Thailand - Second National Agricultural Extension Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No 2420-TH THAILAND NATIONAL AGRICULTURAL EXTENSION II PROJECT STAFF APPRAISAL REPORT July 16, 1979 Projects Department East Asia and Pacific Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS $1.00 = Baht (B) 20 - B 1.00 = $0.05 $1 million = B 20 million B 1 million = $50 thousand WEIGHTS AND MEASURES 1 meter (m) = 3.28 feet 1 kilometer (km) 0.62 miles 1 hectare (ha) = 2.47 acres = 6.25 rai 1 rai = 0.16 ha 1 kilogram (kg) = 2.2 pounds 1 cubic centimeter = 0.061 cubic inch (cc) ABBREVIATIONS BAAC - Bank for Agriculture and Agricultural Cooperatives DAE - Department of Agricultural Extension DEO - District Extension Officer EA - Extension Agent HEA - Home Economics Agent MOAC - Ministry of Agriculture and Cooperatives MOF - Marketing Organization of Farmers NESDB - National Economic and Social Development Board LS - Lump Sum O&M - Operation and Maintenance PEO - Provincial Extension Officer REO - Regional Extension Officer RID - Royal Irrigation Department RTG - Royal Thai Government SD - Standard Deviation SMS - Subject Matter Specialist USAID - US Agency for International Development THAI FISCAL YEAR October 1 - September 30  FOR OFFICIAL USE ONLY NATIONAL AGRICULTURAL EXTENSION II PROJECT STAFF APPRAISAL REPORT TABLE OF CONTENTS Page No. 1. BACKGROUND .... . . . . . . . . . . . . . . . . . . . . . . . 1 General . . ...... ............................... ... 1 The Rural Sector . . . . . . . . . . . . . . . . . . . . . . . 1 Government Rural Policy.. 2 Bank Involvement ... . . 4 2. THE PROJECT AREAS AND PRESENT AGRICULTURAL EXTENSION SERVICES... 5 Agriculture in Thailand . . . . . . . .. . . 5 Crop Production... 6 Present Agricultural Extension Services . . . . . . . . . . . 7 Agricultural Research. . . . . . . . . . . . . . . . . . . . . 9 Agricultural Inputs and Credit g..9 Development of Agricultural Extension Services . . . . . . . . 10 Results Achieved under the First Extension Project . . . . . . 10 Project Formulation .. .12 3. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . 13 General Description .. .13 Organization of Agricultural Extension Services . . . . . . . 14 Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Extension Methodology .. .14 Fellowships and Overseas Training . . . . . . . . . . . . . . 16 Regional Training Centers .. .16 Extension Centers and Housing .. .17 Vehicles and Equipment.. . 17 Design and Construction .. .17 Implementation Schedule .. .18 Cost Estimates ...18 Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Procurement ...21 Disbursements... 22 Accounts and Audit ...22 This report is based on the findings of a mission composed of Messrs. E.B.Boerema and D. Benor (consultant), who visited Thailand from September 2-20, 1978 and a further visit by Mr. Boerema, from January 22 to February 2, 1979 for postappraisal discussions. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Page No. 4. ORGAIiIZATION AND IANAGEMENT . . . . . . . . . . . . . . . . . . . 22 National Level . . . . . . . . . . . . . . . . . . . . . . . . . 23 Regional Level. ..................... 24 Provincial Level ...................... . 24 District Extension Services . . . . . . . . . . . . . . . . . . 25 Operational Methods . . . . . . . . . . . . . . . . . . . . . . 26 Annual Extension Programs . . . . . . . . . . . . . . . . . . . 27 Coordination with Other Agencies . . . . . . . . . . . . . . . . 27 Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Staff Training . . . . . . . . . . . . . . . . . . . . . . . . . 30 Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Monitoring and Evaluation . . . . . . . . . . . . . . . . . . . 31 Environmental Effects .................... . 32 Role of Women . . . . . . . . . . . . . . . . . . . . . . . . . 32 5. BENEFITS, JUSTIFICATION AND RISKS . . . . . . . . . . . . . . . . 32 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Risks ..................... 34 6. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . . 34 Annex 1 - Project Statistics Annex 2 - Cost Estimates Annex 3 - Schedules of Expenditures, Disbursements and Allocation of Proceeds of the Loan Annex 4 - Economic Analysis Price Structure of Rice and Crop Yield Projection Annex 5 - Main Performance Indicators, Loan 1393-TH Annex 6 - Reference Material Chart 15659 - Organization Ministry of Agriculture and Cooperatives Chart 19527 - Organization Department of Agricultural Extension Chart 19536 - Project Organization Chart 20112 - Implementation Schedule Map - IBRD 12068R1  THAILAND NATIONAL AGRICULTURAL EXTENSION II PROJECT 1. BACKGROUND General 1.01 The Royal Thai Government (RTG) has requested Bank assistance in financing the National Agricultural Extension II Project (proposed project). The first Bank-financed extension project strengthens agricultural extension services under the Department of Agricultural Extension (DAE) in 33 of Thailand's 72 provinces. Four provinces were incorporated under the project in 1977; in 1978 an additional 11 provinces were provided with full extension services; and a further 10 and 8 provinces are to be brought under the project in 1979 and 1980, respectively. Positive results in the first provinces, such as an improved cropping intensity, the introduction of higher yielding crop varieties, improved plant densities, the use of new crops and a general responsive attitude of staff and farmers have prompted the RTG to request early Bank assistance in financing a second phase project, so that more farm families would benefit more quickly from the greatly improved services, and so that the rate of project implementation (about 10 provinces per year) could be maintained. 