Thailand - Fifth Highway Project

DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use RFport No. PTR-126a APPRAISAL OF A FIFTH HIGHWAY PROJECT THAILANID November 17, 1972 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  Currency Equivalents: Currency Unit - Thai Baht (B) UM$0.048 - B 1.00 US$1.00 - B 20.80 US$48,077 - B 1 million Fiscal Tear: October 1 - September 30 System of Weights and Measures: Metric Metric British/US 1 meter (n) - 3.28 feet (ft) 1 kilometer (km) 2 0.62 miles (mX) 1 square kilometer (km) = 0.39 square miles (sq mi) 1 hectare (ha) = 2.47 acres (ac) 1 liter (1) - 0.22 British gallons (imp gal) 0.26 US gallons (gal) I ibtric ton (m ton) - 0.98 long tons (ig ton) = 1.10 US short tons (sh ton) Abbreviations and Acronyms: ARD - Office for Accelerated Rural Development DOH - Department of Highways ETO - Express Transport Organization MOC - Ministry of Communicatiom MOND - Ministry of National Development NEDB - National Economic Development Board PMWD - Public and Municipal Works Department RID - Royal Irrigation Department SRT - State Railway of Thailand UNDP - United Nations Development Programe US A.I.D. - United States Agency for International Development ER - Economic Return LCL - Less than carload voc - vehicle operating costs vpd - vehicles per day  APPRAISAL OF A FIFTH HIGHWAY PROJECT THAILAND CONTENTS Page No. SUMmARY ..................................... I. INTRODUCTION .......................................... 1 A. Previous Transportation Projects ................ . 1 B. Bank Group Lending Strategy ............... 1 C. Project Preparation ...... ................... I II. THE TRANSPOIRTATION SECTOR ...... ....................... 2 A. The Country and its Economy ................ 2 B. The Modes ....................... 3 C. Planning and Coordination ........................ 5 III. HIGHWAYS ..6............................... 6 A. The Network ......... ............................. 6 B. Characteristics and Growth of Traffic .... ........ 7 C. Administration ................... 8 D. Planning ........... .............................. 8 E. Financing and Taxation ........................... 9 F. Engineering ......... ............................. 9 G. Construction ....................... ..... 10 H. Maintenance .10 I. Training .11 IV. THE PROJECr .11 A. Description .............. , 11 B. Cost Estimates and Foreign Exchange Component .... 14 C. Execution .................................... 16 D. Financing .17 E. Disbursements .17 V. ECONOMIC EVALUATION .17 A. Construction and Improvement of the Project Roads. 17 B. Other Project Elements .19 VI. RECOMMENDATIONS e...X...... 20 This report was prepared by Messrs. P. R. Morris (Engineer), H.J. Schlechtriem (Econcmist), and Mrs. P. Valad (Editor).  -2- TABLES 1. Government Investments in Transport during Second and Third Five-Year Development Plans, 1967-71 and 1972-76 2. Motor Vehicle Registration, 1961-70 3. Civilian Consumption of Motor Fuels, 1960-71 4. Revenues from Road User Taxes, 1970 5. Department of Highways: Expenditures and Sources of Finance, 1967-71 6. Design Standards for National Highways and Provincial Roads (Rural) 7. Department of Highways: Road Construction Program, 1972-76; Regional Distribution and Sources of Finance 8. Lengths of Roads Maintained by the Department of Highways, 1961-70 9. Detailed Project Cost 10. Traffic Volumes on Project Roads 11. Vehicle Operating Costs 12. Economic Returns and Sensitivity Analysis ANNEXES A. Previous Transportation Projects B. Details about the National (Primary) Highways to be Constructed C. Details about the Provincial (Feeder) Roads to be Constructed D. Estimated Schedule of Disbursements CHART Organization of Department of Highways MAP National Highway Network  APPRAISAL OF A FIFTH HIGHWAY PROJECT THAILAND SUMMLARY i. Thailand has a radial transport system, with Bangkok (the capital) at the center. During the last decade, Government transport investments, made in response to needs of the growing eeconomy, have helped to stimulate economic development. An adequate primary transport system is nearly com- plete, spanning long distances between borders. This system comprises high- ways, railways, inland waterways, ports, and domestic aviation. The Govern- ment's Third Five-Year Development Plan (1972-76) proposes transport invest- ments totalling about 20% of development-expenditures. Highway investments total about 80% of transport investments (a 40% increase over the previous Plan). Highways consist of about 51,000 km of national highways and provincial and local roads; they serve 738,000 registered motor vehicles. About 85% of the national highways and 35% of the provincial roads are paved and the remainder are gravel. Local roads are gravel or earth surfaced. In the past, the Government has directed major attention to improvement of national highways. But in the Third Plan, including the Fifth Highway Project, it is giving more emphasis to improvement of provincial (feeder) roads. ii. Railways are most important of the other modes. A 3,770 km system, all meter gauge and mostly single track, extends into all regions of the country. As roads have been improved, they have attracted an increasing proportion of total traffic. The main inland waterway network is the Chao Phya River system in the Central Plain, with interconnecting canals. It provides about 1,600 km of navigable waterway in the wet season and 1,100 km in the dry season. The port of Bangkok, near the mouth of the Chao Phya, is the only commercial port for ocean-going vessels. Domestic aviation traffic, though still light, is growing fast but, as with railways, short haul traffic is transferring to roads as they are improved. iii. While the primary transport system was being developed, planning was simple. Now that most of the obvious needs have been met, more careful planning will be required for evaluating projects and setting priorities. A Bank mission comprehensively reviewed the transport sector in October 1971 and identified the need for improved transport planning and coordination. To this end, the Government has decided to establish a new transport plan- ning unit, and technical assistance for setting it up has been included in this project. iv. Serious congestion plagues Bangkok because the transport system did not keep pace with the city's rapid growth. The Government has regulated daytime truck entry to reduce congestion, and has employed the consulting firm Kocks (Federal Republic of Germany) to carry out a Bangkok Urban Transport Study. The Study will recommend traffic management improvements and a long- term development program for the City's transport system.  - ii - v. Bank Group lending operations in Thailand have been designed to support the Government's development objectives during the Third Plan. A crucial element of the Plan is to increase exports, and agriculture is ex- pected to contribute most to this increase. Expansion of agricultural produc- tion for export will be facilitated under this Fifth Highway Project by the construction and improvement of three national (primary) highways and four provincial roads. Also under this project administrative improvement will be furthered by the technical assistance and training to the Department of Highways (DOH) and Ministry of Communications (MOC). vi. The Bank has financed ten transport projects in Thailand: four for highways, three for ports, and three for railways. Six were completed satis- factorily, three were extended because of construction delays, and one is expected to be completed without any problems. vii. Under this eleventh transport project, about 285 km of three national highway sections and about 387 km of provincial roads will be constructed and improved, including supervision. With the Bank's agreement, the Government has awarded the contracts for two national highway sections. Feasibility studies will be made of about 1,200 km of provincial roads, followed by detailed engineering of 800 km if justified. A highway maintenance study will be conducted and urgently-needed maintenance equipment procured. Finally, technical assistance will be provided to the DOH and MOC. The DCH will be aided in planning, executing, and maintaining highway projects and training will be given to its professional staff. The MOC will be aided in improving transport planning. viii. Roads to be constructed and improved under this project rank high in the Government's current highway development program. The Bank and the United States Agency for International Development financed preinvestment studies for the national highway sections, and the DOHi and consultants carried out the studies. The Government selected the provincial roads from a feeder road study by the DOH and their advisory consultants, financed by the Bank. The bank also financed detailed engineering, by consultants, of the national highways under the Fourth Highway Project, and of the provincial roads under the Third. The project was appraised in October 1971, but revisions were found necessary to reduce construction costs, and these were completed in October 1972. ix. The project cost, including contingencies, is about US$58.6 million. The foreign exchange component is US$28.6 million or 49%. Cost estimates for two national highway sections are based on contracts already awarded; for the third national highway and the three provincial roads, on unit prices obtained recently in bidding for similar works in Thailand adjusted to reflect costs expected at the time of bidding. Costs of construction super- vision, preinvestment studies, and technical assistance and training are based on previous contracts for similar works in Thailand. The cost of the highway maintenance study is based on an assessment of man-month requirements. Finally, the costs of urgently-needed maintenance equipment are based on items tentatively identified by the DOH.  - iii - x. Responsibility for completing the project over 4-1/2 years will be vested in the DOH. It will be assisted by consultants for construction supervision, preinvestment and highway maintenance studies, and technical assistance and training. Contracts for two national highway sections already being built were awarded after international competitive bidding, and those for the other civil works and maintenance equipment will be awarded similarly. Local contractors secured about 20% of the contracts financed under previous Bank-financed highway projects, and they are expected to secure a comparable or slightly larger share for this one. Under the project, an average of about 2,000 men will be directly employed on the civil works for a period of about 5 years ending mid 1977. xi. The foreign exchange cost of the project (US$28.6 million) will be financed by the Bank loan; the local cost (US$30 million), by the Government. The Government has asked the Bank for US$4 million maximum in retroactive financing for the civil works now underway, and this is included in the project. These works have been started because the Government wanted to maintain its policy of providing steady work for the construction industry and to avoid delay in executing its highway improvement program. xii. Economic returns for individual sections of the project roads range between 12% and 22% with a combined return of 16%. Savings in transport cost to existing and generated traffic will result from these civil works. Substantial benefits also will accrue from preinvestment and highway mainte- nance studies, purchases of urgently-needed maintenance equipment, and technical assistance and training, but they were not quantifiable.   