Recent economic and financial developments in Thailand

 No. E l09b ,---- i i RESTRICTED A ppe nd i.x VII I ~ .J "r I 67018 .. his report is restricted to use within the Bank. INTERNATIONAL BANK FOR RECONSTRUCTION AND. DEVELOPMENT RECENT ECONOMIC AND FINANCIAL DEVELOPMENT S IN THAILAND October 16, 1950 Economic Department Prepa.red by: J. C. de Wilde  Summary an(l. Conclu~ions i I. The Internal Economic Situation 1 Prices and !4:oney Circulation 1 Savings 1 aovernment Budget for 1950 2 Government Gash Position and the c Debt 3 Pro s for Non-I nflationary Gcvern-'I1ent Financing 4 II. 5 Improvement in Gold and Forei~n Exchan,c;e Reserves 5 Fo Trade in First Half of 195C ? Ri Foreign Exchange Inco':le in the ::i'uture 9 E0A Prograrr. 10  I Sununary ,;",-_ _ _ Concl.usions and _ ~ _ _. o . - _.._ 1. The favorable economic development in Thailand which began in 19h7 has continued into 1950. 2. Production has developed satisfactorily. There was a good rice harvest in 1949/50 and rice exports in 1950 may exceed those in 1949. Output of minerals, especially tin, wolfram and lead, sho'l"led a marked in- crease in the first eight months of 1950. 3. The internal monetary situation in Thailand has remained generally stable durinc the first half of 1950. Money in circulation rose slightly, but much less than the increase in the Bank of Thailand's go1d and foreign exchange reserves. Prices tncreased slowly. The evolution of i:cvernment finances was on the whole satisfactory. h. Revised figures on actual government expenditures and revenue indicate ~:. only a small deficit, of 113 million baht for 191.,9 as com9ared vrith the original estimute of 711 million. Although the adoption of a supnlementary budeet has raised the estinlated "paper" dGfici t for 1950 to 721 million baht, existing trends of government revenue and expenditures indicate that the actual 1950 deficit will not be significantly different from that in 1949. 5. The government's cash position has remained sufficiently strong so that there has been no necessity for floating a long-term internal J.oan as originally envisaged for 1950. VVhile the am01mt of Treasury Bills outstand- ing increased by 60 million baht in the first half of 1950 the total internal ----------------.------------- .------.--.-.-----.-.---~--- u.s. ~1 :; 12.5 baht at the official rate of exchange or 22.2 baht at the free market rate.  - ii debt rose by only 48 million. There was a further slight decline in the foreign debt which at the end of June 1950 stood at the modest figures of t 1,561,000 and 05,431,000. 6. There are good prospects that the government will be able to abstain from inflationary financing in the future. Revenues are likely to increase as the result of rising national income, inprovements in tax collection and projected tax revisions. At the same time certain expenditures such as payments of war damage claims, some capital expenditures and probabl~T the government's net outlay on the railways will fall considerably. It should not be difficult therefore to balance future budgets, or at- least to keep deficits within amounts which can be financed out of the modest annual in- crease in domestic money savings or with occasional foreign borrowing for specific proJects. 7. Improvement in the foreign exchange position of Thailand has continued in 1950 as a result of increasinE conmodity prices and some rise in the volume of exports. Gold and dollar assets of the Bank of Tha:Uand, which had remained little chanced since the end of 1948, rose in July and arc probably still rising. The Bank' 8 free st8rling assets, vrhich had risen by t 12.3 million in 19h9, continued to rise at an accelerated temno, the increase in the first seven months or 19.50 amountinG to t 10.5 million. This increase in storline assets has taken place (~espite a substantial shift of imports to the sterling area since the September 1949 devaluations, which was reflected in the decline of U.S. exports to Thailand from ~17.7 million in the first half of 1949 to ;;~12.2 million in the first half of 1950.  iii - 8. Hi th the prospect that substantial defense expenditures in the Western countries vrill sustain a high level of raw materials prices, Thalla,nd t s foreign exchange earnings and reserves can be expected to shoW' further improvement in the future. For example, it is probable that Thailand will receive about 100 per cent more foreign exchange for its rubber e:m.orts and 25 to 30 per cent more for its tin exoorts in the second half of 1950 than in the first half of this year. Moreover, rice, Thailand's princ:i.?al export, should continue to comraand good prices durinc the next fey, YC'1rs. 9. Thailand's prospects . . have also been improved - by t he economic and techni- cal assistance which is being furnished by the United. States Goyernr;;ent through the ECA and which involves the expenditure of about :)S,OOO,OOO as grants-in-aid in the fiscal yec..r 1951.  