1.02 The major objective of the proposed project would be to raise the productivitv, incomes and quality of life of the 2.3 million farm families in the remaining 39 provinces not covered under the first project. This objec- tive would be partly achieved by trained extension agents (EAs) and Home Economics Agents (HEAs) passing on relevant extension information to farmers and their families on a systematic and sustained basis. This information would relate to proven agronomic and farm management practices and would be specifically related to the enterprises of the region. The Rural Sector 1.03 About 35 million people, or 80% of Thailand's population of 44 mil- lion, reside in rural areas where social services are relatively poor, economic activities limited and agricultural productivity is mainly low. The increase in agricultural employment (1.4% per year) has been less rapid than the increase in the rural labor force (3% per year), which has resulted in substantial rural-urban migration and the growing importance of rural nonfarm employment and income. In 1970, about 30% of the average national gross farm family income came from off-farm sources. 1.04 Agriculture continues to be the predominant sector, accounting for more than 75% of the labor force, about 30% of gross domestic product and about 70% of all exports. The volume of agricultural production in the period 1970-76 grew by 4.3% p.a., down from 5.4% in 1960-70, with about 75% of output accounted for by crop production, 4% by forestry, and the balance by livestock and fisheries. Most of this recent growth has come from expansion of the cultivated area since average yields of the major crops have declined and the cropping intensity remains a low 76%. Rice has become  -2 - relatively less important in agricultural -value added (declining from 51% in 1960 to 39% in 1975), while upland crops, particularly maize and cassava, have contributed larger shares to total output. Maize and cassava exports together are now almost approaching the value of rice exports. The good overall per- formance of Thai agriculture is in large measure due to a vigorous private sector and Government investments in infrastructure (roads, water control, ports, electric power, etc.). Until recently, agricultural support services, such as research, credit and input supply, and extension, have been given little emphasis. 1.05 Average incomes of farm households improved to $850 p.a.($142 per capita) in the period 1970-76, mainly due to an increase in the average area of cultivated land per farm and higher relative prices for farm products. There are significant disparities in farm income between the 19 different agro-economic zones, mainly due to unequal resource endowment, with the highest incomes being realized in areas of irrigated agriculture in the Central Region and the lowest in the North and Northeast. 1.06 Despite agriculture's overall good performance during the past 15 years, about one third of the rural population remain poor in absolute terms (absolute poverty in Thailand is defined by the Bank as a per capita income of less than $90 p.a.). Moreover, as readily accessible arable land reserves are exhausted, continued rapid growth of this sector will be more difficult to maintain. The period of easy accessibility to new land is now drawing to a close and, with continued quick growth of the rural population, the national average farm size may already have begun to decline. About two thirds of all poverty households are in rural areas of the North and Northeast where the major source of family income is low-yielding rice grown under rainfed conditions. It is in these areas that the land is most underutilized, that physical infrastructure is least adequate, and that agricultural and social support services tend to be the weakest. It is also here that oppor- tunities for nonfarm employment are the most limited. Government Rural Policy 1.07 There is growing concern in the Government over these and other emerging issues of longer-term development of the rural sector. The Govern- ment is increasingly stressing the need to achieve greater spatial balance in economic growth and to ensure that all socioeconomic groups benefit from the growth process. The latest Plan (the Fourth National Economic and Social Development Plan, 1977-81) states that "several basic policy reforms are considered necessary for promoting greater economic security for the nation and creating a more equitable economic and social order which would mean an eventual eradication of poverty among the large segments of the population."  - 3 - National development objectives in the Plan include accelerated economic growth, reduced income disparities, reduced population growth, expanded employment and improved management of basic resources. 