Technical Assistance Consultant’s Report

Project Number: TA No. 7044-THA February 2009

Thailand: Mass Integrated Ticketing Project (Financed by the Japan Special Fund)

Final Report

Prepared by

CECI Engineering Consultants, Inc., Taiwan TAP

For Office of and Traffic Policy and Planning, Ministry of Transport, Asian Development Bank

This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. For project preparatory technical assistance: All the views expressed herein may not be incorporated into the proposed project’s design.

Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Table of Contents Summary ...... I Abbreviation Reference Table...... VIII 1. Introduction ...... 1-1 1.1 Background...... 1-1 1.2 Objectives ...... 1-2 1.3 MRT Systems in Bangkok ...... 1-2 2. Policy and Integrated Ticketing Strategy...... 2-1 2.1 Key Findings from Previous ADB TAs...... 2-1 2.2 Objectives of an Integrated Ticketing System ...... 2-4 2.3 Structure ...... 2-5 2.4 Fares Models...... 2-8 2.4.1 MRT Price Elasticity of Demand ...... 2-8 2.4.2 Testing of Various Fares...... 2-9 2.4.3 External Benefits...... 2-14 2.4.4 Suggested Fare Model...... 2-15 2.5 Fare Products...... 2-15 2.6 Fare Policy Conclusion ...... 2-17 2.7 Implementation Strategies for the MRT Common Ticketing System ...... 2-17 2.8 Current MRT Operator Plans for Establishing a JV Company to Issue Common Tickets on Their Own Systems ...... 2-23 2.9 Applications of Electronic Money (E-money) and Electronic Tickets (E-ticket)...... 2-23 3. Procurement for Back-end System ...... 3-1 3.1 Introduction ...... 3-1 3.2 Procurement Method and Procedure...... 3-2 3.3 Appraisal Mechanism...... 3-5 3.4 System Requirements ...... 3-7 3.4.1 Central Clearing House (CCH)...... 3-7 3.4.2 Card Issuing Machines (CIM)...... 3-12 3.4.3 Key Management System (KMS) ...... 3-13 3.5 System Specification Recommendations and Cost Estimation ...... 3-15 3.6 System Operation and Maintenance...... 3-19 3.7 System Technology Transfer...... 3-23 3.8 Potential Risks...... 3-24 4. Determine Financing Requirements and Funding Strategy...... 4-1 4.1 Introduction ...... 4-1 4.1.1 Overview of Project...... 4-1 4.1.2 Financial Analysis...... 4-1 4.2 Financial Model...... 4-2 4.2.1 The Model...... 4-2

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4.2.2 The Model Cases ...... 4-3 4.2.3 The Business Model ...... 4-6 4.2.4 The Investment Costs...... 4-7 4.2.5 The Revenue...... 4-9 4.2.6 Operations & Management Costs...... 4-11 4.2.7 Financing...... 4-14 4.2.8 Projected Financial Performance ...... 4-14 4.2.9 Transaction Fee...... 4-15 4.2.10 Sensitivity Analysis...... 4-16 4.3 Project Value for Money Assessment...... 4-17 4.3.1 Introduction...... 4-17 4.3.2 Funding Options...... 4-18 4.3.3 VfM Analysis...... 4-18 4.3.4 Analysis Results...... 4-21 4.4 The Management of the Fare-based Revenue Streams as well as the Smartcard Funds Pool...... 4-22 4.4.1 The Smartcard Pool (Pre-paid Account)...... 4-22 4.4.2 The Working Capital Account ...... 4-23 4.5 The Financing and Funding Strategy...... 4-24 4.6 The Financial Management of the Government Agency...... 4-24 4.7 The Investment Recovery Plan for the Government...... 4-25 4.8 Forming a Common Ticketing Company (CTC)...... 4-27 4.8.1 The Establishment of CTC ...... 4-27 4.8.2 The CTC Registration Process ...... 4-31 4.8.3 The Applying for the E-Transaction Licenses ...... 4-33 4.8.4 Other Issues on the Forming of CTC ...... 4-34 4.9 Smartcard Regulations ...... 4-36 4.10 Operation of a Common Ticketing Company (CTC) and Related Issues of Transportation Policies...... 4-37 5. Governance Structure and an Implementation Plan...... 5-1 5.1 Organization Structures of MRT Systems in Bangkok ...... 5-1 5.2 Laws and Regulations for an Integrating Ticketing Organization...... 5-3 5.3 Supervision of the Operations of the Common Ticketing Company...... 5-5 5.4 Model of Establishing a Common Ticketing Company...... 5-5 5.5 Implementation Plan...... 5-6 6. Terms of Reference (TOR) for Program Management Services...... 6-1 6.1 Introduction ...... 6-1 6.2 Project Schedule...... 6-3 6.3 Scope of Services ...... 6-5 6.4 PMS Works of Each Stage...... 6-6 6.5 Skills, Experience Requirements and Tasks of PMS...... 6-35

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6.6 Level of Efforts and Outputs...... 6-51 6.7 Service Cost...... 6-53 7. Conclusions...... 7-1

References and Bibliography Appendix 1: Report and Recommendation of the President, Proposed Technical Assistance Loan Appendix 2: Draft Contract of the Procurement of Backend System Appendix 3: Financial Model Assumption Appendix 4: Projected Financial Statements Appendix 5: Summary of Funding Option Features Appendix 6: E-Money Business Rules Appendix 7: The Recovery Plan for the ADB Investment Loan Appendix 8: Cabinet Resolution on MRT Issues Appendix 9: Outlines of Terms of Reference for Program Management Service Appendix 10: Laws, Draft Laws and Regulations Relevant to the Common Ticketing Project

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List of Figures Figure 1.1: 5 New MRT Lines Approved in November 2006 ...... 1-4 Figure 2.1: Single Integrated Ticketing System (End State) ...... 2-3 Figure 2.2: Single Integrated Ticketing System (Interim State)...... 2-3 Figure 2.3: Structure of the Common Ticketing System...... 2-18 Figure 2.4: The Development Concept of Common Ticketing System...... 2-21 Figure 2.5: Approaches of System Migration...... 2-22 Figure 3.1: Relationship of Back-end and Front-end Systems ...... 3-2 Figure 3.2: Procurement Process and Schedule ...... 3-5 Figure 3.3: Operation of Back-end System...... 3-19 Figure 4.1: Project Financial Model Logical Structure...... 4-2 Figure 4.2: The Business Model for the Gross Cost Concession of the New Lines...... 4-6 Figure 4.3: The Business Model for the Net Cost Concession of the Existing Lines ...... 4-7 Figure 4.4: The Organization Structure of Common Ticketing Company...... 4-12 Figure 4.5: The NPV of Life Cycle Cost for Government Payment and Cost ...... 4-22 Figure 4.6: The Smartcard Pool ...... 4-23 Figure 4.7: The Working Capital Account...... 4-23 Figure 4.8: Establishment of CTC ...... 4-31 Figure 4.9: The Company Registration Process ...... 4-32 Figure 4.10: Procedure of Applying for e-Transaction License ...... 4-34 Figure 4.11: The Governance and the Supervision of CTC...... 4-36 Figure 5.1: Governance Structure of the Common Ticketing ...... 5-2 Figure 5.2: Timing Plan for the Common Ticketing Project ...... 5-6 Figure 5.3: Common Ticketing Road Map for the Government ...... 5-9 Figure 6.1:Project Schedule...... 6-4 Figure 6.2:Scopes of Program Management Services...... 6-5 Figure 6.3:Relations between Government Agencies and the PMS ...... 6-7 Figure 6.4:Gross Cost Concession Concept for Accounting and Requests of Payment...... 6-13 Figure 6.5:Structure of PMS consultants ...... 6-36

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List of Tables Table 1.1: 5 New MRT Lines Approved in November 2006...... 1-3 Table 2.1: Comparison between Net Cost and Gross Cost Concession Models ...... 2-1 Table 2.2: Comparison between Different Fare Strategies...... 2-6 Table 2.3: The Comparison of Fare Structure Based on Distance...... 2-7 Table 2.4: Fare Models Results...... 2-11 Table 2.5: Sensitivity Analysis of Fare Elasticity of Demand (for CASE 5 only)...... 2-12 Table 2.6: Sensitivity Analysis of Fare Elasticity of Demand (for all CASES)...... 2-13 Table 2.7: Vehicle Distance and Time Traveled per Day, with and without the MRT Project Implemented...... 2-14 Table 2.8: Average Vehicle Operating Cost of Representative Vehicle...... 2-14 Table 2.9: Average Value of Time ...... 2-14 Table 2.10: Current Fare Products of BTS and BMCL...... 2-15 Table 2.11: Discount Level for Stored Value Cards in Other Cities...... 2-16 Table 2.12: Recommended Future MRT Fare Products...... 2-17 Table 2.13: Advantages and Disadvantages of Different Integration Approaches ...... 2-20 Table 3.1: Committee Background...... 3-5 Table 3.2: Business Scale Prequalification of Bidders...... 3-6 Table 3.3: Evaluation Items for Technical Proposal...... 3-6 Table 3.4: System Requirements for CCH System...... 3-15 Table 3.5: System Requirements for KMS ...... 3-18 Table 3.6: System Requirements for CIM System...... 3-18 Table 3.7: Back-end System Cost...... 3-19 Table 4.1: The Ridership Estimation of MRT lines ...... 4-5 Table 4.2: Base Cost Estimate ...... 4-8 Table 4.3: Inflation Escalation...... 4-8 Table 4.4: Price Contingency Cost...... 4-9 Table 4.5: Project Investment Plan...... 4-9 Table 4.6: Prepaid Card Usage Rates of Different Ticketing Systems...... 4-10 Table 4.7: Card Issuance Accumulated Volume / Number of Card-person-trips per Day of Different Ticketing Systems...... 4-10 Table 4.8: Size of the Organization of Common Ticketing Company...... 4-12 Table 4.9: Financing during the Construction Period ...... 4-14 Table 4.10: Sensitivity Analysis...... 4-17 Table 4.11: The Allowance of Sensitive Factors ...... 4-17 Table 4.12: The Models of Forming CTC ...... 4-30

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Table 5.1: Activities and Actions for the Government to Implement the Common Ticketing System ...... 5-8 Table 6.1: Skills and Experience Requirements for PMS...... 6-49 Table 6.2: Schedule and Level of Input for Program Management Team-1...... 6-51 Table 6.3: Schedule and Level of Input for Program Management Team-2...... 6-52 Table 6.4: Outputs...... 6-53

vi Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Summary

Status Report for ADB Technical Assistance on Preparing the Bangkok Mass Rapid Transit Integrated Ticketing Project

Purpose of the Technical Assistance

Since 2005, ADB has supported a number of technical assistance (TA) projects aimed at improving the convenience, affordability and operating efficiency of the new rail mass rapid transit (MRT) lines planned for development in Bangkok. The ongoing project preparation TA (PPTA) is designed to prepare a roadmap for introducing a single, common fare smartcard that can be used on the new MRT lines, and eventually used on other modes of public transit. The Office of Transport and Traffic Policy and Planning (OTP) is also managing a separate study to address issues concerning the introduction of a common ticket that can be used on the existing skytrain and subway systems.

ADB's PPTA includes six interrelated tasks for the consultants: (i) to develop a transit fare and integrated ticketing policy framework; (ii) to propose a strategic approach to implementing integrated ticketing; (iii) to prepare project cost estimates and a funding strategy; (iv) to develop draft procurement documents for the integrated ticketing system; (v) to prepare a project governance structure and implementation plan; and (vi) to prepare terms of reference for program management consulting services.

The PPTA consultants were mobilized in June 2008. Workshops on their study findings have been held on December 22, 2008 and January 12, 2009. The consultants are scheduled to present their draft final report on January 26, 2009, and the final report is due on February 27, 2009.

TA Study Findings

Transit fare and integrated ticketing policy framework. A distance-based, uniform and integrated fare structure is recommended for the new MRT lines based on equity and efficiency considerations. A uniform fare tariff is needed because there is no significant difference in services provided by different MRT operators. An integrated fare will also support a single flag-fall whereby only one flag-fall will be charged no matter how many MRT lines a rider transfers in a single trip.

To promote public private partnerships (PPPs) in operating future MRT lines, a gross-cost concession contract is recommended because it better supports a uniform and integrated fare structure, as well as more synchronized MRT operations, than a net-cost operating concession. Additionally, gross-cost concessions provide more secure and stable revenues to concessionaires operating lines with low and unpredictable ridership levels. Furthermore, gross-cost concessions allow the Government to retain control over fare policy as well as farebox revenues.

In summary, integrated ticketing will help to improve passenger convenience, promote greater use of public transit, support a uniform and integrated fare structure and, in the presence of a gross-cost PPP concession model, more efficient and sychronized MRT operations.

Strategic approach for implementing integrated ticketing. Given the adoption of a uniform and integrated fare structure and a gross-cost concession model, the preferred strategic approach for implementing an integrated ticketing system on future Bangkok MRT lines is to promote: (i) a single ticketing system; (ii) a single ticket issuer; and (iii) multiple ticket vendors.

I Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

A Common Ticketing Company (CTC), proposed to be a state-owned enterprise with the majority of its shares owned by the Government, would invest in and operate the central clearing house (CCH), and also serve as the single ticket issuer. The CTC would be responsible for developing the standards and specifications for a common ticket system in order to ensure interoperability between the CCH, the front-end devices, and the smartcards. The CTC will also collect and control the fare revenues from the new MRT lines operated under gross-cost concessions, as well as other state- owned rail systems such as the Rail Link. All MRT operators can serve as ticket vendors.

The expansion of CTC’s common ticket to the two existing MRT lines and other public transit modes, such as , in the future will require that the CTC and existing transit operators are able to agree upon mutually acceptable business rules on key issues such as the collection and distribution of fare revenues and cost-sharing arrangements to for new equipment as well as O&M expenses. One of BTS's main concerns, however, is that information regarding its fare revenues would no longer be proprietary under a common ticketing system.

Project cost estimates and funding strategy. The PPTA consultants’ preliminary estimates suggest that CTC’s investment cost could be on the order of 400 million Baht for start-up operations, procurement of the back-end system (i.e. the CCH and related systems) and construction. Based on revenues from transaction fees and cards sales, the operation has a high possibility of being self-sustaining once the number of transactions reaches 1.5 million per day. If the two existing MRT operators adopt CTC’s common ticket, the transaction volumes from these two systems would enable CTC to reach its cost recovery threshold sooner.

Procurement and program management consulting services. As indicated above, CTC would procure the back-end system (including a CCH and related systems) to support the common ticketing system. The PPTA consultants are detailing the steps and associated timeframes for the entire procurement process, through the testing and commissioning phases, which will be based on international competitive bidding. The complexity of the procurement process and the need to ensure that the Government achieves good value for money suggests that the specialized services of program management consultants be retailed to provide assistance in finalizing the system specifications, preparing the tender documents, evaluating and ranking proposals and bid documents, negotiating with the first-ranked bidder, managing procurement, and overseeing the testing and commissioning of the new system. The program management consultants can also assist the Government in setting up the CTC and in training CTC staff. The PPTA consultants' preliminary estimates suggest that the program management services would be required over a period of 4 to 5 years. The cost for a qualified team with international experience and expertise in managing the implementation of an automated fare collection system is estimated to be on the order of 200 million Baht.

Governance structure and implementation plan. A government agency under Ministry of Transport must be selected to champion the project and to work on a proposal to set up a CTC to the Cabinet. The agency would be responsible for establishing the CTC, tendering for program management service and overseeing the CTC’s work through the implementation and operation and maintenance of the integrated ticketing project. To assume this role, a subcommittee for the integrated ticketing system could be established under the Committee for Management of Land Traffic (CMLT). This subcommittee would be responsible for defining the policy framework and providing management direction and guidance for establishing a CTC that maximizes the efficiency of ticketing services and convenience to transit passengers. An indicative governance structure for the integrated ticketing project is depicted in Figure 1.

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Subcommittee of CMLT*

1. Proposes a plan to set 2. Approves the

up a CTC Smartcard plan

Program Management BOT* MOT* 3. Tenders for a Consultant Program 5. Supervises 4. Establishes CTC Management system Service construction

6. Applies for CTC & e-Money Smartcards & Licenses CTC CCH 7. CTC tenders ticketing system Notes: CMLT refers to Committee for the Management of Land Traffic BOT refers to Bank of Thailand MOT refers to Ministry of Transport

Figure 1: Indicative Governance Structure

A key output of the PPTA will be a proposed TA loan for program management services to assist the Government in setting up the CTC and in managing the procurement process for the CCH and related back-end systems, and possibly for some front-end systems to be installed on the new MRT lines. A fundamental precondition for ADB to build upon the PPTA and to structure a formal loan proposal, however, is the need for the Government to designate an appropriate Executing Agency. Ultimately, this decision will need to be taken by the Ministries of Transport and Finance.

Future Actions and Issues

The next step in the formal processing of a TA loan for the program management consulting services involves a tripartite meeting of Government (OTP, PDMO, BOT and other agencies concerned), ADB, and the PPTA consultants. This meeting would be used to seek clarification and confirmation with respect to key issues, including:

(i) the Government’s decision on designating an appropriate Executing Agency to coordinate and manage the program management services under the TA loan;

(ii) the Government’s plans to establish a CTC to assume primary responsibility for the procurement and O&M of a common ticketing system;

(iii) the Government’s position on implementing gross-cost concessions for the new MRT lines;

(iv) the Government’s position on implementing a uniform, integrated MRT fare policy for the new MRT lines;

(v) the Government’s plans for restructuring the existing MRT concessions; and

(vi) the Government’s position on creating an overarching Bangkok Integrated Transport Authority with a mandate to plan and oversee the integration of different modes of .

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Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Abbreviation Reference Table

ADB Asian Development Bank AOA Articles of Association ARL Airport Rail Link B/S Balance Sheet BOT Bank of Thailand BOT Build-Operate-Transfer BECM Bangkok Extended City Model BITA Bangkok Integrated Transit Authority BMA Bangkok Metropolitan Administration) BMCL Bangkok Metro Public Company Ltd, Underground BMR Bangkok Metropolitan Region BMTA Bangkok Mass Transit Authority BTS Bangkok Mass Transit System, Sky BTSC Bangkok Mass Transit System Public Company Limited CCC Civil and Commercial Code CCH Central Clearing House CIM Card Issuing Machines CPEX Chao Phraya Express Boat CPS Central Processing System CTC Common Ticketing Company DBOM Design-Build-Operate-Maintenance DPS Deport Processing System ETA (1) Expressway Toll Authority ETA (2) Electronic Transaction Act ETC Electronic Technology Committee EV Electronic Value E-money Electronic-Money E-ticket Electronic-Ticket FIRR Financial Internal Return Rate ICB International Competitive Bidding KMS Key Management System LOE Level of Effort

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MOF Ministry of Finance MOI Ministry of Interior MOT Ministry of Transport MRT Mass Rapid Transit MRTA Mass Rapid Transit Authority of Thailand MUV Manufacturer’s Unit Value NEC National Economy Committee NECTEC National Electronics and Computer Technology Center: NPV Net Present Value OTP Office of Transport and Traffic Policy and Planning PBY Pay Back Year PDMO Public Debt Management Office PFI Private Financial Initiative PM Prime Minister PMS Program Management Service POS Point of Sale PPP Public-Private-Partnership PSC Public Sector Comparator SAM Security Access Module SOE State Owned Enterprise SOP Standard Operation Procedure SPS Station Processing System SRT State Railway of Thailand TA Technical Assistance TOD Transit Oriented Design TOR Term of Reference VAT Value Added Tax VFM Value for Money WACC Weighted Average Cost of Capital

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Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

1. Introduction

1.1 Background Since the beginning of operations of Mass Rapid Transit (MRT) services in Bangkok, the incompatibility of the ticketing systems of BMCL (Bangkok Metro Public Company Ltd.) and BTS (Bangkok Mass Transit System, or Skytrain) has been creating an inconvenience for residents and visitors traveling in the city. Passengers have to purchase at least two forms of tickets and pay additional flagfall charges when making transfers. This payment mechanism not only creates confusion at gates when riding BMCL or BTS, but also prevents passengers to transfer between both systems. As Bangkok’s MRT systems grow, this problem will get worse and persuade people to drive private vehicles. The previous Technical Assistance (TA) project from Asian Development Bank (ADB) suggested that an integrated ticketing system can improve the quality of MRT service. Following the concept of a “gross cost” concession contract, the new MRT concessionaires may provide service according to the service agreement instead of expected profit. Subsequently, all of the income would go to the Government and then be distributed to the operators according to their service provided. Such a process may require a Central Clearing House (CCH) that audits the performance of the MRT services. The process of planning and designing a back-end system, which includes a CCH, for a new ticketing company (the Common Ticketing Company) will be the primary task in this project. A gross cost concession can also benefit the CCH by offering a more simplified functional design because of no need to allocate the fare revenue between MRT operators. This prevents the need for commercial agreements, which normally requires a time-consuming negotiation procedure. The project work also includes the preparation of the Terms of Reference (TOR) for Program Management Services (PMS) and the back-end system procurement projects funded by ADB loans. The loans should assist Thailand’s government to build up an integrated ticketing system that will cater to the needs for promoting general public transit in the Bangkok metropolitan area. For deriving better applications of transportation smartcards in Bangkok, differing types of overall fare structures are under study, such as distance-based, flat fare, zonal-based, time-based, etc. With the coming expansion of the MRT network and the subsequent demands for transferring between different modes, both single and multiple ticketing systems are to be analyzed. Under the study up-to-date, the single ticketing system with a single issuer and multiple vendors option appears to be easier to implement and the least costly; however, when faced with the burden of modifying the existing operating system’s equipment and replacing current smartcards, there are still some obstacles which need to be addressed before rolling out a brand-new ticketing system. Lastly, in view of the additional energy demands and unstable fluctuation of oil prices, the concept of Transit Oriented Design1 (TOD) has become an increasingly important issue around the world. Bangkok is no exception to this predicament and needs to rapidly integrate its public transit systems so as to ease the impact of any energy crisis. Because public transit transportations usually bring about external benefits such as less congestion and air pollution, subsidized public transit industries should lead the way when external benefits are greater than subsidies from the government. By deploying a common ticketing system, some subsidization schemes, such as the implementation of discounted transfer schemes, would be possible.

1 TOD is a term used to describe an environment or a community is friendly to public transportation system users. TOD creates compact, pedestrian oriented neighborhoods around transit stations. Providing a seamless public transportation system is also a form of TOD.

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1.2 Objectives To solve the ticketing problem of the non-interoperability between different MRT systems, this project has set to accomplish the goal of integrating smartcards for MRT systems. Four objectives must be achieved to realize this integration, that is (1) the new back-end system must have an open standard that allows future expansion; (2) the new back-end system must support the policy of reducing inefficiency of the transit ; (3) the new Common Ticketing Company must be financially feasible; and (4) the new Common Ticketing Company must be a legal and law-abiding entity.