RECEPT ECONOMIC AND FINANCIAL DEVELOPI.f.I£I'JTS IN THHLAND I. The Internal Economic Situation Prices and Honey Circulation 1. The internal monetary situation in Thailand has reillained reason- ably stable during the first half 0f 1950. Both the wholesale price and the cost-of-living index for Bangkok in June 1950 were only 4% higher than in December 1949, while the retail price index was about 5~ lower. In response to an increase in gold and foreign exchange reserves, the volume of currency in circulation rose from 2566 billion baht* at the end of 1949 to 2707 million at the end of July 1950 or by 5.5%. In the s~~e period demand deposits in commercial banks rose slightly from 756 mil- lion baht to 764 million. The most recent available data for the volume of currency in circulation indicates a further sli~ht rise of 2% by August 10, 1950. The increase in currency circulation was sub- stantially less than that in the Bank of Thailand's gold and foreign exchange holdings, which rose from 2600 million baht to 2987 million in the first half of 1950, or by 18 per cent. Savings 2. Money savings, While remaining modest, are apparently increasing at a more rapid rate in 1950. Savings bank deposits in the first half of 1950 rose by 11.7 million baht or at an annual rate of 23.4 million baht as compared with about 7.0 million in 1949. This increase may be a reflection of the governmentfs campaign to mobilize savings which was launched early in 1950 and contemplated the establishment of about 250 * U. S. $1= 12.5 baht at the official rate of exchange or 22.2 baht at the free market rate.  -2- new branehes of the savings bank in rural districts. The Gover~~ent had hoped to obtain 45 million baht of new savings from these branches in the first year in addition tn a net increase of 50 million baht in deposits in existing branches. By September 21, 1950 sixty-nine new branches and agents had actually been established. Savings in the form of insurance premiums have also continued to rise slowly; the estim3ted increase in the first half of 1950 was at an annual rate of 35.3 million baht as compared with 32.1 million in 1949. Time deposits in commerciol banks declined by 8 million baht in the first half of 1950. -,--_ Budget Government .. for 1950 3. The development of government finances has on the whole been satis- factory. At first glance it might appear that the situation has deteriorated, for a supplementary budget bill approved for 195n has raised authorized ex- penditures by nearly 200 million baht to a total of about 2670 :ni11ion b3ht. Of this supplementary amount, 135 mUlion was for additional cost-of-living allowances to government servants and 24 million for further capital c~m- mitments on irrigation and transport. As indicated in the table belrwf, the projected deficit for 1950 has now increased to 721 million baht. This figure, however, is only a IIpaperfl deficit, for past experience has der:1onstrated that the level of authorized or budgeted expenditures is only an upper limit v;hich is never reached, while revenue is always budgeted at a conservative figure which is almost invariably exceeded b, a substantial sum. Thus the 1949 budget also showed a similarly large deficit, namely 711 million baht, but provisional iT. figures for the actual results indicate a deficit of ~nly 113 million, and this may be further reduced in the final accounting to approximateJ.y 9f'1 million baht.  - 3-· Government Budgets OvIillions of Baht) EXPendi tux'es Ordinary Year and Special Revenue Deficit Non-Investment Inves~nt Total. _ _ _ _ _ __ 1949 Budget 1775 533 2309 1598 711 Actual 1618 410 2028 1915 113 1950 Budget 1949 522 522 Revised, Budget 2124 545 721 ------------------------------ 4. In 1950 revenue will significantly exceed budget estimates. Dur- ing the first half of the year revenue collections were 6% higher than in the first half of 1949. If this percentage increase were projected over the entire year, total revenue ~1()uJ.d be 2028 million baht or 79 million more than the budget estimate. Actually t Thai government officials now expect that revenue for the entire year will reach 2200 million. Available data also indicate that the customary short-fall in expenditure is continu- ing. Government disbursements in the first five months were nearly 10% higher than for the SaIDe period last year, but even if tria increase were maintained for the year as a whole t the government outley in 1950 would be only 2221 million baht rather than the budgeted total of 2670 million. It is unlikely, therefore, that the actual deficit will be more than 200 mil- lion baht and it may well be about the same as in 1949_ Government Cash POSl tion and the Public Debt 5. In any event the government's cash position up to the present has been sufficiently strong that there bas been no necessity for floating a  -4- long-term internal loan as originally envisaged for 1950, Government balances with the Bank of Thailand rose from 379 million baht at the end of 1949 to 530 million baht by the end of August 1950, as compared with 585 million on the same date in 1949. There was a 60 million baht increase in Trea~ry Bills issued during the first half of 1950, partly offset by a 12 million baht decline in the internal bonded debt. The external sterling debt remained unchanged at about ~1.6 million, while the U.S. SUrplllS pro- perty debt declined from $5.7 million to $5.4 million in this period. ~pects for Non-Inflationary Government Finencin2 6. It appears quite likel;>' that the government will be able to carry out its intention, expressed in a memorand\UIl submitted. to the Bank rlission in January 1950, to achieve balanced budgets from 1951 onwards end thus to avoid inflationary financing. Improvements in tax collection as well as projected revisions of tax rates are expected to bring a further rise in governroent revenUe to 2500 million baht in 1951. Certain reductions in non-recurrent expenditures are also envisaged in the next few years. TllUS appropriations for war damage compensation to the Allies, which amounted. to 80 million baht in 1950, will decline to about 45 million in 1951 alld will no longer be necessary by 1952. Some capital expenditures, notably on highways, and other outlays are also expected to drop. Moreover, when the railways are organized in an axt'Jnomous entity sowe increases in the existing low railway