Thailand - Second Railway Project

CIRCULATING C~OPYR s T R I C T E D TO BE RETURNED TO REPORTS DESK R e p o r t N o. T.O 83-b This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT PROJECT REPORT ON THE REHABILITATION OF THE STATE RAILWAY OF THAILAND July 28, 1955 Department of Technical Operations  CURRENCY EQUIVALENTS UNIT BAHT OFFICIAL RATE U.S. $1 Baht 12.5 Baht 1 U.S. $0.08 Baht 1,000,000 U.S. $80,000 FREE MARKET RATE (end of February 1955) U.S. $1 Baht 20.47 Baht I U.S. $0.049 Baht 1,000,00 U.S. $49,000  TABLE OF COiNTEI\TS Page Paragraph I. Introduction 1 1- 3 II. Legal Status of the SRT 1 4- 8 III. The Property a. Roadvway and Track 2 9- 10 b. Locomotives 2 11 -12 c. Freight Cars and Coaches 3 13 - 15 d. Comnunications 3 16 -18 e. Shops 3 19 -20 IV. Administration of the SRT a. Management and Organization 4 21 - 24 b. Accounting 5 25 - 27 c. Personnel 5 28 - 32 V. Railway Operation a. Traffic 6 33 - 40 b. Maintenance 8 41 - 42 c. Tariffs 8 43 - 46 VI. Financial Situation and Record of Earnings 9 47 - 51 VII. Forecast of Traffic and Revenues 10 52 - 57 VIII. The Rehajilitation Program a. Physical Program 12 58 - 65 b. Improvement of Operations 13 66 - 70 IX. rost and Financing of the Program a. Estimnated Cost of the Program 15 71 b. Cash Requirements and Sources 16 72 - 77 c. Items Proposed for Bank Financing 17 78 V. Conclusi)ns and Recommendations 18 79 - 88 *F * * *t * MIap of Thailand Appendix I - General Statistics (1954) It IT - Organization Chart " III - Unaudited Balance Sheet as at 31st December, 1954 IV - Investment Program, 1955-1959 V - Tonnage of Freight Traffic, 1945-1954 -I I - Summary of Forecast on Freight Revenues VII - Statement of Estimated Income Account, Investment and Fixed Charges, 1955-1960 VIII - Statement of SHT CommTitments as of November 30, 1954  PROJECT REPORT ON THE REHABILITATION OF TIDE STATE RAILAAY OF THAILAND I. INTRODUCTION 1. In October 1950 the Bank made a loan of $3 million to the Government of Thailand for the re-equipment of the railway shops and for signaling equipment as a part of a railwray rehabilitation program. In 1953 the Bankm-Lras asked to consider an additional loan for extension of this program. A Bank mission visited Thailand in early 1953 and investigated various aspects of the program. A mission from Thailand came to zashington in September 1953 to continue negotiations but no agreement was reached at that time. In July 1954, the Bank indicated to the Mlinister of Finance, the basis on which it would be pDrepared to resume discussions of the projectt In January 1955, the State Railwvray of Thailand (ShT) submitted a report to the `ank outlining an investment program and indicating its intention to operate the railwray system in accordance with sound technical, financial and manage- ment standards and practices. 2. This analysis is based on field observations supplemented by material submitted by the SRT. The project considered for Bank financing involves a new,T rehabilitation and improvement program which supplements the one started after '* orld j'ar II. The program, to be carried out over a period of five years, is estimated to cost 4l.27 billion, of which the equivalent of 4}h8 million (Xl billion) calculated at Ql = '21 would be spent in f.oreign currency. 3. The resort analyzes the investment program, describes the present condition of the railway and its procedures of operation, accounting, manage- ment and financing, makes recominendations for improvements of all aspects of railwRray administration and indicates the conditions under which a Bank loan in an amount equivalent to about $12 million could be recommended. II. LEGAL STATUS OF TIE SRT 4. The SRT was established as a legal entity by an Act of June 5, 1951. Prior to this date the railways had been run as a department of the Ministry of Communications, from which it i.ras separated in order to provide the bapis for a more efficient and business-like operation conducted vtith a minimum of political interference. 5. Under the Statute wJrhich created it, the SRT has full power to manage and develop the railways. The formulation of policies and supervision of the general affairs of the SRT are vested in a Board of Commissioners appointed by the Council of Ministers. The General Manager, who has direct charge of the operations of the SRT, is appointed by the Board subject to approval of the Council of Ministers. 6. The Statute requires the SRT, in the conduct of its business, to give due regard to the interests of the State and the public. The SRT is specifically required to receive the approval of the Government before con- structing new lines, abandoning existing lines, increasing or decreasing  - 2 - capital, selling property, and establishing standard rates for the use of the railwray system. The SRT is required to prepare each year both an operating and a capital budget; the latter must be presented to the Council of Ministers for approval. Revenue remaining after deduction of specified charges and funds required to carry out the approved capital program must be turned o-ver to tlle State. The Statute provides that the Board shall appoint an independent auditor to certify the SR1Ts accounts. 