1.08 The Plan details agricultural sector strategies that aim to expand the value added in agriculture by 5% p.a. These are: (a) intensification of production in presently cropped areas; (b) diversification through expanding the livestock, fruit and vegetable subsectors; (c) limiting the rate of deforestation and expansion of cultivated land to 80,000 ha/year; and (d) emphasizing integrated agricultural development through programs to improve on-farm irrigation, expand agricultural credit, improve input delivery systems and strengthen agricultural extension. Particular emphasis is to be given to regional planning, and to expanding and decentralizing public utilities, transportation and communication services. The Plan also calls for the revision of pricing policies for these services to promote improved distribution of income across regions and socioeconomic groups and proposes expanded social services among lower-income groups. 1.09 As the land constraint becomes increasingly severe, further growth of agriculture and the rural sector generally will depend on progress made in several areas. (a) Land Productivity. Because new land coming under cultivation has a lower yield potential, the main source of increased produc- tion must come from higher yields and cropping intensities. This will require, in particular, more effective agricultural support services, such as research, extension, credit and marketing that lead to improved water management and cultural practices, and increased emphasis on infrastructure improvement and maintenance. (b) Rainfed Agriculture. The Government needs to expand its effort to develop rainfed agriculture, the subsector that presents the most acute problems of poverty, low yields and natural re- source degradation. This requires investment in road construction to improve accessibility of isolated areas, programs of applied research and extension for developing suitable technological packages to meet the needs of farmers in different ecological conditions, and an accelerated program of land titling that would provide security of tenure and the motivation to pursue less destructive cultural practices. (c) Government Institutions. A major constraint on Thailand's future agricultural development is inadequate planning, implementation and monitoring capacity for both development projects and more general supporting services. This reflects in part the highly  -4- centralized nature of government, as well as functional duplica- tion and inadequate coordination among government agencies. There is a particular need to define more clearly the roles of various agencies involved in land development, settlement and land reform. (d) Availability of Inputs and Credit. In recent years there have been shortages of fertilizers. In addition, fertilizer prices are about the highest in Asia, which causes farmers to use less than the recommended quantities and results in low yields for many crops. Despite the rapid expansion in the amount of institutional credit available to agriculture, the small farmer generally continues to experience difficulty in obtaining adequate crop production credit at reasonable terms. Bank Involvement 1.10 The Bank and the Government basically agree on the problems and development prospects of the rural sector, and Bank lending has responded to the changing character of the sector's development needs. Until the early 1970s, Bank lending was concentrated on transportation infrastructure and irrigation, with these two sectors accounting for about 60% of total Bank lending to Thailand in 1973. Lending for irrigation was the Bank's only activity in the agricultural sector until FY75. The initial emphasis was on improving water control through low-cost development in the country's major irrigation areas. Subsequent lending in irrigated areas provided improved supporting services, roads and on-farm development. It is expected that irrigation projects will continue to be important for the overall agricul- tural growth of Thailand. 1.11 The recent Bank emphasis has been on strengthening government insti- tutions in agriculture and rural development, and on laying the foundation for continued diversification of the agricultural sector. Lending in the past few years has included support for the National Agricultural Extension Project ($28 million Loan), a Livestock Development Project ($5 million Loan), the Rubber Replanting Project ($50 million Loan), the Northeast Rural Development Project ($21 million Loan), the Northeast Irrigation Project ($7 million Credit) and a Northern Agricultural Development Project ($22 mil- lion Credit). Projects under preparation include: an agricultural research project, a rural credit project, a rural infrastructure project and irrigation projects. The project now proposed together with the research and credit projects aim to strengthen essential rural institutions, while the northern agricultural development and the research component of the northeast rural development projects represent an initial effort to assist the Government in developing improved production technologies for rainfed areas. The livestock and rubber projects are aimed at diversifying the sector, and increasing productivity and incomes of poorer farmers. The rural infrastructure project would provide or improve rural roads and wells for village water supply. The irrigation project would provide irrigation, drainage and on-farm development in selected areas. 