rates will probably be introduced in order to make the railway authority more nearly self-supporting. This should bring about some reduction in the net expenditures of the government on the railv'!ays  -5- which in 1949 apparently amounted to 173 million baht. Other expenditures, particularly on defense and the civil service, will un10ubtedly rise in future years. However, total outlays can probably be kept witlt.in such 1imi ts that the government will be able virtually to balance its accounts, or at least to confine the deficit to an amount ~hich can be financed out of the modest flow of money savings, together ~th occasional foreigri oor- rOI,'lJing to cover the external costs of particular capital pro jects. There is therefore little danger that the government bu~get will prove a source of inflationary pressure. II. External Economic Relations Improvement in Gold and Foreign Exchange Reserves 7. A further irllprovement in Thailand's foreign exchange position has taken place in the current year. Total gold end dollar holdings of the Bank of Thailand began to rise in July after relrining almost unchanged since the end of 1948. Moreover, the Thai credit balance in the open trade account with Japan, which is denominated in dollars, showed an increase of nearly $10 million in the first seven months of 1950 as compared with a rise of only $3 million in 1949. The rapid increase in sterling holdings evident in 1949 has continued at an accelerated pace in the current year. The Banl{ of Thailand l s reserves of free sterling rose by ,'LlO.5 million in the first seven months of 1950, as compared with an increase of .;.1.2.3 mil- lion in the entire year 1949 , . ," .. ". '"(', its hOldings of blocked sterling shown in the accounts of the Bank of Thailand declined by about~1.5 million in the same period owing to the payment of war damage c1aj.ms.. The Bank l s  -6- holdings of Indian rupees, which had d~clined by Rs. 71 million (e~livalent to .J,5.3 million) in 1949 largely owing to a final payment on the 1946 rupee oredit, deoreased further by Rs. 16 million (~1.2 million) in the first seven months of 1950. In sterling equivalent, the Bank' ~ total sterling area exchange assets 1 including blooked sterling and Indian rupees, showed an increase of~708 million in the first seven months of 1950 as compared with a rise of ~6.9 million in the entire year 1349. The foreign exchange assets of the commercif.l banks bave not changed significantly. B. At the end of July 1950, the Bank of Thailand's gold and foreign exchange holdings were as follows (in thousands): Gold and Dollars $ 135'4559 Thai Credi t on Open Ac- $ 12, 82 count for Japan Free Sterling ~ 25,066 Blocked Sterling J:t 1l,9~9 Indian Rupees Rs 3,301 &-i ss Francs Frs 222 Total (U.S. dollar equivalent) $ 252,410 9. The improvement in gold and foreign exchange reserves has been generally in line with the estimates of a favorable overall balance of pay- ments for 1949 and 1950 made in the Bank's earlier studY "Economic Report on Thailand lf of May 26, 1950. However, the large surplus antiCipated for the balance of pay~ents with the dollar alsa bas not been reflected in the country1s gold and dollar holdings, which have increased only slightly since the end of 1948, Aside from certain statistical difficulties, the ma- jar reason for the discrepancy is probably that the dollar proceeds of ex- ports did not fully accrue to Thailand., Thus available data on trade of the  -7- principal dollar countries - the United states. canada and the Philippines - with Thailand indicate a Thai export surplus of about ~13.5 million in 1949- "Invisible" transactions with these countries probably I!lho~ed a net deficit of not over $8 million and long-term capital movement was negli- gible. In addition United States purchases of Thai rice for China, Japan a.."ld other areas amounted to about $13 million in that year. Hence it would appear tb..at a substal1tial amount of the dollar proceeds of exports were sold to foreigners in the free market of Bangkok, and perhaps Hong Kong, in re- tU.rn for sterling, or that part of the proceeds were kept ab;road by Thai exporters. Foreign Trade in 1!'irst HEllf of 1950 10. No Thai statistics for total foreign trade are available for 1950. However, the fragmentary data llilhich are available indicate clearly that receipts from exports improved in the first part of 1950. partly because of rising volume, but especially because of higher prices. Rice shipments totaled 840,000 metric tons by the end of July 1950 and have been at a slightly higher rate than in 1949. so that exports for the En tire yeax rrIB3' exceed the 1949 figure of 1,216,000 tons. Bubber e~orts in the first half of 1950 amounted to 53,900 metric tons as compared with 49.200 tons in the corresponding period of 1949; and it is estimated that tin exports have been running about 7.5 per cent higher than in 1949. At the same time rice has been sold this year at an average price of about -t40 per ton or -t2 more than last year, while prices of rubber end tin were rising rather steadily even before the outbreak of tne Korean ~ caused a more marked spurt in com- modi ty prices. The doll::>.r yield of rice ex~)orts for the half of 1050 ...  - 8 - namely, $10.3 million - "las somewhat greater thall that originally anticipated for 19.50, although substantially less than in 19!-!