Thailand - Second Highway Project

ETliURlM -ro Q ES'R I CTED REP 13ORT S;SX Report No TO-531a This report was prepared for use within the Bank and its affiliated organizations They do not accept responsibility for its accuracy or completeness The report may not be published nor may it be quoted as representing their views INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF A SECOND HIGHWAY PROJECT THAILAND May 31, 1966 Projects Department  CURRENCY EQUIVALENTS Free Exchange Rate (recent average) Currency Unit - Baht (B) Baht 20 80 = U S $1 00 Baht 1 00 = U S $0 05 Baht 1, 000, 000 = U S $48, 100 Fiscal Year October 1 to September 30 Units = Metric  THAILAND APPRAISAL OF A SECOND HIGHWAY PROJECT Table of' Contents Page SUMMivARY 1 - 11 I. INTRODUCTION 1 II BACKGROUND INFORMATION 1 A Geographic and Demographic 1 B The Transport Sector 2 III. THE HIGHWAY SECTOR 4 A Highway Administration 4 B Characteristics and Growth of Vehicle Fleet 4 C Traffic Volumes and Traffic Counts 5 D Highway Transport Industry 5 IV TRANSPORT COORDINATION 6 A Introduction 6 B Road-Rail Competition 7 C User Charges 7 V THE PROJECT 8 A General Description 8 B Design and Consulting Services 9 C Cost Estimates and Foreign Component 10 D Project EKecution 11 VI ECOINOMIC JUSTIFICATION 12 A Introduction 12 B The Project Roads 13 VII CONCLUSIONS AND RECOMMENDATIONS 17 (Continued) - ----- o O o ----- This appraisal report is based on the findings of a Bank Mission to Thailand in December 1965 consisting of Messrs Hardy and Haker, and upon engineering and economic feasibility studies prepared by several consulting engineers during 1964-1965  Page 2 Table of Contents (continued) TABLES 1. Vehicle Population & Rates of Growth 2. Users' Contribution & Highway Expenditures for Financial Years starting October 1 3. Design Standards for Two Lane Primary Highways (Rural) 4. Design Standards for Project Road Sections 5. Estimate of Cost 6. Actual & Assumed Annual Rates of Growth of Motor Vehicles (%) 7. Vehicle Operating Costs in Flat Country for Inter-urban Roads 8. Traffic Forecasts for Project Roads 9. Rate of Return Summary for Indavidual Roads and Sections MAP: THAILAND: National Highway System  THAILAND APPRAISAL OF A SECOND HIGHWAY PROJECT SUMMARY 1l The Government of the Kingdom of Thailand has requested the Bank's assistance in financing a second highway project, the proposed project would comprise a) the improvement and construction of sections of four national primary hLghways totalling about 770 kms, b) the preparation of feasibility studies and engingering for a further 190 kms of highway, and c) the services of consulting engineers in connection therewith. ii. The total cost of the project is about US$ 72 million equivalent and a loan of US$ 36 million is proposed to cover the foreign exchange cost of construction estimated at 48 per cent, and the foreign costs of engineer- ing. The executing agency will be the Department of Highways of the Ministry of National Development. iii. This will be the second Bank loan to Thailand for hLghways. The first loan of US$ 35 million (Loan 341-TH) was made in June 1963, but was cut back to US$ 25 million in 1964 at the Government's request because, after appraisal in 1962, a substantial amount of work was done on some of the project roads by the Highway Department's own forces as a result of which the Government desired to defer some of the improvement works by contract originally envisaged in the project. After a slow start, progress on the first project is now satisfactory and it should be completed on schedule by the end of 1967. Consulting engineering services provided under the first project concerning the re-organization of the HLghway Department, the train- ing of Thai technical personnel, and the preparation of feasibility studies and final engineering, have prepared the way for the proposed second project and for future projects. iv. The registration of motor vehicles in Thailand has doubled over the past six years and the present primary road system, although fairly extensive in length, is inadequate even for existing traffic. Major improve- ments will be needed to carry the traffic expected as the economy develops. v. The Government is placing special emphasis on highway construction and improvement in its economic development program. An investment of US$ 400 million equivalent is envisaged during the period 1965-71 for the construction of 4,500 kms of new roads and the paving of over 3,100 kms of existing roads, which will almost double the present road capacity. The proposed second highway project constitutes an integral part of the develop- ment program.  - ii - via The road works included in the project are technically sound and are economically justified by the reduction in general operating costs and savings in maintenance costs on the new or improved roads compared with existing roads. When preparing traffic forecasts, recent and future increases due to U.S. military activity and expenditure in Thailand have not been taken into account. The average rate of return on total investment in project roads is about 25 per cent. V1i. Construction contracts for the road works included in the project will be awarded on the basis of international competitive bidding. The duration of the works is expected to be about 4 years with completion during the first half of 1970. Vlll. The project is suitable for a Bank loan of uS$ 36 million equiva- lent with a 24-year term including a 4-year period of grace  - 1 - THAILAND APPRAISAL OF A SECOND HIGHWAY PROJECT I. INTRODUCTION 1. The Government of the Kingdom of Thailand has requested the Bank's assLstance in f mnancing a part of its highway program, the proposed project would comprise the improvement and construction of about 770 kms of the primary road system, and the services of consulting engineers in connection therewith. The total cost of the project is about US$ 72 million equivalent, and a loan of Us$ 36 million is proposed to cover the estimated foreign exchange cost. 2. This will be the second Bank loan to Thailand for highways. A loan of US$ 35 million (341-TH, see Report No. TO-355a) was made in June 1963 for a project consisting of (i) the construction and improvement of about 630 kms of natLonal hLghways, (ii) the purchase of maintenance equipment, and (iii) engineering services in connection with the works and for the re-organi- zation of the Department of Highways including the training of Thai personnel. Progress on the project was slow initially as a result of changes in the Government, and of delays in appointing consulting engineers. In July 1964, about 300 kms of roads were eliminated from the project at the Government's request, and the loan amount cut back to US$ 25 million accordingly. The principal reason for cancellation was that the work done by the Department's own forces on these roads from the time of appraisal in 1962 postponed the need for the major works by contract that had been envisaged in the original project. 3. Progress on the balance of the first project roads is now satis- factory, all construction contracts have been awarded and work should be completed on schedule by the end of 1967. Maintenance supply contracts have been awarded and the re-organization of the Highway Department and the train- img of Thai personnel are progressing satisfactorily. II. BACKGROUND INFORMATION A. Geographic and Demographic 4. Thailand covers an area of approximately 510,000 sq. kms, and is almost as large as France. It is bordered by Burma to the west, Laos to the north, Cambodia to the east, and by the Gulf of Thailand and Malaya to the south (see Map). 5. Geographically and economically, Thailand is divided into five regions. The Northern region is generally characterized by mountain ranges running roughly north-south, it is rich in agricultural products, timber and minerals. The North-eastern region is a relatively flat dry plateau forming part of the catchment basin of the Mekong river, its economy is  - 2 - mainly characterized by subsistence farming. The Central region Includes the wet lowland plains of the Chao Phya River and constitutes one of the major rice producing areas in the world, Bangkok, the capital and cormercial center, is situated near the mouth of the Chao Phya. The Southern region includes the major part of the isthmus linking ThailJand with Malaya, and produces large quantities of tin and rubber. The South-eastern region, between Bangkok and the Cambodian border, is mainly agricultural and produces large quantities of cassava roots, mainly for export. 6. The population of Thailand was about 32 million in 1965 and is increasing at the high rate of about 3.3 per cent annually. Apart from a noticeable concentration around Bangkok and the central plains, the popula- tion is fairly well distributed throughout the country. 7. Thailand's gross national product has been growming at the rapid rate of 7 per cent per annum in recent years, it amounted to $ 3.8 billion in 1965 or $ 120 per capita. Agriculture, the largest sector, accounts for 75 per cent of the labor force and 35 per cent of national product. Mianu- facturing accounts for only 12 per cent of national product, but has been expanding at 12 per cent per annum in recent years. B. The Transport Sector a) General 8. Transportation in Thailand has been influenced by three main factors- (a) most of the mountain ranges and rivers run from north to south; (b) the urban centers are located in the lower Central region while most food growing areas are further north and usually along the rivers and canals, (c) most of the traffic consists of agricultural produce, which is carried to the food-consuming and processing centers of the lower Central region and also to the port of Bangkok for export. 