Thailand - Second Port Project

CIRCULATNG COPY R E S T R I C T E D RETURN TO ID BE RETURND TO REPORTS DESK R e p o r t N o. T.O. 89-b REPORTS DESK WITHIN ONE WEEK 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 REPORT ON THE ACQUISITION OF NEW DREDGES FOR THE PORT OF BANGKOK THAILAND October 1, 1956 Department of Technical Operations  CURRENCY EQUIVALENTS Unit Baht Effective Rates For Valuing Principal Forex Assets U.S. $ n Baht 20 Export Rate (End of July 1956) U.S. $ = Baht 20.70 Import Rate (End of July 1956) U.S. $ = Baht 20.87  TABLE OF COINTENTS Page Para. I. Introduction 1 1 II. Present Status of the Chlannel Dredging 1 2 - III. Silting in the Bar Channel 2 6 - 8 IV. Dredging Equipment - Yaintenance Dredging of the Chanruel 2 9 - 12 - Maintenance Dredging in the Port Basin 3 13 - 17 V. Project Appraisal 4 18 - 20 VI. ILvestigation of the Silting in the Bar Charmel and River 5 21 - 23 VIlo Ac5ministration and Operation of the Fort 5 24 - 27 VIII., Thie 'inancial Position of PAT 6 28 - 31 IXe Conclusions and Recoi,mendations 7 32 - 38 Map: Port of Bangkok  THAIIAN4D .R7,OKT OP THE ACGUIjITIO0N OF NEW DREDGES FOR THE FORT OF 3AhIKCK I. INTRODUCTION 1. In October 1950 the Bank irade a loan of 64.4 million to the Government of Thailand for the development of the Port of Bangkok and the dredging of a channel through the sandbar at the mouth of the Chao Phya River to permit larger ocean-going vessels to enter the port. In July 1954, the Bank was asked to consider an additional loan to the Port Authority of Thailand (PAT) for the purchase of a large new hopper dredge for the maintenance of the bar channel. Subsequently, in early 1955, this request was ext-ended to include the purchase of two addition- al smaller dredges and auxiliary equipment for dredging in the port basin. II. PPSENT STATUS OF T1E CHAYTEL DWEDGING 2. Under the Port Loan of 1950, 2.6 million was used to meet part of the foreign exchange cost of dredging a channel 100 m. wide and 8.5 m. deep through the sandbar at the mouth of the Chao Phya river. A total of 14 3 million c'.m. was dredged under contract at a cost of m'.3 million. The dredging of the outer part of' the channel was done by PAT with its owvl equiprment at a cost equivalent to about h;i2 million. 3. The channel was completed in January 1954, about 16 months late. As PAT did not have sufficient dredging equipment or the proper organization to maintain the channel, the Government concLrred in the Bank's suggestion that the channel should be maintained during the first two years by a foreign contractor and agreed that, thereafter, the Govern- ment woLtld consult with the 3ank before deciding whether to continue maintenance under contract. 4. In M4ay 1954 a management contract for raintenance of the chan- nel was awarded on the basis of competitive bidding to a group of Amierican contractors. The equipment used by the contractors consisted of the Portts original two dredges and a third secondhand dredge acquired from the U.S. Government (Sandon I, II, and III). The key personnel was pro- vided by the contractors. Work under the contract started at the end of August 1954. 5. It was decided to continue the maintenance dredging of the channel under contract for another two years after termination of the 1954 contract on August 31 of this year. On the basis of international competitive bidding, a contract was awarded to an Italian firm. The newly acquired hopper dredge (Sandon IV) will be used on the job. The unit cost of maintenance dredging under the new contract will be appre- ciably lower than under the old one. The contract provides for the training of Thai personnel and it is hoped that by the end of the con- tract the dredging operations can be properly conducted by PAT's own personnel.  2. III. ZILT TNG I TITE DAL CHrdTAIEL 6. Regular soundings have been taken in the channel since its comapletion more ti-an two years ago. They have shown that the rate of silting has varied considerably from month to month, but that the total deposits in any 12-month period have not varied rmore than about 20%. Monthly averages have varied from a maximum of 1.8 million cu.m. of sedi- ments deposited in the channel to a maximum of 600,000 cu.m. of material transported from the channel out to sea by the action of currents and tides. The total amount of material accumtulated annually in the bar channel which has to be removed by dredging is estimiated about 4.5 to 5.0 million cu.m. per year. However, factors which contribute to the rate of silting, such as the characteristics of the discharge of sedi- mernt by the river and msrine factors such as tides, waves, currents and movement of the bed, ar_ of such a complex nature that forecasts of dred,ing requirements are necessarily of a hazardous nature. 