Thailand - Third Education Project

CIRCULATING COPY TO BE RETURNED TO REPORTS DESK DOCUMENT OF INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use FILE COPY Repof No. REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUT IVE DIRECTORS ON A PROPOSED CREDIT TO THE KINGDOM OF THAILAND FOR A THIRD EDUCATION PROJECT February 23, 1973 This report was prepared for official use o nly by the B ank G roup. It may not be publ ished, | quoted or c ited without Bank Group authorization. The Bank Group does not accept qurespondbility for the accuracy'or completeness of the report.  CURRENCY EQUIVALENTS USED IN THIS REPORT Currency Unit - Baht (Bt) US$1 = Bt. 20.8 Bt 1 US$0.048 Bt 1 million = US$48,077  INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF TIE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED CREDIT TO TIE KINGDOM OF THAILAND FOR A THIRD EDUCATION PROJECT 1. I submit the following report and recommendation on a proposed development credit to the Kingdom of Thailand for the equivalent of US$19.5 million on standard IDA terms to help finance a third education project. PART I - THE ECONOMY 2. A report on the economy of Thailand, based on the findings of a mission which visited the country in September 1972, will be distributed to the Executive Directors on March 5, 1973. This will update the basic economic report which was distributed to the Executive Directors under cover of a memorandum from the Secretary (R72-12 of January 18, 1972). The following is a summary of the mission's findings and conclusions. 3. When Thailand's Third Plan (1972-76) began in October 1971, the rate of economic growth had slowed from the average of 8 percent a year in the 1960's to around 6 percent. The balance of payments which had been in surplus was in deficit and there was concern that the capacity to finance imports would become a constraint on future expansion. Since then exports have risen steeply and this has triggered an economic recovery. Exports of goods and non-factor services increased by 10 percent in 1971 and 29 percent in 1972. At the same time imports grew slowly; this combination reduced the external resource deficit and raised foreign exchange reserves. However, much of the improvement in the balance of payments has been due to factors that may not recur, such as abrupt shifts in external demand for some of Thailand's main exports (rice, kenaf and sugar) and the revival of services to the US military since mid-1971. 4. Government spending and investment by state enterprises have continued to rise more rapidly than GDP, thus sustaining the growth of the economy. However, despite rising tax revenues, the current surplus of the Central Government has diminished because of even more rapid increases in current spending on security, education and debt service. The Government will have to reverse the declining trend of its current surplus, to generate enough resources for its program of capital expenditure. Development Policies and Problems 5. The development objectives of the Third Five-Year Plan, which was reviewed in detail in the basic economic report are: first, the revival of the economic growth at or near 7 percent a year while maintaining price and external stability; second, the expansion of agricultural and industrial export capabilities supported by effective export promotion programs; third, a larger share of the public development effort for agri- culture, education and other programs of social improvement; fourth, a  better regional distribution of development gains with concern for the Northeast; fifth, programs to develop institutions designed to channel official external capital into private sector investment as a means of improving external debt management; and sixth, improvements in Thailand's economic management, particularly in the formulation of projects and regional programs. 6. In 1972, the Government began to introduce the improvements in economic management, development policies and project preparation which are called for in the Plan. Perhaps the most important improvements concern economic management; an administrative reorganization was effected in October 1972 with the aim of improving the administration and coordination of economic and social services, and was accompanied by strengthening of staff in such ministries as agriculture, industry and commerce. The reorganization was followed by Cabinet appointments under an interim Constitution promulgated in December 1972. The regrouping of all agricul- tural services in one ministry should make it easier in future to formulate and implement agricultural policies and programs. The same applies to trade promotion, transport anzd communications. However, further efforts are needed to turn these reforms at the top into lasting improvements at the departmental and local levels. The Government, in addition, introduced legislation and policy changes to facilitate the expansion of manufacturing, particularly for export, and to improve the functioning of the capital market. Finally, progress was made in project preparation and the Plan program of external borrowing is on schedule. 7. The Government is allocating more resources to agriculture and its services dealing with the sector have just been reorganized; policy- making and the dissemination of new knowledge are expected to improve as a result. Three main obstacles to the expansion of agricultural production for export exist and require government action if the ambitious Third Plan target of a 30 percent increase in agricultural exports is to be achieved. The first is the price of fertilizer to the farmer which is kept high by import restrictions designed to protect high-cost domestic production. The second is a premium charged on rice exports, which had been eliminated in April 1971 but was reimposed in September 1972 because of a steep increase in rice prices. The premium depresses the price paid to the farmer and should be lifted when external demand conditions warrant it. The third obstacle to expansion consists of unsatisfactory institutional arrangements for credit, extension services, land tenure and land settlement. 8. In manufacturing, export prospects look more promising. Fiscal incentives to exporters have been introduced and are being used. An indus- trial estates authority has been established recently and duty-free zones for export may also be established soon. There is room for further improve- ments in Government support for private industrialists, but even so it is expected that the ambitious Plan targets for the export of manufactures will be exceeded. 9. In the area of financial management, there is a need to expand domestic financial institutions which would mobilize long-term savings domestically and abroad for the financing of private investment. The  - 3 - Government has already introduced changes in taxation and regulations that will help contractual savings institutions to expand. A start has also been made in strengthening institutions specializing in the financing of agriculture, small industries and residential construction which could help raise the level of investment in these sectors by offering more suitable terms and services to borrowers. There is also a need for the Government to continue encouraging the expansion of domestic institutions which borrow on favorable terms from official sources of external capital for onlending to private investors to finance equipment imports. These institutions in part replace foreign suppliers' credit and thus help reduce the growth of Thailand's external debt service liabilities. 10. The Government's population policy aims at reducing population growth to 2.5 percent by 1976, and the dissemination of modern birth control techiques has made quick progr'ess; but this is a recent development and Thailand will have to contend with a rapid increase in the working-age population until the mid-1980's. Unemployment is frictional and seasonal at present, since Thailand still has virgin land which is being opened up by many who would otherwise be unemployed. Most new entrants to the labor force become farmers because of the limited job opportunities in other sectors. However, the supply of cultivable land may be exhausted as early as the 1980's and it is therefore essential to implement policies to increase farm employment per unit of land against this eventuality. These include measures to raise crop yields, expand irrigation, and promote other farm activities (livestock, fishing, silk, etc.). 11. Differences in income between urban and rural families are large and tend to widen. However, the progress made by rural families during the 1960's was quite considerable. the policies prescribed for agriculture would make for a more equal distribution of income between town and country. The outlying regions, which are predominantly agricultural, have lagged behind the Bangkok area in development and income growth. Government programs dealing with the special problems of the less developed regions are furthest advanced in the Northeast and are under preparation for the North and the South. The Outlook in 1973 12. The recovery, which began in 1972 as a result of the steep rise in export earnings, is expected to gain further momentum in 1973. With anticipated increases in private investment and consumer demand, import growth should be rapid. At the same time, however, exports will probably stagnate because a drought in the summer of 1972 has reduced the availa- bility of rice, kenaf and especially maize for export. The resource gap will therefore begin to widen again, but an increased inflow of long-term private and public capital is expected to prevent a significant loss of reserves. Third Plan Prospects 13. The recent improvement in Thailand's economic situation and the outlook for 1973 indicate that the Third Plan target for real GDP growth  - 4 - of 7 percent a year during 1972-76 is realistic, while foreign exchange reserves will probably stay above the Plan forecast. However, the depressive effect that the 1973 setback in agricultural output and exports may exercise on subsequent economic expansion points to the need for a more active devel- opment policy during the remainder of the Plan period. Policies and programs designed to promote production for export should receive first priority, considering the importance of exports as a determinant of GDP and private investment growth and the trends in the balance of payments. 14. The deficit on goods and non-factor services will increase. Commodity exports will start rising again after 1973, and the anticipated rapid growth of tourist receipts should make up for possible declines in receipts from the US military which are a major source of uncertainty. However, the growth of imports which depends largely on the saving effort, the growth of investment and the speed at which import substitution is promoted, is expected to lead to a current account deficit of nearly $1.3 billion in 1973-76. 