-9 '''hen rice to the value of about $13 million was bOll~ht by the United States for the account of China, Japan and other areas. Owing principally to this reduction in dollar income from rice sale~, allocations of foreign exchange at official rates . .'ere denied to pri vate importers of books and perioa.ieals and to the r,.overnment tobacco monOpoly (in reopect of purchases other than machinery and equipment) after January 1, 19.50. Effeeti "e £1'0;:1 the miiWle of 19.50, such e~change has not been availaJle either for the importation of 1u.bricating oi Is anil grease and has been grant(3ct for other petroleum l)roducts on the basis of c.i.f. value rather than on the basis of retail sales value as hitherto. 11. The higher volume of exports reflected continued im- provement in l)roduction which Was particularly mal'ked in t~1.e case of minerals. The out7mt of tin concentrates in the first ei?7ht months of 19.50 was 91.53 long tons, eq1.livp,lent to an annual l'ato of almost 14000 tons as comnared ~'lfi th 781.5 tons in 1949. In the same period, the production of 'l!lolfram ana lead ore \,,8.S at an ~~ual rate of about 750 and 11.50 long tons respectively as com- pared vIi th 674 and 3.50 tons reSIJecti vely in 19L~9.  12. This general increase in the volume and value of exports ~\d not affect every country with which Thailand has a significant volume of trade. For eXc"llilPle, according to United States figures, Thailand's exports to the lnited States in the first seven months of 1950 -- $28.5 million -- were actually $1 m:.llion 1 ess than in the corresponding pel'iod of the precedirg year; but, because inpo:rts from the United states fell from $26 million to $14 million, Thailandl~ export surplus rose from $3 million to $14.5 mil- lion. Presumably there has been a substantial diversion of imports from the U,nited S~'),tes to countries which have devalued their currencies and to .Japan, as well as some diversion of exports. The approximate extent of this shift in imports is indicated by the fact tr..at total sales of sterling area cur- rencies by the Bank of Thailand and cornmercial banks rose from ~23.5 million in the first half of 1949 to .:t34~3 million in the first half of 1950, while sales of dollars dropped from $52.5 million to $34 million in the same period.• Ris;ng Foreign Exchange Income in the fut1.4re 13.. The higher level of cOdl1odi ty prices since last July will yield a much r.J.gher foreign exchange income in the second. half of 1950. It is likely that rubber prices, will average at least tvrit:~e as :1igh as in the first half of the year, so that, assuming the same volume of e.xporto, the ::oreign ex- change income from rubber ',\'ill be doubled. Similarly, the yield of tin ex- ports may be expected to average 25 to 3<Y;6 bigher,! and t.tlEtt of lac and shel- lac about 13% more. Moreover, there is no :'eason to ex.pect an early decline in the price of Thail~~dls largest export, namely rice, because rice e~orts  -10 - from Burma are unlikely to improve rapidly and the demand for rice 'Nill in- crease rather t"an diminish owine to rising requirements in Japan and relief needs in Korea. 14.. Hieher import prices 'will, of course I offset to some extent the lareer fo;'eign exchanc;e income from (' . 'Im.'·,,:: J but on balance there will remain a net improvemsnt in Thailand's terms of trade by comparison with the first half of 1950. The resulting increase in Thailandts cold and foreien exchan,ce reserves is likely to continue for some years" for ray!/' materials :")rices vlill probably be kept hieh by laree defense outlays in western cOLL'1'Lries. Given continued prudent management by the government, Thailand:s increasinc foreign exchange earnings and reserves sholud be ample to service current and future loans for capital development, provide for a risi.nr:: standard of livine and additional investment J and cushion the impact of possible crop failures or ceclines in co~nodity prices in the future. ECA Pr2gra:; 15. Thailand t s prospects have also been lm;::>roved by the economic and technical assistance which is beine furnished to the countl"V' by the United ~ v States throu.0:h - the Economic Cooperation - ... strat~on. Ad.llin'; -'- The . . }'C' ' A "1' 'I'D. ~ C omm it abotttj8~ooO~ooo of crants-in-aid for this ~roCram in the fiscal. year 1951. A Ii ttle over half of thi3 wil:~' r~~obably be sper.t for teclmical assistance in the fields of health and medicine" acriculture c~nd transportation. The bal- ance 'will consist of comraodities such as medic2l sup.:!1ies" plL"YS~ excavators and tractors for irrigation J,ll'ojects" insect:'lcid,2s., 8(',;,t:i.:!ment for transporta- tion) etc.. Through a Specie.l 'l'echnical and ECGEornic !~ission stationed in Bang_ kok the U.S. Government hopes to assist Th3.:i.lcmd in makj_ne the best possible USE' of this grant and to lay the foundation for a continuine prozram of assistance" -. I . (Appendix VIII) FORM OF LETTLR FROM THL THAI REPRESENT AT I'lL MAKING CERTAIN REPRESENTATIONS ON THE FINANCIAL ......... _~ POLICY ____ OF THE ........ _""""'--'_""'r' GOVERHMENT OF ....... __......o.r-_-....-.......... ~ THAILAND ............... _ _.. ______ _ . [Letterhead of the Kingdom of Thailand] [Date of Loan Agreements] International Bank for Reconstruction and Development 1818 H street, N. W. viashington 25, D. c. Gentlemen: Referring to the three loans in the amounts of $ _______ , $----...