7. During the first year after comoletion of the channel, the anour&t of deposits in the chanrnel was substantially in excess of the amouift of dredging. The average rate of silting was 372,000 cu.m. per mor.th anCU tLe average aLount of material dredged o-ver the entire year was only 245,000 cu.m. per month with the result that at the end of February 1T95 the accumliLated amount of material above project depth of the chaainel was 2,3 milion cu.m. 8. During the next 12-month period ending February 1956, the dredging results show very considerable iLprovement, attaining during the last four months of the period an average monthly rate of 620,000 cu.m. At the end of February 1956 the amount of mater4al above project depth was reduced to 1.6 million cu.n.. With the new dredge Sandon IV added to the fleet, PAT expected to catch up with arrears before work started on the new maintenance contract in September, but because of defects in the cotistruction of the dredge vhich reduced its performance, an estimated one million cu.m. above project depth remained as of Sep- tember 1. IV. DTNEDGINC PITMENT Maintenance Dredging of the Channel 9. The dredges Sandon I, !I and III now operating in the channel are of older construction and are expensive to maintain. The Sandon II is over 50 years old and Sandon lII, although not as old, has proven to be the most exrensive to operate. 10. With a view to providing greater dredging capacity and more efficient operation, PAT in June 1954 placed an order in the Netherlands for a hopper dredge, Sarndon IV, with a hopper capacity of 2,000 cu.m. costing $1,550,000. Delivery was made in Bangkok in mid-January 1956.  3. During trials in February and March its rate of dredging was equivalent to about 320,000 cu.m. per month at medium haul, but a rn-aher of faults and deficiencies were found and the dradge had to ro into drydock where much of the equioment had to be dismentled, modifiad and reassembled by the builders. It has been in irregular service since the latter part of May as further defects developed which required correc+tion. These defects are being corrected. It is now apparent that PAT should have retained naval architects to orenare specifications for the dredge and to supervise its constr-ction. 11. The acquisition of the Sandon rN was fully justified on the basis of the dredging requirements in the bar channel. When Sandon IV comes in to regular operation, it is intended to disDose of Sandom III and to operate the Sandons I, II and IVr which together could dredge up to 800,000 cu.m. per month, After making aporopriate allowances for overhauls and rest periods, the estimated yearly requirements would be more than covered. 12. As the Sandons I and II are old and require much maintenance, PAT 1' actively considering the purchase of a second large dredge to re- place them. The decision on this point has been deferred until experience has been gained with the Sandon IV. Maintenance Dir ,' gn the Port Pasin 13. The opening of the bar channeL to vessels of deep draft makes it necessary to have adequate depth in the port basin. No dredging'in the port basin has been carried out since July 1954 when maintenance dredging under contract was terminated. Already some ships have reported touching the bottom when swinging. There are two dredging problems at Klong Toi. The first is the removal of silt alongside the quay so that ships can be berthed without danger of grounding at lo,, tide, and the second is to maintain the basin at sufficient depth so that ships can be loaded to deep draft in the anchorage, 14. The dredging immediately alongside the quay for a width of 30 meters from, its face does not involve large auantities of material. PAT estimates that the amount of material to be -emoved would be of the order of 30,000 cu.m. per year. Unfortunately this material cannot be dredged 'by means of a hopper dredge, firstly, because this type of dredge requires a "run" of a long length of quay free of ships, and secoiely, because it cannot operate close enough to the quay wall. Experimental work convinced PAT that a clamshell dredge unloading onto barges would be most suitable for this purpose. 15. No reliable information is avai'able on the rate of silting in the port basin beyond 30 meters from the quay, but PAT has estimated on the basis of all available data that the dredging requirements in the basin will amount to about 800,000 cu.m. annually. This dredging can best be accomplished by a hopper dredge of about 750 cu.m. hopper capacity, equipped with pumps for discharging the dredged material ashore in order  4. to avoid the excessively long haul- to the usual disposal area at sea beyond the mouth of the river. PAT's other hopper dredges do not have pumps for this self-unloading and moreover are too large for dredging in the basin. 16. It is evident, therefore, that the necessary maintenance dredg- ing could not be done by the present equipment even if part of it could be temporarily released for the purpose. Consequently, without the two proposed new drmdges it would not be possible to maintain deep-draft anchorage in the basin, or to accomnodate ships at the quay with the full draft permitted by the entrance channel when its project depth is restored. 