7. The Statute seems to provide a satisfactory framework for the opera- tion of the SRT as an autonomous entity. In fact, however, the SHE depends on government approval for all decisions of importance, and even for decisions affecting some day-to-day operations. This situation, howvever, is less the result of the positive requirements of the Statute than of the general political and administrative environment in Thailand. While that environment remains, changes in the Statute to enhance the independence of the SRT are likely to have little effect. 8. It would be desirable to provide for broader representation in the Board of Commissioners of the many economic interests which make use of the railvay system. Representation of agriculture, industry, commerce and banking could be provided for wiithout any cAange in the existing Statute and would result in a strengthening of the Boardts ability to make sound policy for the railway system. III. THE PROPERTY a. Roadway and Track 9. Tihe roadbed, structures and embankmernts are in good condition, well maintained and the drainage properly taken care of. The 3333 km of meter- gauge track are laid on hardiwood sleepers which have not been treated. Spikes are used rather than screws to attach the rails. 2ith few exceptions, all of the rails are 50-lb rails and are now 35 to 45 years old. The road ballast is adequate in quantity, but is not properly sized. 10. Because the rails are old and are not canted, they are so badly wforn that the wheel flange in some places along the line bears on the fish plates. Rails must be replaced on 2132 km of track. Budgetary provisions have been made for the renewal of 754 km of track wfith 60-lb rails (of which 4h9 km have been laid), leaving a balance of 1378 km of track to be relaid ith heavier 70-lb rails. b. Locomotives 11. As of January 1955, the SRT owned 328 steam. locomotives and 44 diesel-electric locomotives. Eighty steam locomotives and 19 diesels are overage and have to be scrapped as soon as replacements hav&ebeen made. All steam locomotives use wood for fuel. Compared to the diesels, the operation of the steam locomotives is expensive and commercial speeds are very low since the locomotives have to be refueled every 60 to 70 kIs. 12. Locomotives are kept in a perfect state of cleanliness and in good mechanical condition.  - 3- c. Freight Cars and Coaches 13. The number of freight cars on the books in January 1955 was 6210, wrhich included 2660 cars delivered since the end of the war. About 600 cars should be scrapped because of overage and poor condition. 14. Passenger coaches in January 1955 totaled 632, of which 569 wlere bogies. MIore than half of the coaches were purchased after the war. About 90 cf thI old coaehes should be scrapped. Because of the great increase in passenger traffic in the past 10 years, the existing fleet cannot cope wTith present requirements. 15. The couplers now in use are of the old "hook and link" type and are not strong enough for the operation of heavy freight trains with the more powerful modern locomotives. Because of weak couplers, freight trains have to be split into sections for steep grades and the result is a drop in opera- ting efficiency. To increase the capacity of the SRT, longer and heavier trains must be operated, requiring the installation of automatic couplers. d. Communications 16. The present methods of communications are inadequate to operate a modern railway. The principal stations are connected to Bangkok by telegraph w,ires, and mTessages to intermediate stations have to be relayed either by telegraph or, over short distances only, by telephone. The train service is controlled by block instruments (token system) Trith some exceptions where the telegraphic train order is still in use. 17. Because of the lack of long distance telephone communications, the dispatching of trains cannot be centralized in Bangkok as it should be. The station masters at the terminal stations are responsible for forming the trains and allocating freight cars. En route, freight cars can be discon- nected and replaced by q,thers at the discretion of another station master. This situation leads to abuse and' disorganizes the handling of freight. 