Thailand - Second Port Project

R E S T R I C T E D R e p o r t N o. P 118 This document was prepared for internal use in the Bank. In making it available to others, the Bank assumes no responsibility to them for the accuracy or completeness of the information contained herein. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATIONS OF THE PRESIDENT CONCERNING A PROPOSED LOAN TO THE PORT AUTHORITY OF THAILAND October 4, 1956  INTERNATIONAL BANK FOR REECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMiMEENDATIONS OF THE PRESIDENT TO THE EKECUTIVE DIRECTORS CONCERNIING A PROPOSED LOAN TO THE PORT AUTHORITY OF THAILAlD 1. I submit herewith the following report and recommendations on a proposed loan in an amount in various currencies equivalent to $3.4 million to the Port Authority of Thiailand to finance the purchase of three dredges and auxiliary equipment. PART I - HISTORICAL 2. In 1950 the Bank made a loan of $4.4 million to the Government of Thailand for the development of the Port of Bangkok. $2.6 million of that loan was used to meet part of the foreign exchange costs of dredging a channel through the sandbar in the mouth of the Chao Phya River in order to open the Port of Bangkok to seagoing vessels of up to 10,000 D1UT. 3. In accordance with the Loan Agreement the Government established in 1951, an autonomous agency, the Port Authority of Thailand (PAT), to operate the port and to carry out the Bank project. The dredging of the channel was done partly with PAT's own equipment and partly under contract with a Dutch firm. The channel was completed in January 1954. In May 1954 a management coritract for maintenance of the channel was awarded to a group of American firms, who used two dredges already owned by PAT and a third one acquired from the U. S. Government. This contract expired at the end of August of this year. PAT decided it would be necessary to continue dredging in the bar channel under contract for another two years, and has, after calling for tenders, awarded a new contract to an Italian firm. 4. The three dredges used by the American contractors were all old and expensive to maintain. In order to provide greater dredging capacity and more efficient operation, PAT applied for a Bank loan of about 4165 million to meet the foreign exchange cost of a 2,000 cu. in. hopper for dredging in the channel and placed the order in June, 1954. Dredging is also necessary in the port basin to accommodate the vessels of deep draft which can reach the port at high tide as a result of the deepening of the bar channel. There are two problems: (i) the removal of silt alongside the quay and (ii) the maintenance of sufficient depth in the port basin. Study showed that a clamshell dredge to unload onto barges would be suitable to maintain the depth of water along the quays and that the dredging in the basin could best be done by a hopper dredge of about 750 cu. m. hopper capacity. In i!'arch, 1955 the application for a loan was changed to include the foreign exchange cost of these dredges, which were ordered in September, 1955 and July, 1956. All orders were placed on the basis of international bidding. 5. The Bank's study of the project was delayed pending the settlement of certain questions relating to the economic policies of Thailand (see para- graph 20). These questions were discussed with the Government towards the end of 1954 and undertakings satisfactory to the Bank were given. A Bank  mission made a technical appraisal of the project in February, 1955, but negotiations were delayed because the Bank felt it desirable for the Gov- ermnent first to arrange for a survey to determine whether it would be possible to reduce thl-e rate of silting in the port basin and the channel. The Government agreed to the Bank's suggestion and in lMiarch 1955 invited a number of firms experienced in this field to tender. The analysis of these tenders was not completed until early 1956; it then became apparent that the work involved would cost considerably more than had been expected and would take many years to complete but with no certainty that in the end any economic way could be devised to reduce the rate of silting. Accordingly the Bank decided to delay negotiatiors no further on this account. 6. Draft documents were sent to Thailand on Mlay 25, 1956, and negotiations were held in HWashington in July. 7. The proposed loan would increase the total amount of Bank loans to Thailand to 440,800,000. The loans already made are as follows: Year 1950 35-TH Railway Rehabilitation $ 3,000,000 1950 36.-TI Irrigation Project 18,000,000 1950 37--TH Port Construction and Development 4,400,000 1955 128-TN Railway Rehabilitation 12,000,000 $37,400,000 As o2 June 30, 1956 4?1,645,000 of the principal of the first three loans had been repaid. PART ILI - DESCRIPTION OF PROPOSEMD LOAN Borrower 8. The Borrower would be the Port Authority of Thailand, an autonomous body, established in 1951. Guarantor 9. The Guarantor would be the Kingdom of Thailand, a member of the Bank. Amount 10. The proposed loan would be in various currencies in an amount equiva- lent to $3.4 million.  -3- Purpose 11. The mroceeds of the prop)osed loan would be used to meet the foreign exchange cost of thlree dred-es, ancillary equipn-ent and services conrected w.iith the project. (The eqa.ipment to be firnanced is described in de'tail in Schedule 2 of the dra't Loan Agreement). Re1.efoursement ijould be made for excjpenditures since July 27, 1954 armouinting to about 'j)2 millioni Amortization 12. The proposed loan would be for 15 years, amortized by se.ni-annual paXyLments begin:.ning Aurgust 15, 1958, calculated to retire the loan by August 15, 1971. Interest, Corl-ission and Commitmtent Charges 13, The lcan would bear interest at the rate of 4-3/4% per annum including the statut-.ory comm-!ission of 1/. The co-