1.12 The proposed project would further strengthen the DAE, increase crop yields and improve incomes of farmers throughout Thailand. It is therefore fully in line with the Government and Bank objectives for future development in Thailand.  - 5 - 2. THE PROJECT AREAS AND PRESENT AGRICULTURAL EXTENSION SERVICES Agriculture in Thailand 2.01 Farm Size and Land Tenure. The total cultivated area in Thailand is about 14.6 million ha, or about 29% of the country's land area. Nearly 90% of the 5.0 million farm families /1 are self-employed and 73% of the holdings are farmed by owner-occupiers rather than tenants. The average holding size is 4.45 ha. The farm size distribution in 1974 is estimated by the Division of Agricultural Economics within the Ministry of Agriculture and Cooperatives (&IOAC) as follows: Size of farm Percentage of farms Percentage of area (ha) Less than 1.0 8 1 1.0-2.4 22 7 2.5-4.9 30 21 5.0-7.1 18 21 7.2-9.6 10 16 More than 9.6 12 34 100 100 Only in four provinces, mainly in the Central Plain, does the proportion of full tenant farmers exceed 25%. In the Northeast, where more than 40% of Thailand's farm families are located, the highest recorded rate of tenancy is below 20%. 2.02 There are some 1.53 million holdings within the 39 project provinces (Annex 1, Table 2) with about 7.0 million ha of farmland, of which 5.34 mil- lion ha is harvested. Nearly 92% of the farms are operated by the owner and only a very small percentage are rented outright. The average farm size in the project provinces is 4.7 ha or slightly larger than the country's average. About 60% of the harvested area is planted to rice (of which 2.4% is upland rice), about 10% to corn, 5% to cassava, 4% to sugarcane, 12% to rubber and 9% to other food and industrial crops, and fruits and vegetables. 2.03 Climate, Soils and Topography. Thailand's climate is tropical and monsoonal. The temperature is high and relatively uniform throughout the year in all regions and is generally favorable for year-round crop production where adequate water is available. /1 More than one family may farm a holding. The average is about 1.25 farm families per holding.  - 6 - Peak temperatures usually occur in March and April with lows from November through January. In the Central, Northern and Northeastern Regions, altitude modifies temperature considerably; in the northern highlands it is cool enough to produce temperate fruits and vegetables, including vegetable seed. There is little variation in day length and radiation levels are generally satisfactory for maximizing yields. Only the Southern Region may receive inadequate solar radiation for maximum yields during the wet season. 2.04 Except for the South, Thailand is dominated by the southwest monsoon. Average annual rainfall is around 1,240 mm in the North, 1,200 mm in the Northeast and 1,340 mm in the Central Region; about 85% of total rainfall occurs between mid-May and October. While total wet season rainfall is generally sufficient for rice cultivation, dry spells at critical times depress yields and supplementary irrigation is beneficial; in the dry season it is generally impossible to grow a second crop without irrigation. In the South, average annual rainfall varies with location and ranges from 2,100 to 2,600 mm. The northeast monsoon brings heavy rains from October through January, which is the main rice growing season. Over half the annual rainfall occurs during this period, with December rainfall sometimes exceeding 500 mm. It is very dry from February to April, but rainfall increases from May to September. 2.05 Most of the irrigable areas in Thailand are in the flood plains of the major rivers where the combination of heavy rainfall and flooding limits wet season cultivation to paddy. In the Chao Phya Plain, heavy soils predom- inate and paddy is also the preferred crop in the dry season. The situation is similar on the coastal plains of the South. Dry season cropping is more diversified on the alluvial soils of the North and in the small areas devel- oped for irrigation in the Northeast. The most extensive soil type in the Northeast is a sandy loam that frequently becomes waterlogged in the rainy season and dries out to considerable depth in the dry season. The soil fertility is moderate to low and rainfed rice is the main crop on this soil. The undulating plains and river terraces provide drained areas for diversi- fied cropping (kenaf and cassava) during the rainy season. Many areas would be available and suitable for tropical legume pastures and livestock enter- prises. Generally the soils of the Northeast are highly responsive to fertilizer applications, but high risks are involved where the soil's water- holding capacity is low and rainfall in unreliable. Valleys in the South generally have good quality loam soils suitable for rice and a wide range of other crops. The dominant soils in the South are shallow and sometimes stoney sands, which extend from the foothills to the sea and are highly responsive to fertilizer applications. Crop Production 2.06 Rice yields in Thailand average about 2.0 ton/ha harvested area and 1.8 ton/ha planted area. Without irrigation, rice yields average about 1.4 ton/ha in the Northeast, where rainfall is least reliable; 1.8 ton/ha in the Central and Southern Regions; and 2.2 ton/ha in the North. With irrigation, yields of 2.8 ton/ha