9. The result is that, on the whole, the country's main transport arteries run from north to south, with a lateral network of secondary arteries feeding into them. Communication from east to west is difficult and less developed because several mountain ranges and rivers must be crossed. 10. Except for the railways, there are no traffic statistics on passenger and ton-kms by mode of transport. Nevertheless, the indirect evidence imdicates that highway transport has been growing at such a rapid rate in the last ten years that it is now the most 3nportant transport mode. b) Highways 11. The road network was developed in line with the geographic and economic factors discussed previously (see paragraph 8), major arteries radiate from Bangkok (see Map). Highway development was generally slow until the early 1960's, but it has been accelerated since, so that between 1960 and 1965 the network under the jurisdiction of the Department of Highways increased from 8,300 to 9,400 kms and the length of paved roads from 2,800 to 5,000 kms.  -3- Nevertheless, the present system is quite inadequate even for the existing traffic, and major improvements will be needed to carry the traffic to be expected as the economy develops. The Departments of Irrigation and Agricul- ture construct low class feeder roads and the Army constructs security roads, but no statistics are available on their lengths. 12. To overcome the inadequacies of the present road network, the Govern- ment is placing special emphasis on highway improvements in the transport sector of its economic development program. The Government's "Highway Construc- tion and Improvement Plan, 1965-1971", envisages an investment of US$400 million for the construction of 4,500 kms of new roads, including four-lane roads, and the paving of 3,100 kms of existing roads, this will almost double the present road capacity. The Plan assumes that US$90 million will be available from foreign lending for its financing. The presently proposed second highway project constitutes an integral part of the Plan. c) Railways 13. The Thailand State Railway system consists of about 3,700 kms of meter-gauge mainline track, radiating from Bangkok, the principal lines run from north to south, as in the case of other transport modes. A six-year improvement program was started in 1961 to increase the railway's carrying capacity and operating efficiency, the program is partially financed by a Bank loan of US$14.6 million (Loan No. 280-TH). Performance has been generally satisfactory, but there have been some procurement difficulties and delays. 14. Freight traffic amounted to about 1.5 billion ton-kns in 1964 and has been growing at an annual rate of 5% the past four years. The average haul was 385 kms and has been increasing slowly. The major cormodities carried are rice, petroleum products, cement and clinker, they account for 80% of the traffic. The volume of passenger-kms has been increasing at 4.5% per annum and totalled 2.8 billion in 1964. d. Inland Waterways 15. Thailand has an extensive inland waterways system of about 1600 Ihns, which is concentrated largely in the Central region. It is essentially based on the Chao Phya and its major tributaries, and on canals linking these rivers. This mode of transport is particularly suitable for the movement of bulk cargo, such as paddy, rice and petroleum products. No reliable statistics are available on the quantities carried but they have been estimated at 4.5 million tons, of which about one-half is rice and paddy.  -4- III. TH1 HIGHWAY SECTOR A. Highway Adminmstration 16. National roads in Thailand are divided into three classes primary, secondary, and provincial (feeder). In 1963, responsibility for provincial (feeder) roads was transferred from the Ministry of Interior to the Department of Highways of the Ministry of National Development, which is now responsible for the construction, improvement and maintenance of all classes of national road in the country It is the policy of the Department to employ consult- ing engineers to prepare feasibility studies, final engineering, and to supervise the construction of all major highway works. 