-, and $--'---....,- ... which the International Bank for Recon- struction and Development has agreed to make to the Kingdom of Thailand, I am writing to summarize and to confirm certain representations which have been made to the Bank in connection with the application for these loans. The purpose of the loans is to assist in financing a part of a program for the development and rehabilitation of the productive facilities and resources of Thailand by pro- viding the necessary foreign exchange for the purchase of goods which are required and are to be used in carrying out this pro- gram. Specifically the proceeds of the loans are to be used for irrigation works in the Central Plain of Thailand, the rehabili tat ion and improvement of the Royal State Railvlays, and the development of the port of Bangkok. The Government of Thaila~d recognizes that certain basic governmental policies are essential in order to maintain the financial and economic stability necessary for the fulfilment of the purposes of these loans, and for the successful execu- tion of its development program in general. In particular, the Government of Thailand intends to finance all its expenditures by non-inflationary methods. In fact, this goal was virtually achieved in the year 1949 for which provisional accounts indicate a deficit of only Baht 90,000,000, which maybe further reduced in a final accounting; and in the year 1950 it is expected that the defic"ili will be substantially less than original e imates With a further rise in revenue, partly resulting from certain planned tax revisions, and anticipated curtailment of exp,:mditures, the Government is confident that an approximate balance total revenues and ex:penditures will be achieved in the year 1951. Vdthin the .framework of the overall financial policy set forth above, it is the intention of the Government to make appro- priate provisions in its budget for the financing of the local currency costs of its development and rehabilitation program, including the local currency costs of projects whose cost in foreign currency is to be financed by the Bank's loans. During the existence of its rice monopoly, Government intends to set aside its revenues from the rice monopoly in a special account and intends to use those revenues for defraying the local currency costs of the above-mentioned projects for irrigation '"orks in the Central Plain of Thailand, the rehabilitation and imnrovement of the Hoyal State l~ailways, and the development of Port of Bangkok, and of other development projects. The Government intends to consult the Bank v\ihenever it believes that imperative reasons require a departure from the policies expressed above, and to take into account the Bank's views in determining the extent of any such departure. Sincerely yours, KINGDOM OF THAILli.ND By~~~__~~____~~__ Authorized Representative 10/20/50 (APPdJ;l(U;,: II) LETTER FROM THE PRESIDENT OF THE BANK TO THE THAI AMBASSADOR ABOUT THE AUTONOUOUS RAIL~iAY AND PORT AUTHORITIES [Date of Loan Agreements] My dear I~. Ambassador: I am writing you with reference to Schedule 2 of the two Loan Agreements (Railways Project and Port Project) of even date between the Kingdom of Thailand and the Bank, which Schedules, among other things, provide for the establishment of autonomous railway and port authorities satisfactory to the Banko During the negotiations of the loans, we discussed in some detail the character the tno autonomous authorities should have in order to be able to function as efficient business organizations. 11e agreed that the most essential condition of their successful operation will be a vi~~rous and independent management capable of conducting the business of the authorities without political interference. \/e further agreed that in order to fulfil that condi tion, the General :Managers of the two authorities would have to be men of high calibre and wide business experience, that they must be given the powers necessary to guarantee their independence; and that the fact that the broad policies for the two authorities must be formulated by their Boards should never be permitted to lead to Board interference with the conduct of operations by the management. In addition, you requested us during our discussions to indicate what other features the Bank considers desirable for the establishment of satisfactory railway and port authorities. ',ile are therefore sending you two memoranda, one dealing with the railway and the other with the port authority, both dated  -2- ret 0 ter ~O~ 195'0. ~e$'e memoranda sumrnarize the pOints which, in the Bank's opinion, should be covered in either the legislation for the establishment of the two authorities or by the regulations of the two authorities. While the Bank considers these points important for the proper establishment and functioning of the two organizations, the summaries are not exhaustive, and are not meant to be s~bstitutes for the detailed planning by the compe- tent officials in Thailand who will be responsible for the successful establishment of the proposed organizations. During the working out of the details some modification of some of the points set forth in the memoranda may become desirable or neces- sary to assure the establishment of satisfactory authorities, and, i f so, continuing consultations between your Government and the Bank would be the most expeditious way of assuring the establishment of autonomous authorities satisfactory to the Bank. The Bank will remain interested in the efficient functioning of the t'wo authorities ~3.fter their establishment and, if the occasion should arise, would feel free to consult with your Government and to make representations to it on the subject. ~e understand that your GovernMent ~ecognizes this continuing interest and is prepared tc ~<~.V:' ,L1.8 consideration to any representations that the Ba!1i.~ ,!,.-;:,.- 11..:3.1.8 ~_ij -':;;:_a~.:; :;:-egard. please be go~j enough to sign the enclosed copy of this letter and return it to us. Sincerely yours, President Confirmed: - ............... -..............-- ........,...... Authorized Representative .......... ----~..-..-........,....