1.3 MRT Systems in Bangkok Current Bangkok Mass Rapid Transit (MRT) systems are separated by two different systems and three lines. Opened in 1999, BTS (Bangkok Mass Transit System) or Skytrain is the elevated Metro system operated by Bangkok Mass Transit System Public Company Limited (BTSC). BTS consists of two lines, Dark and Light Green Lines, with a combined distance of 24 km and 23 stations. Since 2004, BMCL (Bangkok Metro Public Company Ltd.) has run the underground with a distance of 20 km and 18 stations. Both systems had a total ridership of 679 thousand trips per day (485 thousands for BTS and 194 thousands for BMCL) in 2007, which occupied 10% of total public transportation trips (OTP 2008a). Currently, BTS and BMCL have 3 interchange stations: (1) Saladaeng/ Silom, (2) Asok/ Sukhumvit, and (3) Mochit/ Chatuchak Park. Not only are the station names different for both of the systems, but the distance between the respective stations’ locations at the interchange is a little bit far from each other. This adds confusion and dissuades people from transferring between the systems. With regard to payment, both BTS and BMCL adopt MIFARE 1k smartcards for their stored value cards. However, due to differing card formats and other technical issues, their smartcards lack interoperability. In 2008, approximately 1.5 million BTS smartcards were in circulation. The volume of smartcard transactions is around 330k per day and amounts to around 2/3 of the total transactions. The remaining 1/3 transactions comes from magnetic strip card trips for single journey tickets and one-day passes. For BMCL, approximately 1 million smartcards were in circulation. The volume of smartcard transactions was around 125k per day and amounted to around 3/5 of the total transactions. The remaining 2/5 transactions come from IC token trips for single journey tickets. BTS and BMCL are authorized by net cost concession. To maximize their profits, there is some degree of competition between them to attract more ridership. In the area of ticketing, they want passengers to buy and use their own smartcards. The willingness for them to make interoperability between their ticketing systems is weak. Therefore, passengers need to purchase two cards and pay additional flag-falls when transferring between the systems. This kind of competition caused by net cost concession will not only deter the common ticketing plan for MRT systems, but also affect the transfer willingness between systems. For other public transport systems in Bangkok, there are currently no electronic types of ticketing payments. Buses and accept only cash and pre-paid paper coupons. The cash form of ticketing slows down passenger flows at the stations and on the vehicles, and is labor-intensive in managing cash and coins. Hence, the lack of integration in ticketing discourages transit patronage in the use of public transit. Four MRT lines are currently under construction, including the Airport Rail Link (Suvarnabhumi Airport – Makkasan, 28 km, scheduled to be open in 2009), Dark Green Line Extension (Saphan Taksin – Bang Wa, 8 km, scheduled to be open in 2012), Light Green Line Extension (On Nut – Bearing, 5 km, scheduled to be open in 2010) and a segment of the future Red Line (Bang Sue – Makkasan – Hua Mak, 19 km scheduled to be opened no later than 2012). The

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Airport Rail Link will provide two types of services, a City Line and an Express Line, but each line will have separate gates and different tickets. The ticketing system of the Airport Rail Link is also now under construction and plans to issue two types of ticket media, smartcards (stored value cards) and tokens (single journey tickets). At this point, State Railway of Thailand (SRT), the management authority of Airport Rail Link, does not support the idea of implementing common ticketing standards since any change in plans will likely delay their opening schedule. In November 2006, the government approved a plan for five new MRT lines in the Bangkok Metropolitan Region. The plan is scheduled to be finished by 2012 with a total length of 118 km rail lines to be constructed. The information of these new lines is shown in Table 1.1 and Figure 1.1. After these new lines are finished, the entire MRT network in the Bangkok Metropolitan Region (BMR) will reach a length of 222 km and the estimated ridership of the MRT network will be 2.4 million trips per day in 2012. Although the 2012 ridership will be more than 3 times of the current ridership, MRT systems are still forecasted to occupy only 28% of total public transportation trips (OTP 2008a). In comparison, MRT ridership in Taipei and Hong Kong occupied 40% and 35% of total public transportation trips respectively in 2007. Table 1.1: 5 New MRT Lines Approved in November 2006 Dark Green Light Green Line Red Line Blue Line Line Line Bang Sue- Bang Sue- Bang Sue- Hua Bang Yai- Mo Chit- Baring- Section Rang Sit Taling Chan Tha Phra Lamphong- Bang Sue Saphan Mai Samut Bang Khae Prakan Length(km) 26 15 13 14 23 13 14 No. of 10 4 7 10 15 7 7 Stations Managed by SRT1 MRTA2 MRTA MRTA MRTA

1: State Railway of Thailand. 2: Mass Rapid Transit Authority.

Source: OTP 2008b.

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Source: OTP 2008b Figure 1.1: 5 New MRT Lines Approved in November 2006

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2. Fare Policy and Integrated Ticketing Strategy

2.1 Key Findings from Previous ADB TAs 1. Fare Options Previous TAs (2006b, 2007a) utilized the Bangkok Extended City Model (BECM) to estimate the fare elasticity of demand for existing MRT lines in Bangkok. The analysis was based on the ridership of 2005 and the fare of 2006. Short term elasticity is around -0.5. The analysis estimated that the average daily ridership increased by 11% or 154,000 trips for MRT and air-con buses if a flat fare of 15 Baht was applied to these two modes. The net cost for the public transportation would increase 690 million Baht per year, or one-third of the current deficit of Bangkok public transportation systems. If the 15 Baht flat fare expands to non-air-conditioned buses, the buses would then lose a large number of riders and end up with several empty buses. Therefore, previous TAs recommended distance-based fares in Bangkok. Furthermore, if a common ticketing system is in operation, a zonal fare type of system should be taken into serious consideration. 2. MRT Concession Options Previous TAs discovered that different types of net cost structure were disadvantageous for both the Government and concessionaires. A standard gross cost concessions model should be developed for the new MRT concessions. Differences between net and gross cost models are summarized in Table 2.1. From the standpoint of ticketing systems, a gross cost concession model would allow the Government to have more control over the pricing policy, enable the Government to more easily implement desired social objectives, and bring about simpler fare revenue management actions. Table 2.1: Comparison between Net Cost and Gross Cost Concession Models Brief Description Disadvantages Advantages Net Cost Concessionaires: Tends to reinforce Transfers patronage risk Model Keep revenue they incumbent to concessionaires. collect. concessionaires. Encourages Bid on the net amount Cost structure may be concessionaires to be they need (or will pay) to higher than Gross Cost innovative & take more operate services. Model. responsibility for service Operate within imposed Less suitable where planning (more relevant policy framework (eg. services may change. to ). fare structure), and Less control by Government can be generally accept revenue government. more “hands-off ”. risk. Gross Cost Concessionaires: Government generally More flexible solution Model Pay all revenue to takes more revenue risk. for expansionary government. Concessionaires may not situation. Bid the cost that they be encouraged to be Costs of providing need to be paid to innovative and develop services clearer than operate a specified their markets. with Net Cost Model, service, and unit costs These constraints can be and some evidence that for service variations. ameliorated by it leads to lower costs. Operate within imposed transferring a reasonable Government more in policy framework (eg. share of patronage risk control, has more fare structure). Revenue to the concessionaire. flexibility to seek risk may be shared, changes in services, and

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Brief Description Disadvantages Advantages though may reside more has a more active role in heavily with network development. government. Source: Asian Development Bank (2006a)

3. Technical Options of an Integrated Ticketing System There are two basic ticketing system structures to integrate different MRT concessionaires. The first would be multiple systems integrated by interoperability standards, and the second is a single integrated ticketing system. Previous TAs recommended the single integrated ticketing system structure in view of its major advantages, such as: z Less system implementation and procurement costs. z More scale of economics. z Less requirements/interfacing for each MRT line to negotiate with each other and set up standards for their own system. The structure of the single integrated ticketing system is shown in Figure 2.1 while its major components are comprised of: z Single common ticket. z Single clearing house. z Interoperable front-end. For the existing ticketing systems of BTS and BMCL, there may be a need for a transition period to migrate the systems into a single integrated ticketing system. In addition, the existing net cost concession model needs to be changed into a gross cost concession model in order to allow a common fare policy to be practical and feasible. Based on the current net cost concession, BTS and BMCL have different cost models and concession agreements. Thus, it will be difficult for them to charge a same fare tariff and eliminate a second flag-fall when transferring between different systems. A same fare tariff and the elimination of a second flag-fall comprise the core concept of a common fare policy. The system structure in the transition period is shown in Figure 2.2. The BTS and BMCL may first need to integrate their ticketing systems between each other before migrating into the gross cost concession model. After migrating into the gross cost concession model, they can be integrated with the new single integrated ticketing system.

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Figure 2.1: Single Integrated Ticketing System (End State) Source: Asian Development Bank (2007a)

Figure 2.2: Single Integrated Ticketing System (Interim State) Source: Asian Development Bank (2007a)

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4. Institutional Arrangements In order to enhance the coordination of public transportation systems development in Bangkok, previous TAs initiated the idea of establishing a Bangkok Integrated Transit Authority (BITA). There are two possible plans of implementation for BITA: (1) Management BITA In this option, BITA will be in charge of strengthening the integration and management of rail system development. Bangkok Metropolitan Administration (BMA), MRTA and SRT, under BITA’s control, will implement and manage their own MRT projects; however, they would be subject to BITA’s approval to deliver MRT projects and would follow BITA’s instruction guidelines for preparing MRT concession agreements. (2) Full BITA In this option, BITA would be responsible for ensuring the provision of the full integration of Bangkok public transportation systems, that is, at least for MRT lines and buses. BITA would replace the MRT functions of BMA, MRTA, SRT and the proposed Bus Control Management Authority (BCMA). This option would substantially improve the provision of seamless public transportation systems in Bangkok. Similar organizations of full BITA in other countries are , the Land Transport Authority in Singapore and the Verkehrsverbund in Germany.

2.2 Objectives of an Integrated Ticketing System Two kinds of objectives of the integrated ticketing system are defined to encompass an entire MRT system: 1. Social objectives (1) Increase ridership and maintain occupancy Increasing the ridership of MRT systems will decrease private vehicle trips and consequently reduce the level of traffic congestion and vehicle tail air pollution. However, the objective of increasing ridership must be accompanied by maintaining sufficient occupancy to avoid high operating costs. (2) Establish equitable fares For an integrated MRT network, MRT fares structure should consider the level and quality of service provided and should not be different due to the different costs of each MRT system. For example, the difference in the construction and operating costs for elevated, underground and at-grade MRT systems is significant. From the viewpoint of passengers, however, their services are almost the same. Hence, these systems should not have different fare structures. (3) Increase ease of use This objective is to simplify the fare structure of MRT systems. For example, should MRT fares be priced in a more “convenient” way for single journey tickets (15 or 20 Baht instead of 14 or 22 Baht)? The fare structure should be easily understood by customers and enable them to choose the most advantageous fare (i.e. monthly passes for students). 2. Financial objectives (1) Increase fare revenue and maintain ridership Under the circumstance of gross cost concession for MRT, the fare structure highly affects the government budget. MRT fare structure should increase revenue as much as possible. Considering the fare elasticity of MRT demand is usually less than -1 (neglect

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the minus sign), increasing fares means increasing revenue and the operator naturally would like to raise the fare as much as possible. This strategy however conflicts with the social objective of increasing ridership. Therefore, there should be an equilibrium mechanism between fare revenue and ridership. One method to achieve the equilibrium is to use the , which is fare revenue divided by fare operating costs. A ratio equal to 1 means that MRT fare revenue just covers the operating cost. In this situation the ridership can maintain a certain level and the government does not need to subsidize the operating cost. Therefore, both revenue and ridership objectives can be achieved with the farebox recovery ratio equal to 1. (2) Increase fare options This objective is to increase the ability of passengers to choose a fare option which best meets their needs. For example, two types of options would be (1) day passes with unlimited uses which would appeal to tourists and (2) passes with limits of number of trips, which would appeal to students and workers. (3) Reduce the fare collection cost Under the current situation of BTS and BMCL ticketing systems, their construction and operation costs in total are high because separate front-end and back-end systems are needed. One of the important objectives of the integrated ticketing system is to reduce the cost of fare collection. By using common systems and equipment items, such as add-value machines, the CCH, the key management system, card issuing machines, etc, MRT operators will save on this cost due to less purchasing, development and operation of such systems. In addition, the economy of scale reduces the unit price of systems and equipment. (4) Develop a more transparent fare collection system Under the gross cost concession, the government controls MRT fare revenue; therefore, the ticketing systems of MRT lines need to be transparent enough to ensure that the government receives accurate fare revenue. If MRT operators conduct their own ticketing systems, the government will need an extra mechanism to routinely inspect the results of fare collection. But on the other hand, if the government has direct control over the ticketing system, the results of fare collection will be more convincing.

2.3 Fares Structure 1. Different Fare Strategies Generally, two ticketing structures are commonly employed for MRT systems all over the world - flat fare and differential fare structures. Flat fare is the easiest solution for operators and passengers and requires simple low-cost technology for implementation. However, unfairness is a major problem found in the flat fare structure since operators or governments have to subsidize long-distance passengers from the income of the short-distance passengers. On the other hand, differential fare structure is the structure most favorable by operators and governments. In this case, fare can be determined by distance, time, and market demand; market demand pricing is the offering of passes and discounted tickets. Passengers and operators are likely to accept the differential fare structure when the technique of fare collection is feasible. The different types of strategies are summarized as follows: (1) Flat Fare－flat fare is the simplest fare strategy and the easiest one for people to understand. However, it causes unfairness because persons with long trips pay the same fare as those with short trips. (2) Distance-based Fare－paying according to the distance traveled is a very common concept

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in transport modes. Distance-based is the most fare benefit efficient. That is to say, passengers just pay what service they obtain. But, there should be a fare cap beyond a certain long distance; otherwise fares would be too expensive for passengers with very long distance trips. (3) Zonal fare – derived from distance-based fare. Zonal fare is simpler and easier to use for passengers. However, the zonal system has some equity concerns for drawing up the zone boundaries since a higher price will be paid when a zone boundary is crossed. (4) Time-based Fare－usually divided into peak-time and non-peak time fares. Peak-time fare is higher because peak-time passengers are usually less sensitive to fare increases. Time-based fare can achieve peak-spreading. It is useful if the off-peak time has spare capacity and the peak time is saturated. From the view point of passengers, however, peak time means more crowded conditions and more travel time. People may object to pay more money for less service quality and challenge the idea of time-based fare. Traditionally, time-based fare is basically a textbook strategy because of the difficulty in its implementation, but in fact it is a feasible option because of the electronic ticketing. (5) Market Demand Fare－this fare strategy depends on the frequency of use and willingness to prepay. Discount fares are usually provided for pass and stored-value card holders. Table 2.2: Comparison between Different Fare Strategies Fare strategy Advantages Disadvantages Flat Fare Easy for people to understand Large subsidies from short-distance (especially for visitors). trips to long-distance trips and unfair Easy for operators to collect fares. for short-distance trips. Possible to lose many short-distance trips. Distance-based Fare Generally considered equitable Unpopular for passengers with long because longer trips require higher trips. cost. Fare revenue most efficient. Zonal Fare Fare rate is simple and easy to Zonal boundaries are not easily collect fare. divided. Unfair for short trips across zonal boundaries Time-based Fare May increase non-peak time trips Could cause the objection from and balance peak and non-peak peak-time commuters. time ridership. May increase the total revenue. Market Demand Welcome for frequent riders. May decrease revenue. Fare Source: Consultant.

2. Suggested Fare Strategies Distance-based fares are implemented in most Asian cities, ex. Seoul, Hong Kong, Singapore, Taipei, Guangzhou, and Shanghai. On the other hand, most European cities apply zonal fares, whereas flat fares are often employed in North American cities. Table 2.3 compares these three fare structures based on distance. Currently, a differential fare structure is applied to Bangkok’s mass rapid transit systems and passengers pay their fares according to the distance traveled. For BTS, single-trip fare starts from 15 Baht and adds 1 or 2 Baht after every station until reaching the fare ceiling of 40 Baht, and for BMCL, single-trip fare starts

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from 15 Baht and adds 2 or 3 Baht after every station until reaching the fare ceiling of 39 Baht. There is also a 15% discount for BMCL users with stored value cards while BTS has just recently terminated its promotion of a 20% discount for the Sky SmartPass (its stored value cards) during August 2008. Table 2.3: The Comparison of Fare Structure Based on Distance Fare structure Flat fare Zonal fare Distance-based fare Feature Equity to passengers Low Medium High Fare benefit efficiency Low Medium High Simplicity of fare collection High Medium Low

For most passengers, distance-based fare is the most equitable fare structure since zonal fare has some equity concerns when a zone boundary is crossed. The fare structure of all public transport modes needs to be integrated in order to apply zonal fare, otherwise a big portion of trips across zones might migrate to other modes which cost much less, thereby decreasing ridership. The distance-based fare is recommended for future Bangkok MRT systems. Nonetheless, due to its simplicity and ease to collect, zonal fare will be a long term option for all Bangkok public transportation modes when the respective fares are integrated. Market demand fare is also suggested for future Bangkok MRT systems. The strategy can meet the demand of different groups of riders, such as frequent riders, tourists and students. For some large metropolitan areas like Singapore and London, distance-based fare is accompanied by time-based fare to balance the peak and non-peak period ridership of the MRT systems and to reduce the operation burden in peak periods. However, for all current public transport systems in Bangkok, only distance-based fare is applied with the exception of non-air con buses (flat fare is used). In fact, time-based fare in Bangkok could persuade peak hour passengers to instead take a taxi or drive and thereby cause a negative impact for street traffic. From observations made by the Consultant, the ridership difference between peak and non-peak periods of BTS and BMCL is not very significant. The phenomenon may be due to the large number of tourists traveling throughout the day and lacking of industrial workers in Bangkok. It seems that visitors and the working class have opposite travel behavior from the standpoint of travel time of day. Therefore, time-based fare is not recommended in Bangkok’s MRT systems. In Bangkok, every MRT system is owned by a different concessionaire and has different concession conditions. Hence, one may expect every system to have a different fare structure. But, for customers, there is no significant difference of service between MRT systems; therefore, the same fare rate should be applied across all MRT systems. Same fare rate across all MRT systems is defined as uniform fare. Most of the MRT systems in large metropolitan areas employ a uniform fare. If future MRT systems apply a gross cost concession model, then all fare revenue should be given to the government directly and the government should pay the service fee to concessions based on services they provide. Even though the construction and operating cost for changing to a gross concession model would not affect the fare rate of current MRT systems, migrating from net cost model to gross cost model is a process that can be highly politicized, risky and costly. Hence, due to the uncertain limitations of current concessions, not much can be done in changing to a uniform fare for current MRT systems in the short term. But in the long run, every MRT system needs to apply the uniform fare policy to achieve the objectives defined. Another issue related to fare policy is the flag-fall. Currently, BTS and BMCL collect

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their own flag-falls with 15 Baht. So, passengers transferring between the systems need to pay 30 Baht for both flag-falls. When considering that the average fare for each system is equivalent to 22 Baht, these flag-falls are costly and certainly harm the ridership of transfer trips. Collecting both flag-falls also goes against the objective of establishing equitable fares. Although the policy of collecting flag-falls once will decrease the average fare of transfer trips, according to the previous TA (ADB 2007), only 0.2% of the revenue would decrease. This is because the total ridership would increase by 8.3%, which thereby compensates for loss generated by the lower average fare. So, to attract more passengers to ride the MRT, future Bangkok MRT systems must apply an integrated fare policy (no second or subsequent flag-fall) which will effectively make up for lost fare revenue. Under the current situation, each MRT system has its own smartcard ticketing system and is not interoperable, which means that the ticketing system cannot identify passengers transferring from one system to another. For the current MRT systems, an integrated fare policy can only be put into practice if a common ticketing system is implemented. For reasons of the elimination of 2nd flag-fall and the interoperability of ticketing systems between MRT systems, a Common Ticketing Company must be set up to process the common ticketing of all MRT systems. The Common Ticketing Company should be led and financed by the Government in order to control the fare revenue of MRT operators. Being owned and led by the Government will also prevent MRT concessions to enter into any commercial arrangements regarding fare revenues between themselves.

2.4 Fares Models

2.4.1 MRT Price Elasticity of Demand 1. MRT Price Elasticity Review The objective of MRT fare model analysis is to suggest a future MRT fare model based on the gross cost modes for MRT operators. To this end, MRT price elasticity of demand is firstly examined. The MRT price elasticity of demand is defined as (change of MRT ridership) / (change of MRT fare), and has been analyzed in a number of studies; for instance, (1) Balcombe et al (2004) studied the demand of public transportation systems in England and obtained the following results: The short term (less than 2 years) MRT fare elasticity of demand is between -0.15 and -0.55 with an average of -0.30. The long term (12 to 15 years or longer) MRT fare elasticity is between -0.61 and -0.69 with an average of -0.65. The short term peak hour MRT fare elasticity has an average of -0.26, and non-peak hour has an average of -0.48. The short term Bus fare elasticity has an average of -0.42, and long term has an average of -1.01. (2) According to a recent fare adjustment in 2008 for the Taipei Metro system, The fare elasticity of demand surveyed one week after the adjustment is -0.39; (3) Litman (2004) compared public transportation fares in several areas (mainly in Europe and Australia) and suggested the following elasticity of demand: The short term elasticity is between -0.2 and -0.5, and the long term elasticity is between -0.6 and -0.9. The short term elasticity in peak periods is between -0.15 and -0.3, and the long term

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one is between -0.4 and -0.6. The short term elasticity in non-peak periods is between -0.3 and -0.6, and the long term one is between -0.8 and -1.0. From the observations of the above studies, it can be seen that the fare elasticity of MRT is generally lower than that for bus, plus the short term elasticity is lower than the long term elasticity, and the peak period elasticity is lower than non peak period elasticity. According to fare policy papers in previous TAs (2006b, 2007), fare elasticities of demand of current and future MRT systems are estimated between -0.49 and -0.92 with an average of -0.7. However, these reports also concluded that these elasticities of demand are possibly estimated too high. Instead, a -0.5 elasticity is more suitable in the conclusion of previous TAs. 2. Estimated Bangkok MRT Price Elasticity For estimating the Bangkok MRT price elasticity, the reality that MRT fares are relatively much higher than fares of other public transportation systems, such as buses, has to be taken into consideration. For instance, for a single journey ticket of an 8 km trip, the current BTS fare is around 40 Baht and the BMCL is around 30 Baht. These fares are 2.9 and 2.1 times as much as the fare of air-con buses (only 14 Baht). But, because of the congested street traffic in Bangkok, MRT has much faster operation speed than buses and even taxies; that is, the service of buses and taxis can hardly replace that of MRT. Another phenomenon is that MRT ridership in Bangkok has a large number of tourists. It is considered that tourists usually have a lower elasticity than commuters, and a lower elasticity of MRT fare is expected. Furthermore, from the discussion of Bangkok MRT fare elasticity of demand conducted at progress meetings of this project, it was observed that the average income of MRT users is expected to be higher than that of the users of other public transportation modes. Therefore, in view of all of these characteristics, the MRT fare elasticity of demand is likely to be less than -0.5. Consequently, it is suggested that an average elasticity of -0.4 is used for MRT passengers for the analysis of fare models in this project.

2.4.2 Testing of Various Fares 1. MRT Demand Based on eBUM The Extended Bangkok Urban Model (eBUM) is a transportation demand model for the Bangkok metropolitan area developed by the Office of Transport and Traffic Policy and Planning (OTP). This model is based on the real travel demand (trips) surveyed in 2007 and forecasts travel demands for 2012, 2017, 2022, 2027 and 2032. This project uses the MRT demand estimation in 2012 for fare model analysis. There will be five MRT lines operating in 2012 – Red (including Airport Link), Green (Light and Dark), Blue and Purple Lines (including the operating sections of Blue and Green Lines). The total ridership per day is estimated at 2,400,000 trips. Although this project originally focuses on the fare policy for new MRT lines, it is difficult to separate the ridership of existing lines from the total ridership for the entire network. For example, should trips which cross the existing section and future section of Blue Line be considered as trips of existing lines or future lines? Therefore, this project estimates the demand for fare models based on the entire MRT network. 2. Fare Model Cases Several future MRT lines extend to suburban areas where the distance between adjacent stations in those areas differs a lot from the distance between stations in the central area. For example, the Red Line (Bang Sue-Rang Sit and Bang Sue-Taling Chan) is 41 km long and has 16 stations and an average distance for adjacent stations of 2.7 km. For the existing Dark Green Line with 17 km long and 17 stations, the average distance for adjacent stations is 1.1 km. Fare models in this project therefore make use of distance (by kilometer) as the fare

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tariff instead of the number of stations traveled. Seven distance-based/flat and integrated fare models are estimated: CASE 1, flat fare of 15 Baht charged once CASE 2, single flag-fall 10 Baht, 1Baht/km CASE 3, single flag-fall 10 Baht, 1.5 Baht/km, (base case) CASE 4, single flag-fall 10 Baht, 2 Baht/km CASE 5, single flag-fall 15 Baht, 0.5 Baht/km CASE 6, single flag-fall 15 Baht, 1 Baht/km CASE 7, single flag-fall 15 Baht, 1.5 Baht/km Results of these models are shown in Table 2.4. The average fare per trip for CASE 3 is equal to 22.45 Baht, which is close to the current average fares per trip for both BTS and BMCL in 2007 (21.3 and 21.2 Baht for each system). Therefore CASE 3 is served as the base case for the estimation of ridership for other fare models. The suggested elasticity of demand -0.4 is utilized to estimate the ridership. According to the discussion from section 2.3, the integrated fare strategy is applied in all models. That is, no matter how many times passengers transfer between MRT lines, the flag-fall of these trips is collected once. Besides distance-based fare models, the model of a flat fare of 15 Baht is included for analysis too. The farebox recovery ratio (fare revenue / operating cost) is utilized to compare these fare models. 3. Operation Costs The operation cost of CASE 3 (base case) comes from the combined BTS and BMCL operation cost per trip in 2007. The cost is estimated at 19.1 Baht per trip. Since new MRT lines will just begin to start operation in 2012 and will thereby provide for much extra capacity, the marginal cost per trip is assumed at 13.4 Baht per trip, 30% less than the cost per trip of CASE 3. 4. Fare Model Comparison Among all models, the farebox recovery ratio of CASE 5 (fare tariff = flag-fall 15 Baht + 0.5 Baht/km) is the closest to 1. That is, fare revenues are very close to the operating cost (in fact 303 million Baht less per year). The average fare of CASE 5 is 15% less than the base case. With regard to relatively expensive MRT fares today (compared with other public transport fares), future MRT systems should consider lower fares to attract more passengers and to increase the ridership portion of MRT among all public transport modes from a mere 10% in 2007. For CASE 5, the ridership is 141,000 trips per day more than the base case. Because of the higher income population for MRT passengers than bus riders, these trips will largely come from the private vehicle or taxi trips and reduce the traffic congestion on the road network. In order to explore the impact of fare elasticity of demand, a sensitivity test of elasticities from -0.2 to -0.8 is made (Table 2.5 and 2.6). The results show that farebox recovery ratio is slightly affected by the change of elasticity. The ratio of CASE 5 is from 0.961 to 0.983, with a mere 0.004 for a 0.1 elasticity change. The difference between fare revenues and operating costs is from 303 to 673 million Baht per year. That is, increasing the elasticity by 0.1 will enlarge the revenue surplus (fare revenues minus operating costs) for an amount of 62 million Baht per year. For all elasticities tested, CASE 5 always has the farebox recovery ratio closest to 1.