APPRAISAL OF A FIFTH HIGHWAY PROJECT THAILAND I. INTRODUCTION A. Previous Transportation Projects 1.01 The Fifth Highway Project will be the eleventh Bank-financed transportation project in the Kingdom of Thailand. Previous projects comprised four for highways, three for ports, and three for railways. Annex A gives details about them and their progress. B. Bank Group Lending Strategy 1.02 Bank Group operations have been designed to help Thailand achieve its development objectives during the Third Five-Year Development Plan (1972-76). Among these objectives, the highest priority is to increase exports, and agriculture is expected to contribute most of them. By facili- tating agricultural production and exports, the three national (primary) highways and four provincial (feeder) roads to be constructed and improved under this Fifth Highway Project will contribute to these objectives. Administrative improvements also will be furthered under this project by the technical assistance and training to the Department of Highways (DOH) and Ministry of Communications (MOC). C. Project Preparation 1.03 Roads to be constructed and improved under this project rank high in the Government's current highway development program and will provide much-needed betterment or expansion of the present highway network. The DOH, assisted by consulting firms, carried out the feasibility studies and detailed engineering of the national highways. Previous loans from the Bank and a grant from United States Agency for International Development (US A.I.D.j financed this preinvestment work (para 4.02). The Government selected the provincial roads included in this project from a feeder roads study conducted by their advisory consultants and updated by the DOH. Consultants prepared detailed engineering for these roads (para 4.04). 1.04 To maintain its policy of providing steady work for the construction industry and to avoid delay in executing its highway improvement program, the Government has awarded construction contracts for two national highway sections (para 4.03). It has asked the Bank to finance this work retroactively, and this finance is included in the project (para 4.19). 1.05 The maintenance study and technical assistance to the DOH and MOC are suitable for financing by the United Nations Development Programme (UNDP). But the Government has asked the Bank to finance them because it prefers  - 2 - to use UNDP finance for other studies and technical assistance, mainly in social sectors. 1.06 This report is based on information provided by the Government and consultants, as well as on the findings of the October 1971 appraisal mission composed by Messrs. P.R. Morris (Engineer) and II.J. Schlechtriem (Economist). Mr. S. B. Andricopoulos (Agricultural Economist, Food and Agriculture Organization/IBRD Cooperative Program) assisted in evaluating the agricultural aspects of the project. The report was edited by Mrs. P. Valad. II. THE TRANSPORTATION SECTOR A. The Country and its Economy 2.01 Thailand is a medium-size country in Southeast Asia, with an area of 514,000 km2 and a population of about 37.3 million in 1971, comparable in size and population with Spain. Climate and topography do not seriously impede transport movements. But the length between borders results in long travel distances. The climate is monsoon tropical, with two rainy seasons. Mountains and rivers dominate the topography. A spur of the Elimalaya IMoun- tains occupies most of the north and extends along the western border with Burma through the Mfalay Peninsula (including the Kra Isthmus). Two major rivers, the Mekong and Chao Phya, originate in these mountains. The country is divided into the Central, Northern, North-eastern, and Southern Regions. 2.02 Thailand is predominantly rural. About 85% of the population lives outside urban centers (more than 10,000 inhabitants) and earns its livelihood from agriculture. Bangkok, the political, comnmercial, cultural and, recently, industrial center, is the only major city. Its population is increasing over 5% annually (compared with the country average of 3%), and now is over 3 million. To reduce income disparities between Bangkok and the countryside and among regions, the Government has undertaken regional development programs. 2.03 The economy grew rapidly in the 1960s (9% annually) and supported a significant growth of transport. But it grew less rapidly from late 1969 to mid-1971 (6% annually) mainly because world market prices fell for rice and rubber (the main export commodities) and US military expenditures decreased. Economic growth accelerated again in the second half of 1971 because of an unexpectedly large increase in exports, a continued growth in Government expenditures, and an increase in US military expenditures. For 1972, continued recovery is expected and the Governnent's main objective for the Third Plan (1972-76) is to sustain a T' ainual growth rate. Achieve- ment of this objective may be difficult because Tlhailand will have to increase its commodity exports by 8% annually and receive a larger inflow of official external capital. Demand for transport will continue to grow, but at a lower rate, in line with the economy.  -3- B. The Modes (a) General 2.04 The pattern of movement for goods and passengers reflects Bangkok's dominant position in the economy. Primary and agricultural products are carried to Bangkok for export, processing, and local consumption; imported and locally-manufactured industrial products are moved in the opposite direction. To accommodate these flows, a radial transportation system has evolved, with Bangkok at the center. It consists of highways, railways, inland waterways, ports, and domestic aviation. This system is generally adequate to serve present needs of inter-regional traffic and is basically complete. 2.05 Few statistics exist on passenger and freight movements, except on the railway. Road transport, however, is the most important mode, with rail and water transport following. Domestic aviation does not carry a large share of traffic. As roads have been improved they have attracted an increasing proportion of total traffic. The individual modes are dis- cussed hereafter. 2.06 Congestion is serious in Bangkok because the city has grown rapidly but its transport system has not expanded at the same rate. The Government has banned entry of heavy trucks into the city during the day. It also has employed the consulting firm Kocks (Federal Republic of Germany) to carry out a Bangkok Urban Transport Study. Kocks started the Study in 1971 and is expected to complete it in late 1974. The firm will produce interim reports on particular aspects such as the improvement of traffic management, and will prepare a long-term development program for the City's transport system. (b) Highways 2.07 Chapter III gives details about highways. (c) Railways 2.08 The system of the State Railway of Thailand (SRT) consists of about 3,770 km, all meter gauge and mostly single track. The main lines radiate from Bangkok to the North, Northeast, East, and South. In the East, they connect with lines of the Khmer Republic and in the South with those of the Federation of Malaysia. Between 1960 and 1970, carload freight and passenger traffic about doubled and by 1970 the system carried 2.2 billion m ton-km and 4.1 billion pass-km, respectively. 