Thailand - Vocational Education Project

RESTRICTED FILE CWar PY Report No. P-512 This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF THAILAND FOR THE VOCATIONAL EDUCATION PROJECT September 29,-- 1966  INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT REPORT AND RECOMMNDATIONS OF THE PRESIDENT TO THE ECECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KIN1GDOM OF THAILAND lOR A VOCATIOHAL EDUCATION PROJECT 1. I submit the following report and recommendations on a proposed loan in an amount in various currencies equivalent to $6 million to the Kingdom of Thailand for a Vocational Education Project. PART I - BACKGROUND 2. An education project for possible Bank financing was proposed by the Government of Thailand following a UNESCO mission which visited Thailand in September 1963 to draw up a program of investment in education. This mission broadly outlined Thailand's education needs and in June 1964, at the request of the Government of Thailand, the Bank and UNESCO sent a joint mission, under the cooperative pro-ram, to advise and assist the Thai authorities in the preparation of a project which would be suitable for a Bank loan. 3. The project proposals and a formal application for a loan were received in September 1964; the project was appraised in Ntovember - December 196h. The appraisal indicated that the project was feasible but should be reduced in size and scope so as to conform more closely to the country's estimated manpower requirements. The adjustments proposed in the appraisal report have been accepted by tn, Government. 41. FNegotiations for a proposed loan on these terms were held in Washington in September 1965. The Government was represented by a delegation headed by H.1E. Ambassador Sukich Nimmanaheminda, and Mr. Abhai Chanbabimol, Under Secretary of State for Education. By arraneement with the Government further consideration of the project was deferred until architectural consultants, a project adviser and equipment and training specialists had been selected and appointed. Wjiith the exception of the architectural consultants already appointed by Thailand, these experts have been found by US AID, which will be meeting the costs of employing them. 5. If the proposed loan is approved, it would be the Bank's sixteenth loan to Thailand, and would increase the total of Bank loans to Thailand to $234.2 million (net of cancellations). Of these, six have been fully disbursed. The following is a summary statement of Bank loans to Thailand as at August 31, 1966.  - 2 - Summary Statement of Bank Loans to Thailand Year of Borrower Purpose Principal Loan Amount Undisbursed 1950 Kingdom of Thailand Railway Rehabilitation $ 3.0 Kingdom of Thailand Port Improvement 4.4 Kingdom of Thailand Irrigation 18.0 1955 State Railways Railway Rehabilitation 12.0 1956 Port Authority Port Improvement 3.3 1957 Yanhee Electricity Multi-purpose 65.8 Authority 1961 State Railways Railway Rehabilitation 1.6 3.8 1962 Kingdom of Thailand Petchburi Irrigation 3.4 .8 Kingdom of Thailand Third Chao Phya 5.6 .9 Irrigation 1963 Yanhee Electricity Power 6.6 .2 Authority Kingdom of Thailand National Highways 25.0 18.9 1964 Industrial Finance Industry 2.5 1.6 Corporation of Thailand Kingdom of Thailand Meklong Irrigation 22.0 16.6 1965 Yanhee Electricity Power 6.0 3.8 Authority 1966 Kingdom of Thailand National Highways 36.0 36.0 Total (less cancellations): $ 228.2 of wh.ich. has been repaid: 35.7 Total now outstanding: 192.5 Amount sold: $15 .0 of which has been repaid: 7.7 7.3 Total now held by the Bank: 185.2 Total undisbursed: 82.6 No IDA credits have been made to Thailand.  - 3 - 6. The progress of Bank-financed projects in Thailand generally has been satisfactory. Complicated procurement procedures caused some delay in disbursing the 1961 Railway Loan (280-TH). The Bank has agreed to a postponement of the Closing Date of the loan to Septeinber 30, 1967 to meet commitments entered into by June 30, 1966. It is believed that the loan will be fully disbursed by the revised Closing Date. The slow rate of disbursements from the 1963 National Highways Loan and the 1964 Meklong Irrigation Loan reflects some slowness in starting up, and the time taken to carry out preliminary engineering works and to order equipment. These projects are still expected to be completed on schedule. 