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Table 2.4: Fare Models Results MRT MRT fare Average fare Fare elasticity of Operating cost Farebox recovery patronage/day revenue/year (Baht/trip) demand (million Baht /year) ratio1 ('000 trips) (million Baht) CASE 1, flat fare of 15Baht 2,719 14,140 14.25 -0.4 18,290 0.773 charged once CASE 2, single flag-fall 2,577 16,359 17.39 -0.4 17,599 0.930 10Baht, 1Baht/km CASE 3, single flag-fall 2,400 18,685 21.33 Base Case 16,732 1.117 10Baht, 1.5Baht/km CASE 4, single flag-fall 2,238 20,368 24.94 -0.4 15,937 1.278 10Baht, 2Baht/km CASE 5, single flag-fall 2,541 16,873 18.19 -0.4 17,423 0.968 15Baht, 0.5Baht/km CASE 6, single flag-fall 2,364 19,100 22.14 -0.4 16,553 1.154 15Baht, 1Baht/km CASE 7, single flag-fall 2,189 20,785 26.01 -0.4 15,701 1.324 15Baht, 1.5Baht/km Farebox recovery ratio is equal to (MRT fare revenue)/(Operating cost). The average fare per trip for CASE 3 is equal to 22.45 Baht, which is close to current average fares per trip for both BTS and BMCL (21.3 and 21.2 Bahts). Therefore, CASE 3 is used as the base case for the estimation of ridership for other fare models. Resource: Consultant.

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Table 2.5: Sensitivity Analysis of Fare Elasticity of Demand (for CASE 5 only) MRT MRT fare Average fare Fare elasticity of Operating cost Farebox recovery patronage/day revenue/year (Baht/trip) demand (million Baht /year) ratio ('000 trips) (million Baht) CASE 5 with a elasticity of 2,471 16,404 18.19 -0.2 17,077 0.961 -0.2 CASE 5 with a elasticity of 2,506 16,638 18.19 -0.3 17,250 0.965 -0.3 CASE 5 with a elasticity of 2,541 16,873 18.19 -0.4 17,423 0.968 -0.4 CASE 5 with a elasticity of 2,577 17,107 18.19 -0.5 17,596 0.972 -0.5 CASE 5 with a elasticity of 2,612 17,342 18.19 -0.6 17,768 0.976 -0.6 CASE 5 with a elasticity of 2,647 17,576 18.19 -0.7 17,941 0.980 -0.7 CASE 5 with a elasticity of 2,683 17,811 18.19 -0.8 18,114 0.983 -0.8 Resource: Consultant.

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Table 2.6: Sensitivity Analysis of Fare Elasticity of Demand (for all CASES) Elasticity -0.2 -0.3 -0.4 -0.5 -0.6 -0.7 -0.8 Fare Model CASE 1, flat fare of 15Baht 0.760 0.767 0.773 0.779 0.785 0.791 0.796 charged once CASE 2, single flag-fall 0.920 0.925 0.930 0.934 0.938 0.943 0.947 10Baht, 1Baht/km CASE 3, single flag-fall 1.117 1.117 1.117 1.117 1.117 1.117 1.117 10Baht, 1.5Baht/km CASE 4, single flag-fall 1.292 1.285 1.278 1.271 1.263 1.255 1.247 10Baht, 2Baht/km CASE 5, single flag-fall 0.961 0.965 0.968 0.972 0.976 0.980 0.983 15Baht, 0.5Baht/km CASE 6, single flag-fall 1.157 1.155 1.154 1.153 1.151 1.150 1.148 15Baht, 1Baht/km CASE 7, single flag-fall 1.343 1.334 1.324 1.313 1.303 1.292 1.280 15Baht, 1.5Baht/km Resource: Consultant.

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2.4.3 External Benefits Three major items are considered as external benefits for MRT systems: 1. The vehicle operating cost saved because of less road traffic for those who continue to drive. 2. The time cost saved for those who continue to drive. 3. The environment cost saved from those who take MRT instead of driving. OTP studied MRT benefits from a comparison of the road traffic conditions with and without the entire MRT systems. Table 2.7 shows vehicle distance and time traveled with and without the MRT project implemented, while Table 2.8 shows the different average vehicle operating cost. With an inflation rate of 3%, it can be estimated that in 2012 the MRT project can save the vehicle operating cost of 3,819 million Baht per year in the 2007 price. Table 2.9 shows the average value of time in different years. It is estimated that in 2012 this value costs 112.9 Baht/person-hour in the 2007 price. The calculated value generated by the average value of time multiplied by the travel time saved by the MRT project in 2012 is equivalent to 9,568 million Baht. And for environment cost, OTP estimated that the average environment cost for light-duty vehicles is 5.0 Baht/vehicle-km in the 2003 price, while the derived environment cost saved by the MRT project is 5,916 million Baht in 2012. Adding up these three kinds of costs, the MRT project can totally save the external cost of 19,302 million Baht in 2012. Table 2.7: Vehicle Distance and Time Traveled per Day, with and without the MRT Project Implemented Without MRT Project With MRT Project vehicle distance vehicle time speed vehicle distance vehicle time speed

(million km) (million hr) (kph) (million km) (million hr) (kph) YR2011 226.98 10.07 22.54 224.73 9.84 22.84 YR2012 235.27 10.55 22.34 232.39 10.23 22.73 YR2016 268.45 12.47 21.53 263.02 11.80 22.29 Source: OTP (YR 2011 and 2016). Interpolation is used for data in YR 2012.

Table 2.8: Average Vehicle Operating Cost of Representative Vehicle 2003 constant prices Speed(kph) 10 20 30 40 50 60 70 80 Baht/Vehicle km 8.86 6.02 5.12 4.68 4.42 4.27 4.20 4.17 Source: OTP Representative vehicles taken are medium-sized passenger cars. Table 2.9: Average Value of Time 2000 constant prices 2006 2011 2012 2021 Average value of time 71.4 88 91.8 126.2 (Baht/person hour) Source: OTP (YR 2006, 2011 and 2021). Interpolation is used for data in YR 2012. Based on Urban Master Plan data for High Comfort Public Transport Category.

The ridership of the entire MRT project is 2.4 million trips per day and has a total external benefit of 19,302 million Baht in 2012. Plus, when compared with the base case (CASE 3), CASE 5 has an additional ridership of 0.141 million trips per day; therefore, it can be estimated that the

2-14 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report external benefits for CASE 5 are 1,134 million Baht per year. Taking into account for secondary external benefits, such as less traffic accidents and stimulation of land and economic development, the external benefits should be even much greater than the additional operating costs of 690 million Baht from the base case (CASE 3).

2.4.4 Suggested Fare Model Among the 7 fare models of analysis, CASE 5 has a farebox recovery ratio closest to 1 and has external benefits much greater than the additional operating costs of the base case. The fare tariff of CASE 5, with single flag-fall of 15 Baht and 0.5 Baht per km, is recommended for future MRT systems. For an 8-km trip, the suggested fare is 19 Baht, which is reasonably priced between the current fare of BTS/BMCL (26 to 35 Baht) and the fare of air con buses (11 to 14 Baht). However, the additional operating costs of 690 million Baht per year from the base case must come from the government.

2.5 Fare Products 1. Current Fare Products The current fare products of BTS and BMCL are shown in Table 2.10. There are three major categories: single journey tickets, stored value cards, and day passes. Only full price tickets are offered by BTS for single journey tickets and stored value cards (Sky SmartPass) since BTS just ended the 3-year promotion of a 20% off full price for Sky SmartPass in August 2008. BMCL’s single journey tickets and stored value cards provide adult tickets for adults and discounted tickets for children, the elderly and students (stored value cards only). Adult stored value cards obtain a 15% discount from the full price. BTS’s 30 Day Passes, which include 20, 30 or 40 trips, are categorized as adults and students. BTS also provides 1 Day Passes for unlimited trips. On the other hand, 1, 3 and 30 Day Passes for unlimited trips are provided by BMCL. And for single journey tickets, BTS and BMCL have the same charges of 15 Baht, but at the same time have differing distance-based fare tariffs. But, an average fare per trip is around 22 Baht for both systems. Table 2.10: Current Fare Products of BTS and BMCL BTS BMCL Single journey ticket Adult1 Adult, child, elder2 Stored value card Sky SmartPass3 Adult, student, child, elder3 Day pass 1 day pass1 (unlimited) 1, 3, 30 day pass3 (unlimited) 30 day pass3 (20, 30, 40 trips, student, adult) 1: magnetic cards, 2: IC tokens, 3: IC cards

One important prerequisite for the common ticketing system is to integrate fare products for all systems, especially for single journey tickets and stored value cards. If fare products are not standardized; for example, if one population of passengers (i.e. children younger than 6 years of age) has a discount in “System A” while no discount in “System B” is offered, then should these passengers purchase a full price ticket or a discount ticket once they cross different systems? Another case is the percentage of discount difference between the systems (for example, store valued cards with 15% off for BMCL and no discount for BTS). These phenomena will bring about a lot of complaints and confusion from passengers. The functional requirements for the system will also be complicated and difficult to design. Therefore, fare products should be standardized before the implementation of the common ticketing system for Bangkok MRT systems takes place.

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2. Recommended Fare Products The following fare products are recommended for future Bangkok MRT systems: (1) Single journey tickets The different single journey tickets of current MRT systems have caused confusion and seem unfair from the viewpoint of passengers. Passengers need to pay two basic fares if they travel on different lines in one trip. In the future, single journey tickets need to be integrated across different MRT lines. That is, only one single journey ticket is needed for a MRT trip. To save on the cost of and operating the integrated ticketing system, it is suggested that the fare media of single journey tickets is the same as that with stored value cards. Single journey tokens will be good examples. Two kinds of single journey tickets are suggested below: A. Basic fares Refers to adult fares B. Discount fares Discount fares refer to fares such as child, student, concession (for handicapped) and elderly fares. Single journey tickets may have only adult fares, but stored value cards should have these kinds of fares offered to the populations of these groups as needed. The discount for the young or students for the age group of 16 to 24 is important for public transportation operators because they are about to obtain driver licenses and have more freedom of modal choice. Without a discount, this age group will easily drift to private modes of transport and cause a major loss for operators in terms of fare revenue. The discount percentage and their terms should be the same among all systems (such as stipulating children tickets for people older than 6 years and younger than 12 years, and elderly tickets for people older than 65 years of age). A discount level of 50% is suggested for child, student, concession (for handicapped) and elderly fares. (2) Stored value cards To promote frequent usage for MRT systems and to decrease the fare collection cost, stored value cards may offer a discount of the price of single journey tickets. The percentage of discount should be the same across MRT systems. Examples of fare discount for stored value cards in other countries are shown in Table 2.11. The discount level ranges from 0 to 66%. A 20% discount is recommended for stored value cards in future Bangkok MRT systems. Student and concessionary (for handicapped) stored value cards should ideally be personal cards (with a choice of having a printed photo on the cards), in order for the government to control the subsidy for these fares and to prevent fraudulent use of these cards. Table 2.11: Discount Level for Stored Value Cards in Other Cities Taipei Hong Kong Beijing London Systems EasyCard Octopus Kuaipay Oyster Discount level for 20% for MRT Around 10% for MRT 20% for bus 0~66% for MRT stored value cards 0% for other modes 5~10% for bus 0% for MRT 50% for bus Resource: Consultant.

(3) Day/month passes Two kinds of passes are considered for future Bangkok MRT systems. The first

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kind is time-based unlimited use for all MRT systems in which 1, 3, 7, and 30 day passes are suggested. The second kind is time-based limited use for all MRT systems in which 30 day passes with 20, 30, and 40 trips are suggested. The first kind of passes focuses on tourists because they usually do not know how many trips they will take when they buy passes. The second kind of passes is for commuters that usually know the number of trips they will take in a certain period. To save on the cost of building and operating the integrated ticketing system, it is suggested that the fare media of day/month uses smartcards. Recommended future MRT fare products are shown in Table 2.12. Table 2.12: Recommended Future MRT Fare Products Single Journey Ticket Stored Value Card Pass Adult, Child, Elderly Adult, Child, Student1, Adult, Child, Student1 Concession1, Elderly 1: It is recommended to use personal cards for students and concessions in order to obtain government subsidies and to prevent misuse. Note: the definition of child, elder, concession, and student needs to be same across all MRT lines.

2.6 Fare Policy Conclusion We suggest that distance-based, uniform and integrated fare strategies should be employed by the Bangkok MRT network in the future due to the equity and efficiency of these strategies. A uniform fare tariff is needed because there is no significant difference between services provided by MRT operators. The flag-fall should be charged only once no matter how many MRT lines a rider transfers in a single trip. Otherwise, it will discourage riders who need to transfer MRT lines. A complicated and controversial time-based fare strategy is not recommended because it may dissuade people to ride the MRT during the peak hour and cause a negative impact for street traffic. The fare tariff with a single flag-fall of 15 Baht and 0.5 Baht per km is recommended as the fare formulation for MRT lines. The fare revenue of all MRT lines calculated by the model can just cover operation costs because its fare box ratio is close to 1. In addition, external benefits for this model are much greater than the decreased fare revenue compared with the revenue collected by the current fare level of BTS and BMCL. Three types of fare products are planned for future MRT systems: single journey tickets, stored value cards and passes, whereas discount fares should be provided to children, students, the handicapped and the elderly. Finally, to prevent complications for fare products, the discount percentage and their terms should be the same among all MRT systems.

2.7 Implementation Strategies for the MRT Common Ticketing System 1. Front-end Systems vs. Back-end Systems The structure of a common ticketing system can be as shown in Figure 2.3. The entire system is divided into two parts; the front-end and back-end systems. The major function of the back-end system is the central clearing house (CCH). The CCH processes transaction data from the front-end system and then performs settlement and clearing with transit operators such as MRT and bus companies. Other important functions of the back-end system include the Key Management System (KMS) and Card Issue Machine (CIM). The front-end system consists of systems and equipment which makes contact with the customers directly and collects the associated transaction data. It includes ticketing gates or validation machines, add-value machines, station process systems, and central process systems for transit operators. These systems and equipment items usually reside inside the transit

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operator’s offices, their stations or vehicles. This is the reason why they are called the front-end system. The front-end system is also called the Automatic Fare Collection (AFC) system. It should be noted that the operation of the back-end system is complicated and needs professional staff to negotiate with all participant transit operators. Business agreements with transit operators are required to perform the settlement and clearing; therefore, a new company should be set up to operate the back-end system.

Figure 2.3: Structure of the Common Ticketing System

2. Integrated Ticketing Approaches Two methods to integrate ticketing systems are considered in this project. The first method is to ensure compatibility between the different smartcards so as to enable the continued use of existing smartcards. For this situation, the front-end ticketing equipment and the back-end applications of every operator need to be modified. The SAM card1 of every operator’s system needs to be installed inside every other’s front-end equipment, and the firmware2 of front-end equipment needs to be modified in order to allow the front-end equipment to accept smartcards issued by another operator. This method is called multiple CCH because every MRT operator needs their own CCH. Although passengers do not need to replace the existing smartcards with new-issued smartcards, modifying the existing front-end equipment may be very costly and time consuming. Besides this, operators normally would not trust other clearing house systems; thus, operators are likely to maintain their own CCH for

1 SAM(Security Access Module) cards are smartcards to hold cryptographic keys inside front-end equipments. A SAM card is usually in a reduced form similar to a SIM card. A SAM card interacts with a transit card to check if the transit card is authentic when the transit card is validated by the front-end equipment. 2 Firmware is a computer program that is embedded in a hardware device (ie the front-end equipment). Although firmware is a computer program, it is tightly linked to a piece of hardware, and has little meaning outside of it.

2-18 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report dealing with routine transaction and fund-allocation. Consequently, every CCH needs to settle with other CCHs which will cause a lot of routine work and negotiation time. Plus, for card reading and writing, readers need to communicate with cards from different operators and to transmit data to every CCH. This will increase errors produced during the card reading/writing process and the risk of data loss. Therefore, in view of the increasing price tag of modification of equipment and CCH for MRT operators, this method does not appear to be an attractive or preferable option. The second method of integrating the systems is to issue a common ticket. By forming a new independent ticketing company (Common Ticketing Company), a brand new standard ticket format can be determined with the consensus of operators and government representatives and their consolidated requirements. The Common Ticketing Company shall hence be in charge of the new tickets, providing a new central clearing house system as well as the ticket operation and management. Only the SAM card from the new ticketing company needs to be installed into front-end equipment of existing systems. Existing operators need to modify their systems according to the new common ticket system requirements and customers can still use the existing cards if they don’t travel beyond the existing systems. Under this situation, existing operators will not duplicate the investment of modification and spare the addition of another clearing house system. Also, future MRT operators will need to follow the new common ticket system requirements to construct their own electronic payment systems. However, attention must be paid to certain issues for the common ticketing system such as the management of the enormous amount of money deposited by the passengers. Thus, governmental agencies must join the board of the Common Ticketing Company to prevent any mishandling from misallocating funds and resources. The establishment of rules and regulations are relatively important to monitor the smartcard business development. Due to the fact that common ticketing business involves expertise in a new technology, the common ticketing system will require a skilled team to operate and maintain (O&M) the system. In the beginning stages of operation of the CTC, it may be difficult to find sufficient and experienced staff members to perform the O&M job. A good strategy to solve this problem is to introduce the construction team of the back-end system as the O&M team in the beginning stages of operation. Afterwards, the O&M activities will be smoothly transferred to the CTC after one or two years of operation.

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Table 2.13: Advantages and Disadvantages of Different Integration Approaches Multiple Systems Single System Advantages It is technically easier if existing Front-end equipment of the existing operators are only considered. system only needs to be upgraded one Customers don’t need to change time. existing cards. Future MRT operators don’t need to construct their own CCH. Government has more ability to direct ticketing policy. More ability to expand the system to other public transportation modes such as buses. Disadvantages More MRT operators, worse Need to form a new Common performance of front-end equipment. Ticketing Company. On-station customer service cannot Need to set up a serial of standards deal with the problems of smartcards for the common ticketing system. issued by all other operators. More risk of vendor lock-in. Every CCH needs to settle with Need for more government roles and several other CCHs. It will cause responsibilities. complications and security problems. Every operator needs to negotiate with all other operators one by one. More security problems come from SAM cards storage. Source: Consultant.

3. Recommended Approach The recommended approach is for (1) Single System, (2) Single Issuer, and (3) Multiple Vendors. A set of common ticket system standards should be defined to assure interoperability between the back-end system (including central clearing house, key management system and card issue machine), front-end devices, concessionaire systems and cards. A Common Ticketing Company (formed by the government and related stakeholders) defines the implementation and operation requirements for the back-end system and then invites contractors to tender. Requirements for both back-end system and front-end devices must follow the common ticket system standards. These system standards should be included in the procurement documents for each system or device. The Common Ticketing Company is the Single Issuer. Although multiple issuers allow each MRT operator to have great flexibility in managing their own cards, it creates extra costs to construct and maintain several card-issuing systems. Multiple issuance systems also create security problems, such as keys exchange and blacklist downloading. The development concept of the MRT common ticketing system is described in Figure 2.4. OTP will be the policy and planning organization for the entire MRT network, while MRTA (Mass Rapid Transit Authority), BMA (Bangkok Metropolitan Administration) and SRT (State Railway of Thailand) will be management authorities for MRT concessionaires (including future concessionaires, BTSC and BMCL) to regulate MRT systems. Owing to the complexity (both technical and institutional) of the common ticketing system, there will be a project management team to coordinate all stakeholders and to supervise the implementation and operation of the common ticketing system.

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OTP

Policy & planning Project Regulators Management Contractor BMA MRTA SRT manage regulate Common MRT Operators Ticketing BTS BMCL Airport New Company settlement Link Operators Key management System issue cards contractor CPS, SPS CPS, SPS CPS, SPS CPS, SPS Establish Front-end Front-end Front-end Front-end Back-end common System ticket devices devices devices devices standards sell sell sell sell cards cards cards cards Cards Cards Cards Cards

Source: Consultant. Figure 2.4: The Development Concept of Common Ticketing System

Due to the different settings for MRT systems (such as different construction and operation costs, different ridership, etc.) and one flag-fall for each system, the present approach of net-cost concessions cannot support the recommended fare strategies, which are based on uniform and integrated fare. In order to apply these fare strategies, the government needs to control the fare revenue. Therefore, the approach of gross-cost concessions must be applied for future MRT systems. In short, the Common Ticketing Company will be set up by the government, the MRT fare revenue will go directly to the new company and be transferred to the government, and the government will distribute the service fee to MRT operators based on services provided. So, MRT operators can reduce the risk resulting from the level of ridership. There is no direct linkage of service fee and fare revenue. The government has more flexibility on fare policy to pursue social, financial and environmental objectives for the entire MRT network. Also, the government can double-check the amount of service fee to pay MRT operators by ridership reports from the CTC as well as reports from MRT operators. 4. Common Ticketing Approach for the Transit Period Although the final goal of the ticket integration process is to have a situation in which every MRT passenger is using a common ticket, resolving business-political matters associated with migrating the net cost model of the current and soon-to-be opening MRT lines to a future gross cost model will require further discussion and negotiation among relevant stakeholders. Therefore, the planning scope of the Common Ticketing System for this project is limited only to the five future MRT lines referred to in Table 1.1. For the current and soon-to-be-opening MRT lines, however, there will have to be a transition period, and during this period, their ticket systems should accept two kinds of cards by modifying related facilities; one kind for their own systems, and one kind for the common ticketing system. The

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former ones can be used only in their own systems and the latter ones can be used across the entire system. During the transit period, all transactions should go through the CCH, and their fare structure remains the same, i.e., flag-fall and current fare are unchanged. However, the former systems should be gradually replaced by the latter systems so as to reduce the operation and maintenance costs of duplicate systems. At the final stage, an integrated fare structure should take place by rolling out gross-cost concessions and canceling additional flag-fall charges when making transfer. In the technical aspect, two approaches for the system migration for the existing and soon-to-be opening MRT systems are considered. The first approach (Approach 1) is to modify the current MRT front-end systems to accept both existing smartcards and common tickets (by loading the common key on gates). By downplaying the current smartcard usage, these operators allow new users to only purchase the common tickets. Regarding the current smartcards, they can be either exchanged for common smartcards or transformed into the format of common smartcards without exchanging cards, depending on the degree of format difference between the current and common smartcards. Also, their back-end systems will need to be modified so as to link to the new CCH. Approach 2 is to install additional ticketing gates for common ticketing in the transition period. As in Approach 1, the existing back-end systems will also need to be modified to link to the new CCH. But, unlike Approach 1, which needs to modify ticketing gates to accept both cards, Approach 2 just installs new gates or changes a part of current gates for common smartcards. Regardless of which approach is used, in the end, only common smartcards are allowed to be used in the system to decrease the operation cost caused by duplicated systems. From the users’ perspectives during the transition period, if they want to ride on the new MRT systems, then they need to use common tickets. But, if they want to ride only on the current MRT systems, then they can still use the current smartcards without changing into common smartcards. Moreover, since there are around 2 million smartcards in use, the migrating process in the transition period should be as smooth as possible. The concept of both of these approaches is shown in Figure 2.5.

Current Current Common Common Smartcard Smartcard Smartcard Smartcard

Approach 1

Load common key

Current Current Common Common Common Smartcard Smartcard Smartcard Smartcard Smartcard Approach 2

Load common key

Transition Period Figure 2.5: Approaches of System Migration

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2.8 Current MRT Operator Plans for Establishing a JV Company to Issue Common Tickets on Their Own Systems Currently, the existing MRT operators are planning to set up a joint venture company to issue common tickets between their own systems on their existing lines and future line expansions. However, if this JV proposal moves forward, there will be two major issues of concern. First, the JV Company may choose an integrated ticketing approach which causes the least modification cost to their existing systems, rather than the most efficient approach for all MRT systems, including existing and future ones. If that is the case, there will be a big issue of vendor lock-in if new operators want to join the JV ticketing systems. And second, the standards of the JV company system will differ from the standards of the new MRT common ticketing system. This may create barriers for new lines to join, and thereby further complicate the process for integrating all of the MRT ticketing systems. This JV proposal is one of the greatest risks that the CTC and the common ticketing system will encounter. The existing MRT operators have a good opportunity to begin operators for the new MRT lines because they have more experiences than other competitors. If this JV plan about the integrated ticketing system is finally realized, then this portion of new MRT lines will likely use the JV ticketing system. Hence, some issues will come about from this scenario. First, the volume of transactions of the CTC common ticketing system will become low since the presence of the JV ticketing system will generate less revenue from transaction service fees and therefore create a financial problem for the CTC. Second, the cost to migrate the JV ticketing system to the CTC common ticketing system will be high and thereby mitigate the willingness for migration.