2.09 Past railway operations have been profitable. But this situation may change unless reforms and investments are made to improve efficiency. Principal reforms needed include: (i) discontinuation of uneconomic local services; (ii) improved investment planning; (iii) a more flexible and cost- related tariff policy; and (iv) improved marketing of services. The Bank  -4- will support the Government in carrying out these reforms within a Fourth Railway Project which is now being prepared. 2.10 The southern line of SRT parallel to the project highway, Langsuan- Suratthani, is busy but a substantial part is uneconomic less than carload freight and local passenger traffic, much of which is likely to divert to the road. This should allow the SRT to reduce the number of local trains and close several stations, thus making it possible to handle the remaining traffic more efficiently. (d) Inland Waterways 2.11 The main inland waterway network consists of the Chao Phya River system in the Central Plain, with interconnecting canals. About 1,600 km are navigable in the wet season and 1,100 km in the dry season. More than half the traffic is sand and construction materials extracted from the rivers and being transported to Bangkok. Another third consists of agri- cultural commodities, mainly rice, also being transported to Bangkok. Traffic is imbalanced, with about 93% southbound and 7% northbound. This imbalance, and the lack of year-round navigability, cost of dredging, and conflicting needs of water for increased irrigation or power generation are the main limitations on inland water transport. Ce) Ports 2.12 Bangkok, operated by the autonomous Port Authority of Thailand, is the only commercial port where ocean-going vessels can berth. It is a river port situated about 30 km from the mouth of the Chao Phya River, and its approach needs constant dredging. Bangkok handles 80% of Thailand's international sea traffic and about 40% of its coastal traffic, totalling 10 million m tons in 1969. Expansion of its facilities, particularly for bulk traffic is constrained because of the sharp bends and shallowness of the river. The Bank's Third Port Project (Annex A) includes expansion works to meet traffic demands up to 1980. By 1980 a second deepwater port will be needed or waiting times for ships will be excessive. Two locations southeast of Bangkok, Laem Krabang and Sattahip (an existing military port), may be adaptable to commercial use and the Government is now studying these possibilities (Annex B)). 2.13 The Government plans to improve many small ports for coastal shipping and to develop a deepwater port on the Kra Isthmus to serve exports. Studies are now being made of Kantang and Phuket on the western coast of the Isthmus and of Naradhiwat and Songkhla on the eastern coast. But only small quantities now are lightered in these ports and expansion soon is not economically justified. Further study is needed to determine priorities among them. (f) Civil Aviation 2.14 Bangkok's Don Muang airport is a civilian and military operation administered by the Royal Thai Air Force. It is served by over 30 foreign  airlines and is the focal point of domestic operations of Thai Airways Company Limited. International passenger traffic grew at an average annual rate of 26% between 1966 and 1970, while domestic passenger traffic grew at an annual average rate of 25% in the early years of the same period and declined to an average annual rate of 10% after 1969. Passenger movements at Don Muang totalled about 1.5 million in 1970. Ground space at Don Muang is inadequate, and in the next 6 to 8 years additional facilities will be needed to accommodate projected traffic. The Goverment is considering whether to construct a separate civil airport at a new location. 2.15 The Government-owned Thai Airways operates scheduled services from Bangkok to 20 domestic airports, Vientiane in the Kingdom of Laos, and Penang in Malaysia. Its fleet consists of seven Avro 748's and four Douglas DC-3's. Traffic is light and in some locations has dropped so low when roads have become available that scheduled services are no longer justified. Two other airlines provide international services: Thai International Ltd. flies to 18 regional points, including Tokyo, New Delhi, and Sydney, and Air Siam offers passenger/freight service to Los Angeles. C. Planning and Coordination 2.16 The Ministry of Communications (MOC) is responsible for transport policy. Through its own departments, or through supervising Government transport enterprises, it is concerned with all transport planning and operations; however, construction and maintenance of roads were only transferred to MOC from the Ministry of National Development (MOND) on October 1, 1972. Recently, the National Economic Development Board (NEDB), the Government's central planning agency, has directly assisted the ministries concerned in preparing their transport plans. 2.17 During the last decade, the Government has made transport invest- ments in response to needs of the growing economy. These investments have in turn helped to stimulate economic development. A vigorous, efficient, and competitive highway transport industry has evolved, mainly owned by many private operators. The railway has tried to meet the challenge of road competition, but reforms are needed to improve its efficiency (para 2.09). Transport planning was simple as the primary system was being developed, and while needs were obvious no significant excesses or misallocations of transport investments occurred. But now that most of the obvious needs have been met, planning of future development will have to be more careful, par- ticularly in evaluating projects and setting priorities. 