Thailand - Bangkok Water Supply Project

RETL0 Cb'' TO DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUC ON AND DEVELOPM INTERNATIONAL DEVELOPMENT ASSOCIATIO Not For Public Use F1L Er CQk.,PY Report No. P-1285-TH REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE METROPOLITAN WATER WORKS AUTHORITY WITH THE GUARANTEE OF THE KINGDOM OF THAILAND FOR A BANGKOK WATER SUPPLY PRCJECT June 8, 1973 This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility 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$ o.o48 Bt 1 million = US$ 48,077  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE METROPOLITAN WATER WORKS AUTHORITY WITH THE GUARANTEE OF THE KINGDOM OF THAILAND FOR A BANGKOK WATER SUPPLY PROJECT 1. I submit the following report and recommendation on a proposed loan to the Metropolitan Water Works Authority (MWWA) with the guarantee of the Kingdom cf Thailand for the equivalent of US$55 million to help finance a project for water supply. The loan would have a term of 26 years, including 6 years of grace, with interest at 7-1/4% per annum. The Asian Development Bank (ADB) has negotiated a parallel loan to the Borrower for US$19.6 million, with the same term and grace period but at its own standard rate of interest, which is at present 7-1/2% per annum. PART I - THE ECONOMY 2. A report entitled "Current Economic Position and Prospects of Thailand" (82a-TH), based on the findings of a mission which visited the country in September 1972, was distributed to the Executive Directors on March 9, 1973 (R73-40 and R73-41). This updated 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). A sunmary of the mission's findings and conclusions was given in my report on the Fourth Railway Project which was distributed to Executive Directors under cover of a memorandum from the Secretary (R73-71 of April 12, 1973). This summary has been updated and revised following a meeting of the Consultative Group for Thailand, held on May 3 and 4, 1973, and is reproduced in Annex I, following the Country Data. PART II - BANK GROUP OPERATIONS IN THAILAND 3. My report and recommendation on the Fourth Railway Project also set out past Bank Group lending in Thailand and discussed the Group's strategy for Thailand and the projects which were expected to come forward for your consideration in the balance of this year and in FY 1974. The relevant section has been revised to bring it up to date and is attached at Annex I, pages 7 and 8. Annex II contains a suammary statement of Bank loans and IDA credits as at May 31, 1973, IFC investments as at March 31, 1973, and notes on the execution of on-going projects.  -2- PART III - WATER SUPPLY AND SEWERAGE IN THAILAND Settlement Patterns 4. Thailand's population was estinated in 1971 to number 37 million. Of this total, about 30 million were believed to live in communities with a population of 5,000 or less, 4 million in small towas and 3 million in the Bangkok metropolitan area. 5. Bangkok has been the capital of the nation for almost two hundred years, and is the center of national life in almost every field of activity. In the i960's its annual population growth rate averaged 5.7% p.a., due in part to the extension of the municipal bourndaries. As of 1970 its popula- tion was growing at about 4% per year. It iS estimated that by 1985 about 6 million people will be living in the area which MWWA is responsible for serving. 6. Under its Third Five-Year Plan, the Government is giving increasing attention to investment outside Bangkok, and the Bank Group is both en- couraging this and contributing to it through a large part of its le.nding program. These investments, which are both economic and soc.il, may diminish the forces which make for such a concentration of people and resources in Bangkok. But the change will not occur on such a scale as to cause Bangkok to cease to be Thailand's largest and most important city; far less will it affect this project. The need for inves:ment to provide Bangkok with the basic amenities of urban life will continue; in addition to lending for water supply, the Bank has indicated an interest in helping to finance urgently-needed transportation improvements in the city, provided that an appropriate framework of institutions and policies emerges from current Government consideration of these matters. The Bank has also expressed its willingness to work with Thai agencies on the formulation of an overall strategy for the development of Bangkok. Water Supply 7. Rainwater is plentiful in most parts of Thailand during the months of March to September. Extensive irrigation works spread or store the floodwater, and make it available over a longer perioc'. Groundwater is readily available in many areas, but in most districts this source has been exploited only to a limited extent. The northeastern region does not enjoy the same abundance of water as other areas. Throughout the country, where public water supply systems have not been constructed, people obtain their supplies from shallow wells, roof drainage, or the numierous rivers, streams and canals. 8. In communities with rewer than 5,000 inhabitants, about 15% of the population is served by some kind of public water supply system. In towns whose populations range from 5,000 to 100,000 the proportion served rises to about 30% and in the Bangkok metropo_Atan area to ebout 60%.  -3- 9. Three organizations are primarily responsible for domestic and industrial water supply. These are: (a) the Sanitary Engineering Division (SED) of the Department of Public Health, which is active in villages and towns of 500-5,000 inhabitants; (b) the Provincial Water Works Division (PWWD) of the Public and Municipal Works Department, which helps provide water supply in cities of over 5,000 inhabitants, other than Bangkok; and (c) the Metropolitan Water Works Authority (MWWA), which serves the Bangkok metropolitan area. 10. The Central Grovernment is by far the largest source of finance for capital investment in the sector; outside Bangkok this finance is provided on a grant basis. Revenue collection is generally poor and water revenues do not cover operating costs, except for systems operated by PWWD in medium-sized towns. 11. Thailand does not at present have a national water use policy. However, a proposed loan for an irrigation project in the Pitsanuloke region, which is scheduled for presentation to the Executive Directors in FY 74, would finance a study to recommend administrative machinery and policy-guidelines for the allocation of water in the Chao Phya Basin at the southern end of which lies Bangkok. This would be a major step towards a national policy. Sewerage and Drainage 12. Sewerage, as distinct from drainage, virtually does not exist in Thailand. As a result, water pollution is becoming serious in Bangkok and along the coast nearby. A Master Plan for sewerage, drainage and flood protection in the Bangkok area was completed in 1968 and approved in prin- ciple by the Government in 1969. Detailed design of a first phase project was completed in about 1970. Implementation, which would require both institution-building and construction, has not yet begun. The proposed project would increase the need for drainage and sewerage and during nego- tiations the Government made commitments concerning this which are described in para 38 below. PART IV - THE PROJECT 13. A report entitled "Thailand - Appraisal of the Bangkok Water Supply Project" (146a-TH of June 8, 1973) is being circulated separately to the Executive Directors. A loan and project summary is provided in Annex III.  -4- History of the Project 14. In 1967, the Metropolitan Water Works Authority (MWWA) was estab- lished to take over the responsibility, previously discharged by four separate water authorities, for supplying water to the four municipalities in the Bangkok metropolitan area. This was a major step towards building ar institution which could implement a project of the scale now proposed. ^.: