95) 28(95) - - - - -

Total of dtiaber bridg 263(1,121) 85(354) 60(234) 118(533) 40(185) 40(184) 38(164)

Strengtheoing/Replacement of kteeal Irids .aNorthern Line 24(31) - 3(3) 21(28) 12(14) 9(14) -Southern Line 40(50) - 6(8) 34(42) 4(6) 15(17) 15(19)Northaetern Line 5(5) - - 5(5) 5(5) - -

Total of steel Wiidg& 69(86) - 9(11) 60(75) 21(25) 24(31) 15(19)

/a Number of bridges (No. of spans),

Source: SRT and Bank Staff.December 1978

- 66 -

Table 24

THAILAND

FIFTH RAILWAY PROJECT

Makkasan and Districts Workshops: Machinery and Equipment Financed by the Loan

Item Quantity Estimated Cost(US$ '000)

Cast Iron Brake Block production line equipment 1 58025 ton Overhead Cranes with running rails 2 570Pipe Bending Machine 1 5Complete set for repairing electrical rotating 1

machines: Dynamic balancing machine 1 )Armature winding and Bending machine 1 ) 145Armature lathe 1 )Commutator bar under cutting machine 1 )

Dynamic Balancing Machine for turbochargers 1 48Load Testing equipment for Locomotives 1 36Dynamic Balancing Machine for Cardanshafts 1 36Air Compressor (25 cu m/1) 1 43Fork-lift Truck (3 tons) 1 10Transformers (1-300 KW and 1-400 KW) 2 17

(4 units 400 A - 3.5 KV) 4 ) 22(6 units 600 A-600 V) 6 )

Total 1,512

Source: SRT and Bank staff.December 1978.

0.rleOliio Ochnnle.1977-8k

p aOJ C T #0 09 1 D I9 79 - I9 a N-b- 1~~~~~~ ~ ~~~~~~~~~~~~~ 9 77 1976 oic 1970 19779 qa980 1981th.lhar Ste.. 8~~~~~~~ ~ ~~~~~976 JOJ3.-9 0-0 J-o A-J J. q-tooi".. 9-0 3-0 A-3 3-I 0D0 3.0 6-3 J-l 0-0 3-9 6-1 3-S

8.2 ft. 30 D8.6.L lcote. otb Spar- rt-bdding .. cotattr 30 30

1.3 ft- 130P.... S., I.I.- deldo.#8.3 tIc. 830 .toorcnr. -~_.aceLoi. bd 80n

Arctntc 6 toolato 6188 79 32 Ss 3

1.4 M~~~~~~~~ 273 ft.igbI .... 1~~~~~~~~~~~~~~~~~~~~03 103

2.8 "Mb8l1 r.la. th 0...80 Ob/pd .all.1. 203 MMns Sn. - ~Laboi (north) -c.rc nd -

F. 213 -?ln Cht.ng-H_, U. 203 too 203.tn.

- d.It,ntp _________________ ~~~~~~~~~~~~~~~~283 113 283

2.2 I.1te. .td .ldtog-

100 :Lbl.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0M93 7b.M MM-u .... A.... j.. 1~~~00 __ __ _ __ __ _

0. 40 - .I8 70 Itt/pd r.ronlIti...d __ __ _ __ _ __ _9__ __

F. 2305- o-iO-Mnt fTh..i - ontO 08g200 230270

2.3 M 7.06 . ....ot t...1n 21,000 NtOOOOthi ti. idding

alids- I.hblill.- Ottalltlt

2. .. 7d k. eat..ltin b,0. id. 1653.41a0/369 18/1533

f o. 36 2 S - . h t h c td. . .. 7 9 Z t p a . a . n r f o n1 o t_ _ _ _ _ _ _ _ _ 0 / 8

No.7 -t- .. i bg. idding ________________________________________________L,q"-~~~~~~~~~6tlttc

I ~ ~ ~ ~ ~ ~ ~ ~ ~~~-dlttNo.02 tte hrdgo. 9 *nn. -. a.tnlbi 88gd1/6

32. Osol-anet Ic rc lto... -hdditt

h.,h bdding

/b UI- Ud" I ... t-ti- -1. t.i8t.d

S.-I.: SRT .. d ft.k S- tttaln.fo

Utrhahor ifto7eoO

THAILAND

FIFTH RAILWAY PROJECT

Procurement Schedule for Bank-Financed Items

E V E N T SI II III IV V VI VII VIII

Materials for manufacturing:79 passenger cars 12/01/78 01/01/79 03/01/79 06/01/79 06/10/79 07/10/79 01/10/80 09/10/80