are obtained in the wet season and more than 4.0 ton/ha in the dry season. Corn yields average slightly over 2.0 ton/ha, groundnuts slightly over 1.0 ton/ha, and soybeans around 1.0 ton/ha. The industrial  crops, cotton and kenaf, average around 1.0 ton/ha, cassava 13 to 18 ton/ha, sugarcane around 50 ton/ha and rubber about 600 kg/ha. Crop statistics for each project province together with standard deviations (SD) from the mean regional crop yields are presented in Annex 1, Table 3. Average provincial crop yields may differ from the regional average by 30% or more. Given that the climatic variations within each of the regions are not a major factor, then it may be concluded that there is ample scope for yield increases. Long-term (1959-61 to 1973-75) growth rates for crop area, yield and production are summarized in Annex 1, Table 4. It indicates that there has been a significant increase in crop area for most crops, but that crop yields are almost stagnant and have actually been declining for several crops. The major crop, paddy, grown on 59% of the project area had a long-term yield increase of only 0.6% p.a., while maize, cassava, kenaf, mungbean and soybean yields declined, presumably as marginal lands were brought into production. Present Agricultural Extension Services 2.07 The Ministry of Agriculture and Cooperatives (MOAC) consists of nine major departments, one of which is the DAE (Chart No. 15659). The DAE provides extension services for most agricultural crops to the 5 million Thai farm families. Within MOAC, the Departments of Livestock Development, Fisheries, Land Development and Cooperative Promotion provide these services for animal husbandry, and pasture and forage production; aquaculture; land development; and the agricultural cooperatives, respectively. The Tobacco Monopoly, and at least one private company, operate an efficient extension service for tobacco growers, in rubber replanting schemes, the Rubber Replanting Aid Fund provides an extension service to smallholders until the second year of tapping, and some sugar factories provide a minimal extension service to farmers growing cane on contract. Extension services provided by different organizations do overlap in some districts, and further steps would be taken under the proposed project to improve coordination in the future (para. 4.19). 2.08 Presently the DAE is headed by a Director General, who is assisted by two deputies. The department is divided at the headquarters level into nine divisions with extension, technical and administrative responsibilities. In 1977, under the first project, the divisions were to be grouped functionally and the Deputy Directors General were to be allocated formal responsibility for specific divisions. In the field, DAE was until recently loosely organized into six geographic regions subdivided by the boundaries of the political jurisdictions, including 72 provinces (changwats) and 686 districts (amphurs) (MIap IBRD 12068R1). Lines of command were not clearly drawn until the first project was being implemented. The Regional Extension Officer (REO) had no direct supervisory responsibilities over the Provincial Extension Officers (PEOs) in his region, who reported directly to the Director General or occasionally through a Deputy Director General at headquarters. DAE's overall organization has been strengthened as part of the first project, but it was for several reasons not possible to reorganize as planned, mainly because the position of Senior Administrative Officer was not approved by the i4inister of Agriculture and Cooperatives. This resulted in a regrouping of the nine headquarter divisions under two Deputy Directors General, one responsible for four administrative and extension divisions and the other for five technical divisions. The proposed project would further strengthen the overall organization (paras. 4.02-4.03).  - 8 - The PEOs supervise District Extension Officers (DEOs) who in turn are respon- sible for field activities (para. 2.10). Provincial administrators occasionally become involved in extension matters, since major decisions on agricultural extension policy and financing are cleared with the Governor at the provincial level and the District Administrator (Nai Amphur) at the district level. Extension budgets are prepared by DAE and funds are made available to the PEOs through the Governors at four-monthly intervals. 2.09 The REO is responsible for certain specialized services administered from the regional headquarters. His staff consists of Subject Matter Special- ists (SMSs) who train and backstop provincial staff, and plant protection staff in the Regional Plan Protection Centers who handle pest eradication programs. The concentration of most SMSs at regional headquarters has deprived provincial services of adequate training and technical support on a continuous basis. 2.10 In each provincial office there are about ten extension and adminis- trative personnel and generally only one SMS, while there are usually one DEO and two EAs in each district. Within the 323 districts in the project provinces, a total of 1,649 extension personnel (206 DEOs, 323 Assistant DEOs, and 1,110 EAs) serve 2.3 million farm families, giving a district extension staff-farmer ratio of about 1:1,400. Due to the administrative and regulatory tasks of extension personnel, particularly those of DEOs and Assistant DEOs, the effective ratio becomes about 1:2,200. Only 73 HEAs devote all their time to providing home economics courses for women (1:30,000 farm families). 