2.9 Applications of Electronic Money (E-money) and Electronic Tickets (E-ticket) E-money is generally used for micro-payment which may not be different from the payment made by credit cards or bank cards. The service charges of micro-payment transaction are lower than those of credit cards and bank cards, which are 1 % to 3 % for credit cards and bank cards and 0.5% to 1% for the E-money smartcards. The difference of charging rates may result in the volume of transactions that share costs of clearance and settlement. On the contrary, the service charges for E-ticket transaction would be much lower for its nature of helping to promote general interests on public transportation. Thus, the charge for an E-ticket transaction may be a 0.1 Baht to 0.3 Baht per transaction. The security of transactions for E-money involves a higher financial standard so that transaction duration could be slightly longer. As the transaction time is critical for the transit operation, the operator cannot tolerate a queue before the MRT gates because of a longer transaction time. E-ticket, on the other hand, satisfies the transaction time requirements in which all transactions should be done in 0.4 seconds. Uses of credit cards, bank cards and e-money cards for paying transportation charges are commonly seen around the world. Mainly, the applications are limited to a less congested environment, such as parking or inter-city train tickets. In Kaohsiung, Taiwan, Matercard ™ has introduced E-money for public transit. This successful demonstrative use of e-money cards for transit application has undergone some technical modifications which include the data related to MRT and bus operations, such as passenger identifications, original and destination records, transfer records and card-locked function. Some of the data may not be needed for pure e-money applications, but are definitely required for the e-ticket operations. For the clearance and settlement, the central clearing houses (CCH) for E-money and E-ticket are slightly different. The CCH for E-money will perform the clearance between stores and financial institutions, while the CCH for the E-ticket will do clearance between transit service

2-23 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report providers and the ticketing company. The efforts of clearance between two types of payment are also unalike. The E-ticket CCH involves a huge amount of passenger data and a sequential relationship to determine the fund settlement. Because of the activities for subsequent transactions, such as a transfer, E-ticket may call for a third party, such as city government, to reimburse the loss of revenue for the canceling of a flag-fall. Generally, the burden and complexity of clearance of E-ticket is much higher than that of E-money. Now that the functional difference of E-money and E-ticket is obvious, the reason for combining them together is to take advantage of the high issuing volume of E-tickets that maintain a healthy smartcards business. When considering a ticketing system with thousands and thousands of patronage customers, the business related to transactions, money deposit, commissions and advertisement would be phenomenal. Therefore, all major transportation sectors are enthusiastic to promote smartcard business, not only for their daily operation, but also for gaining profits from extended business such as micro-payment or e-money. Recording all travel activities on the E-ticket is quite unique and can not be done without using electronic means. The advent of the smartcards paves the way of the potential integration of the transportation system, especially for public transit systems. In the past, it would be impossible to validate a transfer between modes or to subsidize the transfer passenger. The analysis of transfer would improve the service quality of the transit system and it can be done by employing the E-ticket, instead of pure E-money. This project aims to integrate public transit systems including MRT by adopting a common ticketing system. At the very least, the new MRT lines under the “gross-cost” strategy would have an opportunity of introducing the new common ticketing system. Under the gross-cost concession, the operator should submit all revenue to the government and provide MRT services to the customers for a predetermined charge to the government. In addition, the fare rate under the gross cost concession would be similar across the systems, and the cancellation of the flag-fall charge for transfer would generate a positive influence on promoting public transit in Bangkok. Transaction charge from the common ticketing company would also be absorbed by the public sector under the gross-cost concession. Simply speaking, the common ticketing company, a stated-owned enterprise, should have a mission in supporting public transportation, whereas the clearing process may be more like a bookkeeping process to understand the performance of the operations of public transportation. If the E-ticket and E-money would not be integrated on a single electronic purse (e-purse), the dual e-purse would be a good option. Two purses having their own functions and related security requirements would temporarily reduce the trouble of negotiation between different agencies. Either a single CCH, or separate CCHs would be suitable for the operation. Single CCH would take care of the E-money and E-ticket clearance and settlement, while separate CCHs would require agreements between the two CCHs for further data processing and interchange. One thing that must be taken care of is ensuring that the customer should have clear instructions for using the dual-purse smartcard. The procedure for adding values on the smartcards should also be explicit. Auto-loading when the smartcard has a lower balance should be built in the system and the auto-loading process would be done when customers pass through a smartcard reader. Until the business deal is set between E-money and E-ticket, the integration of dual-purse can be carried out and the convenience of smartcard can be further enhanced. When considering that customers tend to enjoy the type of benefit in which they can have services performed before actually paying for them, the stored-value smartcard would be less attractive for the general public because a no-interest bearing smartcard would have a greater risk of becoming lost and the transaction could be easily replaced by cash. Unless the use of E-money can provide a great discount, bonus accumulation, extraordinary convenience, or better control of children’s allowance, customers may use E-ticket for transportation and E-money for non-transportation.

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According to the experience of E-money applications, many examples show that the E-money business encounters difficulties for the pre-paid strategy and is not as favorable as the post-paid strategy. Some people even experience bankrupting the E-money card and thereby prevent the exchange of goods and services. Although putting all stored money in a trust fund would solve this problem, the volume of transaction or the amount of money deposited on the E-money card would contribute to the success of the business. Thus, the issuing of a stand-alone E-money card may result in low ownership of the cards and end up with unstable business. Taking into account that E-ticket and E-money have different requirements for the back-end system, and the pre-paid E-money is less attractive for the general public, it is suggested that the Common Ticketing Company (CTC) focus on E-ticket business only in the early stage of operation. After the smartcards pass a certain volume (for example 5 million or more), the CTC can then get into E-money business. When the CTC negotiates with retailers and banks, the huge amount of smartcards in circulation will put itself in a good position. As for the smartcard design, one purse for both E-ticket and E-money and two purses for each purpose separately have their own advantages and disadvantages. One purse is more convenient for users; however, the card design, security issues and negotiation between agencies will be more complicated. The two-purse solution has opposite consequences, and it would be better for the CTC to analyze it in more detail.

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3. Procurement for Back-end System

3.1 Introduction In order to successfully integrate the ticketing systems of Bangkok’s MRT lines, the government will need to establish a Common Ticketing Company (CTC) to carry out the integration of the existing systems and also maintain operations of the new integrated ticketing system. Such an endeavor requires the company to set up a “back-end system”, which includes a Central Clearing House (CCH) to perform the clearing and settlement for MRT and other transit operators. These transit operators will not need to expend extra costs on the construction of their own back-end system, nor employ extra staff to operate and maintain the system, but on the other hand, will have to rely on the government to collect all of the money and transaction information from the transit operators. The money will be protected by the government and distributed to the operators based upon the collected information, and the information could be further used for analysis and transportation planning. Therefore, after the government has set up the CTC, the company will need to first tender the back-end system. 1. Issuance Before System Procurement A complete ticketing system is comprised of both front-end and back-end systems. The front-end system includes the Central Processing System (CPS), Station Processing System (SPS) and other front-end devices, such as gate and passenger agent machines, while the back-end system includes the Central Clearing House (CCH), Card Issuing Machines (CIM), and Key Management System (KMS). Before procurement of the front-end and back-end systems takes place, the Program Management Services (PMS) Consultant team shall develop the standards of the “common ticket” (or follow the standards developed by the government). The standards must include (1) card format, read and write process; (2) management of card key; and (3) communication protocols and interface between the front-end and back-end systems. By following the standards of the common ticket, the front-end and back-end systems can be successfully integrated. The government will not need to tender the front-end and back-end systems at the same time, but the procurement of both systems shall follow the standards. There are several types of smart cards used by different cities in the world. To decide which type of will be used is a very important issue. The government should consider many factors; for example, which type of smart cards are used by the two existing MRT operators, the functions of the smart card, the cost of the smart card, the future upgrading of the system, etc. In order to properly manage the smart card and future extensions, it is suggested that the government set up an agency to manage the smart card in Thailand. 2. Procurement Scope The scope of this procurement covers the purchasing of the back-end system (CCH, CIM, and KMS) and its operation and maintenance (see section 3.6). These three items are the key components of the back-end system and are highly related to each other. The primary function of the CCH is to manage the transaction data, cards, systems and clearing operation, while the function of the CIM is to authorize the cards and to manage the security mechanism, and the function of the KMS is to manage the protection key of the previous two system items and to ensure the legality and completeness of the transaction. After the CIM first authorizes the card, the transaction is then uploaded legally and completely to the CCH for clearing. Figure 3.1 shows the relationship of the back-end and front-end systems.

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Figure 3.1: Relationship of Back-end and Front-end Systems The procurement of the front-end system shall be combined with the mechanical and electronic systems of each new MRT line. The devices of the front-end system are connected with the electricity and networking system of every station, and are not easy to be separated. The separation of front-end systems and mechanical and electronic systems of stations will make it difficult to define the interface of each construction, and thereby cause a second construction while wasting money and time. How to arrange the schedule of the two constructions will present another problem. Thus, it is suggested that the procurement of the front-end system, following the government card standards, shall be combined with the construction of new MRT lines.

3.2 Procurement Method and Procedure 1. Procurement Method The Common Ticketing Company (CTC) will be responsible for carrying out the procurement with assistance from the PMS Consultant. The procurement will follow international competitive bidding principles and be divided into two stages: (1) prequalification of bidders and (2) proposal evaluation. The final selection of the bidder will be made on the basis of “the most advantageous bidder.” Since this procurement entails complicated systems and requires highly professional services, the evaluation of bidders will involve many aspects, including technical skills, service quality and other related issues. The price will not be the only issue taken consideration. With an objective and professional evaluation from experienced experts, the CTC will be able to procure the best system and service.

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2. Procurement Procedure The procurement procedure shall either conform to Thailand’s government procurement regulations “The Office of Prime Minister Regulations on Government Procurement B.E. 2535”, or, in case of funding by an international loan agency, shall apply the procedural rules of the organization which is the source of loan. The following procedure was drafted according to the tender procedures of Thailand’s governmental regulations.

Tender Preparation: Step 1 - CTC shall establish the Bidding Plan with the assistance of the PMS Consultant (see Sec. 6.2 PMS phase 3). Step 2 - Organize and hold the meeting to explain the Bidding Plan to interested bidders. The CTC may revise the Bidding Plan after the meeting (see Sec. 6.2 PMS phase 3). Step 3 - The PMS team shall prepare the Terms of Reference (TOR) and Tender Documents (see Sec. 6.2 PMS phase 4). Step 4 - CTC (or OTP) shall request for the waiver of e-Bidding Procurement from the e-Bidding Committee (The Office of Prime Minister Regulations on e-Procurement B.E. 2549). Step 5 - CTC shall apply the “Tender Procedure Method” under the regulations of the Office of Prime Minister B.E. 2535 Re: the Procurement, or apply the procedural rules of the International Organization which is the source of loan.

Prequalification: Step 6 - Announce the procurement project (include the TOR and Tender Documents). Organize and hold the meeting to explain the Tender Documents and respond to clarifications from interested bidders. The CTC may revise the Tender Documents after the meeting (see Sec. 6.2 PMS phase 4) Step 7 - Prepare and announce the Invitation for Pre-Qualified Bidders [Clause 31]. Step 8 - Receive the (Prequalification) proposal from interested bidders (the interested bidders shall have sufficient time to prepare their proposals; the law requires at least 60 days prior to the date of receiving the proposal. In case of selection based on an international tender, the procedural rules of the source of loan shall be followed) [Clause 31]. Step 9 - Appoint the Committee in charge of selecting the pre-qualified bidders. The Committee shall be comprised of one Chairperson and at least 4 members who are government officers. (Of the members) there must be at least one expert [Clause 32]. Step 10 - Select the Pre-Qualified bidders and announce the Short List.

Evaluation of Tenders: Step 11 – Organize and appoint two relevant Committees - (1) the Committee to receive and open the Tender Envelopes and (2) the Committee for considering the results of the Tender (Appraisal Committee). Each Committee shall have one Chairperson and at least 2 other members who are normally government officers. If necessary, there may also be members who are not government officers [Clause 35]. Step 12 - Publicize the Notice of Tender and disseminate the Tender Documents (at least 7 business days prior to sale of Tender Documents to qualified bidders. In case of an

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international tender, the government office shall follow the rules of the source of loan [Clause 45]. Step 13 - Sale of Tender Envelopes (at least 7 business days) [Clause 46]. Step 14 - Receive the Envelopes (proposal) from the Qualified Bidders Step 15 - Evaluate the Technical Envelopes (and later on the Price Envelope). The government officer shall appoint at least one technical expert to join the Committee for considering the results of the tender [Clause 55]. The Technical Envelopes shall include the specifications and descriptions of hardware and software, construction plan, and operation and maintenance plan. The operation and maintenance plan shall at least include tasks listed in Sec. 3.6. The cost of theses services shall be listed in the Price Envelope and not higher than 15% of the cost of the system. After evaluating and ranking the bids, the price proposal of the No.1 ranked bidder will take priority for negotiation among the bidders. CTC shall negotiate the price with the highest ranked bidder, and if the price is not acceptable, the price proposal of the second ranked bidder shall be opened for comparison and negotiation.

Award Contract: Step 16 - After the negotiation has been successfully completed, the awarded bidder shall sign and enter a contract with CTC within 15 days.

3. Procurement Schedule The procurement schedule will be subject to the actual duration of the stages of preparation, prequalification, evaluation and awarding of the contract, but as a general rule, the recommended duration would be as follows: Preparation: approximately 4 months will be needed to prepare the bidding plan and tender documents, plus an additional 2 months for obtaining approval (total duration of 6 months). Prequalification: it will take around 2 months for interested bidders to prepare their prequalification proposals and 2 months for selecting the qualified bidders (total duration of 4 months). Evaluation: During the evaluation process, it will take one month to select the bidding committee and publicize the notice of the bidding, 3 months for qualified bidders to submit their tender proposals and 2 months for the committee to evaluate the proposals (total duration of 6 months). Award of Contract: the awarded bidder shall sign and enter a contract with CTC within 15 days. To complete the total process will take more than one year (See Figure 3.2). 4. Draft Contract Please refer to Appendix 2.

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Preparation

6 months

Prequalification 4 months

Evaluation

6 months

Award Contract

Figure 3.2: Procurement Process and Schedule

3.3 Appraisal Mechanism 1. Bidding Committee’s Background There are a total of three committees in this procurement: (1) prequalification committee, (2) receiving the tender committee and (3) appraisal committee, in which the appointment of committee members shall conform to the government’s regulations. The recommended background for the most important committee, the appraisal committee, which will be responsible for appraising the bidders’ technical proposals and price envelope, is listed in Table 3.1. This committee shall have at least 5 members from different areas, including members from government agencies and academic sectors. With the diversified and professional viewpoints of the committee, this procurement will be fair and impartial. Furthermore, it is recommended that the chief executive of MRTA to lead the committee. Table 3.1: Committee Background Area Background Number Senior managers from Ministry of Transportation and Transit policy Government planning agency 5 Regulators of MRT and other public transit, Academia Professors specialized in Public Transit 2 CTC Chairperson of CTC 1 Bank Senior managers from Government’s Bank 1 Total 9

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2. Prequalification of bidders (1) The members of a team of firms cooperating together or individual corporations must be legally registered. (2) Business scale Table 3.2: Business Scale Prequalification of Bidders Members of a team of firms Applicant Corporations cooperating together 250,000,000 (TB) in total and Paid-in Capital 100,000,000 (TB) and above above Revenue in last three For leading member at least 300,000,000 (TB) and above years 300,000,000 (TB) R&D Specialists 20 persons at least 50 persons at least Software Design Services, Data Software Design Services, Data Processing Services, Information Processing Services, Information Business scope Supply Services, Electric Supply Services, Electric Appliance Retail Trade, or Appliance Retail Trade, or Telecommunication Equipment Telecommunication Equipment Retail Trade Retail Trade Construction experiences in fare Construction experiences in fare Qualification clearing and settlement system clearing and settlement system

(3) Documents certifying the above manufacturing qualifications must be provided. 3. Evaluation Criterion and weight Scoring and ranking of the technical proposals is based on the following evaluation criterion and takes into consideration the execution, elasticity system, extensibility and commercial terms. If there is a need to make clarifications during the evaluation in which the bidder needs to clarify or provide additional information to the appraisal committee, then the committee will inform the bidder by written notice and request the bidder to clarify and respond in writing to the appraisal committee. Table 3.3: Evaluation Items for Technical Proposal Score Weighted Sum of Weighted Total Item (0 - 100) Scale Scale Score Score Technical Spec., and system design - 10% - - Implementation schedule and operational - 10% - schedule System demand fulfillment - 15% - Experiences in integrated ticketing system - 15% - Quality (failure rate, reliability, and lifetime, - 10% - etc.) Technology transfer (including - 10% - documentation and training)

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Score Weighted Sum of Weighted Total Item (0 - 100) Scale Scale Score Score Security mechanism planning - 15% - Operation and Maintenance planning - 10% - Commitment - 5% -

3.4 System Requirements

3.4.1 Central Clearing House (CCH) 1. Data Transport (1) Data transport of the CCH must be carried out by a reliable transactional data transmission system. The method of transaction shall maximize cost effectiveness and efficiency of execution, and minimize risks when connecting to an existing commercial system. The system ensures the security, consistency and completeness of the data in the process of transmission. That is, it handles repeated records (for example, re-transmitted transactions) and damaged data, and supervises data uploading and downloading in various levels of systems. Data Reception Data reception refers to all transactions from front-end equipment items and station computers, which include card selling, value deduction and top-up items. Data Verification The access/reception of data between each level is verified so as to ensure data completeness and avoid any repetitions (for example, re-transmitted transactions). Data Processing It is necessary to process and transform data, ex. backlist, into correct formats before being transported to other systems/levels. (2) Transaction Collection Transaction collection refers to examining the format of each part of the data transported, and then transforming the transactions into the format acceptable to the database. Transaction Verification The verification of data received includes the transactions for card selling, card refund, card locking, top-up and value deduction. Types of verification are done over data errors, transaction repetition, processing of exceptional cases, missing transactions, etc. Transaction Transformation Transaction transformation checks every part of the data received from front-end equipment items and station computers, and then transforms the data into the format acceptable for each level/stage. This includes identifying types of transactions and adding it to the forms relating to the database of card issuance. Processing of exceptional transactions This refers to the processing of records which are unable to pass through verification. The possible causes are incorrect equipment settings, abnormal

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functions, wrong equipment configuration, etc. The function includes verifying all error transactions and re-verification for transactions after being corrected. The function also provides details for all illegal transactions. 2. Card Management Card management covers all of the statuses in the life cycle of cards. The data concerning card statuses which are generated or modified by equipment items will be uploaded and recorded onto the main file for the ticket card so as to ensure the completeness and legality of the ticket card. (1) Card Status Card Purchasing After purchasing cards, the reference list for chip ID and the printed numbers on the cards shall be transformed into the database. The related data shall be integrated into the main file for the ticket cards while issuing those cards. Card Issuing The cards purchased cannot be used until they are issued (to change keys and write initial data). The unique ID for a card is undergoing initialization for key diversification. The initialization data written upon issuing includes issuing date, personal profile type, card expiry date, card EV (electronic value), and personal data of registered cards. Card Enabling and Selling Cards should be enabled through a legally authorized machine before use. Card Refunding and Locking Cards can be returned and refunded when they are no longer used. The cards being returned will be locked. In addition, cards under abnormal use will also be locked. Card Missing Users can report a missing card when a registered card is lost. After such a report, the card will be listed in the blacklist. The blacklist is updated periodically and transported to front-end equipment so as to avoid illegal usage. Card Re-issuing Cards being returned can be re-issued if they are not damaged. Such cards can be re-issued to the public and their related card data will be updated. Card Discarding When cards are damaged or cannot be used, they will be discarded. The card data will be deleted after being backed up. (2) Card Management Functions Autoload The autoload mechanism makes top-up when card EV is under a setting value through a credit card account or bank account. Autoload function requires user’s application. The function cannot be used until it is approved and activated. Blacklist Management The blacklist shows cards with an abnormal status, including missing cards, cards with abnormal EV, wrong formats and abnormal accounts (for autoload cards).

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The blacklist will be periodically downloaded to front-end equipment items daily after being processed and verified. Card Expiry Date Extension Based on business requirements or governmental policies, CTC can issue cards with different preferential IDs. Such cards are given a favorable price within a defined period of time so as to avoid abusive use. The expiry date for cards with preferential IDs can be extended to save the cost of producing cards. Test Card Management For testing, verifying and maintaining front-end equipment, it is necessary to test cards on the equipment items. The transactions generated by a test card will not be included as part of revenues. After test cards are issued, its data is recorded to the main file like other ticket cards. In addition, the data should be submitted to the operators as a reference for clearing and settlement. Data Management An available capacity for issuing 5 million cards is required. The original machine should be able to expand to an available capacity for issuing 10 million cards. Its online data space should be big enough to accommodate balance, type of ticket and card status data, and details of the latest 50 value deduction transactions and the latest 10 top-up transactions. 3. Clearing and Settlement (1) Clearing and Settlement Management Clearing and Settlement Management refers to the collection of all transaction data created by an operator. The clearing results should be generated daily on the basis of transaction type, operator and business day. The transactions for clearing include card selling, top-up, autoload, value deduction and card refunding. Autoload data will further be exchanged with banks. (2) Review of Transactions After the clearing operation is completed, a statement form will be generated. This form includes daily statistics (by personal profile and type of transaction), monthly statistics, exceptional transactions, invalid transactions and the clearing handling charge. The files of the above mentioned forms and sheets will be downloaded to operators for data checks. (3) Checking the Validity of Cards Upon clearing, the validity of the card is checked by checking if the card number exists in the main file of cards without any locking records so as to ensure legal use of the card. (4) Data Processing An available capacity for issuing 5 million cards with 3 million transactions per day is required. The original machine shall be capable of expanding to accept 5 million transactions a day. The online data space shall be enough for saving the details of at least one-week of transactions and consolidated data for at least five years. Real-time transactions should not be influenced or interrupted by batch processing. With 3 million transactions a day, the time for clearing and settlement shall not exceed 2 hours. With 5 million transactions a day, the time for clearing and settlement shall not exceed 3 hours. 4. Transaction and History Data Management

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(1) Management of account discrepancies The clearing center has to check related data when there is a discrepancy between the operator and clearing center, or when data is missing due to equipment damage, in order to determine if appropriation or compensation is required. (2) Auditing When the equipment is abnormal or improper human operation occurs, the transaction data may be missing or abnormal. For finding out possible abnormal conditions and preventing improper human operation, auditing is required to ensure the security and completeness of the transactions generated by the system. (3) Preferential Subsidy For fulfilling the requirements specified by governmental policies, the preferential measures for transfers and subsidies are statistically organized and provided to the government and related operators. (4) Data Processing An available capacity for issuing 5 million cards with 3 million transactions a day is required. The original machine should be expanded to accept 5 million transactions a day. The online data space should be enough for saving the details of transactions for at least 3 years and 5-year consolidated data. 5. Equipment Management (1) Equipment Management Functions Installation: All equipment items will be set up in the back-end before they are installed to the front-end. An equipment list will be maintained in the back-end. Registration: After installation, equipment items shall be registered before starting transactions. Removal: if an item of equipment is removed, the equipment file shall be updated and the equipment data will be deleted. (2) Verification and authorization for top-up transactions Online top-up transactions: top-up processing requires connection to the back-end system for verification. Offline top-up transactions: if some equipment is only available for offline top-up, then it is necessary to set some authorization and/or a quota control mechanism so as to lower risks. (3) Software update and control for top-up equipment Data preparation: prepare data for the updating of software, firmware and execution files for activating valid programs. Program transport: periodically transport updated programs to the equipment. Validation: periodically restart the system checking program and execute update operations. Update confirmation: validate through real-time back-end supervision programs. 6. Report Preparation This includes both data organization and report generation. (1) Data Organization

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The data is organized to summarize information related to card selling, transactions, etc., for checking the accounts and preparing reports. As for sales and revenues, the daily, weekly and quarterly reports can be generated and printed. (2) Report Generation Reports are generated with an easy-to-use graphic interface, and include: Invalid Transaction Sheets Exceptional Transaction Sheets Consolidated Invalid Transaction Sheets Consolidated Exceptional Transaction Sheets Daily Settlement Sheets Consolidated Daily Settlement Sheets Daily Operation Analysis Reports Monthly Operation Analysis Reports 7. System Management (1) Data Inquiry Management The management over data inquiry includes maintenance of uploaded and downloaded inquiry data. The inquiry data covers the parameters for system operations. These parameters are distributed among the overall systems. (2) Internal Management Procedures For ensuring the security, availability and best efficiency of the overall application system, the internal management has to provide all necessary processing to achieve such purposes. The processing covers database servers, application servers, operational systems and file system management. The optimization of all hardware, software and internet equipment is one of the targets in which the system is required to achieve. The procedure stated here is considered as a part of the Standard Operating Procedure (SOP) under general conditions and accidental conditions. Time calibration Log abnormal conditions upon system operations. Clear useless data Backup business operation data Restore backup data Restart the system Upgrade software Diagnose system problems Select anti-virus software Protect with firewall Secured online function (3) Failover function The system should be available for failover function. When the master operating computer goes wrong, the system should be automatically switched to a backup computer within an acceptable time interval for on-going normal operations. The system should

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be able to continue dealing with the transactions upon the occurrence of problems.