Concrete ties (275,000) withfasateeing 10/01/78 10/15/78 12/15/78 01/31/79 02/15/79 03/15/79 08/01/79 09/01/80

mat'!r-ila ''r Leidge strengthening/

replacement 10/01/78 10/15/78 12/15/78 02/05/79 02/15/79 03/15/79 09/01/79 09/01/81

Tel.ecom equipment 10/01/78 10/15/78 12/15/78 01/05/79 01/15/79 02/15/79 09/01/79 09/01/80

&ignallfng equipment 11/01/78 11/15/78 01/15/79 02/05/79 02/15/79 03/15/79 10/01/79 12/01/80

Workshops equipment 12/01/78 01/01/79 03/01/79 06/01/79 06/10/79 07/10/79 02/10/80 12/10/80

Events: I Bank's comments on tender documents V Bank's agreement to award of contractII Bid invitation VI Contract dateIII Mid opening VII Start of deliveryIV lenders evaluation VIII Completion of delivery

Source: SRT and Bank Staff.December 1978

ED

- 69 -

Table 27

THAILAND

FIFTH RAILWAY PROJECT

Estimated Disbursement Scheduel

Disbursement atend of quarter

IBRD fiscaEl year Quarter Cumulative& quarter -------(US$ million)------

1978/79

December 31, 1978March 31, 1979June 30, 1979 1.9 1.9

1979/80

September 30, 1979 4.4 6.3December 31, 1979 2.3 8.6March 31, 19B0 2.2 10.8June 30, 1980 2.2 13.0

1980/81

September 30, 1980 1.9 14.9December 31, 1980 0.4 15.3March 31, 1981 0.3 15.6June 30, 1981 0.3 15.9

1981/82

September 30, 1981 0.3 16.2December 31, 1981 0.2 16.4March 31, 1982 0.2 16.6June 30, 1982 0.1 16.7

Principal Assumption

Bidding for procurement for material and equipment not later than March 1, 1979

Source: SRT and Bank staff.

December 1978

- 70 - Table 28

THAILAND

FIFTH RAILWAY PROJECT

Ecorunic Returns on 1979-81 Investments

Economic returns (S)Sensitivity analysis Percent of

Best data Costs Benefits Combined capital cost ofInvestment item estimates +10 -10 -20S -30S variation evaluated items

A. Acquisition of Motive Power and Rolling StockI. Passenger traffic

1. Replacement investments 36 33 33 - - 30 ) 212. New investments /a 15 14 14 - - 12

II. Freight traffic1. Replacement investments 20 18 - - 14 12 ) 372. Nev investments 19 17 - - 12 11

B. Track RehabilitationI. Overall 12 11 11 - - 10 35

II. Individual components1. Rail replacement /b 13 - - - - -2. Replacement of timber with concrete sleepers 11 - - - - -3. Bridge rehabilitation 13 - - - - -

C. Improvement of Telecomunication nc

D. Improvement of Signalling 27 23 22 - - 18 3

E. Workshop ImprovementI. Reconstruction of buildinl and replacesent of cranes 64 55 54 - - 46 ) 5

II. Acquisition of machinery 48 40 39 - - 32

All evaluated items A-E 17 15 - 13 - 11 100

nc - not computed.

/a Without accounting for additional investments in motive power, the individual economic returns are: Third-class coaches -about 38S; Second-class sleepers - 421; Second-class air conditioned coaches - 191.

/b The economic returns for new rails (northern line) and for reneweas with reconditioned rails are 13S and 152, respectively.

Source: SRT and Bank staff.December 1978

THAILAND

FIFTH RAIlWAY PROJECT

SRT Cash Flow Data: 1974-82

(Baht Nillion)

Actusl E:stimated Forecast1974 1975 1976 1i77 :978 1979 1980 1981 1982

CASH BEQUIRED

A. Capital Investment 506 518 224 145 150 783 667 229 200

B. Rail Renewal 15xpenditures - - - 280 27 3

C. Debt Service

Interest 39 65 76 74 72 82 90 96 92Repayments 46 87 94 140 150 147 142 144 99Total 85 152 170 214 222 229 232 240 191