2.11 Extension personnel in the project provinces usually come from urban areas and are mostly inexperienced, inadequately trained, and lack confidence in dealing with farmers. They are excessively burdened with regulatory and administrative duties. There is no system of regular visits to farmer groups and no provision for regular staff training. Only a limited number of large (10-30 rai) demonstration areas are laid out, usually with all inputs supplied free of charge to the selected farmer. 2.12 An acute shortage of SMSs exists at the field level; generally only one SMS is stationed in each province, but, in addition, there is on average one SMS with a higher degree of specialization per province stationed at the regional headquarters (para. 2.09). This very small pool of SMSs is unable to provide adequate technical support to the district extension personnel, particularly in view of their lack of access to vehicles. The SMSs also rarely have sufficient time to mount training programs or to establish the regular contact with research personnel needed to keep them informed of new developments. The shortage of SMS staff is not due to a lack of trained Thai manpower, but rather to a lack of positions and funds for DAE staffing. 2.13 Extension personnel are inadequately accommodated in the provincial and district offices, where they usually occupy a single office. This office also serves as a store for seeds, pesticides, spray equipment, etc. Staff members are not sufficiently mobile to pay regular visits to individual farmers, farmer groups or other agricultural organizations, and they lack implements and agricultural equipment for field demonstrations and audiovisual aids for group meetings.  2.14 The total professional staff complement of DAE is 2,365 in six salary grades. Less than half of these officers have direct contact with farmers. DAE's total extension budget has increased from $7.9 million in the 1974 Thai fiscal year to $12.5 million in 1976 and to $26.8 million in 1979. The 1980 budget request is for $57.7 million. In the 1979 fiscal year the budget allocation amounted to about $5.40 per farm family and about $1.85 per ha of cultivated land (14.6 million ha). Although budgetary allocations have been increasing in recent years, inadequate funding still contributes to the specific shortcomings of project provinces. Adequate funds are provided for provinces incorporated under the first extension project, and most of the budget increases in 1978 and 1979 are for financing the implementation of the first project. Agricultural Research 2.15 Agricultural research is mostly carried out by the Department of Agricultural Techniques, but universities, Regional Agricultural Centers, the Tobacco Monopoly and a few other organizations also conduct basic and applied research. Well over 100 research stations and experimental farms are widely distributed over the major agro-economic regions of Thailand. Much of the research work is controlled and planned by staff in Bangkok, but is executed by research workers in the field, who usually receive inadequate support services. This has led to an overcentralized research effort which does not always meet the demands of farmers in a specific locality. Although agricul- tural research needs to be better focused and strengthened in future, results from some local and overseas research could be immediately applied by the majority of farmers. However, there is little or no formal liaison between extension and research in most project provinces. Extension staff are not always informed about the latest research findings applicable to their areas of responsibility and have, in the past, recommended outdated techniques to farmers. The Government has requested Bank assistance with strengthening its agricultural research capability and a research project is now under final preparation. Particular emphasis will be given to the coordination between research and extension under this project. Agricultural Inputs and Credit 2.16 About half of Thailand's farmers borrow from noninstitutional sources, such as relatives, friends, merchants and moneylenders at varying, but usually high, interest rates. The main sources of institutional credit are the Bank for Agriculture and Agricultural Cooperatives (BAAC), six types of cooperatives supervised by the Department of Cooperative Promotion, Farmers' Associations, sugar factories, tobacco curing barns and several commercial banks. BAAC has extended loans, both directly and indirectly through coopera- tives and Farmers' Associations, to about 10% of all farm families, but indications are that institutional credit currently reaches only about 15% of the farmers and these are mainly holders of comparatively large properties. 