2.18 A Bank mission comprehensively reviewed the transport sector in October 1971 and identified the need for improved transport planning and coordination. The mission's recommendations have been discussed with the Government, which has agreed in principle to set up: (i) a transport policy and planning committee; to review and recommend transport policies and investment programs for Government approval; and  - 6 - (ii) a transport planning unit in the Ministry of Communications; to act as a secretariat to the transport policy and planning committee, including drafting transport policy papers, and formulating transport sector investment programs; the unit will also develop and operate a management information system, to provide an adequate data basis for decision- making on transport matters at all levels of Government and its transport agencies. The project includes an estimated 70 man-months of technical assistance to the MOC to aid in implementation. During negotiations, the Government confirmed its agreement to make the proposed institutional changes by December 31, 1973 and agreed with the Bank on the scope and timing of related technical assistance. 2.19 The Government's Third Five-Year Plan (1972-76) includes an alloca- tion of about B 21 billion (US$1 billion) for transport or about 20% of de- velopment expenditures (Table 1). Highway investments are about B 16.6 bil- lion (US$800 mi'llion) or about 80% of the transport allocation. This is about 40% more than in the preceding Plan. To ensure that the selection and ranking of proposed transport projects reflect economic priorities and realistic time schedules for preparation and execution, the projects should be further studied and analyzed and the Plan should be reviewed and, if necessary, revised. A review of the highway program is in progress (para 3.12). III. HIGHWAYS A. The Network 3.01 The highway network consists of about 10,400 km of national (primary and secondary) highways, 5,900 km of provincial (feeder) roads, and about 35,000 km of local roads. National highways, classified as primary and secondary, connect the main towns and serve predominantly inter-regional traffic. Provincial roads, the important regional roads, collect traffic from local roads and bring it to regional centers and national highways. The distinction between provincial and local roads is not well-defined, and one of the tasks of the maintenance study under the project will be to review the existing classification as part of a comprehensive network inventory (para 4.06). 3.02 The Government's past highway development programs have emphasized improvement of national highways. Consequently, a basic trunk system of paved (85%) and gravel (15%) roads has been established. Now the Government is giving greater emphasis to provincial and local roads, which are inadequate in all but the North-eastern Region. Of the provincial roads, about 35% are paved and the remainder gravel. Most local roads are gravel or earth tracks, passable only in dry weather; their exact length and condition are not known.  B. Characteristics and Growth of Traffic 3.03 The motor vehicle fleet grew at an average annual rate of 20% between 1961 and 1970. About 738,000 vehicles were registered in the country at the end of 1970 (Table 2). The portion registered outside the Bangkok metropolitan area increased during the period from 46% to 59%, mainly because the number of motorcycles in the provinces increased rapidly. Nevertheless, Bangkok has 95 vehicles per 1,000 inhabitants whereas the rest of the country has 13 vehicles per 1,000 inhabitants. Duties and taxes are higher for imported vehicles to protect development of the local automobile assembly industry, but no other restrictions limit the supply of motor vehicles. 3.04 Traffic distribution on the network reflects the concentration of motor vehicles in Bangkok and the capital's dominant position in the economy. Traffic is highest on the approach roads to Bangkok, where it is 8,000-12,000 vehicles per day (vpd), and decreases sharply as the distance increases from the capital. Traffic on provincial roads is less than 500 vpd and on local roads less than 100 vpd. Average annual traffic growth of 12% to 15% has been in line with the increase in motor fuel consumption (Table 3), but lower than the increase in the fleet. Growth rates on individual roads have varied widely, but have been highest in the Northern, North-eastern, and Southern Regions, particularly on improved roads. 3.05 Public bus transport is closely regulated. The Government-owned Transport Company Ltd. has the franchise for all main routes but operates on only a few highly-trafficked routes and sublets operations on most others. The Government is considering legalization of "small bus" services, now operating without licenses mainly in rural areas. These buses serve many short local routes and stop as needed. Bus fares vary according to road conditions and distances and compare reasonably with operating costs. 3.06 The Government has the autlhority to limit the number and size of trucking firms and to control freight rates. But it has not exercised its authority, and the trucking industry has developed without restrictions. The Government-owned Express Transport Organization (ETO), the largest trucking firm, owns 1,260 trucks and hires 5,000-6,000 others. Under Government-sponsored service agreements, ETO has sole rights for: access to the Port of Bangkok and the main railway stations, transit traffic to Laos and the Khmer Republic, traffic of Government-owned manufacturing companies, and haulage of US military cargo. ETO's services are satisfactory now, but its rates are higher than those of private truckers. Private firms take care of most trucking needs; most firms are small (1 or 2 trucks) but many, espe- cially in and around Bangkok, are medium-size (10 or more trucks). The latter often are freight agents, obtaining cargo for themselves and for independent truckers. Freight rates usually are negotiated and not advertised, but seem to be competitive and cost-related. 