18. To provide for better utilization of the equipment and for facilities to centralize traffic information and to control costs, a modern telecommunica- tion netvwork is indispensable. A central dispatching office at Bangkok, connected by telephone to mach station of the railvay system, would control all moveraents of trains and allocations of cars. Daily records of freight movement would be available and operating efficiency would improve. e. Shops 19. The Mvlakasan RaUwlway Shops, which were largely destroyed during the viar, have now been rebuilt and equipped vith the proceeds of a Bank loan. The shops are among the best equipped in southeast Asia and are designed to take care of reQuirements tor many years to come. In addition to the Makasan Shops, where general and heavy repair wrork is done, the SRT is building two running repair sheds at Nakorn-Radjima and Thungsong for periodical overhauls. A number of depots exist at rarious places for the washing of locomotives, inspection and small repairs,  - 4 - 20. The repair facilities of the SRT are adequate for its needs and to a certain extent may be considered at the present time as over-expanded. In view, howrever, of the backlog of arrears in maintenance of rolling stock and of the planned increase in equipment, it is safe to say that these facilities will be fully utilized in the near future. IV. ADIINISTRATION OF TIE SRT a. Management and Organization 21. The railwiay organization consists of 10 departments, all of which report directly to the General Manager. The principal departments are: traffic, mechanic4, civil, construction and comptroller. A personnel depart- ment does not exist. Apart from an obvious need to organize a personnel department, the departmental breakdown is satisfactory. The responsibilities of the departmkents, howrever, are not always clearly defined and coordination between them is poor. 22. Until the end of March l955 thne General Mianager -- and he alone -- was responsible for the coordination of the work of the departments. He had two Thai advisors, a technical and an administrative one, but these men had no administrative functions. It is not possible for a single man, howvever able, to act as top executive if he has no deputies and no proper statistical information to guide him and is required to spend the greater part of his time attending meetings with high government officials, members of parliament and the Railwvay Board. After the Bank had pointed out the need for delegation of authority, the SRT decided to appoint two deputies to the General !iVanager, one in charge or operations and one in charge of administration. The two deputies should relieve the General Manager from responsibilities connected 1with the daily operations of the SRT and allow him to concentrate on matters of general policy and administration. The reinforcement of the executive branch should provide for a much needed coordination among the operating departments which have in fact been functioning in isolation. 23. In early April the two advisors to the General Manager vrere promoted to the positions of deputies. Their effectiveness will depend largely on their personalities and on the degree to -mhich the General Mianager delegates his authority to them. One of their immediate tasks, in addition to coordinating and conducting daily operations, will be to organize a personnel department and a statistical and planning section. In addition to computing all relevant statistical data and preparing a daily summary of facts to be brought to the attention of management, this section should be staffed with oeople capable of analyzing deficiencies of operation, of making reconmendations, of preparing programs of improve- ments and of advising on methods of financing and execution. 24. Among the top rail-way staff are to be found competent railway men capable of doing their job wfell, given effective management and proper adminis- tration. The number of s-ach men is not large and their replacement vhen the time comes will be difficult, as the SrT has not given thought to the prepara- tion of capable men for positions at the second level who could later be promoted.  -5- b. Accounting 25. Autonomy has had the happy result of making the SRT install a good accounting system based on sound commercial principles. The system used is that of the Interstate Commerce Commission in the United States. The central accounting office is well organized and consists of five divi- sions: cashier and paymaster, receipts, expenditures, general account- ing, and asset accounting. 26. The cashier and paymaster division receives all cash receipts from stations, etc., and makes all payments either through its own cash offices or by traveling cashiers. The receipts and expenditures divisions keep separate accounts, subsequently centralized in general accounting. The asset accounting division is responsible for inventory, investment, and inter-line accounts, ancilliary services accounts, i.e., hotels, buffets and restaurant cars, and balance sheet preparation. 27. The accounting proceduares have-been set up by a foreign consult- ant employed by the SRT, who is now supervising the work in the department. The department operates in a very efficient manner. c. Personnel 28. The SRT has a regular staff of some 30,000 men. This number is considered to be ninecessarily high and under better methods of operation and administration could certainly be reduced. There is no personnel de- partment to centralize hiring and separation of employees, to set up appropriate scaTes of rates, to determine the requirements for the various jobs and to take care of the welfare of the workers. Each department does its owm hiring and a man dismissed from a department may be put back on the payroll by another department which has no record of his employment. 