17 Prior to 1964, the Department was organized into more or less separate technical Divisions with a multiplicity of common administrative activities but with little delegation of authority from the Director-General of the Department. In 1964, a reorganization of the Department was begun on a functional basis into three Deputy-Directorates Administration (concerned with personnel, accounting and procurement), Engineering (planning, survey, design and bid documents), and Operations (construction supervision, main- tenance and equipment) In this connection, experts from the U.K consulting firm, O'Sullivan & Partners, are providing advisory assistance under the first Bank loan, with further assistance being provided by a U.S firm, Public Administration Service, under a USAID grant. The consultants' recommendations are slowly being implemented and the Department is beginning to function more efficiently. One of the dlfficulties has been to find competent Thai techni- cal personnel to fill key positions in the organization. A vigorous recruit- ing drive together with the Bank-sponsored training program, both now underway, and a future reclassification of Civil Service salary scales are expected to un- prove the staffing situation. 18. Highway maintenance suffered in the past from inadequate central control and coordination. The tendency of field Divisions was to concentrate on force account construction at the expense of maintenance Much attention has been given in the past few years to improving the highway maintenance organization, and to stopping force account works. Road and shop equipment is being purchased under the first loan project, and a local training program has been started for drivers, mechanics and equipment operators with the assistance of the consulting experts. Annual highway maintenance operations are generally satisfactory, but there is still a tendency for the field maintenance engineers to spend part of their appropriations on highway improvement works to the detriment of routine maintenance 19o The design standards for the three classes of national highway have been reviewed recently by the Department's consulting advisors and slight modifications have been introduced to proQuce more economical designs for low-trafficked roads. B. Characteristics and Growith of Vehicle Fleet 20. One of the most striking aspects of the economic development of Thailand has been the rapid growth of the vehicle fleet in recent years (see Table 1) The annual rate of growth between 1959 and 1964 was a high 1h%,  with the rate for trucks even higher at 17%, The number of vehicles reached nearly 170,000 in 1964, resulting in a vehicle density of one per 200 persons 21. The geographic distribution of vehicles is very uneven. Bangkok, with a population of two million, accounts for one-half of the country's vehicle fleet, involving one car per 23 persons, in the rest of the country, the density is only one-fifteenth that of Bangkok. However, the annual rate of growth of the vehicle fleet for areas outside Bangkok has been 18%, compared to 11% for Bangkok. C. Traffic Volumes and Traffic Counts 22. Systematic traffic counts were begun only in 1962. Today there are sixteen counting stations spread throughout the country in which dally vehicle counts are made in October, January, April and July. In addition there are 250 control stations in which five eight-hour counts are made each April and October. Counts are made manually, but 16 mechanical counting staticns will start to fLnctamn n 1966. Although some errors and inconsistencies were apparent in the early years, checks of recent figures show considerable improvement. 23. On the basis of counts at all 266 stations it appears that the traf- fic has been growing at an annual rate of about 20% between 1962-1965. In areas without good roads, the growth rate is generally only 5-10% whereas in areas where good roads have recently been constructed, the annual rate of growth has been 30% or more in the last three years. D. Highway Transport Industrv 2h4 Even though freight and passenger transport are carried out pre- dominantly by private operators, a substantial amount of their traffic is obtained through arrangements with the two major Government-owned companies the Express Transportation Organization (ETO), and the Transport Company (TC). 25, The ETO operates a public trucking service with about 600 vehicles, a few buses, an inland waterway service, gasoline stations, a printing press, and an insurance business. ETO has a monopoly on certain trucking activities such as cargo pick-up and deliver! at 96 railway stations, through freight to Laos and transport of tobacco and cigarettes for the Government tobacco monopoly. Other truckers may participate in these activities only under contract with ETO and upon payment of a fee. ETO also exerts an important influence on routes and services for which it does not have a formal monopoly by acting as >. iorwarding ageu. on which small trucKers are dependent for their business. 26. The Transport Company (TC) was established to provide intercity highway passenger transportation and to control bus fares throughout the country. The company itself operates only about 100 buses but it issues licenses to smaller operators owning between them 3,000 buses. The fee for the license is US