D. Change in Operating Working Capital (49) (28) 159 131 (41) 106 62 45 26(otber than cash)

E. Payment to Special Funds - -- 8 -8

F. Total Cash Required 542 642 553 490 331 1,406 988 517 417 e

CASH AVAiIABLE

A. Internally Generated Cash

Operating Surplus (75) (237) (100) 98 83 27 188 239 240Depreciation 122 135 158 163 171 188 209 221 228Provision for Rail Renewal 16 16 16 25 25 25 25 25 25Other Income 31 16- 6 - 15 15 11 12 20Total Internally Generated Cash 94 (73) so 286 294 255 4-33 497 513

B. Long-Tens Loans 309 288 292 - 28 529 373 92 10

C. Funds Provided by Government 21 119 120 295 140 505 195 -

D. Cash Available: Beginning of Year 509 391 86 25 116 247 130 143 215

E. Total Cash Available 933 728 578 606 578 1,536 1,131 732 738

F. Cash at End of Year 391 86 25 116 247 130 143 215 321

Ratios: Debt Service Coverage 0.6w (0.7x) 0.3x 1.2x 1.lx 0O9x 1.7x 1.9x 2.5x

Return on Average Net (1.2%) (3.6%) (1.5%) 1.5% 1.2% 0.4X 2.5X 3.07. 3.0%Fixed Assets in Operation

Source: SRT and Bank Staff

December 1978

-/Z - Table 30

THAILAND

FIFTH RAILWAY PROJECT

SRT Operating Revenues and Costs: Effects of Inflation 1972-76

Actual1972 1973 1974 1975 1976 1977

1. Index: Wholesale (local) 100 122.8 158.4 164.2 170.8 184.32. Consumer 100 115.5 143.6 151.2 157.5 173.73. Wholesale (import) 100 121.0 150.0 153.4 155.7 164.04. Average of 1-3 /a 100 119.8 150.7 156.3 161.3 174.05. Weighted average lb 100 117.1 146.3 153.2 159.2 173.86. Traffic: pass-km (million) 4,412 4,694 5,376 5,640 5,628 5,650

ton-km (million) 2,243 2,070 2,296 2,353 2,505 2,912

7. Total traffic units (million) 6,655 6,764 7,672 7,993 8,133 8,562

8. Revenues: Passengers 522 545 627 678 780 8459. Freight 439 411 401 430 543 619

10. Other 41 50 61 70 80 10311. Total revenues 1,002 1,006 1,089 1,178 1,403 1,567

Operating Expenses /c12. Staff costs 455 473 631 754 752 76513. Other (excl. depreciation) 314 300 409 526 593 54114. Total working expenses 769 773 1,040 1,280 1,345 1,30615. Depreciation 118 122 122 135 158 16316. Total operating expenses 887 895 1,162 1,415 1,503 1,46917. Revenue per pass-km (Satang) 11.8 11.6 11.7 12.0 13.9 15.018. Revenue per ton-km (Satang) 19.6 19.9 17.5 18.2 21.7 21.319. Adjusted revenue per pass-km

(17 - 5)(Satang) 11.8 9.9 8.0 7.8 8.7 8.620. Adjusted revenue per ton-km

(18 - 5)(Satang) 19.6 17.0 12.0 11.9 13.6 12.2

Costs Adjusted for Inflation /c21. Staff costs (12 - 2) 455 410 439 499 478 44022. Other costs (13 4) 314 250 272 337 367 31023. Total working expenses 769 660 711 836 845 750

Working Expenses per Traffic Unit (Satang)24. Current (14 -: 7) 11.6 11.4 13.6 16.0 16.5 15.325. Deflated (24 - 5) 11.6 9.7 9.3 10.5 10.3 8.8

/a Arithmetic average.lb Line 14 x 100

Line 23/c Millions of Baht.

Source: SRT and Bank Staff.

December 1978

THAI IANU

FIFTH RAILWAY PROJECT

SRT Balance Sheets: 1974-82(Baht Million)

Actual Eatimated Forecast1974 1975 1976 1977 1978 1979 1980 1981 1982

ASSETS

Current Assets

Cash and Short-term Depun tas 39i 86 25 116 247 130 143 215 321

Accounts Receivable 150 119 108 135 123 t46 178 202 220

Inventory 524 643 633 610 593 702 751 792 821

Total Current Assets 1,065 848 766 861 963 978 1,072 1,209 1,362

Fixed Assets

Gross Non-Depreciable 1,650 1,750 1,798 1,798 1,798 1,798 1,798 1,798 1,798

Gross Depreciable 6,086 6.545 6,586 6,778 6,991 7.998 8,494 8,723 8.923

Subtotal 7,736 8,295 8,384 8,576 8,789 9,596 10,292 10,521 10,721

Less Accumulated Depreciation 1,449 1,580 1,654 1,817 1,988 2,176 2,385 2,606 2,834