29. Prior to the creation of the SRT all railway employees were civil servants and had the benefit of a pension based on years of service. The employees of the SRT have lost this privilege. The pension plan has been replaced by a provident fund to which the employees contribute 5% of their salary matched by an equivalent payment by the State Railways. A pension is given at the age of 60 to employees who have 10 years of uninterrupted service; the pension is only 20% of the last salary and does not depend on the number of years of service. An employee can also withdraw all the ac- cumulated amount at any time he leaves. The result is that many are tempt- ed to abandon their employment when they have accumulated enough money to try their chance in small commerce. If they do not suxcceed, they can always return to the SRT without loss of benefits. This contributes to an un- desirable turnover in personnel. 30. There exists a training school for professional workers. Train- ees have to deposit a sum of 500 bahts (r25) but very often, after having learned their trade, they abandon the deposit and take employment in private industry where they are much better paid.  - 6 - 31. No steps have been taken to give incentives to workers to keep them. The basic rates are low compared to those in private indus- try and good men are hard to keep. A main reason for separating railway personnel from the civil service was to free the SRT to establish its own scale of salary rates in accordance with the labor market. The SRT has not used this freedom. It has appointed a committee to consider the question as well as that of pensions, but the committee is inactive. It is important that the SRT take early action to readjust, where necessary, the salaries to appropriate levels. It is also time for the SRT to organize a proper personnel department which would be effectively in charge of the administration of the personnel. 32. The quality of the railway worker is not bad. The Thai coolie is hardworking. Skilled labor is of good quality, but experienced mech- anics are scarce and their recruitment difficult as a result of private competition. The supervisory personnel appear to be weak. This is partly due to failure on the part of the SRT administration to instruct the super- visors in their duties and give them proper guidance. V. RAILWAY OPERATION a. Traffic 33. The railway trafflc, which hadl dropped to a low point during the war, has since then rapidly increased. Compared with the last prewar year, the volume of tra2fic developed as follows: 1941 194g 1950 12L2 1254 Goods (millions tons) 1.8 1.2 2.0 2.4 2.9 Goods (million ton-km, parcels not included) 571 300 480 556 679 Passengers (millions) 7.7 25.1 25.6 33.2 36.7 Passenger-km (millions) 423 1,307 1,436 2,254 2,348 34. The most spectacular increase has been in the number of passengers, which has risen more than 3V- times despite the shortage of carriages. This was partly due to cheap passenger fares, which have not followed the general cost of living. There has also been an increase in the average distance travelled by a passenger which partly reflects the competitive position of bus transportation over shorter distances. By far the larger number of passengers travel in third class. For every first-class passenger there are 8 second-class and 160 third-class passengers. 35. Freight traffic (exclusive of packages) consists of 40% agricul- tural products, 50% industrial products and manufactured goods and 10% petroleum and miscellaneous products. Only 20% is L.C.L. freight (less than carload loading). On the northern, northeastern and eastern ines, the freight traffic moves principally from the interior of the country to Bangkok and 40% of the cars return enpty. On the southern line the movement  - 7 - is reversed and the outward-bound freight tonnage from Bangkok to the south is four times tiat of the incoming freight. A car travels an average of 60 km per day with an average load of about 5 tons. This result is quite satis- factory considering that the freight movement is not balanced in both direc- tions. A check made at Bangkok station over a period of 3 days showed that 68% of the cars that had arrived had left again on the next day and 23% on the following day. 36. The trucking of cargo to and from the stations and the loading and unloading of freight cars is done under an exclusive agreement by the Express Transportation Bureau (ETB), a freight-forwarding organization under the jurisdiction of the Ministry of Communications. The SRT has granted the ETB the exclusive franchise for the handling of freight and has provided for its agents rent-free office space at all principal stations. In exchange for these privileges, the ETB was supposed to pay to the SRT a fair share of the profits derived from its handling of this freight but has disregarded all claims for such payments since the SRT became autonomous. Because of powerfull political connections, the ETB was able to avoid entering into a firm agreement with the SRT. The Bank suggested and the Government agreed that the ETB should make fair payments to the SRT for its franchise. The Government has now decided the payment should be $2 million in 1955 and thereafter 50% of ETBts net earnings derived from railway business. 