17. The contract for the 750 cu.m. hopper dredge, Sandon V, was awarded to a Dutch shipyard on September 8, 1955 at a cost of $1.28 million. On the basis of experience gained with the construction of Sandon IV it has been decided to appoint a naval architect to supervise the construction and also to make a provision of `100,000 for additional equipment for the dredge. The contract for the clamshell dredge was awarded July 28, 1956 at a f'., of $339,000. Both contracts were let on the basis of international bids, V. PROJECT APPRAISAL 18. The project consists of the maintenance by PAT of the bar channel and of the port basin at Klong Toi and for this purpose the following equipment and services will be required: Item U.S. Dollar Equivalent (000) - Sandon IV (2,000 cu.m.) 1,551 - Sandon V (750 cu.m.) 1,285 - Clamshell dredge 339 - 3 dump barges 88 - Naval Architect's services 13 - Unallocated 124 Total 19. In view of the economic necessity of keeping Thailand's only large port open to ocean-going vessels, the acquisition of the dredg- ing equipoment indicated above is fully justified. The project is suit- able for a Bank loan of about `?3.4 million to cover the foreign exchange cost of the equipment. PAT will be in charge of the execution of the project and should be the Borrow,rer. 20. Taking into account that in the conditions of Thailand any estimate of the economic life of the equioment must be conservative, a term of the proposed loan of 15 years including a grace period of two years would be appropriate.  5. VI. INVESTIGATIONJ OF THE SILTIN2G IN THE BAR CHANEL AND RIVER 213. Maintenance of the bar chalnel requires continuous dredging costing about $2 to $21 million per year. In order to explore means of reducing the cost of dredging the Bank recommended that a stucly be made by specialized consultants of the silting conditions in the estuary and lower reaches of the Chao Phya river, 22, Tenders received from firms outstanding in tilis field of investi- gation revealed the complexity of the problem. Preliminary information indicates that the silting in the channel is due only in part to tne amount of sediment transported by the river and that other factors are pre- dominant and interrelated such as the movement of the material in the bar under the action of currents, tides, winds and waves prevailing in the gulf and in the estuary. The site investigation must therefore be followed by the construction of a large-scale model reproducing the estuary and part of the gulf so that all relevant factors can be reproduced in it as far as possib.e. 23. The engineering consultants selected by PAT as having made the most comnrehensive proposals, estimate the cost of the site investigation and model testing at the equivalent of about 41.5 million spread over a period of foirr years. Not until completion of the model tests would it be possible to indicate what the remedialI measur3s would be and what they would cost. Assumang that the tests would indicate successful remedial measures and that such measures would be in the form of dykes, it is con- ceivable that an economic solution could be found to reduce the amount of annual dredging. Should, however, the cost of construction at sea not be justified by the annual savings in dredging costs, then the principal objective of the survey would be lost. In this case the survey would still supply valuable information in connection with the Port's dredging problems, both present and future. PAT has given full consideration to this problem and has decided, with the corsent of the Government, to proceed with the surveye VII. ADMINISTRATION AND OPERATION OF THE PORT 24. The Port Authority of Thailand was established by the Port Act of 1951. The administration of a modern port was something new to the Thais and the staff employed lacked experience. PAT has suffered from too many changes in the chairmanship, the board and the directorship; from incompetent staff and from lack of technical know-how; from lack of co- ordination with the pilotage service controlled by the Harbor Department. with the Customs Department and the Police; and from insufficient authority to operate, regulate and develop port and navigation facilities. 25,, lfithin the last 18 months the Government and PAT have taken a number of steps to improve the situation: the port director has been given wider powers and to relieve him of some of the burden of his office, two  6. deput-y directors have beer appointed; tne oresence of a foreign port adviser has improved public relations and port operations; a committee has been set up with the participation of the Harbor and Customs Depart- ments and PAT to solve problems that have been the cause of mutual complaints. 26,; Efficient operation of the Port, however, cannot be achieved until PAT has a more competent staff. W4hile PAT continues to be over- staffed, some of the more promising employees have left service to obtain new appointrments with higher pay. Salary scales have been raised but are still considerably lower than tnose paid in private industry. The port director is -iving this matter close attention. A nLznber of dismissals have been made of clerical staff who were giver an examination and failed to reach the required standard. Edacational courses for clerical employees are being held as lTell as courses of instruction for mechanical equipment operatorse Several memners of the staff have had study courses abroad and more are exoected to be sent abroad for loniger terms of training. 