Net Fixed Assets in Operation 6,287 6,715 6,730 6,759 6,801 7,420 7,907 7,915 7,887

Work in Progress 31 62 250 203 140 116 87 87 87

Total Fixed Assets 6,318 6,777 6,980 6,962 6,941 7,536 7,994 8,002 7,974

Investments of Special Funds 689 747 790 817 647 say 919 951 983

Other Assets and Deferred Charges 226 120 92 87 87 87 87 87 87 _

TOrAL ASSETS 8,298 8,492 8,628 8,727 8,838 9,488 10,072 10,249 10,406

LIABILITIES AND EQUITY

Current Liabilities

Current Portion of Long-term Debt 44 45 94 70 75 74 72 72 50

Accounts Payable 222 247 277 150 162 188 207 227 248

Total Current Liabilities 266 292 371 220 237 262 279 299 298

Long-Term Debt 964 1,270 1,304 1,188 1,061 1,444 1,677 1,625 1,558

Reserves

Provident and Other Funds 694 754 798 825 855 887 919 951 983

Provision for Renewal of Rails 126 133 147 172 197 (58) (60) (38) (13)

Other Liabilities 227 170 168 163 163 163 163 163 163

Equity Accounts

Government Capital 5,551 5,689 5,826 6,121 6,261 6,766 6,961 6,961 6,961

Retained Income 470 184 14 38 64 24 133 288 456

Total Equity 6,021 5,873 5,840 6,159 6,325 6,790 7,094 7,249 7,417

TOTAL LIABILITIES AND EQUITY 8,298 8,492 8,628 8,727 8,838 9,488 10,072 10,249 10,406

Ratios: Liquid 2

.Ox 0.7x 0.4x l.lx 1.6x lI.x 1.2x 1.4x 1.8xCurrent 4.ox

2 .9x 2.1x 3.9x 4.lx 3.7x 3.8x 4.Ox 4

.6x

Debt/Equity 14/86 18/82 18/82 16/84 14/86 17/83 19/81 18/82 17/83

Source: SRT and Bank Staff

December 1978

- 74 -

Table 32

THAILAND

FIFTH RAILWAY PROJECT

SRT Long-Term Debt as of September 30, 1977

Repayment (years)Amount /a Interest Grace Repayment

Year Outstanding rate % period period(baht million)

USAID 1960 16 4.00 2.5 20.5

IBRD - Ln. 280-TH 1961 110 5.75 1.5 20.0

- Ln. 898-TH 1973 277 7.25 4.0 19.5

EXIM (Japan) 1969 142 5.75 5.0 15.0

Germany 1968 76 3.50 11.0 19.5

KFW 1968 34 6.00 1.5 10.5

France 1973 251 3.50 11.0 19.5

BFCE & BPPB 1973 226 7.23 .5 10.0

Thailand 1973 72 7.25 4.0 19.5

Krung Thai Bank 1974 54 10.00 - 1.0

Total Outstanding 1258

/a Estimated from fiscal 1976 audited accounts; breakdown for fiscal 1977

not yet available.

Source: SRT and Bank staff.

December 1978

THAI LANDFIFTH RAILWAY PROJECT

ORGANIZATION CHART OF STATE RAILWAY OF THAILAND(as of September 30, 1977)

of |Commisioners

Generad Manager to the General Mnnr

Deput Gneral Manager Deputy General Mcnag.rOPerations Administration

{ Traffi Department Adminisration Depwtment

Transportation CentralCar Control Welfare & LaborGoods& Land EmplovmentPassenger Public Relations & Foreign

_Hotel_5 Districts

Accounting& Financ Department

Mechanica EngineeringDepartment Genral Accounts

_ internal Auditing

Medhanical TreauryMotive Powver Revnue Auditing4 Districts Investment Project & 9udgetRodling Stock Construction Dihburemnent AuditingLocomotive Repair Dat ProcessingRolling Stock Repair Miscelaneous Auditing

_Production

Marketing DeartmentCivil Engineering Department |

I_ Passenger

Projects & Planning FreightTechnical Surve & DesignConstruction Lgal BUreuCivil Engineering DepotUMaintenance of Way

Maintenance of Bridges & BuildingsSignalling & Telecorn Rallway Training CanterTimber & StoneDistricts

M~uedi ur Stores Bureau B

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