7. The following projects are under consideration, and are expected to be presented to the Executive Directors before the end of the year: a) Nan River Project - about $26 million b) Telecommunications - about $20 million. PART II - DESCRIPTION OF PROPOSED LOAN 8. Borrower: Kingdom of Thailand Amount: The equivalent in various currencies of $6 million. Purpose: To help finance the purchase of equipment required for the Government's Vocational Education Program. Interest: 6% per annum. Commitment Charge: 3/8 of 1% per annum. Term and Amortization: Thirty years with no amortization during the first ten years. Then semi-annual installments to retire the loan on November 1, 1996. PART III - THE PROJECT 9. A detailed appraisal of the project (TO478b) is attached. (No. 1)  - 4 - 10. Thailand has made considerable progress in the last 20 years to adapt its education system to the needs of the country. In 1960 the Government launched a National Scheme of Education which extended the period of coi!pulsory education from 4 to 7 years, gave greater emphasis to vocational education and attempted to fit education into the overall development of the country. There remains, however, a major deficiency in the number of technicians capable of assisting Thailand's expanding industry and helping to modernize agriculture. The project described in the attached report will increase the output of students with a vocational education and should significantly improve the quality of their training. 11. The project has two main features: the expansion and improvement of facilities at 14 trades and industries schools and 10 agricultural schools and the expansion and improvement of two institutions for training technical and agricultural instructors. 12. Since 1959 output in the manufacturing sector is estimated to havje increased by about 10% a year. Continued industrial growth will require increased numbers of skilled workers and technicans. On the assumption that industrial employment will increase 6-7% every year the demand for skilled workers with trade school qualifications between 1960 and 1980 is estimated to average about 3,600 per annum. The expanded facilities of the trade schools included in the project will increase output of graduiates by 900 to a total of 2,100 per annum. Together with the output of the trade schools and other sources outside the project the supply of craftsmen and technicians is expected to meet requirements until about 1975. The National Vocational Training Committee, which will include representatives of industry, will contin- uously review the role of the trade schools to ensure that the schools' programs meet the requirements of industry, and will consider the need for further expansion. 13. The training of teachers for the trade schools will be concentrated at Thewes College, Bangkok. In 1962 about 2,250 of the 4,670 vocational teachers were unqualified. The College's courses are designed, therefore, to ungrade unqualified teachers as well as to prepare new recruits from the universities, vocational schools and industry for technical teac'ing. The new facilities at Thewes College are designed to turn out 250 teachers a year, the estimated annual demand between 1966 and 1,)68. Of this number, about 100 will be required for the project schools. 14. Agriculture is the backbone of the Thai economy, and more than 80% of the population depend on agriculture for their livelihood. Despite impressive increases in production in the last 15 years further increases will depend to a large extent on the provision of adequate supporting services to farmers. Thailand will need about 900 middle-level agriculturalists a year for employment in extension services, farmers' cooperatives, settlement schemes and as research assistants. An additional 400 will be required by the private sector or will pursue careers in higher academic work. With the expansion of their facilities the ten agricultural schools included in the project will turn out about 1,250 graduates a year and should meet expected needs.  15. A limited program of diploma level training is included in the project to produce each year some 110 agricultural technicians from four of the agricultural schools and 25 teachers from the Bang Pra Teacher Traiding Gollege. At the same time, a higher agricultural education program is being established in the universities. 16. In-service teacher training programs are also to be established at Bang Pra to raise the level of instruction in the agricultural schools. The importance of these schools to agriculture will also be increased by the establishment of advisory committees to coordinate their teaching with extension and the other services of the Ministry of Agriculture. 17. The success of the trade and agricultural schools will depend to a great extent on the quality of the teachers. For this reason Thewes and Bang Pra College will receive the assistance of eleven expatriate teaching specialists to be supplied by US AID, one for each course offered, who will assist in the preparation of curricula and help develop teacher training techniques. Two Thai counterparts will be assigned to each specialist and will ultimately replace them. 18. There is no shortage of suitable candidates for the trade and agricultural schools nor should the graduates have any difficulty in finding suitable jobs. 19. The total cost of the project is estimated at $21 million of which the Bank's loan of $6 million would be used to meet the eouipment and livestock costs of the project. The Government has undertaken to finance the remaining costs of about $15 million, including foreign exchange costs of about $4 million, from their own resources, partly by budgetary appropriations and the remainder by a loan equivalent to $8 million from the Bank of Thailand on terms si-milar to those for IDA credits. The Government has also undertaken that all funds necessary to operate and maintain the project will be provided. The project will be carried out by the Ministry of Education with the assistance of a project adviser and architectural con-ultants. 