- Kingdom of Thailand October 20, 1950 (Appendix X) MEMORANDUM OF POINTS TO BE COVERED EITHER IN THE LEGISLATION FOR, OR THE REGULATIONS OF, THE AUTONOMOUS RaIL~JAY AUTHOHITY TO BE SET UP ------- -....--- ---..,..--... BY THE KINGDON OF THAILAND ........ ...... --........--------------~- ... The autonomous authority responsible for an efficient system of rail transportation (hereinafter referred to as the Authority) shall be created by legislative action of the Bor- rower, as a separate agency of the Borrower. The Authority shall be a juridical person which can sue and be sued and shall have all powers necessary for the adequate discharge of its responsibilities. Such powers shall include: (i) the power to construct, purchase or otherwise acquire, dispose of, lease and/or operate railway equipment, services and facilities; (ii) the power to purchase or otherwise acquire, lease, own, hold and/or operate, and dispose of real or personal property; (iii) the power to determine, subject to the approval of the Borrower, charges for the use of its rail- way services and facilities~ (iv) the power to make regulatirnlj re~irding the use of such services and facj_li:;..I.t.;s ,2i1d the mode of payment of the charges tt€~~f0r, Such regula- t10ns shall be subJect t~ ~he approval of the Borrower when pertainin~ to general economic or fi~ancial policies of the ~orrower; (7) th€ power to borrow money, ~~bject to of ~ne Borrower.  - 2 - The Authority shall be entrusted with the management, operation and development of the Royal state Railvvays II For that purpose the properties, assets and liabilities of the Royal state Railways shall be transferred to and be vested in the Authority. The net value of such properties and assets shall consti~ tute the amount of initial invested capital of the Authority. The revenue resulting from the operation by the Authority of . the railway services and facilities and from other sources shall accrue to the Authority. If the net revenue remaining after making proper charges, such as charges for depreciation and deferred maintenance, if any, should be insufficient to meet operating costs and to provide appropriate funds for capital improvement and development and if the Authority should be unable to obtain funds from other sources, the Borrmver will make up the deficiency. Any surplus remaining after appro- priate provisions for capital improvement and development shall accrue to the aorrower in accordance with arrangements to be agreed upon by the Borrower and the Authority. The Authority shall prepare an annual budget on both capital and operating account. The c[::ri 1;3.1 budget will be sub- mitted to the Borrower for its appro~alQ The Authority shall set up a~d maintain, under the responsibility of an accounting officer, a system of accounts and internal a'. vlit in accordance with soth'1d accounting prac- tices and in sllch detail as 1s necessary to secure separate information with regard to each of the main activities of the  I - 3 - Authority. An annual audit of these accounts shall be made by an independent auditor to be appointed by the Borrower. The Authority shall publish an annual report within four months after the end of its fiscal year which will include a statement of the accounts as of the end of the fiscal year together with the report of the independent auditor. The Authority shall have its own bank accounts and shall adopt suitable provisions with regard to the deposit and with- drawal of funds into and out of such accounts. The Authority shall have a Board of Commissioners,(here- inafter sometimes referred to as the Board), a General Ilanager and such other officers and staff as are required for the efficient discharge of its responsibilities. The Board of Commissioners shall lay down the policies of the Authority. The Board of Commissioners shall consist of a chairman and not less than three nor more than six other members, all of whom shall be appointed by the Borrower. The terms of office of members first taking office shall be for such varying lengths of time, not exceeding six years, so as to ensure that each term of membership will expire at a different time and that the dates of expiration will be spaced at regular intervals. A successor to a member of the Board shall be appointed in the same manner as the original members and shall have a term of office of six years from the date of the expiration of the term for which his predecessor was appointed. Hembers shall be eligible for re-appointment. The Board may from time to time make regulations for  -·4 - regulating the conduct of their business, for the guidance of persons employed by them, and for other similar matters. The Board shall appoint and determine the remuneration of the General Manager. The General ~anager will be chief of the operating staff of the Authority, shall execute the policies laid down by the Board end shall conduct the business of the Authority. The General Manager shall, subject to the approval of the Board, appoint and determine the remuneration of such other executive officers as are required by the Authority for the efficient discharge of its responsibilities. He shall also appoint and determine the remuneration of other officers and staff in accordance with the regulations made by the Board. As the Authority is an autonomous organi- zation, the provisions of the Civil Service laws of the Kingdom of Thailand shall not apply to the members of the Board, the General Manager and other officers and staff of the Authority. October to, 1950 IJIEUORAHDUIvl OF POHJTS TO BE COVERED EITHER H! IfHL LLGISLATIOH FOR, OR THL RLGULATIONS OF, THE AUTONOLlOUS PORT AUTHORITY TO BE SET ---......