27, There has also been a noticeable improvemenit in the operations of th? whaarf which are now better organized wmith ships discharging at a faster rate. Cus-tom procedures have been speeded up. The instailation of the equipment financed br the Ban' has been completed. WEhile rauch still remains to be done, on the whole condit-ons are steadily improving. VIII . THIE FIRATCIAL PO3ITION OF PAT 25& The Port Act of 1951 provides that all operating expenses of PAT and certain specified charges (depreciation, reserve for contingencies and expansion, etc.) shall, if possible, be metl from its revenues. If, after these expenses and charges have been met, any sulrplus remains, this is to be turned over to the Government for inclusion in the general revenues of Thailand. If, however, PAT's revenues are insufficient to meet operating expenses and the specified charges (other than any allocations to the re- serve for contingencies and expansion), the deficit is to be covered by the Goverrnent unless PAT is able to meet it with funds from other sources. 29. Each year so far PAT's accounts have shown a surplus of operating revenue over operating expenditure,. This surplus amounted to 19 million Baht in 1952, to 29.2 million in 1954 and to 23.1 million (provisional) at November 30, 1955. The cost of maintenance dredging of the bar channel which started in late August l1954 was charged in the PAT accounts to the Government. However, the actual contribution by the Government has in the past only been sufficient to cover -part of these costs,; the balance being met from PAT's own resources. The Government has now agreed for the future to make annual contribations sufficient for the total cost of maintenance dredging of the bar charnel. For the year 1956 an interim arrangement has been made whereby the Government will pay the total cost minls 3 million Baht to be provided Prom PATts surplus. 30. A forecast of PAT3s financial position on current and capital account for the years 1956 throughl 1960 is given below:  7. (Baht 000,000) 1956 1957 1958 1959 1960 Current Account Gross revenue *t 64 70 72 74 76 Expenditure: 45 50 51 53 54 Port operations 38 Li 2 43 4 Depreciation 6 7 7 8 8 Interest on Loan 1 2 2 2 2 lNet Pevenue 19 20 21 21 22 Capital Account i'I2int+enance dredging of bar channel 3 - - River survey - 10 7 7 4 Ava.lable for redcemption of loan and other capital investments 16 10 '4 14 18 Total 19 20 21 21 22 * The increase in gross revenue by 6 million Baht during I957 is due to the proposed introduction of chanlel dues on vessels and an increase in lancing charges of 25 per cent. 31 The financial provisions contained in the Port Act of 1951, the recent governn,;ent decision to make annual contributions sufficient for the total cost of maintenance dredging of the bar chlannel, the financial results of PAT's operations since it was established and its forecast for the next five years are all indications that PAT'ts financial position is comfortable and will remain so in the foreseeable future and also that sufficient funds will be available for the service of the proposed Bank loan. IX. CMICLUSIONS AHD REC0i11NDATIONS 32. The Port Loan of 1950 was made to secure the benefits to the economy of Thailand which would result from opening up the port of Bangkok to ocean-going vessels. Part of the project was the dredging of a channel through the sandbar at the mouth of the Chao Phya river. 33. The channel was completed in Jaxuary 1954. However, maintenance dredging, wihich should have begun even before that date, was not properly started until the end of August 1951h when foreign contractors took over the work. IHaintenance dredging will continue under contract for another two years during which time Thai personnel will be trained to take over the dredging operation upon expiration of the contract.  8. 34. The dredges now in use are old and expensive to maintain. To provide sufficient dredging capacity to maintain the channel, it was necessary to obtain at least one new dredge. This dredge has been ac- quired by PAT and will be used by the contractors together with the Sandon II, 35~- 1iaintenance dredging is also necessary in the port basin. The dredges at present owned by PAT are unsuitable for this work. It is necessary, therefore, for PAT to buy two dredges adequate for the dredging in the basin, 36. The project is suitable for a Bank loan of about $3.4 million to cover the foreign exchange cost of three dredges and three barges. 37. Progress has been made in the past year towards improving the management and operations of PATo PAT has the experience and organization to carry out the project and shoul therefore be the borrower8 38, Taking into account that in the conditions of Thailand any esti- mate of the economic life of the eqaipment must be conservative, a term of the proposed loan of 15 years including a grace period of two years would be appropriate.  BANGKOK EMORIAL BRIDGE THONBURI PORT OF BANGKOK JJP PRADAE N ~~~~/ PORT OF BANGKOK 0 1 2 3 4 5 6 7 8 9 I0KM LIMITS OF PORT OF BANGKOK OF THE 7 PORT AUTHORITY OF THAILAND I~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~I GULF OF * THA ILA NO , j . *. 8ANGKOK BAR , LIGHTHOUSE PILOT VESSEL i * DUMP AREA LONG 100032 100