15. To finance this deficit, an increase in external capital inflows is needed and the Government's policy is to rely more heavily than in the past on public, as opposed to private, external borrowing. The Third Plan target of about $900 million in new commitments of official loans during 1972-76 was accepted as a reasonable estimate of Thailand's requirements by the last meeting of the Consultative Group for Thailand. This target implies a major effort in project preparation, which the Government has begun to make with help from bilateral aid sources and our Regional Mission. It is also Government policy to maintain the private sector's freedom of access to private credit sources abroad and in consequence private capital inflows are expected to rise f'or financing private equipment imports. Since reserves are still at a high level and there is a need to facilitate private investment, this policy appears appropriate at this juncture. However, in order to prevent an excessive rise in private external borrowing on hard terms, it is important that the Government continue to promote the use of official credit lines by domestic financial institutions for financing an increasing share of private equipment imports. External public and private borrowing during the Third Plan are expected to cause debt service to rise to 19.2 percent of exports by 1976. This would be a heavy but manageable burden on the balance of payments. Foreign exchange reserves are projected to decline from $969 million a- the end of 1972 to about $750 million by the end of 197T, which would represent about four months of goods and non-factor services imports at that time. 16. Beyond 1976, however, if the predicted trends in exports, imports and capital inflows continue, reserves would decline further and the growth of Thailand's debt service burden would become a serious problem for the balance of payments. The burden of debt service could be mitigated by a further increase in the share of official capital in total external borrow- ings, and by an acceleration of export growth over and above the rate assumed for the Third Plan period. There is little doubt that the former could be achieved, but a further acceleration Df exports would depend on both Thailand's own efforts and external factors. If this acceleration could not be realized, the country would face the prospect of a rather  - 5 - heavy debt burden in the 1980's and the Government might be forced in the late 1970's to slow down the economy, unless it were able to obtaia more of its public borrowings on significantly improved terms. Thus, Thailand's long-term debt prospects are sufficiently difficult to justify some financing on1 concessicnal terms. In view of this the members of the Consultative Group have agreed to a substantial improvement in the terms of their capital assistance to Thailand. PART II - BANK GROUP OPERATIONS IN THAILAND 17. The proposed credit would be the first IDA operation in Thailand. As indicated in my report on a proposed loan for the Kasetsart University project (R72-86 of April 20, 1972), I have reviewed the case for IDA lending to Thailand, and concluded that a minor part of our program should be financed with IDA funds. Thailand qualifies for IDA assistance on the grounds of poverty, economic performance. and need to ease the long run burden of debt service. Average income per capita is $212. The dynamism of the private sector has resulted in high rates of output growth, investment and saving; we expect this to continue. The Government has displayed a capacity for prudent financial management; there are signs that it will add to this more active economic management. Despite all this, Thailand faces the prospect of an increasing external resource deficit which could eventually force the government to slow the pace of growth, if external financing on softer terms is not available. 18. Since 1950 Thailand has received 26 Bank loans amounting to $464.6 million, net of cancellations. Most of these have been for transportation ($179.1 million), irrigation ($69.2 million) and power ($91 million), with, in addition, one for a dual-purpose power and irrigation project ($65.9 million). The remaining loans have been made for education ($21.4 million), industry ($1.0 million) and telecommunications ($37 million). Annex II contains a summary statement of Bank loans, IDA credits and IFC investments as of December 31, 1972, and notes on the execution of on-going projects. In general, Bank-financed projects have been carried out in accordance with expectations. Construction of the Third Bangkok Port project, financed under Loan 702-TH, began 18 months behind schedule. The delay was mainly caused by the time taken by the Port Authority of Thailand and its consul- tants to pre-qualify bidders, amend tender documents and evaluate bids which were complicated by currency realignments. 