3.4.2 Card Issuing Machines (CIM) 1. Security Mechanism (1) Diversified keys enable each card with different keys so as to avoid being cracked. (2) Cards can only be issued after verification by the card issuing machine and its control computer. (3) If there is not any management card, the diversified keys cannot be generated for the cards. As a result, the issuing of cards cannot go on. (4) The management card should be a Smart Card meeting the international certifying standards. (5) The master key should be encrypted while being loaded into the management card. (6) The management card should contain the quality of cards to be issued, yield rate of card issuance, etc. (7) The software and hardware of a card issuing machine should offer protection for keys from being physically, chemically or mathematically stolen. (8) The control computer for the card issuing machine should be managed by network management so as to avoid the possibility of any malicious behavior conducted by internal employees. (9) Card issuing data should be backed up daily. 2. Control of Authorization (1) Account numbers and passwords are required to key in before creating an order sheet or starting the card issuing program. Order sheet creation and card issuing should be handled by 2 different departments with different accounts, passwords, and privileges. The account number and its login time will be recorded after a successful login. (2) The account numbers and passwords are controlled by leaders of related departments. Different privileges are given based on positions (e.g. full-time or part-time) (3) Actions performed after login should be recorded (e.g. card issuing or card restoration). 3. Order Sheet for Card Issuing (1) The order sheet for card issuing shows the information such as requirements for card issuing data (e.g. personal profile, expiry date, card EV, etc.), order sheet number, number of cards, application date and delivery date. (2) The order sheet should be created before card issuing by an authorized person other than the card issuing team. 4. Card Issuing (1) The operator can log in the card issuing system and select an order sheet to issue cards. (2) Several simple tests (for example, zero ticket value addition and data for checking fakes) can be conducted in the operating process of the card issuing system. If a card fails the tests, it will be separated. (3) After completing the issuing of a card, its ID number and data should be recorded and uploaded to the back-end database. 5. Card QC

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(1) The card issuing machine should also provide functions to verify the card’s contents to ensure the card’s quality. After completing QC checks, the result will be logged into the system. 6. Automatic CIM Efficacy (1) The box for placing blank cards should be available for 500 cards. (2) The box for placing issued cards should be available for 500 cards. (3) The rate of issuance is required to be at least 700 cards per hour. 7. Other Items of Attention (1) Reports can be generated for users to check, print, etc. Daily, weekly, monthly, quarterly and annual reports can be printed and users can set up the cycle on their own.

3.4.3 Key Management System (KMS) 1. Key Management In any system dealing with financial transactions, one will need some level of ‘security’. The cryptography with the keys in the system provides a level of security to prevent fraud. Key Management covers the generation, management and inquiry under each stage of the life cycle of keys (e.g. pending active, active, post active). (1) Key Generation and Storage The keys should be generated by an exact flow at a higher security level (for example, use True Random Number Generator to randomly generate) so as to avoid producing regular numbers which are easily cracked. After keys generation, a storage system at a certain security level is required (for example, encrypted by other keys or save the keys in a hardware device with tamper-resistant function certified by international information security standards). (2) Key Change Each key has its life cycle expiration (based on the type of the key and its length). If the key expires, a function for changing the key is required so as to update and ensure the security of the key. (3) Key Transport The system for transporting protection keys is required. The keys are exported by using a secure channel (with encryption) from the key management system and can be organized by a target system. (4) Key Inquiry Graphic interface is required for the key managers to search and control the life cycle, version, expiry date, type, length, and other information of keys. (5) Key Cancellation The keys should be cancelled due to expiration or other causes. The keys being cancelled are not available to use online. However, they should be saved in the key database until the key is destroyed. (6) Key Backup and Restoration The Key Management System is required to be equipped with a secure key backup system. Such a system can restore the Key Management System if the system is destroyed. To backup the Key Management System requires a safe channel (with

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encryption) or split knowledge so as to ensure its security. (7) Key Destruction When keys expire and have been saved up to a certain period of time, the keys will no longer be used. In this case, the function to destroy the keys is required so as to remove the keys from the database. 2. Transporting the keys to devices Equipment items need system keys to make mutual authentication with the cards before transaction processing. To transport the keys to devices is to put the system keys through dual control and load-in flow (the keys should be transported in an encrypted method during the load-in process) to the reloading machine, deducting machine or card issuing machine. Different keys can be loaded based on the different functions of the equipment items. For deducting, reloading or card issuing, the system keys needed for items of equipment are different. 3. Verification on transaction completeness and equipment online authorization The system requires Message Authentication Code, (a value calculated by using the protection key through specific algorithm against transaction data) to verify transaction data so as to ensure the legality and completeness. Such verification should fulfill the requirements of data processing efficacy specified by CCH. In addition, the system should have a mechanism to mutually make real-time authorization and verification with online equipment (such as top-up or card production equipment). After being successfully authorized by the back-end, the equipment is able to process transactions so as to ensure the legality of the online equipment. 4. System Management (1) Management of User Account Authority and System Resources The Key Management System is required to have an independent account authority and system data management function. The passwords should not be saved in an explicit manner, and should be a certain length. Each role is given the minimum privilege policy based on his or her position. Dual control is required for important functions before executing. (2) Audit Data Management The protection key management system is required to have the function of recording audit data. Upon executing each function, the date, time and should be recorded. The audit data should be kept for a certain period of time and be regularly backed up for the convenience of auditing (3) Equipment Data, Equipment Key Template Control, Data Export and Report Management The system is required to record key transport data. It should be available for equipment data management, such as search, change, deletion, export and printing so as to fulfill the needs of daily operations. Different types of equipment carry different equipment key templates. The system is required to have the functions such as search, change and deletion of these key templates.

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3.5 System Specification Recommendations and Cost Estimation 1. CCH system For the CCH system, a remote backup system should be set up and provided. The scale of the system should be the same as that or smaller than the system in the operations center. The remote data synchronization is carried out by the storage replication approach. Table 3.4: System Requirements for CCH System Requirements of Hardware Hardware Functional Requirements Card database The system is capable of 5 million card issues and capable of 10 million card server issues after expansion. The online storage requires at least storing balance, types of card, status, latest 50 history transactions, and 10 add value transactions by each card. The system requires failure-tolerance. If the online server is down, it’s able to automatically shift to the backup server in 20 minutes, and the system can work normally. Likewise, the transactions in failure can be processed. UNIX, the open platform, conforms to the international standard of UNIX98 and X11 R6. When any CPU is down, the system would allocate jobs to other CPUs automatically w/o breaking the system working off (CPU De-allocation). The system still functions normally when there is at least one internal storage device broken down. It will rebuild data contents up to the current stage automatically after replacing the faulty drive. Provide the backup power and ventilation device. When the power is down or not available, a supervisor can use an alternate one to work normally. Clearing & The system is capable of 5 million card issuing and 3 million transactions daily, settlement and capable of 5 million transactions daily after expansion. The online storage database requires storing details of all transactions for at least one week and collection of servers data more than 5 years. Batch processing can not affect or break off real-time transactions. For 3 million transactions daily, process time of clearing & settlement can not be over 3 hours. For 5 million transactions daily, process time of clearing & settlement can not be over 5 hours. The system requires failure-tolerance. If the online server is down, it’s able to automatically shift to the backup server in 20 minutes, and the system can work normally. Likewise, the transactions in failure can be processed. Providing a house keeping mechanism is required, which avoids accumulative data influencing performance. UNIX, the open platform, conforms to the international standard of UNIX98 and X11 R6. When any CPU is down, the system would allocate jobs to other CPUs

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Requirements of Hardware Hardware Functional Requirements automatically w/o breaking the system working off (CPU De-allocation). The system still functions normally when there is at least one internal storage device broke down. It will rebuild data contents up to the current stage automatically after replacing the faulty drive. Provide the backup power and ventilation device. When the power is down or not available, a supervisor can use an alternate one to work normally. History The system is capable of 5 million card issues and 3 million transactions daily, database server and capable of 5 million transactions daily after expansion. The online storage requires storing details of all transactions for at least 3 years and collection of data for more than 5 years. Provide the history database enquiry AP. The system requires failure-tolerance. If the on-line server is down, it’s able to automatically shift to the backup server in 20 minutes, and the system can work normally. Likewise, the transactions in failure can be processed. Provision of a house keeping mechanism and the history data enquiry are required. UNIX, the open platform, conforms to the international standard of UNIX98 and X11 R6. When any CPU is down, the system would allocate jobs to other CPUs automatically w/o breaking the system working off (CPU De-allocation). The system still functions normally when there is at least one internal storage device broken down. It will rebuild data contents up to the current stage automatically after replacing the faulty drive. Provide backup power and ventilation device. When the power is down or not available, a supervisor can use an alternate one to work normally. Data Offer common interface as FTP to exchange file. transmission Use access authority control and enough space to preserve exchange file. and Use anti-virus software. interchange System should be protected by firewall. server Should have SSL safe line function. Basic components (HDD, Power Supply Units, Fans, etc) are hot-swappable. Should include relevant software and hardware that the system needed. Load Balance feature enables load balancing across the multiple server. Data Must be WEB open structure. management, End user does not install extra software. inquiry, report Accommodate more than 200 connections simultaneously. server Use anti-virus software. System should be protected by firewall.

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Requirements of Hardware Hardware Functional Requirements Should have SSL safe line function. Basic components (HDD, Power Supply Units, Fans, etc) are hot-swappable. Should include relevant software and hardware that the system needed. Load Balance feature enables load balancing across the multiple server. Storage Storage capacity can accommodate 5 million card issues, more then 3 years transactions data (3 million per day), can summarize data for more than 5 years, multiple capacity for volume copy. It can be expanded to 5 million transactions per day, amount to more than 3 years for future use. The Logical Device Expansion function provides increased capacity for a RAID group by real-time addition of disk drives while operations continue uninterrupted. Use Fiber Channel switches for the connection between the server and the individual disk drives. Basic components (Cache Memory, RAID Controller, Disk Drive, Network interface, etc) must be included. Storage systems have full redundant configuration and fail-over capability. Supports hot-swap and hot-plug functions enabling non-stop system operation (24 hours a day, 365 days a year). Faulty components can be replaced and system resources added without stopping system operation. At least 16GB cache memory. Database Relational and Object Relational Database. server and Storage capacity can accommodate 5 million card issues, more than 3 years software transactions data (3 million per day), and can summarize data for more than 5 years. High-performance query. ANSI SQL-1999 Entry SQL Level standard, NLS supporting, also supporting Unicode UTF-8 and UTF-16. Database can support single table, hold 1000 fields, and 1000 fields of single inquiry, in order to manage large-scale databases. Efficiently handle concurrency control and data consistency. On-line transaction ability. Offers disparate data access making it possible to access any number of database systems from an environment in a heterogeneously distributed environment. For smooth interoperability between disparate systems, SQL translations, data dictionary translations and data type translations are required, even if the different systems are based on SQL standards. Dataware house processing ability. Support on-line backup and on-line recovery.

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2. KMS At least two sets of KMS are created, one is official and the other is for backup or testing. If possible, three sets of KMS are recommended (official, backup and testing). Table 3.5: System Requirements for KMS Requirements of Hardware Hardware Functional Requirements Server Consider the problem of . e.g. needs to support ports of contact reader and contactless reader. Approved by FIPS 140-2 at least above Level 3. At least supporting RSA (utmost 4096 bit), DES, 3DES, AES (128/192/256 bit), MD5, SHA-1, and customize KMS using encryption and True RNG (Random Number Generator). If it requires online volume authorizations (including encryption/decryption), needs to evaluate the performance. Suggest user API will at least support PKCS#11. Suggesting that supervisor interface is GUI. Contact Reader Conform to PC/SC and read cards following ISO 7816-1, 2, 3, T=0 and T=1. Contactless Reader RC171, RC5xx, or others Other Requirements by system and user needs.

3. CIM system Table 3.6: System Requirements for CIM System Requirements of Hardware Hardware Functional Requirements Automatic card Support ports of contact reader and contactless reader. making machine Support ISO 14443 Type A & Type B card. Container can contain 300 to 500 cards. Provide addition container for bad card retrieve. Possess the low location of capacity of cards to detect and examine.

4. System Cost Table 3.7 is an estimation of the cost of the back-end system. All prices are exclusive of any customs tariff. The list prices are estimated in 2008 and for system hardware and software only (not including the operation and maintenance fee). Item Nos. 2, 4, and 6 will be procured from abroad and installed locally, while other items will be both procured and installed locally.

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Table 3.7: Back-end System Cost Sub Total No. Description Unit Qty. Explanatory Notes Price(TBH) Price(TBH) include backup and 1 Clearing System Computers Set 1 40,000,000 40,000,000 failure-tolerance 2 Clearing Application Software Set 1 40,000,000 40,000,000 3 KMS Hardware Set 1 3,000,000 3,000,000 4 KMS Application Software Set 1 5,000,000 5,000,000 5 CIM Hardware Set 1 2,000,000 2,000,000 6 CIM Application Software Set 1 3,000,000 3,000,000 7 Network Device and Set Up Fee Set 1 8,000,000 8,000,000 8 System Management Software Set 1 14,000,000 14,000,000 9 Network Management Software Set 1 5,000,000 5,000,000 Total 120,000,000

3.6 System Operation and Maintenance It is suggested that the key related security items, such as card issuing and key security in KMS and CIM should be operated by CTC itself. Only the daily operation of CHC should be outsourced, and this part should be incorporated into the procurement. Similar to the hardware warrant, the agreement for the outsourcing portion should be concluded after three years. After three years of operation, CTC could decide if they should take over the operation or continue to outsource.

CTC Technical Transfer Training & Education

Contractor

Construction

CCH CIM KMS Daily Operation Transaction Verification

Figure 3.3: Operation of Back-end System

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1. Daily Operation (1) Set-up of operation methods Each task should be standardized into SOP according to the related operating procedure that the PMS Consultant has founded. Therefore, if there are new tasks that subsequently take place, they should also be filed to CTC and should be operated based on SOP. (2) Equipment control and check-up The employees who are responsible for management should check the status of the equipment regularly to test and verify that each of the functions are working normally, increase the availability for use of equipment, and ensure that the equipment is being maintained with good quality of operation. (3) Network management The network connection should maintain a smooth condition by checking up on the network connection to prevent the service provider of ISP from becoming unstable and affecting the network quality and network equipment. These tasks could be achieved by supervising the network flow regularly and by adjusting the network bandwidth timely to help data transmission. (4) Clearance task batch by batch Every day at dawn the back-end clearance management system would process the clearance task according to the dealing data that each operation operator uploads a day prior to it. After the clearance task is completed, the related clearance data should be saved into the database. (5) Production of the financial statement Based on the result of clearance and operation rules of each operator, the financial statement would be designed differently so that different categories of dealing reports would be separated to be checked and verified. (6) Dealing data check-up and verifying Each operator should check and verify the dealing data with one another while the clients and CTC should conclude a clearance span, produce the daily operation financial statement, and provide them for the clients and CTC as well as the government appropriation department to verify and allot the amount of the money. Except for particular agreement of the clearance span, both parties should process the clearance of the task daily. (7) Data Backup According to the company’s backup policies, the backup program should be arranged and established in the backup software. There should be a backup for all of the data once a week. The set of backup magnetic tapes should be backed up several times in rotation in order to avoid any malfunction caused by a single magnetic set which could possibly lead to an irrecoverable situation. (8) Parameter maintenance As the operation rules are changed, the equipment parameters could be altered according to the operation demands. Hence, the new parameters should be set to be applied to all of the equipment before it is taken into effect. (9) System maintenance The programs of performance status would be controlled and managed by the

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special system engineers, and the programs’ contents and related setting could be adjusted according to different demands. (10) Maintenance of the database Besides maintaining the database to a high-level of feasibility, the efficiency of the database should be supervised in order to promote the operation efficiency and make the database intact and accordant as it should be. (11) Abnormal data The operation data is continuously transmitted to the back-end clearance system. As a result, when the forms of data become abnormal, there could be a malfunction in processing the clearance task. It is required to regularly perform a checkup on the condition of the data transmission so that the error in data processing can be removed and analyzed by the system maintainer. (12) The maintenance of the environment in the computer room The environment should be controlled with an ideal humidity and temperature along with regular maintenance of electricity and fire fighting equipment. Also, in order to secure and protect the safety of the equipment, the entrance should be strictly supervised by security guards. 2. Allocation of personnel in the operations and management (1) Computer room management (24 hours): planning for 1 to 2 personnel each shift, three shifts a day, 8.5 hours a shift in rotation, 6 persons are required (2) Operation engineers: 3 to 4 persons are required, personnel includes Database Administrator, System Administrator and System Engineer. (3) Network management: 1 person (4) Finance: 1 to 2 persons, according to the business in operation 3. Maintenance management The Contractor shall be responsible for system maintenance during the warranty period. The details on the arriving time and repair time are listed in the draft contract. As for the contents of the tasks during the warrant period, the company should establish a maintenance program which includes the maintenance organization, quantity of spare parts, shift scheduling approach, preventive maintenance program scheduling, maintenance check list, and statistics on malfunction cases, etc. 4. Reliability/ Maintenance degree test and verification (1) Reliability test and verification task There should be a period for equipment adjustment for the company after equipment has been put into operation. During this period, a malfunction examination committee should be established to perform the reliability and / maintenance degree test and verification task. (2) Definition of “Reliability” A. Dependant Failure: A dependant failure is caused by its own malfunction. B. Independent Failure: An independent failure is not related to any other malfunctions of any other item. C. Relevant Failure: This type of failure is due to the malfunction in the designated function in the toll equipment, or any independent malfunction and failure caused by the equipment which could not meet the standard.

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D. Non-relevant Failure: This type of failure or malfunction is caused by an external condition of the equipment under the circumstance of testing. That is, the functional, environmental, or test condition does not happen when the equipment is in the normal condition and in the correct manipulation of operation. E. Intermittent Failure: This refers to a failure which happens and lasts only in a certain period, and the function of the equipment would be revived after the failure. F. Mean Time between Failures (MTBF): Mean Time between Failures is that total operation time of the equipment divided by total times of relevant failures of the equipment, and the equation is shown as follows: Total operation time of the equipment MTBF= ───────────────────────────── Total times of relevant failures of the equipment

G. Mean Cycle between Failures (MCBF): Mean Cycle between Failures is that Total times of the equipment operation cycle (or dealing time) divided by Total times of relevant failures of the equipment. A cycle or a dealing time means that a passenger is permitted to enter the entrance gate once. The equation of MCBF is shown as follows: Total times of the equipment operation cycle MCBF＝ ────────────────────────────── Total times of relevant failures of the equipment

H. The Standard of reliability should be set up The CIM reliability is presented with MCBF (Mean Cycle between Failures) shown as follows: Item Dealing times demand MCBF CIM 20,000

The reliability of the item shown below is presented with MCBF (Mean Cycle between Failures) as follows: Item MCBF required hours Central data processing system 20,000 (3) Definition of the degree of maintenance A. Mean Time to Repair (MTTR): Mean Time to Repair means an average value for the total active maintenance time (T cm) that it takes in the certain duration (T) under the condition of malfunction of relevant equipment which is up to (N) items. The equation is shown as follows: TCM MTTR＝ ───────── N

B. Maximum Time to Repair (Mmax .90: This means to select the maximum time of ninety percent of the total active maintenance time as the value (That is, ninety percent of the total active maintenance time has to go below the designated Mmax value). C. Active Maintenance Time: The value of the Active Maintenance Time is totally

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calculated from the moment that the maintainers arrive and refers to the time spent on the scene for repair. This may include the time spent on ruling out malfunctions and segregation, the time spent on replacement and repair of the malfunction, and the time spent on reviving the operation situation, as well as the time spent on testing and verification. D. Corrective Maintenance: This maintenance task is due to unexpected incidents, such as malfunction, accidents, damages, or natural disaster in which the equipment, subsystem and facilities need to be maintained so as to recover the original operating conditions. E. Preventive Maintenance: This includes the maintenance tasks in which the system, subsystem, and equipment or facilities need to be maintained based on the scheduled timetable. The task includes service testing and verification, assembling set maintenance and repair, testing and verification of the functions of the operation system. F. The requirement of the degree in equipment maintenance The Company should guarantee that the task set in the contract shall at least correspond to or be superior to the degree of the maintenance requirements:

Equipment title Average repair time (hours) Maximum repair time(hours) Tickets processor 0.4 0.9 Tickets processor hard disc set 0.4 0.9

3.7 System Technology Transfer The main purpose for transfer of technology is to make sure that the unit in charge of operating the technology will fully understand the coverage of the items and that they are equipped with enough skills and knowledge to maintain the daily operation. Transfer of technology includes the following items: 1. Hardware The Contractor that has won the bid should specify the structure allocation of the hardware so as to clearly present the coverage of all of the hardware equipment for this project, of which the contents should include: (1) The function chart of the original hardware (2) The set standard of each equipment (3) The manual of hardware assembling and dissembling (4) The instruction of the traits of each apparatus (5) Easy learning of the instructions of the interface management (6) Easy maintenance of malfunction 2. Software The transfer items of the software should contain package software and custom-made software, of which the items include: (1) Software function instructions (2) Introduction of the development tools

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(3) Easy learning of the operation of the software (4) Education training of the original package software (5) Easy maintenance of malfunction (6) Detailed design (7) Data model (8) System documents of standards and specifications 3. Submission of the documents In order to ensure that the objectives of the project are fulfilled and that the Standard Operating Procedures are fully followed in establishing the system, the Contractor also needs to submit and append the following information: (1) Task plan instruction (2) Set-up and Plan manual (3) Testing program manual (4) Backup Set-up manual (5) Software development manual (6) Delivery of the source codes (7) Test and verification plan manual (8) SOP manual

3.8 Potential Risks There are many potential risks in the procurement and construction of the back-end system. Here, we list three major risks that the CTC may face during the system procurement and the ways of prevention. 1. The system could not fulfill the CTC’s requirements. The government and CTC may have many different requirements and design a great number of functions for the common ticket. The system, however, may not be able to fulfill all of the requirements because of the constructor’s inability, lack of communication, or design change. The way to avoid this situation is to select the best constructor via a thorough evaluation during the procurement. The evaluation shall include the experiences and past construction cases of the constructor, the technical ability, company scale and other related issues as suggested in Sec. 3.3. With the careful selection of a qualified constructor, CTC may avoid this potential risk. 2. The construction schedule is delayed, the system is not easy to use, and the system is hard to upgrade. These problems are common for back-end system construction. The way to prevent the risk is to recruit experienced Program Management Service consultants to oversee the system construction. With the related experience in system construction, the consultants shall posses the knowledge to ensure that the construction stays on schedule and is implemented according to the system requirements. These consultants shall also effectively communicate with CTC, the government and the Contractor during the construction. 3. The system is locked-in by the Contractor in which the system maintenance and upgrading is controlled by the constructor.

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A system locked-in by the Contractor would increase the cost of maintenance and future upgrading. To prevent such a situation, the Contractor should provide source code and right of software so that the CTC could modify the system by itself. The Contractor shall also be requested to use an open system, such as UNIX, so that CTC could purchase the system from other contractors. After construction, the Contractor shall provide the technology transfer, including technical documents, operation manuals, system training and education. The procurement and construction of the back-end system is not like conventional projects. It includes complicated hardware, software, operation and maintenance. Experts in these areas of work will be needed to assist the government in preventing risks and ensuring that the system fulfills the CTC’s requirements.