20. Procurement of equipment and livestock will, to the extent practicable, be on the basis of international competitive bidding and in conformity with the procedures outlined in the "Guidelines relating to Drocurement under World Bank Loans and IDA Credits". The Ministry of Education will set up a central purchasing agency to take over local procurement by individual schools and will employ two equipment specialists to advise on the preparation of equipment lists. PART IV - LEGAL INSTRUMENTS AND AUTHORITY 21. The draft Loan Agreement between the Bank and the Kingdom of Thailand and the Report of the Committee provided for in Article III, Section h (iii) of the Articles of Agreement are being distributed to the Executive Directors separately. The Loan Agreement conforms substantially to the usual pattern for projects of this kind. In  - 6 - addition, Section 5.02 (a) of the Loan Agreement requires the Borrower to establish and maintain a central purchasing agency in the Ministry of Education. PART V - THE ECONOMY 22. An economic report on the situation of Thailand (FE 53b) was distributed to the Executive Directors on May 24, 1966. A brief resume of the report is given in the following paragraphs. 23. The Thai economy has established an impressive record of economic growth. In the early 1960's real output rose by 7.5% a year. Rapidly rising exports and domestic savings enabled the economy to support a steep increase in investment, from under 16% of gross domestic product in 1957 to 22% in 1965, while the resource gap went up only marginally. This is a remarkable achievement for a country which, despite fast growth, is still relatively poor, with an average per capita income of $120. In general, the policies of the Thai Government were well suited to the needs of the economy as they were directed towards encouraging private activity. Proper management of fiscal affairs and monetary policy maintained overall financial stability, encouraged growth of exports, and attracted an increasing flow of foreign private capital. Public outlays were raised substantially in recent years and on the whole were directed effectively towards meeting urgent economic and social needs. 24. The five years 1967-1971 covered by Thailand's Second Plan are expected to be a period of continuing economic growtth, though the pace is likely to be somewhat slower than in the recent past. Growth in real income is likely to be around 6.5 - 7% a year which would permit further substantial increases in income per head. As in the past, investment will probably increase more rapidly than gross domestic product. Moreover, the basic trend is for exports and domestic savings to grow more slowly than investment and associated imports so that foreign financing on a somewhat larger scale is likely to be required. Thailand's purformance and the prospect of increasing investment along sati-sfactory lines would justify an increase in borrowing abroad from official sources. This would raise no question of creditworthiness. However, it is uncertain now to what extent Thailand will have to resort to such increased borrowing as foreign spending in the country presently provides substantial foreign exchange receipts which er. reflected in a sharp rise in exchange reserves in 1966. 25. A Consultative Group for Thailand has been sponsored by the Bank to develop and coordinate financial and technical assistance in support of Thailand's Second Plan. PART VI - COMPLIANCE WITH ARTICLES OF AGREEMENT 26. I am satisfied that the proposed loan complies with the requirements of the Articles of Agreement of the Bank.  - 7 - PART VII - RECO1IY4ENDATION 27. I recommend that the Executive Directors adopt the following resolution: RESOLUTION NO. Approval of Loan to Kingdom of Thailand (Vocational Education Project) in the amount of the equivalent of US$ 6 million RESOLV,M VD THAT the Bank shall grant a loan to the Kingdom of Thailand in an amount in various currencies equivalent to six million United States dollars (US $6,000,000), to mature on and prior to November 1, 1* , to bear interest at the rate of six (6%) per cent per annum, andtto be upon such other terms and conditions as shall be substantially fn accordance with the terms and conditions set forth in the form of Loan Agreement (Vocational Education Project) between the Kingdom of Thailand and the Bank which has been presented to this meeting. IWTashington, D.C. George D. Woods September 29, 1966 President