19. For the next few years, about half the Bank's lending program for Thailand will be directed to projects in transport, power, water supply and communications. Irrigation development will also be a major feature. But projects in education, family planning, agricultural credit, industry and tourism will broaden the spectrum of the program although they will account for lesser amounts. Both Bank and IDA projects are increasingly selected to achieve a wider geographical spread for development benefits. One of the main functions of the Regional Mission recently established in Bangkok is to assist the Government in developing projects which will con- tribute to tlhis. The Bank's readiness to finance some local costs in  - 6 - appropriate cases will enable it to participate more fully in base-level projects in agriculture and the social sector. A Consultative Group for Thailand, which is chaired by the Bank, met last in February 1972 and will meet again in April 1973. 20. During the balance of the current fiscal year, I expect to present for your consideration a credit of $5 million for the Chao Phya irrigation project, a loan of $14.6 million for the fourth railway project, and a further loan of about $42 million for the Bangkok water supply project for which the Asian Development Bank is also consiLdering a loan of $17 million. A Northeast crop improvement project, the Pitsanuloke irrigation project, and the multi-purpose Quae Yai project, all of which are being appraised, should be ready for your consideration in 1974. Other projects under consideration for FY 1974 include seed multiplication, industrial finance, industrial estates, port development and urban infrastructure in northeast Thailand. The Government of Japan, which in April 1972 signed a V 64 billion equivalent credit agreement with the Government of Thailand, has expressed an interest in participating in the financing of the Bangkok water supply project, the Pitsanuloke irrigation project, and the Quae Yai project. This should be facilitated by the decision recently announced by the Japanese Government that it will fully untie loans extended to Thailand for develop- ment projects. Other lenders to Thailand are planning to increase their coimnitments under the Third Plan. 21. On December 31, 1972 Bank loans disbursed and outstanding to Thailand amounted to $195 million, representing 22 percent of the country's total external debt of $893 million. The level of Bank/IDA commitments is expected to increase substantially over the next five years, but loans and credits disbursed and outstanding are not expected to exceed 30 percent of the projected external debt by 1978. 22. Prospects for IFC operations in Thailand look reasonably good and investments in a pulp project and aluminum sheet and foil manufacturing are under consideration. PART III - EDUCATION IN THAILAND An Overviewv of the Sector 23. Formal education for most Thais begins and ends with primary school; 83 percent of the re:Levant age group attend primary school, whereas only 13 percent attend secondary school. A majority of Thai children attain literacy but not all stay in school long enough to ensure that their literacy becomes permanent. 24. The character of Thailand's educational system has been changing in the past decade from one with highly academic curricula and an overwhelming concentration of learning institutions in the Bangkok area, to one in which curricula are more related to work skills and actual conditions in Thailand, and institutions are geographically more dispersed. Foreign aid to the  -7- these changes. Much remains to be done along these same lines and along others which will be indicated below. The Main Problems 25. There is an imbalance of educational opportunity as between Bangkok and the rest of the country: the Bangkok area still enjoys a very high concentration of resources at all levels except lower elementary. This is illustrated by the following facts which a Bank Sector Study Mission reported in 1971: - the pass rate from lower to upper primary was about 85 percent in Bangkok and 15 percent in the Northeast; - Bangkok, in 1970, had about 40 secondary students per 1,000 inhabitants, the Northeast 5 and the other regions 10; - 16 of the 25 higher education establishments were located in Bangkok and the three regional universities accounted for less than 15 percent of total university enrollments. Technical institutes, upper vocational schools and the newly established comprehensive schools are distributed more evenly through the country. The same is true of teacher training colleges; and of the three regional univer- sities one, Chieng Mai, is already well established. 26. The administration of education is complicated by divisions of responsibility between ministries and within ministries. The Ministry of the Interior has responsibility for the administration of primary education, but the Ministry of Education retains responsibility for its technical and pedagogical aspects. Departments of the Ministry of Education have customarily exercised considerable autonomy and negotiated directly with the Budget Bureau. So too have some university faculties. A reorganization of the Government, announced in October 1972, left the division of authority between the Ministries of the Interior and Education unaltered, and an internal reorganization in the Ministry of Education made at the same time did little to facilitate coordination. The disadvantages of these arrangements have been discussed with the government, and the Ministry of Education is endeavouring to improve the situation. 