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Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

4. Determine Financing Requirements and Funding Strategy 4.1 Introduction

4.1.1 Overview of Project The purpose of this Bangkok Mass Rapid Transit Integrated Ticketing Project (the Project) is to help the Thailand Government (the Government) develop a strategic approach, financing plan, implementation program and project management arrangements to procure an integrated ticketing system for future expansion lines of the Mass Rapid Transit (MRT) network. The current MRT system is comprised of three lines operated by two different companies with different types of operating concessions, different fare structure and different ticket formats. Such a situation complicates the design and implementation of an integrated ticketing system for the entire MRT network, including both the existing and future lines, since it aims to have a Central Clearing House (CCH) with the related ticketing services. But, when one considers the added social and financial benefits in having common tickets, such as an increase of convenience and support for uniform fare structures which helps reduce costs, increase ridership and consequently leave a positive impact on the environment, the Government needs to take the lead in defining a fare policy which can achieve these objectives by promoting an integrated ticketing system for future lines and establishing business rules for the MRT operators (Operators). This Project presents the opportunity for the Government to develop such a platform of the CCH for an integrated ticketing system, and at the same time, facilitate the common ticketing policy. Later on, once the integrated ticketing system is in operation, current MRT lines in operation will have the chance to migrate to the system so that it can be applied to all lines belonging to the network. 4.1.2 Financial Analysis As per the requirements of the “Terms of Reference for Consultants to Prepare a Program Design and Feasibility Study for the Project”, the financial analysis will determine the financing requirements and a funding strategy based on a projection over a period of time. Such a task will involve estimating the system’s capital costs and the costs for operation and maintenance upon implementation, suggesting the preferred mode of system delivery, either conventional procurement or by way of participation from the private sector, and then determining the funding strategy according to the Government’s financing ability and the possibilities of private participation. Furthermore, the Project will examine how the Government or private sector might be able to recover some or all of its initial investment over the long term. In short, the financial analysis will include the following: 1. Financial model: The capital and operation and maintenance cost of the ticketing system (back-end and front-end) and relative devices will be taken into account for expansion plans over a 10-year period. 2. Project Value for Money Assessment (VFM): Develop and assess funding operations ranging from a system fully funded by the Government to the Public-Private-Partnership (PPP) arrangement. VFM will be used on the preferred mode of system delivery. 3. The management of revenue and fund pool: Examine the management of the fare-based revenue streams as well as the smartcards funds pool. 4. The financing and funding strategy: Prepare a single system CCH financing and funding strategy that incorporates consultations with the Government agencies and other stakeholders. 5. The financial management of the Government agency: Assess the financial management capacity of the Government agency responsible for the Project implementation. 6. The investment recovery plan for the Government: Examine how the Government might

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recover some of the initial investment over the long term. 4.2 Financial Model 4.2.1 The Model The financial model is developed upon the integrated common ticketing policy, the technical requirements and the feasible business model. The financial calculations will be made according to the estimation of capital investment, rational revenue and expenditure and financing structure. Figure 4.1 illustrates the Project’s financial model logical structure.

outcome Financing and Funding strategy

Projected financial statements, including balance sheet, income statements and cash flow output Performance indicators: FIRR, NPV, PBY

calculation Investment Revenue O&M Financing

- CCH system - patronage - personnel - equity - adding value - card usage cost structure machines - MRT lines - board - financing cost input - additional & - CCH rate expenses replacement - card sale - operation cost - lease & - maintenance others - depreciation

Source: Consultant Figure 4.1: Project Financial Model Logical Structure The financial model has four parts; namely, (1) initial investment, (2) revenue, (3) O&M and (4) financing, which adhere to the technical requirements of the Project. These four parts receive input data from their respective related factors for an accounting period of at least 10 years and calculate outputs of projected financial statements, including balance sheet, income statement and cash flow. At the same time, there are three financial indicators; Financial Internal Return Rate (FIRR), Net Present Value (NPV) and Pay Back Year (PBY), which are most frequently used in evaluating the project’s performance. Finally, after analyzing the output, the financing and funding strategy (outcome) is determined. When calculating financial data to generate the output, a number of assumptions will be used for items such as the local and international inflation rates, local wage growth rate, corporate tax, import tariff, depreciation method, asset usage life, the deposit rate and loan interest rate, the equity return rate, nominal and real discount rate, etc. Please refer to Appendix 3 for a more detailed look at the project model assumptions. The calculations of the outputs are made in accordance with generally accepted accounting principles and follow the guidelines of “Financial Management and Analysis of Projects” published by ADB in July 2005.

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4.2.2 The Model Cases The model cases are based upon the implementation of a common ticketing policy for the Bangkok MRT system. Common ticketing benefits riders in a number of ways, such as flag-fall reduction and the convenience of being able to use a common ticket for each MRT line. This in turn increases MRT ridership, reduces operating costs and improves traffic flow and environmental conditions within the Bangkok metropolitan area. The scenarios for financial projection are defined as the following three cases. 1. Case A: All of the MRT lines will use the common ticketing system and service. The lines are comprised of the red line, green line, blue line and purple line and the ridership estimation is shown in Table 4.1.

Ridership Green Line Existing Extension

Blue Line Existing Extension

Red Line

Purple Line Case Range

2. Case B: New lines and new line extensions (refer to Table 1.1) will use a common ticketing system and service and existing lines will continue to use their own ticketing systems. However, the ridership for the new line extensions (on the green lines and the blue line) is assumed to be half of the total ridership estimation for their respective lines.

Ridership Green Line Existing Extension

Blue Line Existing Extension

Red Line

Purple Line Case Range

3. Case C: New lines and new line extensions (refer to Table 1.1) as well as half of the existing lines will use a common ticketing system and service. In this case, the ridership of the green lines and the blue line using the common ticketing system is assumed to be 3/4 of the total ridership estimation for their respective lines.

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Ridership Green Line Existing Extension

Blue Line Existing Extension

Red Line

Purple Line Case Range

Case B will be the base case for the outputs and outcome. But, the transaction fee, FIRR and NPV of Case A and Case B will also be calculated for reference.

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Table 4.1: The Ridership Estimation of MRT lines Unit: 1000 person-trip/per day Line 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Red Line - - - - - 549 623 698 773 848 923 1,057 1,191 1,326 1,460 1,595 1,764 Green Line (dark and light) 502 600 699 797 896 995 1,100 1,206 1,311 1,417 1,523 1,590 1,657 1,724 1,791 1,859 1,954 Blue Line 205 311 418 524 631 738 829 920 1,011 1,102 1,193 1,243 1,293 1,343 1,393 1,443 1,566 Purple Line - - - - - 118 132 147 162 177 192 332 473 614 755 896 962 Sum 707 911 1,117 1,321 1,527 2,400 2,684 2,971 3,257 3,544 3,831 4,222 4,614 5,007 5,399 5,793 6,246 Source: OTP. Notes: 1. Red line includes Airport Link. 2. Green line includes dark line, light line and their extensions. Green line is currently operated by BTS. 3. Blue line includes the existing line and the extension, which is currently operated by BMCL.

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4.2.3 The Business Model The Government will set up the Common Ticketing Company (CTC) to deliver a CCH and common ticketing card service to the related MRT parties, which generally includes the CCH service demander and the riders. In the CCH service, CTC will receive a transaction fee from the CCH service demander (the Operators in the nest cost concession, the Government in the gross cost concession) and transfer the fare revenue and data to the demander. In the common ticketing card service, CTC will receive the prepaid payment from the riders and pay the commission to the party who provides the card sale and the adding value service. The existing lines (operated by BMCL and BTS) use a net concession with the Government, which is based on a Build-Operate-Transfer (BOT) model. In this arrangement, the Operators take the business and financial risk. But, because of the low recovery of investment for MRT projects, the Government would like to adopt a gross cost concession into the new lines. That is a kind of Private Finance Initiative (PFI). In this situation, the Government will pay the payment to the concessionaire by a contract, which depends on the performance of the MRT service. CTC will set up parts of the front-end system; namely the Station Processing Systems (SPS) and Central Processing Systems (CPS), thereby enabling the CTC to obtain the O-D (origin-destination) trips data by different types of riders who use the smartcards. CTC can play the role to help the Government by (1) conducting the contract management for gross cost concession of MRT lines, especially in the service payment, (2) ensuring that the daily transition data of the smartcards for MRT lines is correct and unchangeable, and (3) consolidating the data of the single journey tickets as well as different kinds of pass tickets and discount tickets via the data retrieved from MRT operators. The Government will know the exact daily O-D trips of the MRT line and can then determine the MRT service performance and pay to the MRT operators based on the MRT operators’ transit data and the CTC data. Therefore, the business model will differ for these two types of concessions. For the gross concession lines, CTC will transfer fare revenue to the Government and receive a transaction fee from the Government, while for the net concession lines, CTC will transfer the fare revenue to the Operator and receive a transaction fee from the Operator.

regulation regulation Government Service payment (Exc.CCH ) fare revenue CCH fee Data exchange MRT CTC operator Add Value commission MRT stations cash Mrt service Add value

Rider

Figure 4.2: The Business Model for the Gross Cost Concession of the New Lines

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regulation regulation Government

fare revenue CCH fee MRT Data exchange operator CTC

Add Value commission MRT stations cash MRT service Add value

Rider

Figure 4.3: The Business Model for the Net Cost Concession of the Existing Lines

4.2.4 The Investment Costs 1. Base Cost For the construction of the integrated ticketing system serving passengers on the MRT lines, the CTC shall have to establish the back-end system, combine the back-end system with front-end systems to be constructed, and build up facilities that provide the ticketing service to the passengers. The transaction data received from MRT Operators must be correct and unchangeable, thereby requiring the CTC to set up various processing equipment items at the MRT stations. Hence, the base cost consists of the back-end and some components of the front-end of the ticketing system. The back-end system includes the hardware and software of the CCH (as seen in Table 3.6), and the front-end system components (owned by CTC) include the Central Processing Systems (CPS), Station Processing Systems (SPS) and adding value machines. The CCH hardware (clearing system computers, KMS hardware, CIM hardware, network device and set up fee), CPS, SPS, adding value machines and CCH software of system management and network management are locally purchased and charged by value added tax (VAT), while the CCH software of clearing application, KMS application and CIM application is imported and charged by tariff and VAT. However, the tariff rate for the CCH software has now been exempted. The Government plans to procure during the fourth quarter of 2010 to select the contractor. Construction is expected to begin in the 1st quarter of 2012 and the construction period is estimated to be around 1.5 years. The construction cost payment will be in 2012 and 2013. An overview of the base cost is indicated in Table 4.2 with the price shown for the base year price of 2008.

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Table 4.2: Base Cost Estimate (1000 Bahts) Items unit Qty Unit rate Taxes Totals (including taxes) foreign local % 2012 2013 Total Back-end CCH set 1 49,533 7% 26,500 26,500 53,000 system hardware CCH set 1 17,757 7% 19,000 19,000 software 1 CCH set 1 44,860 7% 24,000 24,000 48,000 software 2 Front-end Adding value psc 120 14 7% 1,800 1,800 system machine CPS set 4 1,869 7% 8,000 8,000 SPS set 60 935 7% 60,000 60,000 Total 50,500 139,300 189,800 Source: Consultant. Note: 1. CCH software 1 contains the system management and network management software. CCH software 2 includes the clearing application, KMS application and CIM application software. 2. VAT is 7%. The imported tariff for the electronic system (equipment) is 30% according to Thailand’s customs 8608.00.20 Electro-mechanical equipment. It is 0% in the Association of Southeast Asian Nations (ASEAN) Free Trade Area and it is 6.67% if the equipment is original from Japan. The imported tariff for CCH software is exempted according to Thailand’s customs 8523.40.11, since it is suitable for computer use and unrecorded. 3. CCH hardware and software include the major and backup systems. 4. There are three components of the front-end system, including adding value machines, CPS and SPS. 5.The “adding value machines” are operated by the clerks of Operators at the MRT station. These machines are not the same type of machines which enable riders to automatically add value by themselves. Those machines are much more expensive than the “adding value machines”, For the existing lines, Operators add value for the users.

2. Contingency Costs There are two kinds of contingency costs; physical contingency costs and price contingency costs. Although there is not much of a possibility for changes in quantity or the construction method for the CCH system, there may be a one to two quarter delay in the integration between the front-end system and back-end system. Taking this into consideration, it is assumed that there is no physical contingency cost. The price contingency cost is due to inflation. Imported products will be affected by global inflation and local products will be affected by local inflation. The international and local cost escalations are referenced by the resource provided by ADB, which is as shown in Table 4.3. The price contingency cost is shown in Table 4.4. Table 4.3: Inflation Escalation year 2008 2009 2010 2011 2012 2013 Local cost escalation 4.0% 3.5% 3.2% 3.0% 3.0% 3.0% International cost escalation 6.8% 0.7% 1.4% 0.4% 0.5% 0.5% Source: ADB, Aug. 2008 Note: The international inflation rate is derived from the international cost escalation indicators that the products are imported from G-5 countries. It uses the Manufacturer’s Unit Value (MUV) index.

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Table 4.4: Price Contingency Cost (1000 Bahts) Items 2012 2013 Total Back-end CCH hardware Local 3,675 4,580 8,254 system CCH software 1 Local 3,284 3,284 CCH software 2 Foreign 1,502 1,630 3,132 Front-end Adding value Local 311 311 system machine CPS Local 1,383 1,383 SPS Local 10,369 10,369 Total 5,177 21,556 26,733 Source: Consultant.

3. Project Investment Plan The initial investment includes the base cost and its contingency cost. The Project Investment Plan is shown in Table 4.5. Table 4.5: Project Investment Plan (1000 Bahts) Items 2012 2013 Total A. Base Cost Back-end system 50,500 69,500 120,000 Front-end system 69,800 69,800 Subtotal A 50,500 139,300 189,800 B. Contingencies Physical Price 5,177 21,556 26,733 Subtotal B 5,177 21,556 26,733 C. Financial charges during implementation Total (A+B+C) 55,677 160,856 216,533 Source: Consultant. 4.2.5 The Revenue Revenue is mainly derived from transaction fee income, card sales, leasing income and interest income. 1. Transaction fee income The transaction fee income comes from the smartcard transaction fee of the MRT lines in the projection. It is calculated by the person-trips using smartcards and the transaction fee. The person-trips using smartcards depends on the ridership estimation and the card use ratio for the riders. The ridership estimation is as shown in Table 4.1. As for the card use ratio, it is suggested to refer to the experiences of Bangkok and Taipei as shown in Table 4.6. Hence, the card use ratio is set as 25% in the 1st year, 65% in the 4th year, and escalates up to 80% in the 10th year. The daily transaction is projected as 0.4M in the first operation year and 1.5M in the fifth year. In the 10th year, the daily transaction is escalated to be up to 3M.

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Table 4.6: Prepaid Card Usage Rates of Different Ticketing Systems BMCL Prepaid Cards 1st year: 30% (weekday) and 16% (holiday) 4th year (2007): 65% (weekday) and 44% (holiday) Taipei Easycard1 1st year: 19%, 4th year: 86%, 10th year: 88% Note 1: The average usage rates for MRT, buses, and parking lots.

The transaction fee is set at the specific rate that CTC can balance the cash flow and make a return on the investment. For the sake of the Operators, the transaction fee divided by the average fare per person-trip is not more than 3%. CTC should start the CCH business after the ticketing system is accepted and capable of being handed over to CTC. The construction period is around 1.5 years depending on the progress of the consolidation of the ticketing front-end and back-end system and the system acceptance. It is estimated that the CCH shall start service from the 3rd quarter in 2013. 2. Card sales CTC issues common ticketing cards to riders who will then enjoy the benefits of the common ticketing policy. The card issuance volume correlates to the number of card-person-trips per day. From the experiences of Hong Kong, Taipei, Shanghai, Singapore, Tokyo and London, the ratio of card issuance accumulated volume / card-person-trips per day ranges from 1.5 to 5.5. For this study, it is suggested that the card issuance volume for the whole MRT system is 2 times of card-person-trips in the 1st year before escalating up to 4 times in the 10th year. CTC is assumed to initially have a 50% market share of all cards, and is then expected to eventually obtain 100% of the market share upon fulfilling the goal of having a common ticketing policy for all MRT lines. The number of cards issued by CTC in the 1st year of operation is projected to be 0.4M cards and the accumulated number of issued cards escalates up to 3.76M cards at the end of the 5th year based upon the increase of the times of card-person-trips and CTC’s market share of all smartcards in MRT lines. At the end of the 10th year, the number of accumulated issued cards escalates up to 12.2M. Table 4.7: Card Issuance Accumulated Volume / Number of Card-person-trips per Day of Different Ticketing Systems Taipei Easycard 4.6 (2008) London 2.5 (2006) Singapore EzLink 2.0 (2006) Shanghai Traffic Card 4.3 (2005) Hongkong 1.5 (2005) Tokyo Suica 5.5 (2006) Source: Consultant.

The purchase cost of a smartcard is around 32 Baht, but the card fee paid by the rider when they first obtain the card is projected to be 40 Baht. A transportation smartcard will be used in the MRT lines at this stage and the riders will be able to buy the smartcards at the MRT stations. CTC will pay the card sale commission to the Operators, which from market experience, is around 2% of the card fee. The card sale profit after deducting the purchase cost and the sale commission is around 18%.

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3. Leasing income CPS and SPS will be leased to the Operators for 10 years. The leasing return rate is assumed to be 15%, which is a lower leasing return rate in the leasing market. The initial investment of CPS and SPS is 93M in the second construction year and the annual leasing income from the Operators is estimated to be 20M Baht for the 10 years of operation. 4. Interest income A travel deposit of 30 Baht is paid by the customer in advance when purchasing a smartcard. The travel deposit is overdraft when the fare exceeds the card value balance, whereas the users can add value on the card as needed. The travel deposit and the prepaid payment will be deposited into a special account of a financial institution. When a trip is made, all of the fare from the special account is transferred to the Operators. But, the interest income generated from the travel deposit and the prepaid payment can be used as working capital of CTC. On average, the added value balance per effective card is assumed to be 100 Baht. In the 1st year of operation, the deposit balance of the travel deposit and the prepaid payment is 42M Baht. With an assumed interest rate of 2.25%, the interest income of the 1st year escalates to 0.94M Baht. For the 10th year, the deposit balance reaches 1,340M Baht and the interest income escalates to 30M Baht. Unlike the transaction fee income, card sales, leasing income and interest income, the income generated from e-commerce via retailers is likely to be rather conservative in the projection. Thai Smart Card Corp., Thailand’s biggest e-commerce smartcard company, was incorporated in 2001, and its parent company is CP All Public Company Limited (formerly C.P. Seven Eleven Public Company Limited), which owns 72.64% of the company. Their paid in capital is 1200MB, but their accumulated deficit was 612MB at the end of 2007. The company has not generated earnings from the establishment even though there are over 2500 Seven Eleven stores in Bangkok. Despite having many partners in e-commerce and enabling users to use their Thai smartcard in numerous locations, the retail partners still need to provide more strong incentives to the users, such as a special discount price for using the smartcard. Hence, since Thai Smart Card Corp. does not present an attractive or easy means of obtaining profit via e-commerce, it is suggested not to consider e-commerce in the projection. 4.2.6 Operations & Management Costs 1. Personnel Costs The organizational structure of CTC shall be divided into at least three departments; namely, sales, system operations and administrative management and is suggested to be organized as shown in Figure 4.4. According to the differing stages, the size of the organization is suggested to be as shown in Table 4.8. Staffing includes 6-7 managers during operation and around 44-50 persons. The average salary of the manager is around 40,000 Baht per month and the average salary of other staff members is about 25,000 Baht per month. The Executive Managers are suggested to be comprised of 5 individuals with a salary of around 250,000 Baht per month. The salary assumptions are referenced from the transportation operators in Bangkok. The annual personnel cost includes 13 months salary and 7% added welfare. The personnel costs will increase according to the annual salary growth rate.

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Board of Auditing Directors

President Vice President

System Marketing AM Assistant VP Assistant VP Assistant VP

Manager Manager Manager Clearing Marketing Logistics Customer service Account Accounting System management Finance management Card sales HR

System construction New business Office affairs and replacement support Quality control R&D

Figure 4.4: The Organization Structure of Common Ticketing Company

Table 4.8: Size of the Organization of Common Ticketing Company Unit: persons Stages Construction Construction Operation Operation Depts. year 1 year 2 year 1-5 year 6-10 Sales 5 5 20 18 System 10 20 20 27 AM 5 5 10 12 Sub total 20 30 50 57 Managers 4 5 6 7 Staffs 16 25 44 50 Sub total 20 30 50 57 Executive 3 4 5 5 Managers Total 23 34 55 62 Source: Consultant. Note: AM refers to administrative management.

2. The Board Expenses The Board expenses include remuneration salaries to the Board of Directors and the auditors. Under the consideration of the release of shares by the Government and the

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possibility of new shareholders joining CTC, it is suggested to allocate around 11 director seats on the board (more details are provided in Section 4.7). The remuneration to the directors is 20,000 Baht per month as referenced with the transportation operators in Bangkok. The auditors report to the board directly and take charge of the auditing of the company’s operations. It is suggested to have one manager and one other staff auditor. The salary per person month of the auditor manager and staff auditor should be the same as the salary of the operational departments of CTC. 3. Administrative Management Cost The administrative management cost includes the office supporting expenditure such as printing, business trip expenses, marketing expenses, water and electricity expenses and so forth. When referenced with the financial report of Thai Smartcard Co. of 2006 and 2007, the cost is assumed to be 120% of the personnel costs. 4. Maintenance Costs The maintenance cost per year is about 10% of the initial equipment cost. 5. Rental Costs The office space is roughly 1,000 square meters and costs approximately 600 Baht/square meter/per month. The rental of space for the remote backup system is around 1 million Baht per year and covers an area of 10 square meters. 6. Depreciation The cost of equipment items is depreciated by the asset life according to the straight line method. (please refer to Appendix 3 for more details) 7. Telecom expenses The telecom expenses depend on the transaction volume of the CCH. The average telecom expense per 1 million CCH transactions is set to be 5000-6000 Baht. 8. Adding value commission expenses Riders can add value to their cards at MRT stations by the service of staff members of the Operators. With reference to the Taipei and Bangkok market experience, the effective cards are assumed to be 80% of all the cards issued by CTC (an effective card means the cards are used in one year). The added value for each time is 200 Baht and it is assumed to have value added twice a month. The adding value commission is charged by 0.3% of the adding value. It is referenced with the average adding value commission fee of EasyCard Corporation in Taipei. The adding value commission is supposed to cover the operation cost of the merchant (the Operator), such as the personnel cost and the telecom expense. CTC will pay the adding value commission to the Operators. 9. Trustee expense The trustee fee is charged by the trustee assets. It is usually included the transfer service to the accounts, and its annual rate is around 0.3-0.5%. The trustee assets are the deposits of the travel deposit and the prepaid payment (please refer to Section 4.2.5 Item 4 - Interest Income for more details on the annual deposit balance). 10. Inventory assets The Inventory is 2 months storage for the annual card sales volume. 11. Replacement Investment Replacement of hardware is necessary after 5 years. The replacement investment per year from years 6-10 is 20% of the initial hardware investment. Inventory and replacement investment are the assets that CTC needs during operation. The O&M expense for the construction period is amortized in the first 5 years of the operation period.

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Among these O&M expenses, the personnel (salary), the board, administrative management, maintenance, rental and depreciation are fixed costs while the telecom, trustee and adding value commission expenses are variable costs. The fixed cost is relatively high in the first 5 years of the projection, whereas in the second 5 years, the variable costs exceed the fixed costs due to the CCH daily transaction exceeding a certain level (around 1.5 million transactions per day). That will retain earnings and possibly make enough cash inflow to recover the investment. 4.2.7 Financing Funding for the construction period will demand up to 400 million Baht. The Project investment cost is 217MB in the construction period, and the operation cost for the start-up preparation is 113MB. In the first years of operation, CTC will experience a loss before the transaction volume reaches the break-even point. Therefore, prior to operation, it will be necessary to retain in cash an amount of around 70MB. Hence, the funding demand is 400MB (217 + 113 + 70MB). The funding demand is not as much as that of other types of infrastructure and the construction period is shorter. For the business strategy, the Government will establish CTC and hold 100% of the shares. The funding cost by way of loan or equity for the Government in the construction period is the same. It is suggested that CTC shall be funded by the equity from the Government. The Government can obtain the investment capital through the budgetary procedure, which comes from the government budget or from other loans. ADB can provide the investment loan to the Government in order to enable the Government to initiate CTC and implement the common ticketing system. CTC in turn can attain working cash inflow in the operation period if the transactions processed exceed a level of around 1.5 million transactions per day. Otherwise, if there is short term cash flow shortage in the operation period, a short term loan can be made. The financing plan during construction is shown in Table 4.9. Table 4.9: Financing during the Construction Period (1000 Bahts) year 2012 2013 sum Investment cost -55,677 -160,856 216,533 Operation cash flow -52,990 -60,404 113,394 Capital 160,000 280,000 400,000 Net cash flow of the year 51,333 18,470 70,074 Cash balance 51,333 70,074 70,074 Source: Consultant. Note: The ticketing system is projected to be accepted in the 2nd quarter of 2013. The ticketing service will begin in 3rd quarter of 2013. The operation cash flow in 2013 includes the net operation cash flow in the operation period (from 3rd to 4th quarter of 2013).

4.2.8 Projected Financial Performance 1. Projected financial statements The projected financial statements of the base case are detailed in Appendix 4 together with the income statement, balance sheet and cash flow statement. 2. Projected financial performance indicators The projected financial performance indicators of the base case for the nominal price (according to the concerned inflation factor) are as follows. (1) NPV: 46,467 (1000 Bahts) for 2008 price. (The WACC is 5.5% in the construction period

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when the government owns 100% of shares. The WACC is 7% and 8.5% in the 1st and 2nd operation year if the government will release 20% of shares to the private investors each year. The private return on equity is 13% for the transportation operator in Thailand. The average WACC is 7.42% in the projected period that includes 2 construction and 10 operation years.) (2) FIRR: 10.00% (CTC is the vehicle for the common ticketing policy and should pay attention to the public interest so as not to increase the rider’s cost. FIRR is a small premium to WACC and not as much as the private sector’s.) (3) Pay back year: It will pay the investment back in the 7th year for the cash flow. For discounted cash flow, the pay back year is the 9th year. (4) Debt ratio: The debt ratio may be as high as 50-60% because a lot of pre-paid payment by the customers is considered a liability. But, if the advanced payment is waived off from the Balance Sheet (B/S), the debt ratio is not more than 5%. It should be noted, however, that if the inflation factor is waived from the projected cash flow, the real project financial results can be obtained. According to the guidelines of the “Financial Management and Analysis of Projects” of ADB, the discount rate should use the WACC without the inflation factor. In the construction period, the nominal WACC is 5.50% and the real WACC is 2.23%. In the 1st operation year, the nominal WACC is 7% and the real WACC is 3.68%. And in the 2nd operation year, the nominal WACC is 8.50% and the real WACC is 5.14%. The average real WACC is 4.23% in the projected period.