---- ---- UP BY THE KINGDOM OF THAILAND .....--..--------.... .........~-----.-..-..------ The autonomous authority responsible for the development of the Port of Bangkok (hereinafter referred to as the Authority) shall be created by legislative action of the Borrower, as a separate agency of the Borrower. The Authority shall be a juri- dical person which can sue and be sued and shall have all powers necessary for the adequate discharge of its responsibilities. The Authority shall exercise its powers in a geographically defined region in the Bangkok area to be known as the Bangkok Port District (hereinafter referred to as the Port District). Such powers shall include: (i) the power to construct, purchase or otherwise acquire, dispose of, lease and/or operate port and navigation services and facilities; (i1) the power to purchase or otherwise acquire, lease, own, hold and/or operate, and dispose of real or personal property; (iii) the power to determine, subject to the approval of the Borrower, charges for the use of its port and navigation services and facilities; (i v) the pOi 'er to make regulations regarding the use of such services and facilities and the mode of payment of the charges therefor; the operation or development of private port and navigation services and facilities within the Port District, for the  - 2 - purpose of achieving unified port development; and navigation and traffic within the Port District. Such regulations shall be subject to the approval of the Borrower when pertaining to general economic or financial policies of the Borrower.; (v) the power to borrow money, subject to the approval of the Borrower. The Authority shall be entrusted with the management, opera- tion and development of the Port Terminal at Klong Toi and of such other public undertakings of port and navigation services and facilities as is necessary to enable the Authority to carry out its responsibilities. For that purpose the pro- perties, assets and liabilities of the Port Terminal at Klong Toi and of such other undertakings shall be transferred to and be vested in the Authority. The net value of such properties and assets shall consti- tute the amount of initial invested capital of the Authority. The revenue resulting from the operation by the Authority of its port and navigation services and facilities and from other sources shall accrue to the Authority. If the net. revenue remaining after making proper charges, such as charges for depreciation and deferred maintenance, if any, should be insufficient to meet operating costs and to provide appro- priate funds for capital improvement and development and if the Authority should be unable to obtain funds from other sources, the Borrower will make up the deficiency. Any  - 3 - surplus remaining after appropriate provisions for capital improvement and development shall accrue to the Borrower in accordance with arrangements to be agreed upon by the Borrower and the Authority. The Authority shall prepare an annual budget on both capital and operating account. The capital budget will be submitted to the Borrower for its approval. The Authority shall set up and maintain, under the responsibility of an accounting officer, a system of accounts and internal audit in accordance with sound accounting prac- tices and in such detail as is necessary to secure separate information with regard to each of the main activities of the Authority. An annual audit of these accounts shall be made by an independent auditor to be appointed by the BOl'rO" "er" The Authority shall publish an annual report within four months after the end of its fiscal year which will include a statement of the accounts as of the end of the fiscal year together with the repo~t of the independent auditor. The Authority shall have its own bank accounts and shall adopt suitable provisions with regard to the deposit and withdrawal of funds into and out of such accounts. T11() Authority shall have a control Boc:rd (hereinafter sometimes called the Board), a General Manager, to be called the Port Director, and such other officers and staff as are required for the efficient discharge of its responsibilities. The Control Board shall lay down the policies of the Authority. The Control Board shall consist of a chairman and  ..... ".. "4 " not less than three nor more than six other members, all of whom shall be appointed by the Borrower. The terms of office of members first taking office shall be for such varying lengths of time, not exceeding six years, so as to ensure that each term of membership Fill expire at a different time and that the dates of expiration will be spaced at regular intervals. A successor to a member of the Board shall be appointed in the same manner as the original members and shall have a term of office of six years from the date of the expiration of the term for which his predecessor was appointed.. Members shall be eligible for re-appointment. The Board may from time to time make regulations for regulating the conduct of their buSiness, for the guidance of persons employed by them, and for other similar matters .• The Board shall appoint and determine the remuneration of the Port Director. The Port Director will be chief of the operating staff of the Authority, shall execute the policies laid down by the Board and shall conduct the business of the Authority. The Port Director shall, subject to the approval of the Board, appoint and determine the remuneration of such other executive officers as are required by the Authority for the efficient discharge of its responsibilities. He shall also appoint and determine the remuneration of other officers and staff in accordance with the regulations made by the Board. As the Authority is an autonomous organization, the prOVisions of the Civil Service laws of the Kingdom of Thailand shall not apply to the members of the Board, the Port Director and other officers and staff of the Authority.  (Annex A) STATUTORY LOAN COMMITTEE REPORT To: The President 1 Intetpa.tional Bank for Reconstructi9n and Development Report of Loan Committee under Article III, Section 4 (iii), of the Articles of Agree- ment on the proposed loan to the Kingdom of Tha.iland (Railways Project). The undersigned Committee, constituted under Article V, Section '/, of the Artioles of Agreement of International Bank for Reconstruction and Development (hereinafter called the Bank) hereby submits its report p~rsuant to Article !,II, Section 4 (iii) ,of said Articles in respect of the ;.)!'o-posal that the Bank grant to the Kingdom of Thailand a loan in the principal amount of ~3,OOO,OOO. The purpose of said loan is to provide the foreign exchange for the pUrchase of goods required to carry out the project of rehabilitating, improving and increasing the capacity of the Royal State Railways. 1. The Committee has carefully studied the merits of the proposal to grant such a loan and the purposes to which the proceeds of the loan are to be applied. 2. The Committee is of the opinion that the project toward the financing of which the proceeds of such loan are to be applied comes within the purposes of the Bank as set forth in Article I of said Articles of Agreement and that the said project is designed to promote the development of the productive facilities and resources of the Kingdom of Thailand and is in the interests of the Kingdom of Thailand and of the members of the Bank as a whole.  I 3. Accordingly, the Committee finds that the said project merits the financial assistance of the Bank and hereby reeommends the said nroject for such assistance. COMMITTEE R. L. Garner Boonma l;Jongsvm.n A. S. G. Hoar ---------------------~~-. D. Sommers L. B. Rist ----------,, ----, _ D. Crena de Iongh . .. Dated at l"ashington, D. C. October 23, 1950  (Annex B) STATUTORY LOAN COllHITTEE REPORT To: l~President, Internfitional Bank for Reconstruction and ReveloP!J1ent Report of Loan Committee under Article III, Section 4 (iii), of the Articles of Agree- ment on the proposed loan to the Kingdom of Thailand (Irrigation Project). The undersigned COmmittee, constituted under Article V, Section 7, of the Articles of Agreement of International Bank for Reconstruction and Development (hereinafter called the Bank) hereby submits its report pursuant to Article III, Section 4 (iii), of said Articles in respect of the proposal that the Bank grant to the Kingdom of Thailand a loan in the principal amount of $18,000,000. The purpose of said loan is to provide the foreign exchange for the purchase of goods required to carry out the project of furnishing a water supply for irrigation in the Central Plain of Thailand. 1. The Committ.ee has carefully studied the merits of the proposal to grant such a loan and the purposes to which the proceeds of the loan are to be applied. 2.. The Com.mittee is of the opinion that the project tm.lard the financing of which the proceeds of such loan are to be applied comes within the purposes of the Bank as set forth in Article I of said Articles of Agre~ment and that the said project is designed to promote the deyelopment of the productive facilities and resources of the Kingdom of Thailand and is in the interests of the Kingdom of Thailand and of the members of the Bank as a whole.  - 2 - 3. Accordingly, the Committee finds that the said project merits the financial assistance of the Bank and hereby recommends the said nroject for such assistance. COMl"JTTEE R. L. Garner Boonma 1iJongswan A. S. G. Hoar D. Sorumers ~----------------- L. B. Rist Dated at Hashington, D. C. October 23, 1950  · I (Annex C) STATUTORY LOAN COmlITTEE REPORT To: The President. ,International Bank for Reconstruction and Development Report of Loan Committee under Article III, Section 4 (iii), of the Articles of Agree- ment on the proposed loan to the Kingdom of Thailand (Port Project). The underSigned Committee, oonstituted under Article V, Section 7, of the Articles of Agreement of International Bank for Reconstruction and DeveJopment (hereinafter called the Bank) hereby submits its report pursuant to Article III, Section 4 (iii), of said Articles in respect of the proposal that the Bank grant to the Kingdom of Thailand a loan in the principal amount of $4,400,000. The purpose of said loan is to provide the foreign exchange for the purchase of goods required to carry out the project of developing the Port of' Bangkok. 1. The Committee has carefUlly studied the merits of the proposal to grant such a loan and the purposes to which the proceeds of the loan are to be applied. 2. The Committee is of the opinion that the p~oject toward the financing of which the proceeds of such loan are to be appUed comes vrithin the purposes of the Bank as set forth in Article I of said Articles of Agreement and that the said project is designed to promote the development of the productive faoilities and resources of the Kingdom of Thailand and is in the interests of the Kingdom of Thailand and of the members of the Bank as a whole.  -2- 3. Accordingly, the Co~~ittee finds that the said project me~its the financial assistance of the Bank and hereby recommends the said project for such assistance. COMMITTEE R. L. Garner Boonma lJongs-wan ---------------------------- S. G. Hoar it .. D. Sommers i. B. Rist ----_._----_.._--- D. Crena de longh Da ted at 1'Yashington, D. C. October 23, 1950