2.17 The availability of high quality seed or planting material is poor, but is gradually improving through the joint efforts of the Department of Agricultural Techniques (production of foundation seed), the DAE (through its Seed Multiplication Division), and the Marketing Organization for Farmers  - 10 - (MOF) which plans to operate a revolving fund to purchase and distribute seed with the assistance of extension personnel. In 1976, about 95% of all fertil- izers used in Thailand were imported. An average of only about 11 kg/ha (average of all fertilizers available) was used in 1975/76 on all agricultural land, which is one of the lowest rates in Asia [para. 1.09(d)]. About half of the available agrochemicals are now manufactured locally. Fertilizers and agrochemicals are mainly purchased from local traders, but cooperatives and Farmers' Associations, through MOF, are becoming increasingly important as suppliers of inputs. Overall usage of quality seed and inputs is one of lowest in the region. Development of Agricultural Extension Services 2.18 To achieve sustained agricultural development, the Bank-financed irrigation projects (Credits 379-TH and 461-TH and Loan 1149-mi) as well as the Northeast Rural Development Project (Loan 1198T-TH) have included exten- sion components. These components aimed to ensure that irrigation works, rural roads and other agricultural infrastructure yielded projected benefits in the absence of an effective extension service within the project boun- daries. These extension components used enterprising and knowledgeable farmers as Farmer Foremen for liaison between the professional extension service and a large number of farmers. Before commencement of the present program to strengthen agricultural extension, the regular professional exten- sion services operated at a ratio of about 1 EA to 2,700 farm families. The Farmer Foremen in the Bank-financed projects operated at a ratio of 1:200 and they were supervised by EAs at a ratio of 1:6. 2.19 The system described for irrigation projects led to noticeable improvements in extension work, largely through a system of regular visits (once every two weeks) to farmer groups on a "fixed time, fixed place" basis, and fortnightly training sessions for Farmer Foremen and EAs on topical subjects by SMSs and extension supervisors (Training and Visits or T&V system of extension). Unfortunately, the Farmer Foremen received minimal remuneration, and since they usually cultivated farms of above average size, they were often unavailable for a full working day during busy times on their own farms. After a careful review of several alternatives, the Government decided not to extend the system of Farmer Foremen to the rest of the country under the National Agricultural Extension Project (Ln 1393-TH). Instead it has chosen to improve the extension service by employing vocational school graduates who would be full-time civil servants stationed in the villages. The extension service would, however, continue to use progressive farmers (contact Earmers) as their main contact with other farmers in the area. Results Achieved Under the First Extension Project 2.20 The implementation of the first extension project commenced in four provinces in 1977. In 1978 a further eleven provinces were added and the next ten provinces are being incorporated under the project during 1979. Most new staff appointments for 1979 and preliminary staff training sessions were completed by the commencement of the wet season in May/June 1979. About 900 EA's have been operating in the first 15 provinces, and another 600 were appointed in April 1979. There remain from 10-20% EA vacancies, mainly in provinces with a high security risk. The EA's are regularly  - 11 - trained in up-to-date crop production aspects and receive support from SMS's, supervisory staff at district and provincial level and from researchers stationed at the experiment stations. Improvements in staff training programs and in the schedule of visits to farmer groups are continuously proposed and adopted. Extension consultants have been particularly effective in assisting DAE with implementing and refining extension operations. 2.21 Local government authorities and farmers alike have responded most positively to the provision of frequent visits by trained EAs and HEA's to farmer and housewife groups. Some offers of temporary free accommodations were received for the newly appointed EAs, and farmers are freely offering land for demonstration and experimental plots. Field days, farm walks and visits to demonstration plots are generally well attended. Rates of adoption of extension recommendations have been greatest in areas with a low risk of crop failure. Attempts to diversify cropping and improve cultural practices, especially with improved crop varieties, are, however, also successful in drought-prone areas. 2.22 Despite two extremely unfavorable wet seasons in the first two years of project implementation (a severe drought in the four Northeast provinces in 1977, and extensive flooding in the Northeastern and Central Region provinces, and drought during rice crop maturation in the southern provinces in 1978-79) considerable impact has been made by the expanded, and now well organized and supervised extension service in the 15 project provinces covered at the end of 1978. Government organized relief work (making available small irrigation pumps, improved crop varieties, fertilizers and pest control chemicals) formed the basis of most extension work in the 1978 dry season in the Northeast. By demonstrating the beneficial effect of a sound agro-technology package to farmers, the areas of irrigated crops increased about 8 fold and