Items Nominal Tax adjusted Inflation Real cost Weighted WACC cost cost rate component (real) Equity 5.50% 5.50% 3.00% 2.23% 2.23% 2.23% (cons 1,2) Equity 7.00% 7.00% 3.00% 3.68% 3.68% 3.68% (op 1) Equity 8.50% 8.50% 3.00% 5.14% 5.14% 5.14% (op 2-10) Source: the study and “Financial Management and Analysis of Projects” of ADB.

The NPV of the projected free cash flow, which is discounted by the real WACC 4.23%, is 241,715 (1000 Baht) and the FIRR is 14.46%. 4.2.9 Transaction Fee According to the previously mentioned assumptions for determining the investment costs, revenue, operation and management cost and financing, the transaction fee is calculated for (1) the condition that CTC builds and operates the ticketing system and (2) the condition that CTC provides the ticketing service and the Government builds the ticketing system. 1. CTC builds and operates the ticketing system Since this is a policy-oriented project with a required return rate for the risk, the expected FIRR is 10%. The transaction fee per transaction is as follows in the three scenarios.

Scenarios Transaction Fee (Baht/per transaction) Case A 0.2532 Case B (Base Case) 0.3687 Case C 0.2912

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2. CTC provides the ticketing service while the Government builds the ticketing system If the Government would like to invest in the ticketing system construction, then CTC provides the CCH service, develops card sale business and takes charge of the replacement of equipment. Also, if the revenue of CTC from the transaction fee, card sale and interest income can cover the operation and management costs of CCH, corporate taxes and the replacement cost, then CTC can run the business in the operation period. The projected FIRR of CTC is expected to be 10%. The transaction fee is as follows in the three scenarios. Scenarios Transaction Fee (Baht/per transaction) Case A 0.2220 Case B (Base Case) 0.2980 Case C 0.2540

The construction cost is not relatively much compared with the operation and replacement cost in the ticketing system. If the Government builds the CCH and CTC provides the ticketing service, the transaction fee is 20% less than the transaction fee set in the model of the former model “CTC builds and operates the ticketing system” on the equity return rate of 10%. 4.2.10 Sensitivity Analysis The investment cost, ridership, card use ratio, transaction fee and O&M fixed cost are the most important factors during construction and operation. The sensitivity analysis of each of these factors for the project financial results is shown in Table 4.10. As can be seen from the table, the ridership, card use ratio and transaction fee are the most important factors for operation as they have the most impact on the incomes. With the high fixed cost characteristics, the O&M fixed cost is also very sensitive to the operation, especially in the early stage. The investment cost, on the other hand, although still being somewhat sensitive, is not as sensitive as the other 4 factors. The max allowance change for the factors which makes the NPV become negative is shown in Table 4.11.

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Table 4.10: Sensitivity Analysis

Investment cost -30% -20% -10% 0% 10% 20% 30% NPV 92,742 77,317 61,892 46,467 31,042 15,617 192 % 100% 66% 33% 0% -33% -66% -100% IRR 13.21% 12.05% 10.98% 10.00% 9.09% 8.23% 7.43% % 32% 21% 10% 0% -9% -18% -26%

Ridership per day -30% -20% -10% 0% 10% 20% 30% NPV- 167,189 - 94,281 - 23,408 46,467 116,343 186,202 253,844 % -460% -303% -150% 0% 150% 301% 446% IRR -3.88% 1.55% 6.06% 10.00% 13.59% 16.92% 19.92% % -139% -85% -39% 0% 36% 69% 99%

Card use ratio -30% -20% -10% 0% 10% 20% 30% NPV- 167,189 - 94,281 - 23,408 46,467 116,343 186,202 253,844 % -460% -303% -150% 0% 150% 301% 446% IRR -3.88% 1.55% 6.06% 10.00% 13.59% 16.92% 19.92% % -139% -85% -39% 0% 36% 69% 99% Transaction fee -30% -20% -10% 0% 10% 20% 30% NPV- 209,650 - 122,588 - 37,188 46,467 130,123 213,313 294,510 % -551% -364% -180% 0% 180% 359% 534% IRR -8.40% -0.65% 5.20% 10.00% 14.21% 17.99% 21.38% % -184% -106% -48% 0% 42% 80% 114%

O&M fixed cost -30% -20% -10% 0% 10% 20% 30% NPV 214,228 159,792 103,313 46,467 - 10,378 - 67,224 - 125,825 % 361% 244% 122% 0% -122% -245% -371% IRR 20.06% 16.64% 13.26% 10.00% 6.86% 3.80% 0.71% % 101% 66% 33% 0% -31% -62% -93% Source: Consultant. Table 4.11: The Allowance of Sensitive Factors factors % allowance factors % allowance Investment cost +30% Ridership per day -7% Card use ratio -7% Transaction fee -6% O&M fixed cost +8% Source: Consultant Note: compared with the base case. 4.3 Project Value for Money Assessment

4.3.1 Introduction Value for Money (VfM) assessment is a valuation method for the public sector to make a decision in choosing procurement methods for the undertaking of an infrastructure project. The selective procurement method is value for money where it represents the optimum combination of whole-of-life costs and quality (or fitness for purpose) of the good or service to meet the user’s requirement. It can be regarded as the cost and benefit analysis of the selective methods to compare the government costs of them in the whole life cycle. As previously noted, VfM is defined as the optimum combination of whole-of-life costs and quality (or fitness for purpose) of the good or service to meet the user’s requirement. It is not the

4-17 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report choice of goods and services based on the lowest cost bid, but it still needs to take the risk and quality into consideration. It needs historical information and data to perform the high degree of estimation and modify the optimism bias in the project. In the UK, only those projects exceeding ￡20 million are feasible to pursue Private Finance Initiative (PFI) due to the high cost of PFI in the planning, bidding and contract management, which includes VfM in the three stages of the planning and procurement. The UK government sets up the Public Sector Comparator (PSC) data base and optimism bias of large public projects and unifies the important parameters in the Treasury Breen Book. That will facilitate VfM assessment. Very few governments have such a data base. 4.3.2 Funding Options This Project aims to establish CTC to serve as the platform of a common ticketing policy for the Bangkok MRT system. It can be profitable if a certain number of transactions are made under the common ticketing policy. But, for the complex integration of all MRT lines, public resources need to drive CTC to the CCH system under the common ticketing policy. The Government should be the stakeholder of the company. On the other hand, since the Project is around 400MB, the scale is not big enough to adopt PPP. From the legal perspective, the Government shall have the power to grant a concession contract to the private sector only in the case that the said activity or the project is required to use natural resources, state assets or the activity of the project is determined by law to be a duty of the government to provide for the public. For this Project, the Private sector will take too much risk by operating without Government involvement or the concession. Hence, there is not much room to consider PFI or PPP. To take a closer look at this situation, a summary of funding option features can be referred to in Appendix 5. There are three funding options studied in the Project. They are: 1. State Owned Enterprise (SOE) in which 100% is fully owned by the Government with the Design and Build (DB) model stated in Section 5.4. The system provider designs and builds the system and transfers to CTC. It is conventional procurement. 2. SOE in which 100% is owned by the Government in the construction period and the other investors will join together after construction in which the Government plans to invite the Operators to join the company and sell shares to them. The Government can dilute the business risk as per the share ratio. In this case the selling of shares is a resource of repayment to the ADB investment loan. Then, CTC introduces the construction team as the future operations and maintenance team. CTC is still SOE after the shares release, but the private sector will join in CTC by means of shares or the executing team. This is recommended as Section 5.4 Design, Build, Operate and Maintain (DBOM) model. 3. The Private sector runs the business. Since the third option presents high revenue risk without public resources, the project financial return will not be practical. As private enterprises are concerned with making the most profit for the stakeholders, this would not be the best method to carry out the common ticketing policy and the Government will have to pay much more for the contract management. Therefore, only the first and the second options are chosen to be tested by VfM analysis as follows. 4.3.3 VfM Analysis The purpose of the VfM analysis is to evaluate which option is the best cost of the whole life cycle of the Project for the Government. This includes the net cost and risk taken into account for construction, procurement, financing and operation. The VfM analysis uses a quantitative method by means of the financial analysis and the risk analysis of the options. It is shown by the net present value of the options. The difference of the net present value between the options for the government’s payment is the value for money of the most favored option compared with the least favored one.

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1. Assumptions Options (1) SOE 100% (2) SOE with the Private Sector later Base capital cost Base case Base case Revenue Base case. Base case O&M The administration cost is usually Base Case 20% more than the private sector. The Private sector joins later. They The maintenance cost is 10% will put more pressure on the more than base cost. operation performance. The personnel costs which are inclusive of the executive managers and staff in DBOM strategy are estimated in the projection. Replacement 10% more than Base case Base Case Tax 30% 30% Project management 190M 190M for bidding + cons y1+y2 and opr.y1 Investment 0 If shares owned by the Gov are under management cost 50%, 2M per year (management, auditing…) Invest loan Loan from ADB with the rate of Loan from ADB with the rate of 3%. 3%.

The discounted rate is the opportunity cost of the Government. The 10 year government bond in the recent 10 years averages to around 5.50%. So, the discounted rate is 5.50%. The base year is 2008, and the transaction fee is set at 0.3687 Baht / per transaction. These are only used to compare the NVP of government payment for the options. There are two aspects to be discussed; one is the Project investment performance, and the other is the risk adjustment. 2. The Project investment performance In the case of (2) SOE with the private sector, the Government may transfer the shares to the Operators with 5-10% for each Operator in the first 2-3 years of the operation period. The share by the Government ranges from 100% to 60% in the first years (please refer to Sec. 4.7 for more details). It is expected to run the business more efficiently based on the expertise of the management team while the private investor will utilize its best efforts in making the most profit for the equity under the Government policy. For the Government, it shares some part of the business risk as per the share ratio. Although (2) SOE with the private sector will have more investment management on the Project for the Government, the second option still shows a better performance in the construction and operation period for the Government payment.

NPV (1) SOE 100% (2) SOE with the private sector Unit:1000 Bahts CTC CTC GOV 100%->60% Capital (loan from ADB) - - Base cost -168,020 -168,020 Operation cash flow 180,121 341,060 Net cash flow (project) 12,010 173,041 118,245 Project and investment -147,998 -158,020

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NPV (1) SOE 100% (2) SOE with the private sector management Interest and loan repayment -280,365 -280,365 Sold share amount 134,694 The government payment in -416,326 -185,060 the construction and operation Source: Consultant. 3. Risk adjustment and analysis Owing to the features of the Project, there may be some risks posed from the base cost overrun, O&M overrun and patronage shortfall (revenue decrease risk). Since there is no data base for PSC and the private sector in Thailand with regard to public transport or electronic ticketing systems in the infrastructure, reference is made to international studies on the delivery of public transport projects, especially those which are or include the information and communication technology projects, UK market experience data and related ADB studies and reports. The possibility of a risk event and the % difference from the base case are shown below. In the option of (2) SOE with the private sector, the Government owned 100% shares of SOE in the construction period, and tenders the system providers to construct the ticketing system. The base cost overrun situation is the same in both options, but in the O&M overrun, there is less optimism bias for the option of (2) SOE with the private sector because the executive team may put more pressure on the operation performance than (1) SOE 100%. For the patronage shortfall, it is the same in both of these options. The risk adjustments for the two options show that the risk cost of (1) SOE 100% is more than (2) SOE with the private sector. And in the second option, the Government owns some portion of the shares of SOE and partially inherits the risk cost.

Risk Adjustment (1)SOE 100% (2) SOE with the private sector Event possibility % difference Event possibility % difference from the base from the base case case Base cost overrun 30% 45% 30% 45% O&M overrun 15% 30% 15% 20% Patronage shortfall 30% 30% 30% 30% (revenue) Source: (1) Optimism bias in UK Treasury 2002 review of large public projects, UK Treasury 2002. (2) Procedures for Dealing with Optimism Bias in Transport Planning Guidance Document, The British Department for Transport, June 2004. (3) As Supplementary Green Book Guidance in UK shows, for the equipment and development projects (manufactured equipment, information and communication technology development projects), its upper bound optimism bias is 200% and the lower bound is 10% in the investment expenditure. The construction cost for this project is not as much as other infrastructure projects and the construction duration is 1.5 years. The base cost overrun is possibly at the stage of consolidation with the back-end and front-end system. The cost would derive from the schedule delayed, such as the personnel and administration cost. The optimism bias is suggested to be 45%. (4) The experience data for the PFI workshop used in UK. (5) Thailand: Infrastructure Investment Advisory Assistance (Phase II), Technical Assistance Consultant’s Report, ADB, July 2007. (6) Preparing the Ho Chi Minh City Metro Rail System- PPIAF Study Completion Report, ADB, August 2008.

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NPV (1)SOE 100% (2) SOE with the private sector Unit:1000 Bahts CTC CTC GOV 100->60% Base cost overrun 22,683 22,683 O&M overrun 57,452 32,880 Patronage shortfall 143,968 143,968 (revenue) Risk adjustment subtotal 224,103 199,531 136,346 Source: Consultant 4.3.4 Analysis Results From the analyses of the investment performance and risk factors, it can be seen that the second option of SOE with the private sector has the value for money when compared with the first option of SOE 100%. The government payment and cost NPV of option (2) is 318MB less than option (1). The VfM of option (2) comes from the funding resource for the ADB loan repayment, the expertise management of the private sector and the risk shared with the private sector.

NPV (1) SOE 100% (2) SOE with the private sector Unit:1000 Bahts CTC CTC GOV 100->60% Capital (loan from ADB) - - - Net cash flow 120,101 173,041 118,245 Project and investment -147,998 --- -158,082 management Budget for interest, loan -280,465 -145,770 repayment (with net shares selling) The government payment in -416,362 --- -185,608 the construction and operation Risk adjustment subtotal -224,103 199,531 -136,346 Government total payment -640,464 --- -321,945 and cost in the whole life cycle of the Project Source: Consultant

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Unit: MB Risk transferred to the private by alternative (2)

VfM for Risk cost: alternative (2) NPV 224 Npv=318

Contr mgt: 148 operation Risk cost: 136

Buget for Contr mgt: 158 financing: 280 operation Budget for financing: 146

(1)SOE100% (2)SOE with the private Figure 4.5: The NPV of Life Cycle Cost for Government Payment and Cost

4.4 The Management of the Fare-based Revenue Streams as well as the Smartcard Funds Pool The management of revenue stream and the smartcard fund pool is very important. The pre-paid money by the customers should be isolated from CTC’s working capital account. According to the notification of the Bank of Thailand, the E-Money Operator shall prepare its Accounting Record by separating the money received from the customer from its revolving capital (Appendix 6: E-Money Business Rules). The pre-paid account (the smartcard pool) will be managed correctly and safely by the clearing system and the cash management. 4.4.1 The Smartcard Pool (Pre-paid Account) With reference to Figure 4.2 and Figure 4.3 of the CCH business model for the net cost concession and the gross cost concession of MRT lines, the travel deposit will be obtained when the customer purchases the ticket and the added value will enter the smartcard pool of CTC. The pool is only for the fare payment to the Operator (the net cost concession) or the Government (the gross cost concession). The fare payment will be paid daily by the revenue data received from the Operator of the CCH settlement date. After the revenue data is verified by the system, the payment will be delivered to the Operator or the Government before the appointed time, which is usually the next day of the CCH settlement date. For safety and efficiency, it is suggested that the smartcard pool is a special trust account, which is managed by the trustee bank.

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Buy cards

Card sale Net cost concession

Travel Operator deposit Smartcard pool Gross cost concession Add value Government

Figure 4.6: The Smartcard Pool

4.4.2 The Working Capital Account The working capital account is for the income, the cost and expenditure of the ticketing and CCH service provided by CTC. This does not include the pre-paid payment from the customer, which is the obligation and debt item for the company. The transaction fee, card sale, leasing income and the interest income of the smartcard pool would enter into the working capital account. CTC can receive the transaction fee and card sale per month for the management efficiency on the transaction record checking. The payment for the card purchase, salary, board expenses, administration cost, telecom, maintenance, rental, selling card and adding value commission and equipment replacement would be obtained from the account. The working capital account is revolving for the company’s operation. If there is shortage of cash flow, the funding will enter into this account.

CCH service fee The operation cost and expenditure: Operator (net cost) card purchase salary Government(gross) The working board expense capital administration account telecom rental Card sale selling card and adding value commission Leasing income equipment replacement

Interest income of smartcard

Figure 4.7: The Working Capital Account

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4.5 The Financing and Funding Strategy The Government will invest in CTC and own 100% of shares at the beginning for the initial capital cost during the construction period. The initial funding demand including the base cost, contingency cost and the working capital demand will be 400MB. If the Government would obtain the investment loan from ADB, which has a rate of 3% with 2-4 year grace period and 5-7 year repayment period. The capital of the company is 400MB, which will support the financial demands of the construction and the early operation stages. The transaction fee shall be market competitive and can cover the operation activity of the company. It will have the operational cash inflow after the transactions per day exceeds 1.5M. Except for the early stage of the operation period, the company will acquire the cash flow from the operation during most of the time period. There is no need for financing if the business develops successfully in the future, but if the business does not grow up as expected, the company can be financed by loan with the financial leverage. For the replacement of equipment, the company may take out a long-term loan or lease the equipment. The company may possibly develop the e-commerce application business in the future based on the large number of smartcard users and can cooperate with the commercial banks in this field. The company usually obtains the loyalty or the cooperation down payment through open bidding from the banks. The loyalty or payment will be the funding for the replacement of equipment, the principle repayment or the shortage of the working capital. If the debt ratio (exclusive of the pre-paid and travel deposit) is comparatively high and there is little change to improve the financial structure in the short term, the company is suggested to proceed from new issue to raise capital. It can invite new investors to join in. 4.6 The Financial Management of the Government Agency The Government will set up CTC in accordance with SOE rules and budgetary procedures. The company can start operations upon being granted the license from the Electronic Transaction Committee through BOT. The government agency shall handle the investment management and the CCH and e-money business regulations. According to the rules, regulations and features of the business, the financial management of the government agency is as follows. 1. Separating the smartcard pool from the working capital account: The pre-paid amount and the travel deposit by the users should enter the smartcard pool and the pool is only for the fare payment. It is suggested to be managed by the special banking account and the trustee. The income, cost and expenditure of the CCH operation will be the working capital of CTC. 2. The accuracy of smartcard pool: The company shall deposit its prepaid money received from customers in cash with the commercial bank or special financial institutions at any time for no less than the remaining balance of money that the company received in advance from customers. The daily fare payment to the Operators or the Government by different MRT concessions should be the same with the fare revenue record of the Operators during the CCH settlement date. 3. Financial disclosure as BOT’s terms: such as the pre-paid balance, the transaction fee, the cash refund, etc., are detailed in Appendix 6. 4. The paid in capital: The paid in capital should be above 200MB in the operation period. 5. The liquidity of cash flow: The smartcard pool will be managed safely by the special account. For the company’s operation activity, it is important to keep the liquidity and provide the CCH service daily. The liquidity should be enough to maintain normal operations. The debt ratio (the debt exclusive of the prepaid and the travel deposit / the total assets) should not exceed 70% and the debt service coverage ratio (the earning before tax, interest and depreciation / the principle repayment and the interest) shall be above 100%. The company should have a

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proper financing plan to keep the liquidity. The stakeholders should promise to proceed from new issue to retain a healthy financial structure and the liquidity. 6. Auditing and reporting: The annual financial statements shall have the balance sheet, income statement, cash flow statement and the statement of changes in shareholders’ equity, which should be audited by the authorized public accountant. The annual financial statements shall be reported in the annual stakeholders meeting. If the company is SOE, it should follow the financial management of SOE regulations. 7. The operation report shall be presented in the monthly or quarterly directors’ board meeting. This can consist of the income, cost and expense, the transactions, the fare payment, the prepaid and travel deposit account and the card issuance, etc. 8. The board and the Government agency can ask the operation managers to prepare and deliver the related management data and reports as needed. 9. Due diligence: The board and the Government have the right to perform due diligence periodically and not periodically. 4.7 The Investment Recovery Plan for the Government The ticketing service is the vehicle to improve the mass transit system by inducing more riders to use the system. This has been the experience in other cities as well. It is a kind of transportation policy. Take for example the case of Taipei, While the Taipei MRT lines were being constructed, the Taipei City Government decided to review the bus routes. With only one operator in the Taipei MRT system, the government took the initiative to study whether or not the bus operators could also facilitate transit service for the MRT riders. Instead of being a competitive mode of transport, the bus service actually became a cooperative mode of transport. In fact, the bus operators were able to earn more money because they were taking in more bus riders as a consequence of the introduction of MRT transit. The government initiated the ticketing company and invited the MRT and bus operators and other investors to be the shareholders at the same time. Thus, it took a lot of time to negotiate with the investors and delayed the original schedule of forming the ticketing company. But finally, in the end, the ticketing company was set up and the transit policy was successful. Now, over 60% of the people use public transportation and the bus operators have helped improve the financial situations. It is suggested for the Government to be involved in establishing the CTC and provide for the initial equity capital for CTC. The reasons are; 1. The MRT systems in Bangkok are very complicated. There are different operators, different MRT fares, different concessions and different regulators. Eliminating the 2nd flag-fall and making the fare more reasonable are very important issues, and the key to improving mass transit systems. 2. The common ticketing policy must be operated by the Government and only the Government can induce the MRT Operators to obey the common ticketing policy. 3. The gross cost concession is expected to be used in the future MRT lines. CTC can collect the fare revenue for the Government and obtain the data exchange from the operators. CTC will be a good vehicle for the Government in the concession management. 4. Common ticketing should be implemented as the transportation policy, and can only be carried out by the Government. CTC is the vehicle of the common ticketing, and it is suggested that the Government become involved in the establishment of the CTC. 5. The Government provides the initial equity capital for CTC. It can soon start an implementation plan to match with the construction schedule of the new lines. CTC, which is owned by the Government, can start the ticketing system procurement with assistance from

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the PMS Consultant. The Government will take the rational, fair and future demands into consideration for the ticketing system procurement, and with assistance from the PMS Consultant, will enable the ticketing system to be procured with good quality and according to schedule. If other investors join in the CTC at the stage of establishment, the Government will need more time to negotiate with the investors, which may end up delaying the kick-off and consequently be unable to accommodate the schedule of the new lines. 6. The Government can invest in the CTC while following the budgetary procedures. CTC will be an SOE if the Government holds at least 50% of the shares of CTC. If the Government will assign MRTA to be the regulator and conduct the investment, MRTA can invest in CTC under the MRTA Act and follow the budgetary procedures. The Government will set up CTC and complete the construction of the system and equipment items. At the beginning of the operation, the Government plans to invite the MRT Operators to be the stakeholders of the company and may sell shares to the Operators. The selling price is suggested to be the par value plus the opportunity cost and the required premium. The opportunity cost of the Government is the average 10 year government bond rate which is around 5.50%. The Government should have the premium as the construction risk. The shares selling amount is the resource of the repayment of the principle of the investment loan. MRT operators would be the possible buyers. If the Operator is invited to be the shareholder of CTC, it will help CTC to develop the ticketing business into MRT lines. CTC will save the ticketing cost of the Operators if the Operators use the CTC ticketing service. CTC will also induce the common ticketing policy to the Operators and help the Government to solve common ticketing problems. The riders will increase for the common ticketing policy and the wellness routes of MRT. That will improve the Operators’ financial situation. If the Operator is a shareholder of CTC, there will be a rational transaction fee. This fee will keep the CTC in operation, but shall not increase the burden of the Operator and the Government no matter whether gross cost or net cost concessions of MRT lines are being used. Otherwise, it will increase the ticket fare for the rider. This shareholder structure is the optimal one to create a balance between the riders, the Government, the Operators and CTC. Hence, this will present a win-win strategy. The Government shall aim for this goal so as to help realize the fulfillment of a common ticketing policy. In the short term, there might be four operators operating the green line, blue line, red line and purple line as per the ridership discussed in the Project. In the future, however, there might be even more operators for operating the new MRT lines. It is possible to invite commercial banks to be the shareholders if there is the chance to develop e-commerce. In the long term, there may be 4-6 operators and 2-3 commercial banks or cooperative institutions invited to be the stakeholders. It is suggested that the Government is designated as the largest stakeholder and take control of the Board of Directors. CTC should match with the transportation policy and focus on the improvement of the mass transit system of Bangkok while paying attention to the public interests. For the sake of the possible 5-10 new shareholders in the future, the Government may release 5-10% shares to each new participant. There are 11 directors suggested to be appointed to the board. If a new participant holds 5-10% of shares, he/she may be appointed as a director. If not, he/she may not join the board. The Government still owns the majority of shares of CTC (40-60%) and owns over half of the Board of Director seats. After a vote by the directors, the Chairperson of the Board will be assigned by the Government. In the projection, there will be 11 directors on the board and the Government would release 5-10% of the shares to each Operator of the four possible candidates in the first 2 years. It would still hold 60-70% of shares and be the largest stakeholder. There will still be room for other Operators in the future. It is assumed that the share selling price includes the capital cost and the risk premium is 10%. The Government releases shares in the first 2 years of the operation period with portions of 20%