27. The Bank's Sector Study, referred to above, drew attention to the following needs of the system: - more teachers: 15 percent of primary classes had no teacher; - better qualified teachers: 30 percent of primary teachers had no formal qualifications;  - 8 - more textbooks: primary school students outside Bangkok were very short of textbooks in 1971; since then the situation has improved sharply but much remains to be done; curriculum reform - to relate education more closely to labour market needs; - better educational planning and administration; - greater educational opportunity outside the Bangkok area; - more efficient use of resources: the number of school days per annum, which was only 150 in 1971, was raised in 1972 to 180 but this is still below the Asian average of about 210. Educational Objectives and Progress Towards Them 28. The National Education Scheme, introduced by the Government in 1960, gives priority to the following objectives: compulsory, free education up to the age of 15 by 1980; better vocational education; improved and expanded agricultural education at tlle secondary and higher levels; and better educational planning and administration. Under this scheme, the Government has made some progress in tackling problem areas. Since 1966, - enrollment for teacher training has grown by about 17 percent per annum; - repeater rates in primary grades have been steadily reduced, vocational and technical school enrollments have been expanded by almost 6 percent and 22 percent per annum respectively, and comprehensive schc,ols have been established; by 1971 20,000 children were attending schools offering diversified curricula; - the number of children in primary schools has risen by almost a million to reach 5.66 million, an annual increase of 3.3 per cent. Secondary school places have increased by 270,000 to reach 662,000, an annual increase of 11 per cent; - enrollment in university faculties has increased by 13.6 percent per annum; - annual public education expenditures have increased at a higher annual rate (17.6 percent) than total Government expenditures (12.6 percent). The Next Four Years 29. The education policy of the Third National Economic and Social Development Plan (1972-76) has a dual emphasis: first, to increase enrollment in line with economic development needs; and second, to improve the quality of education. The Plan calls for an increase in education expenditure rela- tive to the public budget and GNP to a level where educational development  - 9 - expenditure on education would account for one third of all development expenditure, as compared with 27 percent in the Second Plan. The amount for the Plan period would be 33 billion Baht ($1.6 billion). Quantitatively, the Plan calls for a major effort to expand enrollment at the secondary and upper primary levels (annual increase of 14 and 12.6 percent respectively), and in teacher training. 30. Qualitatively, the Third Plan proposes measures to reduce dropout and repeater rates, to improve teacher training and to expand the number of diversified secondary schools. It also proposes to increase the provision of textbooks and to introduce incentives to attract teachers to village schools; also of importance are its proposals for curriculum and text- book revision. Bank Lending to the Sector 31. The Bank has made two loans to Thailand for the education sector. The first, 471-TH signed in 1966, is financing the expansion and improvement of facilities at 14 trades and industries schools, 10 agricultural schools and 2 institutions for training technical and agricultural instructors, situated in various parts of the country. The second, 822-TII signed in 1972, is financing the expansion and improvement of Thailand's major agricultural university, which is located in the Bangkok area. Bank lending has therefore played a role in developing work-skills in the country. Major components of present project would continue this theme but expand it into the broader task of relating school curricula more closely to life in rural Thailand. PART IV - THE PROJECT Project History 32. Some components of this project were identified by a UNESCO identification mission which visited Thailand in January 1970; this was followed up by a joint Bank/UNESCO reconnaissance mission and a UNESCO preparation mission later that year. Appraisal was originally scheduled for March 1971 but the government then decided to seek financing from the Asian Development Bank's Special Fund for some of the items originally identified. As a result it was agreed to postpone appraisal until the Bank Education Sector Study mentioned in para 13 above had reviewed the country's educational development needs. After completion of this study further discussions were held with the Government in December 1971, as a result of which a preparation/appraisal mission visited Thailand in M1arch/April 1972. The proposed credit was negotiated in Washington from January 8 to 18, 1973. The Government delegation was led by H. E. Ambassador Anand Panyarachun assisted by Khunying Ambhorn Meesok, Deputy Under-Secretary, Ministry of Education.  - 10 - Scope of Project 33. This project is designed to help the Thai education system move toward the objectives proposed by the National Education Scheme and the Third National Economic and Social Development Plan, referred to above. It would do this in various ways but most importantly by directing project benefits to institutions which, for the most part, are located in less developed areas away from Bangkok; this is in line with the Third Plan's major objective of reducing the imbalance of resource allocation between Bangkok and the regions. Equally important is the emphasis which this project puts on reform of the curricula to increase the teaching of science and practical subjects, and to relate primary and secondary education more closely to life in Thailand. Details are in the report entitled "Appraisal of a Third Education Project in Thailand" (No. la-TH of February 16, 1973) which is being distributed separately to the Executive Directors. A credit and project summary is provided in Annex III. 34. The project would aid the following institutions: (a) 10 primary teacher training colleges: site development for, and construction, furnishing and equipping of 7 of these, equipment only for the remaining 3 (which are already under construction). (b) 32 existing general secondary schools: furniture and equipment for all 32, and, in addition, building extensions at 21 of these. The technical assistance component of the credit would finance fellowships for senior staff from each school to obtain experience with diversified secondary schools overseas. It would also provide experts in the field of diversified secondary education; (c) National Curriculum Development Center: site development for, and construction, furnishing and equipping of the Center; provision of specialists to participate in its work. This is a new institution whiich is intended to play a leading role in curriculum reform; (d) Faculty of Science at the Prince of Songkhla University: site developmernt for, and construction, equipping and furnishing of extensions; fellowships for overseas study by faculty members and the provision of expatriate academic and other specialist staff. A development coordinator would be provided to he:Lp the university formulate its long-range development plans. 35. In order to provide sufficient primary teacher trainers and teachers of science and practical subjects at secondary level to staff institutions included in the project, accelerated training programs would be organized. For the purpose of producing better-qualified instructors for these programs fellowsh:Lps for graduate study overseas would be made  will be organized. The services of specialists who would help organize these programs would be financed out of the proposed credit. 36. The credit would finance a study of how Thailand might best expand the use of radio and television for education; it would also provide fellowships for overseas study in this field. 37. The primary teacher training colleges included in the project would teach agriculture, animal husbandry and rural sociology in addition to the standard subjects. Student places at these colleges would total 20,000. 38. The credit would enable 32 general secondary schools to offer pre- vocational courses in agriculture, home economics, commerce and farm mechanics, starting at grade 10, by which time students should have an adequate background in science, mathematics, languages and social sciences. The total number of student places in these schools, including existing places, would be about 46,000. 39. The services of the specialists to be provided to the National Curriculum Development Center under the project would include work on the design and implementation of new curricula, improvements in the system of textbook production and distribution, and studies of the possibility of further increasing the number of school days and of shortening the primary cycle. An additional function of this center would be in-service training for school administrators, school inspectors, education planners and teacher trainers. 40. The Faculty of Science at the Prince of Songkhla University provides the initial two years of science courses for students in the fields of engineering, medicine, education and agriculture: improvements in this faculty would therefore raise standards in several faculties. The university is acutely short of staff with academic qualifications above tite first degree level. 41. Educational institutions outside Bangkok have difficulty in attracting high-quality staff. The provision of housing for staff partially eases this problem and therefore the Ministry of Education project institu- tions outside Bangkok would provide some staff and student housing. Cost Estimates 42. The cost of the project (including import duties and taxes) was estimated prior to the recent devaluation of the ITS dollar at $39.0 million equivalent. This estimate, which included a provision of $2.75 million for price contingencies, has not been revised. The proposed credit was intended to finance 50 percent of the total project costs including $16.3 million of foreign costs and $3.2 million of local currency expenditure, the balance of the funds required to be provided by the Government. As a consequence of the recent currency changes, the credit would finance somewhat less, and the Governmnent somewhat more, than 50 percent of total project costs, but this is not expecte(I to create any problem.  Project Implementation 43. Twio project units would be set up to execute this project, one at the Ministry of Education and one at Songkhla University: two units are required because the University does not fall within the jurisdiction of the Mlinistry of Education. The Ministry of Education Project Unit would consist of a director, an architect and a procurement officer and would be supported by specialists on equipment procurement, who would be financedi by the Credit. The Unit's architect and procurement officer would be full-time appointments. The University Project Unit wqould consist of a director, an architect and an adviser to the director; the university development coordinator who would be provided under the technical assistance component of the project would occupy the post of adviser to the project director. 