3.07 The Government has enacted regulations on vehicle weights and dimensions that are reasonable for the earlier stages of developing a highway network. But they may now be unduly restrictive in some respects  - 8 - and will be reviewed as part of the highway maintenance study under the project (para 4.06). C. Administration 3.08 Under the current organization of ministries, the DOII in the MDC is responsible for administering, planning, constructing, and maintaining national highways and provincial roads. The provinces and municipalities are formally responsible for the local roads and are assisted by central Govern- ment agencies (para 3.09). The Royal Irrigation Department (RID) in the Ministry of Agriculture builds and maintains roads serving irrigation projects; the Army, national defense roads. 3.09 The DOH has an adequate organization (Chart), with a full complement of professional and technical staff whose academic qualifications are adequate. But middle-level staff lack sufficient professional experience and are trained on-the-job (para 3.22). Most provinces and municipalities have rudimentary works organizations and their works capabilities are being built up by central Government agencies, normally through programs for rural and community development. The most important agencies are the Office for Accelerated Rural Development (ARD) in the Prime Minister's Office and the Public and Municipal Works Department (PNWD) in the Ministry of the Interior. Both provide technical expertise and equipment to local authorities. The ARD takes care of "sensitive" provinces, mostly in the North-eastern Region. It relies heavily on bilateral aid. 3.10 The DOH prepares proposals for highway development programs and annual budgets. At present, after clearance by the Ministry (now MOC) these proposals are reviewed by the NEDB which recommends them to the National Executive Council (Cabinet) for approval. In future, the new transport planning unit of the MOC (para 2.18) will incorporate the DOH highway development program into a transport sector program. This program will be reviewed by the transport policy and planning committee (para 2.18) before being submitted to the NEDB and the National Executive Council. D. Planning 3.11 The Planning Division of the DOII is in charge of all preinvestment work, including preparation of highway improvement programs and annual budgets. It conducts engineering reconnaissance, prepares initial cost estimates for proposed improvements, and selects projects, based on economic criteria. Its planning has been simple, but has not been uniform or systematic. Now that most of a basic trunk system has been established, more sophisticated planning will be needed. The ARD and P111D assist in planning local roads and carry out engineering preparation. They select roads according to only general economic, administrative, and security considerations, but do not make quantitative evaluations. 3.12 The Government recognizes that adequate analyses have not been made of highways included in the Third Five-Year Plan (1972-76) and the DOH, assisted by its advisory consultants T.P. O'Sullivan (United Kingdom),  -9- is reviewing and revising these analyses (para 2.19). Until this is com- pleted early in 1973, work will continue largely on projects begun under or carried over from the Second Five-Year Plan (1967-71) and on projects for which feasibility studies were completed in anticipation of foreign financing. To improve long-term planning, the Government is having T.P. O'Sullivan review the Planning Division's data collection system, including traffic counting. Difficulties not easy to overcome are that planning in other Government agencies is often less advanced than in the DOH and that input data for highway appraisals is lacking. 3.13 The Third Plan includes an allocation for highway investments of about B 16.6 billion (US$800 million). This amount would be distributed among the DOH (B 15 billion), ARD (B 660 million), PMWD (B 580 million), and RID (B 375 million). The DOH road development program is shown in Table 7. The Bank's recent Transport Sector Mission agreed with the Plan's emphasis on provincial and local roads, but suggested that about B 11.7 billion (US$560 million) would be more realistic for the DOH from the standpoint of project preparation and execution. It also recommended a review of project priorities. Tentative estimates by the Mission showed that about equal portions should be spent on national highways and provincial roads. E. Financing and Taxation 3.14 Highway expenditures are financed from general budgetary revenues and foreign loans and grants. Road user taxes are not earmarked, except for proceeds from motor vehicle registration fees. Revenues from these fees are distributed among the Police Department, and the Municipalities, Sanitary districts, and provinces. In 1970, the Government collected about B 2.6 million (US$124 million) in road user taxes (Table 4). This represented about 85% of the DOH's expenditures, including administration, for national highways and provincial roads (Table 5) and over 70% of all Government agencies' highway expenditures. 3.15 The Government has no specific policy to tax road users, but levies taxes to raise general public revenue, to protect the domestic automobile assembly industry, and to limit automobile ownership (considered to be a luxury). A more rational policy would be desirable, and a study should be made to determine one. During negotiations, it was agreed that an appro- priate time would be when the Bangkok Urban Transport Study and the highway maintenance study under this project have been completed, probably in 1974, since they would provide most of the data needed. F. Engineering 3.16 The Location and Design Division of the DOH carries out highway design of national highways and provincial roads to the limit of its capacity; the ARD and PMWD design local roads in accordance with standards laid down by the DOH. To cope with excess work, particularly for large and complicated projects, the DOH employs consulting firms. Although most are foreign, they are employing an increasing number of local staff. Also local firms are beginning to supply specialist services, like materials testing.  - 10 - The DOH has adopted a reasonable range of design standards for national highways, provincial and local roads, according to class, terrain, and traffic (Table 6). G. Construction 3.17 The Construction Division of the DOH administers construction of national highways and provincial roads. About 90% of this work is by contract and the rest by force account. Force account work is largely through three training centers, partly financed by bilateral aid (para 3.22). Road construction not under the jurisdiction of the DOH is mainly by force account. 3.18 The DOH executed the 1967-71 construction program satisfactorily. The Government's policy of completing most work through a continuous series of contracts, awarded after competitive bidding, has fostered the growth of an efficient, vigorous, and highly competitive construction industry. It also has kept prices stable. Small contracts have been reserved for domestic contractors, but large contracts, even when fully financed from the budget, have been subject to international competitive bidding. For the Fourth Highway Project, 2t firms were prequalified (17 foreign and 4 domestic). The Government hopes to be able to prequalify more domestic firms for this Fifth Highway Project, particularly for construction of the four provincial roads. H. Maintenance 3.19 The Maintenance Division of the DOH maintains national highways and provincial roads (Table 8) through its Headquarters Office and 12 Field Divisions. Each Field Division is responsible for a group of the 58 Field Districts. Provinces and municipalities maintain local roads, the RID maintains roads serving irrigation projects, and the Army maintains national defense roads. 3.20 Maintenance of national highways and provincial roads by the DOH has improved over the last 5 years. Maintenance expenditures have increased from B 234 million in 1967 to B 365 million in 1970 or average expenditure per km of road from B 18,500 (US$890) to B 22,400 (US$1,080). Progress has been made in instituting regular and systematic routine maintenance, like repairing surfaces, cleaning drains, and cutting grass. But periodic maintenance, like resurfacing of bituminous roads or reshaping and resurfacing of gravel roads, is still inadequate and a large backlog of this work exists. A highway maintenance study will be made under the project to prepare a 5-year program and to recommend improvements in maintenance operations (para 4.06). 3.21 Maintenance of local roads by provinces and municipalities has been deficient, even considering the low traffic volumes on these roads. Most are unimproved and in poor condition. The Government's highway improvement program under the Third Five-Year Plan includes bettering  - 11 - maintenance of local roads and strengthening the works capabilities of local authorities (para 3.09). I. Training 3.22 By the end of 1972, 37 professional staff will have completed special training courses abroad under programs financed by the First and Third Highway Projects. Additional staff has been trained under bilateral aid agreements. Local education facilities, particularly at the Asian Institute of Technology, have improved and the need for academic training abroad in future has lessened. But many DOH staff are young and lack practical experience that would enable them to work independently. There- fore, under this Fifth Highway Project, the DOH wishes to continue the on- the-job training, especially in highway planning and maintenance, initiated by T. P. O'Sullivan under the Second Highway Project. It also wants the consultants who will carry out the feasibility studies under this project to train counterparts (paras 4.05 and 4.08). The project will include overseas training of three transport economists for the DOH, and a similar number for the transport planning unit, for whom suitable courses are not available in Thailand. Field training of road supervisors, mechanical equipment operators, and mechanics is continuing at 3 local centers financed, staffed, and equipped with the assistance of Australia, Japan, and New Zealand. IV. THE PROJECr A. Description 4.01 The project consists of: (i) construction and improvement, including supervision by consultants, of about 285 km of national (primary) highway sections and about 387 km of provincial (feeder) roads; (ii) feasibility studies by consultants of about 1,200 km of provincial roads, followed by detailed engineering by consultants of about 800 km, if justified; (iii) a highway maintenance study by consultants and the procurement of urgently-needed mechanical equipment for highway maintenance; (iv) technical assistance by consultants: (a) to the DOH for planning, executing, and maintaining highway projects, and (b) to the MDC for improving transport planning and coordination, and training of staff.  -12 - (a) Construction, Improvement, and Supervision 4.02 Three sections of national (primary) highways, described in Annex B, will be constructed and improved: (i) Don Muang-Bang Pa In-Saraburi (83 km); (ii) Siracha-Rayong (72 km); and (iii) Langsuan-Suratthani (130 km, including about 20 km of access roads). The DOH, assisted by its advisory consultants, T.P. O'Sullivan, conducted feasibility studies for the first two highways under the Bank's Second Highway Project. Louis Berger, Inc., a US consulting firm, made the feasibility study for the third highway under a grant from the US A.I.D. Under the Bank's Fourth Highway Project, De Leuw Cather (US) carried out the detailed engineering for highways (i) and (iii); Kampsax (Denmark), for highway (ii). 4.03 To maintain its policy of providing steady work for the construction industry (para. 3.18) and to avoid delay in executing its highway improvement program, the Government has already offered the Don-Muang-Bang Pa In-Saraburi and Siracha-Ban Lamung-Rayong Roads for international competitive bidding and awarded the contracts, in agreement with the Bank. For the Don Muang- Bang Pa In-Saraburi Road, it awarded contracts to the Italian-Thai Development Corporation (Thailand) on December 9, 1971 and to the Hyun Dai Construction Co. (Korea) on November 15, 1971. For the Siracha-Ban Lamung-Rayong Road, it awarded the contract to the Dae Lim Industrial Co. (Korea) on April 11, 1972. De Leuw Cather is supervising construction of the Don Muang-Bang Pa In- Saraburi Road and will be employed for the Langsuan-Suratthani Road. Kampsax is supervising construction of the Siracha-Ban Lamung-Rayong Road. 4.04 Four provincial (feeder) roads, described in Annex C, will be con- structed and improved: (i) San Sai-Phrao (81 km); (ii) Chiengmai-Doi Saket-Mai Suai (133 km); (iii) Suphanburi-Chainat (99 km); and (iv) Khao Daeng-Ranot (74 km). These roads were selected from a feeder road study carried out by T.P. O'Sullivan in 1967 under the Bank's First Highway Project and updated by the DOH in 1969-70. Detailed engineering was carried out initially by Lyon Associates (US). It was revised by Scott, Wilson, Kirkpatrick (UK) to reduce construction costs, and the Government intends to employ the same firm to supervise construction.  - 13 - (b) Feasibility Studies and Detailed Engineering 4.05 Based on the feeder road study (para. 4.04) and in consultation with the Bank, the DOH has selected about 1,200 km of provincial roads for feasibility studies. If justified, about 800 km of the highest priority roads will be selected for detailed engineering. During negotiations, the Government agreed that it will select the roads for detailed engineering in consultation with the Bank. (c) Highway Maintenance Study and Purchase of Urgently-Needed Mechanical Equipment 4.06 This two-phase study (para 3.20) will: (i) review highway maintenance policies, operations, and methods; (ii) formulate a highway inventory (including classification proposals); (iii) prepare optimum 5-year maintenance programs for national highways and provincial roads, based on economic analyses of costs and benefits; (iv) assess the resources needed to carry out maintenance programs with estimated annual capital and recurrent budgets; and (v) review legislation and regulations governing weights and dimensions of motor vehicles. Phase I (6 months and about 30 man-months) will include a review of and preliminary recommendations for items (i)-(iv), including recommendations for immediate purchases of urgently-needed equipment and an estimate of highway maintenance needs. The project provides for financing of this equipment, but the equipment will not be ordered until the Government and the Bank have reviewed the Phase I report and the Bank has agreed to the items to be purchased. Phase II (6 months and about 25 man-months) will include final recommendations for items (iii) and (iv), and a review of and recommendations for item (v). 4.07 During negotiations, the Government agreed that it will: (i) purchase the maintenance equipment recommended in the Phase I report in consultation with the Bank; (ii) prepare a 5-year program for maintaining the national highways and provincial roads, based on the final recommendations of the highway maintenance study; (iii) discuss these recommendations and the proposed program with the Bank; (iv) carry out the agreed program according to a timetable satisfactory to the Bank; (v) maintain the national highways and provincial roads adequately thereafter according to sound engineering and highway practices; and (vi) provide promptly, as needed, the finance, facilities, services, mechanical equipment, and other maintenance resources needed.  - 14 - (d) Technical Assistance and Training 4.08 The project includes continuation of advisory services by T.P. O'Sullivan (para 3.22). Four experts will be employed during a period of about 2 years to assist the DOlI in carrying out its responsibilities, particularly for: (i) planning highways; (ii) preparing and executing highway development programs; (iii) improving highway maintenance operations; and (iv) training professional DOH staff, both on-the-job and through training courses. Also included is an estimated 70 man months of technical assistance to the MDC by consultants to aid in implementing agreed institutional changes for improved transport planning and coordination (para. 2.18). Additional pro- fessional staff will be trained as counterparts to consultants carrying out feasibility studies and detailed engineering (para 4.05) and through overseas training courses where necessary. B. Cost Estimates and Foreign Exchange Component 4.09 The project cost, including contingencies, is estimated at US$58.6 million. The foreign exchange component is US$28.6 million or 49%. Table 9 shows detailed costs, which are summarized on page 15. 4.10 Cost estimates for construction of Don Muang-Bang Pa In-Saraburi and Siracha-Ban Lamung-Rayong Roads are based on the amounts of the contracts already awarded (para 4.03). The cost estimate for the Langsuan-Suratthani Road was prepared by De Leuw Cather, and cost estimates for the four provincial roads by Scott, Wilson, Kirkpatrick, based on unit prices obtained recently in bidding for similar works in Thailand adjusted to reflect costs expected at the time of bidding. Costs of construction supervision, feasibility studies and detailed engineering, and technical assistance and training are based on previous contracts with consultants for similar work in Thailand. The cost of the highway maintenance study is based on an assessment of man-month requirements. Costs of urgently-needed maintenance equipment are based on items tentatively identified by the DOH. The cost estimates were agreed with the Government during negotiations. 4.11 Contingency allowances of about 18% for construction and 10% each for consulting services and purchases of maintenance eqlipment are considered adequate. The contingency for construction allows 10% for increases in quan- tities of work and 6% for increases in local prices (about 4% annually) and 9% in foreign prices (about 6% annually) from the expected time of receiving bids to completion of construction. The 10% physical contingency allowance for consulting services is for increases in the man-months of work in super- vision, design, etc.  -15- Foreign Exchange Project Element Local Foreign Total Local Foreign Total Component I. Construction and Improvement of: (a) National (primary) Roads 271 222 493 13.00 10.70 23.70 45 (b) Provincial (Feeder) Roads 188 154 342 9.10 7.4o 16.5o 45 Sub-total I 459 376 835 22.10 I8.10 40.20 II. Supervision of I 35 35 70 1.70 1.70 3.40 50 III. Feasibility Studies and Detailed Engi- neering 33 33 66 1.60 1.60 3.20 50 IV. Maintenance Study 4L 6 10 0.20 0.30 0.50 60 V. Maintenance Equipment O1/ 41 41