the dry season rice area increased from 1,800 to 10,500 ha producing a high average yield of 3.1 ton/ha. A large number of farmers have now purchased their own pumps as a direct result of achievements in the previous season. In areas where irrigation is not possible, much emphasis is being given to timely row seeding of suitable crop varieties, weeding and crop protection. Most of the positive extension results have been obtained through well conducted demonstration plots. In the 1978 wet season there were a total of 3,950 demonstration plots of all crops, mainly on properties of contact farmers. In 1979 a total of almost 27,000 demonstration plots, mainly for rice, groundnuts, cotton, corn, and mungbean are planned in 25 provinces. Other activities which are quickly adopted by farmers are the production of straw mushrooms and home garden vegetables. Their production is promoted jointly by the EA and the HEA. 2.23 The civil works program has been completed satisfactorily in four Northeast provinces and is now in progress in three Central region provinces. Because of DAE's proposal to provide staff housing at provincial and district centers and high inflation rates for civil works, costs for the amended civil  - 12 - works program exceeded appraisal estimates and budget allocations. Retender- ing for the revised construction program in eight provinces of the Thai FY78 budget year became necessary. Tendering is now in progress for two Regional Training Centers and for 18 provincial construction packages, and it is expected that the complete civil works program will become on schedule by January 1, 1980. Procurement is proceeding in phase with the facilities being made available and with staff appointments. The overseas higher degree fellowship program is about to commence and several groups have made visits to neighboring countries. Due to later staff appointments than anticipated (4-6 months) and because of the delayed construction program, incremental operating costs are lower than expected and this may result in an overall project cost reduction of about $5.5 million (from $56.5 to $51.0 million). Because of the delayed construction program, disbursements are lower than anticipated at appraisal (as of late March 1979 $4.3 million, against an appraisal estimate of about $8.0 million). Main performance indicators for Loan 1393-TH are presented in Annex 5. Project Formulation 2.24 The Government proposed early implementation of a second project following: (a) encouraging results achieved in 15 provinces under the first project; (b) the frequent requests from other provinces to be provided with similar improved services; (c) its wish to continue expanding the new style extension services at a rate of 10 provinces per year; (d) a satisfactory review of the implementation capacity of DAE; and (e) the expectation of adequate staff availability in the next five years. Extension methodology and the ratio of extension workers to farm families would be identical to those of the first project. 2.25 The project was prepared by a special project preparation team in DAE with the assistance of a consultant engaged under the first project. The project was appraised in September 1978 on the basis of a detailed preparation report and on postappraisal discussions in Thailand in January 1979.  - 13 - 3. THE PROJECT General Description 3.01 The proposed National Agricultural Extension II Project (proposed project) would expand and strengthen the DAE's extension services in the remaining 39 of Thailand's 72 provinces. These provinces were not covered under the first extension project (Loan 1393-TH). Tables 1-3, Annex 1, provide the statistical details for the provinces. Following implementation of the proposed project, all Thai farmers would have regular access to the agricultural extension service. The proposed project would provide for: (a) further strengthening of the DAE's headquarters organization and establishing clear lines of command and coordination from the national level to the districts; (b) the establishment of nine extension regions by subdividing the large Northern, Northeastern and Southern Regions; (c) improved liaison between extension, research and other agricultural related organizations in project provinces through the establish- ment of provincial agricultural extension coordinating committees and technical advisory panels; (d) a substantial increase in the number of extension, supervisory, technical and support staff; (e) the introduction of sound extension methodology based on a system of continuous training and regular farm visits (T&V system of extension); (f) a program of local training for all extension workers along with a limited number of overseas fellowships, and training tours to neighboring countries; (g) the construction of two Regional Training Centers, about 40 combined Provincial and District Extension Centers, about 270 District Extension Centers and about 310 housing units with 3 apartments each for EAs; (h) the procurement of vehicles, equipment, furniture and demonstration plot materials; (i) the employment of agricultural and engineering consulting firms, and short-term specialists; and (j) project monitoring and evaluation.  - 14 - Organization of Agricultural Extension Services 3.02 The Director General of DAE would continue to be r-o