44. The construction work at Songkihla University would be designed and supervised by a local architect who is responsible for the existing buildings there and is currently retained for the University by the Government. The design of premises for all other items in the project would be done by Ministry of Education arclhitects. Procurement and Disbursement 45. Construction contracts would be awarded on the basis of international competitive bidding. It is expected that these contracts will be awarded to local firms. Contracts for the supply of furniture and equipment would also be awarded on the basis of international competitive bidding. It is expected that all furniture contracts would go to local manufacturers and most equipment contracts to foreign manufacturers. Preferrecl domestic manufacturers would be accorded a preferential margin of 15 percent of the c.i.f. price of competinS imports or the rate of customs duties applicable, whichever is the lower. Thailand does no.t participate in any regional arrangement which gives import duties preference to certain foreigi suppliers. 46. As negotiated, the credit documents provide that the credit would be disbursed on the folloving basis: 40 percent of the total cost of civil worls and professional fees; the forcig,r. exchange costs of equipment and furniture imported directly: the ex-factory cost of equipment and furniture mianufactured locally: 65 percent of the cost of equipmetnt and furniture imported but locally procured; and the foreign exchange costs of specialists services and fellowships. As a consequence of the dollar devaluation, it may be necessary to disburse a smaller percentage of the cost of civil works and professional fees in order to spread disbursements over the whole of the construction period. As a result, the amount of local expeniditure financing originally envisaged ($3.2 million) would be somewhat reduced. PART V - LEGAI INSTRUMENTS AND) AUT1HORITY 47. The draft Development Credit Agreement between the International Development Association and the Kin-gdom of Thailand, the Recommendation  - 13 - of the Committee provided for in Article V, Section 1(d) of the Articles of Agreement and the text of the Resolution approving the proposed credit are being distributed to the Executive Directors separately. The draft agreement conforms to the normal pattern for credits for education projects. 48. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association. PART VI - PECOMMENDATION 49. I recommend that the Executive Directors approve the proposed Development Credit. Robert S. MIcNamara President Attachments Washington, February 23, 1973   ANNEXa I Page 1 COUNTRY DATA - TfAILAND H__h POPULATION DENSITY L,Q)r km2 37.1 million (mid-1971) 73 per km2 Rate of Growth: 3.1% (from 1960 to 1970) 98 per km of arable land P'RLATTON CHARACTERTSTICS HEALTH (1969) 'r;de Birth Rate (per 1000): 41.8 (1967) Population per physician 6,600 rod o Death Rate (per 1000): 10.9 (1967) Population per hospital bed 1,504 ,rfart Mortality (per 1000 live births): 80-90 (1970) TNCiMt DISTRIPUTTON (1970) DISTRIBUTION OF LAND OWNERSHIP (1963) of income, lowest quintile 6.5 urban, 5.5 rural % owned by top 10% of owners : 32.5 highest quintile : 45.5 urban, 51.0 rural % owned by smallest 10% of owners : 1.0 ArO'ESS TO PIPED WATER (1970) ACCESS TO ELECTRICITY (1971) ofr population - urban : 45 % of populat'on - Bangkok Metropolitan Area - rural 15 - Other 67 provirices : NUTRTTION (1971) EDUCATION (1971) Calorie intake as % of requirements 100 Adult literacy rate % : 70 Rer capita protein intake (grasmmes) : Primary school enrollment % : 90 GNP PER CAPITA in 1971?]: us $2o6 ;ROSS NATTONAL PRODUCT IN 1971 ANNUAL RATE OF GROWTH (%, constant prices) US $ mln. 1960-65 1965-70 1971 p C.NP st Market Prices 6,875 100.0 7.2 8.5 6.1 Gross Domestic Investment 1,606 23.4 14.4 15.4 -3.8 Hross National Saving 1,388 20.2 14.6 11.5 lO. 8 Current Account Balance 218 3.2 Fxport of Goods, NFS 1,204 17.5 10.8 7.1 10.3 Import of Goods, NF'S 1,43Q 20.8 -1.1 12.3 -8.3 OUTPUT, LABOR FORCE AND PRODUCTIVITY IN 1971 Value Added Labor Force V. A. per Worker US $ min. j K1n. -fi US $ % Arri cultotre 1,985 28.6 13.076 76.9 152 37.2 Industry 1,776 25.5 o.958 5.6 1,854 453.3 Services 3,190 45-9 2.868 16.9 1,109 271.1 Unallocated .5. _.1Z' o.6 . _ Total/Average 6,951 100.0 17.002 100.0 409 100.0 G.OVERNMENT FINANCE General Government Central Government (US $ m.) % of GDP (US $ min) % of GDP 1972 1972 1970-72 1972 1972 1970-72 Current Receipts 1,116 14.9 15.1 1,059 14.2 14.3 Current Expenditure 1.083 14. 14.0 1.031 13.8 13.3 Current Surplus 33 0.4 1.1 28 0.4 1.0 Capital Expenditures 453 6.1 6.3 432 5.8 5.9 External Assistance (net) 37 0.5 0.7 37 0.5 0.7 g The per capita GNP estimate is at 1970 market prices and is calculated on the same basis as the figures in the 1972 World Bank Atlas. All other conversions to dollars in this table are at the average exchange rate prevailing during the period covered. / Tentative estimate of unemployed; their normal occupations are not known. j Fiscal years ending September 30 of calendar years shown. not available not applicable p preliminary  ANNEW Y T Page 2 COUNTRY DATA - THAILAND Nov. Nov. s CP.SDTT .an,d PPRTCES -12.5 1