37. The following maximum speeds are in effect: 65 kim per hour (40 miles)for passenger trains, - 50 km per hour (31 miles) for freight trains equipped with pneumatic brakes - 40 km per hour (25 miles5 for all other trains. Perranent speed restrictions exist on about 8% of the total length of track; temporary restrictions are frequent due to the condition of the track. 38. According to regulations, speeds have to be reduced at stations where there is no stop, the reason '.eing that switches which are not locked are simply held in position by a laborer. In more than a hundred stations, switches are locked, but the speed restrictions have not been lifted. A simple device for locking the switch by hand would be inexpensive, could be rapidly installed and stop the practice of reducing speeds at all switches. This would result in higher comnercial speeds and in savings in fuel. 39. Another handicap in train operation is the frequent and long stops at stations. Some are necessary because of the time-consuming refueling of the wood-burning steam locomotives. However, on the diesel-operated runs, the same running times have been maintained for no justifiable reason. Other reasons which reduce the running time are the absence of freight-handling equipment at stations and the insufficient number of sidings and their short length, which delay shunting operations.  40. The train schedules make excessive allowance for possible delays. It happens frequently that a 20-minute delay is caught up on a stretch of 60 to 80 kilometers. In general, there is a tendency to reduce the running speeds and increase the duration of the stops in order to make operations easier. Thus, for passenger express trains, the average commercial speed (including stops) of the northern, northeastern and southern expresses are respectively only 32, 29 and 42 km per hour. The SRT should modify the train schedules, increase commercial speeds and run the trains on a more efficient basis. b. Maintenance 41. Maintenance of mechanical equipment is done at the Makasan central shop, at the running sheds and depots. At present, the SRT is in the process of organizing the repair work at the 14akasan shops and of setting up proper shop procedures. The shops have a total of 1800 men, of whom less than one- third are qualified maintenance men. New mechanics are difficult to recruit. Workshop procedures are not yet in effect. Because of these shortcomings, the output of the shops is below what it could be and the percentage of equipment out of service is too high. However, the quality of the work per- formed is definitely good. 42. For the maintenance of the track, the SRT uses, on the average, 1.6 men per km of track. The number of men assigned to this work is excessive and should be reduced after completion of the rehabilitation of the track and after purchase of appropriate track maintenance equipment. The SRT is experi- menting with different kinds of pneumatic hand tools. Recommendations have been made b-y7 the Bank on methods4of relaying the rails and shoveling of the ballast. co Tariffs 43. Between 1941 and 1955 freight rates have been revised three times and passenger fares siy times. Freight rates now in effect are thoseof 1952. Carload goods except livestock yieid the equivalent of 1.35 U.S. cents per ton-mile; livestock, 3.50; package freight, 3.70; and all freight together, 1.850.* These rates are based on charging what the traffic will bear, with due regard to the cost of competitive trknsDort by waterways. There exists a large number of tariff classes with progressively higher base rates for higher values of freight. Within each class, the ton-mile charge diminishes with increasing length of haul. The rates for loading and unloading the cargo and for trucking are set by ETB. * U.S. average for 1953 : 1.43 cent per ton-mile. This average rate refleats a large proportion of cheap bulk goods, such as coal, ore and building materials.  - 9 - 44. The SRT's freight rates are low compared with those of railways in certain other underdeveloped countries carrying similar goods. A gen- eral increase of these rates at the present time might, however, be harmful to the Thai economy and is not envisaged by the Government. Some increase in revenue may be obtained by a revision of classifications resulting in moderate increases of rates for higher-priced cargo. 45. At the suggestion of the Bank, passenger fares were increased on February 15, 1955 by 67%. It is too early to judge of the effect of this substantial rate increase on the passenger traffic. It is reasonable to expect an immediate drop in the number of passengers, which might level out again to last yearts average over a period of 1 to 3 years. The new tariffs yield a revenue in 3d class travel corresponding to 0.8 U.S.