4-26 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report and 20% separately for the first 2 years. If the Government will obtain the investment loan from ADB, the Government budget for the interest and loan repayment of ADB is as shown in Appendix 7. The Government will pay 276MB for the interest and loan repayment by the budget in the period, which is deducted by the shares selling amount. That would show the Government cost to conduct the Project. In the 10th year, CTC’s equity book value is 784MB as per the projection. As the Government holds 60% of the company shares, the investment value is 470MB. That will present 194MB of investment profit on the book value. Based on of the financial performance of the base case, CTC can make earnings when the daily transaction exceeds 1.5M. That will increase the equity book value and the cash dividends can be paid after the statutory surplus reaches 10% of the capital. The stakeholder, the Government, can get some investment back from the cash dividends. In order to focus on the CCH business and the common ticketing policy, the retail transactions and e-commerce application are not taken into the projection. If CTC expands the business into the retail transactions and e-commerce applications, it possibly may gain more profit because of the large number of transport users and good customer base to expand the other application business. If so, the Government may get more cash dividends than expected. CTC does not need as much investment in the initial stage as other infrastructure projects. It becomes a kind of cash inflow business after the number of transactions exceeds the B/E point. The company’s capital is around 400MB and the company may not have the funding demand in the operation stage. So, there is not much incentive to going public and be listed in the stock market. The listed company will appeal for the best benefit of the stakeholders, but CTC is a public interest type of company. With the better performance expected in the later stage of operation, the equity book value will be greater than in the early stage, and if the Government wants to sell shares, the price would be better and the Government would get more cash back. 4.8 Forming a Common Ticketing Company (CTC) 4.8.1 The Establishment of CTC In order to manage the ticketing business securely, all world-wide transportation smartcard operators commonly involve in (1) issuing the smartcards and (2) operating the corresponding Central Clearing House (CCH). Simply, a smartcard has an encrypted security key on the card that should match with any smartcard reading device. If the key does not match with the key on the reading devices, then no transaction would be processed. This prevents potential hackers from tampering with the system by adding bogus value on the cards or cheating the card readers on the gate for free accesses. Thus, adopting a single smartcard system for the Common Ticketing Company (CTC) should be considered. The CTC will be the only agent that issues all common ticketing smartcards. However, from the point of view of attracting investors to join in the smartcard business, a multiple vendor policy could also be considered. In this case, vendors purchase blank smartcards from the CTC, which has a standard format, and then initializes cards and sells them to their customers. The vendors can enjoy the benefit of having their own brand identity printed on the cards and using the smartcard as a media to advertise business, plus they can expand their affiliation with non-transportation business or even enjoy the dividends from the smartcard operations. Hence, existing MRT operators would be able to both maintain their ticketing business using the multiple issuer strategy, and also take part in the smartcard market’s extension to wider applications. This would attract transit operators and interested investors to join as stakeholders of the ticketing company. Since the commission of selling smartcards is returned to the vendor, this creates incentives for smartcard vendors to sell more smartcards. As the volume of smartcards circulation increases, the

4-27 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report greater economy of scale will prevail and the greater profit can be obtained through the larger number of transactions. Subsequently, passengers with smartcards would find it easier to travel within the city by using public transit. Two options of CTC operations were analyzed in this study; namely, single CCH and multiple CCH. Technically, the single CCH is easier to manage, especially for the security purposes. The multiple CCH approach can also be carried out, but the difficulties associated with switching and settlement of transaction would entail a tremendous effort. The clearing time may be long enough for the operators to lose their trust, plus the error-prone results may require an additional auditing process. On the other hand, single CCH has a low risk in operation. All smartcards will have the same card format and fund pool, but may have different looks, depending on the design of smartcard issuers. In short, the operation of a CTC would be characterized by the following types of features, including: 1. The revenue comes from the transaction fee and the profit of selling smartcards with a mark-up price. 2. Additional revenues may be generated from retailing transactions, advertisements, and the residuals of inactive smartcards. 3. The volume of smartcard uses would affect the profit of the business and all transit systems, including buses that should be considered to use smartcards. 4. The operating cost of a CTC would consist of office costs, staffing, out-going commissions, costs for making smartcards, service and handling charges at Point of Sale (POS), communication and equipment costs. Balancing a CCH business however may not be such an easy task. For instance, depending on the circumstances, such as the operation model, some businesses may need 5 million transactions each day in addition to having a side business such as retailing transactions to cover all of the total costs. Another factor of concern is obtaining a license from the BOT may require specifying clearly all of the items of business operations. If the operation of a CCH turns out to be very similar to running a bank or a credit company, the standards of security deposit, insurance and transaction protocols may call for unreasonable investment so that only a financial entity could have the ability to operate a CCH. Therefore, the CTC may consider incorporating with financial stakeholders. According to the recommendations of the previous TA and the preliminary results of this study, the Bangkok Mass Rapid Transit systems need to establish a common ticketing system by setting up a CTC to manage the common ticketing business. After taking into account all of the concerns and possibilities, there are two kinds of models to be considered in setting up the CTC;

Model 1: A company limited in which 100% of shares are owned by the Government Under this model, MOT will propose the CTC plan to the Cabinet. Once the plan is approved, MOF will hold 100% of shares in CTC at the beginning, and the Executing Agency to be responsible for setting up a new CTC company will be designated. According to Model 1, the process of the establishment of CTC will be as follows; (1) MOT will propose the CTC Plan to the Cabinet. (2) Upon approval, the Cabinet resolution will contain key issues on (i) the shares of CTC which will be 100% owned by MOF (ii) the Executing Agency which shall be one of the government authorities or the state owned enterprise under the supervision of MOT (iii) the duties and responsibilities of the Executing Agency which shall include setting up CTC, preparing procurement on Program Management Service, monitoring and supervision of

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CTC management. (iv) the request on the cooperation among the relevant mass transit authorities in using the CTC service. (3) CTC will be set up under the process set forth in the Civil and Commercial Code (CCC). (see Figure 4.9 for company registration process). (4) CTC will apply for the e-Transaction and e-Money licenses through BOT (see Figure 4.10 for the procedure of applying e-transaction license). In the initial period, CTC shall recruit the necessary managers and its staff while the Board of Directors of CTC will be selected by the procedure set forth in the General Qualifications of Members and Officials of State Enterprise Act B.E. 2518, which is applicable to all SOE. (5) The Executing Agency shall recruit the PMS Consultant through the tendering process for CTC (6) The PMS Consultant will help CTC in preparing the procurement for the integrated ticketing system and Operations and Management (O&M) of CTC.

Model 2: A subsidiary company of MRTA in which 100% of shares are owned by MRTA Under Model 2, the MRTA will be the Executing Agency in setting up the CTC. MRTA will propose the plan to the Cabinet, and once approved, MRTA will hold 100% of shares in CTC. MRTA shall assist CTC in the tendering process for the PMS Consultant and the back-end system. According to the MRTA Act B.E. 2544, MRTA is permitted to set up a subsidiary whether in a form of company limited or public company to engage in business relevant to MRTA activities. However, prior to setting up a company, MRTA must obtain the approval from the Cabinet. The procedure on the setting up of CTC by MRTA involves: (1) MRTA proposes the plan to the Cabinet. Once the Cabinet issues its resolution, the CTC will be established as a company limited in which 100% of shares are owned by MRTA and it will be set up under the procedures set forth in Civil and Commercial Code (2) After the establishment of CTC, the company shall apply for the e-Transaction and e-Money licenses through BOT. (3) Then, MRTA shall recruit a Program Management Services (PMS) Consultant to assist CTC in preparing the procurement for the integrated ticketing system, which includes the back-end system and O&M of the CTC.

The similar characteristic of the CTC, whether being set up under Model 1 or Model 2, is its SOE status, which derives from the definition prescribed in Budgetary Procedure Act B.E. 2502. According to the said Act, the meaning of SOE shall include the company in which the government or the state owned enterprise holds shares in the aggregate amount exceeding 50%. As the SOE, CTC operation will be subject to the SOE law, rules and regulations. However, as a company limited, CTC should have flexibility in its operation as well as the ability in responding to the market forces. In such a case, CTC might need to make a request to the Cabinet for the waiver of SOE rules and regulations.

The setting up of CTC under Model 1 and Model 2 shall have advantages and disadvantages on various aspects. Details of pros and cons of each model are prescribed in Table 4.12 below.

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Table 4.12: The Models of Forming CTC Items Model 1 Model 2 Description 1. CTC 100% shares owned by MOF 1. CTC is a subsidiary of MRTA 2. MOT (OTP) proposes the CTC plan (100% shares owned by MRTA) to cabinet. 2. MRTA has to propose a plan to 3. Under the cabinet resolution, the set up a CTC to the cabinet for executing agency will be identified as approval. well as the details on the assistance required from relevant government authorities. Pros 1. All stakeholders (SRT, MRTA, BMA) 1. Takes a shorter time to set up can be involved or assist in setting up CTC as MRTA can solely propose a CTC through the cabinet the plan and it does not involve resolution. other regulators. 2. In the future, it may extend its 2. The MRTA will be the executing common ticketing service and agency which has the expertise on clearing house to other modes of MRT, back-end system and transportation (i.e. bus, ). procurement. Cons 1. It takes some time to set up a new 1. As the MRTA subsidiary, it shall SOE as MOF and MOT have to mainly serve the MRT operator jointly propose details of the plan on and not other modes of setting up the CTC. transportation. For other 2. To attain the accomplishment of operators which are under establishment of CTC and monitor supervision of SRT and BMA, it the procurement of PMS, the ability has to join on a voluntarily basis. of the executing agency is important However, this problem might be and it is up to the cabinet to decide solved if MRTA sells their shares which government authorities is a to SRT or BMA in the future and proper unit. dilutes its proportion.

After the analysis of the pros and cons of the models for forming CTC, Model 1 is suggested on the ground that, through the cabinet resolution, all relevant authorities (i.e. SRT, BMA, MRTA) can be involved in the CTC operation and service. However, it is suggested that MRTA should be the Executing Agency on the setting up of CTC because of its expertise in MRT operation. In addition, the MRTA’s experience in procurement might help CTC in the tendering process of its back-end and front-end systems and be able to help CTC in the hiring of a qualified PMS Consultant. Figure 4.8 below illustrates the procedure of forming a CTC and related Program Management Services,

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Subcommittee of CMLT*

1. Proposes a plan to set 2. Approves the up a CTC Smartcard plan Program Management BOT* MOT* 3. Tenders for a Consultant Program 5. Supervises 4. Establishes CTC Management system Service construction

6. Applies for CTC & e-Money Smartcards & Licenses CTC CCH 7. CTC tenders ticketing system Notes: CMLT refers to Committee for the Management of Land Traffic BOT refers to Bank of Thailand MOT refers to Ministry of Transport Source: Consultant. Figure 4.8: Establishment of CTC

4.8.2 The CTC Registration Process As mentioned above, the CTC must obey the Civil and Commercial Code (CCC) and other relevant regulations to be legally set up even though CTC is planned to be established by the form of SOE. Figure 4.9 below presents the company registration process which has to be registered at the Ministry of Commerce. Normally, the registration process will not take more than 1 month.

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The COMPANY REGISTRATION PROCESS Under Civil and Commercial Code

Company Name Reservation 2-4 days

Registration Memorandum of Association

1-3 days

Subscribe Shares

Notice to call Statutory Meeting At least 7 days before meeting Statutory Meeting Approval of 1) Article of Association 2) Ratification of act and expenses of Promoters 3) Number and type of shares and Shares capital paid at paid up percentage least 25% 4) Appointments of Apply for Company Registration directors/authorized directors and auditor 2-4 days

Receive Evidence of Registration or Certification Document issued

Figure 4.9: The Company Registration Process

1. The Article of Association of CTC According to CCC, the company must have its Article of Association (AOA) approved by the statutory meeting. For CTC to ensure that the operation goals of the ticketing service will be achieved, and ideally not be subject to change or distortion in the future, the AOA of CTC should be drafted carefully, and in general, is suggested to include the following. (1) General Provisions (2) Purpose and Scope of Business (3) Shares (4) Shareholders and the General Meeting of Shareholders (5) Board of Directors (6) General Manager (7) Supervisory Board (8) Financial Affairs, Accounting and Auditing (9) Labor Management, Labor Union and Employee Benefits (10) Dispute Resolution (11) Notification and Announcement

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4.8.3 The Applying for the E-Transaction Licenses For the design of the subsequent operation of CTC, the common ticketing committee and program management team supervise the CTC to construct the clearing system. In this regard, all of the rules and regulations related to smartcard issuance need to be documented so that the design would meet the operational criteria. 1. The issuing of E-Ticket Due to the fact that the smartcard which will be issued by the CTC is an electronic ticket, under the Notification of MOF re: the business which has to be authorized pursuant to clause 5 of National Executive Council no. 58, the MOF authorizes the Bank of Thailand (BOT) to issue the terms and conditions to regulate the business operators which are involved in E-Money business. Under BOT terms and conditions, the business operator which issues E-money has to apply for the license from MOF through BOT. With the license, the CTC will be regulated mainly in terms of financial stability and creditability of its business. 2. The operation of clearing house The other main duties of CTC is to settle and allocate revenue among MRT operators under the gross cost basis. According to the Royal Decree on the Supervision of the Electronic Payment Business issued under the Electronic Transaction Act B.E. 2544, the business operator which provides a clearing house service requires a license from the Electronic Transaction Committees through the submission of application and required documents to BOT. The procedure for applying the E-Payment license to BOT is shown in figure 4.10 below. It is estimated that it will take 2 months to apply for and obtain the license from BOT. The validity of the license is 10 years and CTC shall have to renew the license after the license has expired.

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Qualification CTC Documentation Preparation Registered capital is as ETA Emergency Plan for continuous service requires IT Security Plan Directors’ qualifications under section 9 E-payment Policy Submit documents for the application E-payment Implementation Plan Risk Management Plan Internal Control Plan

Feasibility Study and Risk Assessment and Emergency Plan

BOT Other documents as required by BOT

YES NO Submit the application E-Commerce Inform the company to revise documents or to Committee complete documents within 7 days upon receiving the BOT’s request Issue License Figure 4.10: Procedure of Applying for e-Transaction License

4.8.4 Other Issues on the Forming of CTC 1. The future of Common Ticketing The shares of the CTC will be temporarily owned by the governmental agency (MRTA) since the initial investment may be generated from an ADB loan made to the governmental agency. The investment would help partially build up the CTC, and remaining funds would be used for on-going operations. The shares can be split and sold to the potential investors. Once the CTC builds the brand identity, the price of shares may increase and the selling profit would pay back the loan. The study team recommends that a 5% of total shares be reserved for a specialized team of ticketing experts (construction team) to assist in constructing the system since such knowledge may not be retained through the procurement. If the construction team is on the same boat as the governmental agency, the system would have a better chance to survive for a longer time. Additionally, the construction team, known to be one of the CCH operators, would be eager to produce the best quality for the project. As for the MRT operators, once they feel comfortable in joining the common ticketing business, the corresponding regulators who also are on the committee of the CTC would recommend to the board to release shares to the MRT operators in exchange for rights to implement the common ticketing system for the MRT lines. At that moment, common tickets (smartcards) would be accepted at most of the MRT lines. Since the common ticketing project with the Government will invest in CTC, the process shall require an evaluation conducted by the Public Debt Management Office (PDMO). In addition, projects worth over 1 billion Baht need to follow the Public and Private Partnership

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law and regulation (PPP) and then has to go through the PDMO for a more extensive assessment. Although the construction of the CCH costs around 217 million Baht and the total funding demand in the construction period is 400 million Baht, it nonetheless may still need to acquire permission from the PDMO; however, since it is worth less than 1 billion Baht, the evaluation is much more simplified. The CTC initially shall not have investment from the private sectors and no Public and Private Partnership (PPP) regulations can be applied, but the CTC should have more than 50% of shares held by the public agencies and the requirements should be observed. 2. The Role of MRTA According to MRTA Act B.E. 2544, MRTA is authorized to operate Mass Rapid Transit Systems within the Greater Bangkok Area and other provinces, which will be stipulated in the Royal Decree, or between the provinces, and to engage in business which is related to MRT and other business which benefit MRTA and the public in providing MRT services. Pursuant to Article 9 of MRTA Act, the MRTA is permitted to set up a company limited or public company to engage in business relevant to MRTA activities; however, prior to setting up a company, MRTA must first obtain approval from the Cabinet. Under this article, it means if approval is made by the Cabinet, MRTA can set up CTC to collect the fare fee, which is one of the MRTA activities. While pursuant to Article 18, MRTA through the MRTA Committees can determine the fare rate and relevant fees, including the determination on the method of collecting MRT fee. Because of this dual role of MRTA, there might be an issue of conflict of interest in the case that CTC is the subsidiary of MRTA To avoid the said conflict, a specific mechanism is set in the MRTA Act. According to the Act, all of the regulatory power which shall be exercised by MRTA Committees has to be approved by the Cabinet prior to the enforcement. On the other hand, whenever MRTA has to operate any business, such as an MRT line, it has to request prior approval from the Cabinet as well. The example of which is BMCL, in which shares are held by MRTA and is also operated under the concession granted by MRTA. 3. The Supervision of CTC and the relevant authorities. Due to the status of CTC and its function, CTC shall be under the supervision of the following authorities. (1) MRTA Even though CTC is not the MRT operator, the MRTA can be the supervisory agency of CTC due to the fact that the CTC operation in collecting of MRT fare and fee is the same as one of the MRTA duties as specified by MRTA Act. (2) State Enterprise Policy Office (SEPO) SEPO is one of the departments of the Ministry of Finance which has the duty and responsibility of monitoring, supervising, and evaluating the operation of all SOEs according to the Ministerial Regulation issued under the State Administration Act B.E. 2534 re: State Enterprise Policy Office. As an SOE, CTC has to be under the supervision of SEPO and has to follow the SOE laws, rules, and regulations issued by the cabinet, MOF, SEPO, and other relevant authorities. However, as a company limited, CTC may need more flexibility in its operation. In this regard, there is a cabinet resolution on the waiver of SOE rules which may need to be applied to CTC. To exercise the right of waiver, CTC has to submit the request to the cabinet for its approval and the said waiver can be applied only to the rules, regulations and resolutions, such as the rule on the Disposition and Acquisition of shares exercised by the government authority B.E. 2535, but can not be applied to the SOE laws, such as the Budgetary Procedure Act B.E. 2502, or the Act on the General Qualification of Members and Officials of State Enterprise Act B.E. 2518.

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According to the Act on General Qualification of Members and Officials of State Enterprise, the number of members on the Board of Directors (BOD) should not be more than 11 members unless it is approved by the Cabinet. But, in all cases, it shall be limited to 15 members. In addition, there shall be a Selecting Committee who shall select the qualified persons to be directors and submit the list of the said qualified candidates to the Ministry to appoint as the directors. (3) Bank of Thailand (BOT) Generally, the Bank of Thailand supervises and monitors the financial institution in its banking activities. However, as derived from the National Executive Council No. 58, the MOF has also authorized BOT the duty and responsibility in supervising non-financial institutions having similar banking activities. In addition, the Electronic Transaction Committee, which is set by the cabinet under the Electronic Transaction Act B.E. 2544, has authorized the BOT to supervise business operators which engage in electronic-payment activities BOT, then, shall exercise its derived powers from both MOF and the Electronic Transaction Committee through the terms and conditions set forth for business operators in applying the licenses. The aim of the E-Money License issued by MOF is to regulate the financial stability and creditability of CTC business, while the license issued by E-Transaction Committee is to focus on the security of the electronic system and the safety of information as well as the risk management.

Below in Figure 4.11 is an organization chart illustrating the governance and supervision of CTC by relevant authorities.

The Cabinet

BOT MOT MOF ( regulator) (regulator: through SEPO)

MRTA Royal Decree on (regulator) E-Payment Budgetary MOF Notification MRTA Act Procedure Act on E-Money CTC The Board

The Mgt Team

Figure 4.11: The Governance and the Supervision of CTC

4.9 Smartcard Regulations To protect the customers of smartcards, the statutes of governing issuance of electronic tickets should have the following articles of provision: 1. The transportation smartcard shall exclude the bank smartcard, but can be combined. 2. The transportation smartcard shall be licensed for its applied business scope.

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The license for operating a CTC requires a proposal that describes the plan of development and management, procedures of integration of existing smartcards and the cooperation with other smartcard issuers and related business, such as switching and settlement. According to the e-transaction regulations, a company that handles a financial clearing business requires a pay-in capital of 200 million Baht. The applicable areas of smartcard should be explicitly disclosed. In addition, the scope of smartcard usage, level of staff, required equipment, add-value mechanism and transaction and settlement should be described when applying for a license. The internal Standard Operation Procedure (SOP) also needs to identify the compliance of laws and regulations, the sufficiency of safety control, the countermeasures of risk management, the manual for daily operation and the assurance of account processing. Customers of the smartcards may need to know the top-up limit, which is also the liability of the company, deduction methods, applicable areas, clearing and trust accounts and custodial bank. The issuer should have a fair policy on lost and damaged cards, card expiration, refund procedure, modification, cancellation and card termination. The contract between customers and the issuer would have exclusion terms, including rejection of transaction, and waiver of intentional or gross negligence. The CTC should contract items between issuers and contracting parties for allocation costs, equipment installation, transaction fee, and settlement mechanism. In order to distinguish between banking and credit card business, as well as preventing disturbance of high smartcard cash flow, a top-up limit should be set, for instance, 10,000 Baht. And some on-line and off-line transaction rules need to be defined. Because off-line records will be downloaded at the end of a day, operators may receive clearing results in the next working day. As the smartcard has a re-loadable function, a life-cycle should be defined so that the numbers of loading cycles or disposable functions are notified to users. Supervision and obligation of smartcard operation should be observed by the third party. The items that need to be audited are ability to perform, setting a trust account for clearance, verification of security deposit for clearance and security of bank performance bond. Other issues for the operations include privacy issue of smartcard users, integrity of transaction reports and other materials. Transaction records kept at least 5 years with full disclosure of details and settlement should be done daily. 4.10 Operation of a Common Ticketing Company (CTC) and Related Issues of Transportation Policies When the integrated ticketing system has successfully been constructed, the CTC shall formally start its business. It is hoped that the new lines scheduled to open around 2012 and 2013 will be able to adopt the new common tickets. At the time that the mid-term report for this study had been submitted (October 2008), no specific information for the smartcard standards nor interfaces had been revealed by OTP’s common ticketing project team. All data used in the study is assumed from similar experiences. Thus, the time-line for actual operation of the CTC may fall behind the opening of the new lines. The timing of rolling out the new common tickets would be crucial. It has to be coordinated with the new-line opening schedule, or there is no chance to establish a common ticketing system. Once ticketing equipment has been determined and installed at the stations, it would be too costly to modify as per a new standard. Subsidization of public transit is a common practice around the globe. Certain countries have decreased the transit energy costs, while other countries subsidize the riders by encouraging free or discounted transfers. While undergoing this project, OTP is investigating the bus rerouting and the bus fare structure. The outcomes of the projects would have a great impact on the CCH operation since the transfer from bus to MRT, or vice-versa, may have transaction activities, but no transaction fee can be imposed, thereby leaving the CCH with no additional incomes.

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Based on the experience of Taipei smartcard project, the smartcard used for bus operation is critical for the success of the entire project. Usually, the bus system carries most of the riders and creates most of the transactions. Unfortunately, the open ticketing system and the environment of the bus generate problems ranging from reader failure and misreading of the smartcard. This project, nonetheless, focuses only on MRT operations and may face tremendous challenges when expanding services to bus operations. Further study on the above issues will continue as the project moves forward and findings will be provided in the report of next stage.

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5. Governance Structure and an Implementation Plan

5.1 Organization Structures of MRT Systems in Bangkok In order to understand the potential governance structure of the new Common Ticketing Company (CTC), the current concessionaires and their relations between regulators must be studied. In Thailand, each mode of public transit, i.e. bus, train, and metro are governed by different regulators, namely, the Bangkok Mass Transit Authority (BMTA), State Rail of Thailand (SRT), and Mass Rapid Transit Authority of Thailand (MRTA), respectively. Each regulator has been set up as a State Owned Enterprise (SOE) under its specific establishing law. Pursuant to its establishing law, the Ministry of Transportation is in charge of the overall monitoring and supervision of the said regulators. For mass rapid transit systems (metro) in Thailand, there are now two service providers for whom their concessions were granted through the relevant authorities; the first is the Bangkok Metro Company Limited (BMCL) which provides service on a subway (underground) train known as MRT, and the second is the Bangkok Mass Transit System Public Company Limited (BTSC), which operates a Sky Train (elevated) known as BTS. The underground train has been supervised by the Ministry of Transportation (MOT) while the sky train has been regulated by Bangkok Metropolitan Administration (BMA), which is under the supervision of the Ministry of Interior (MOI). The rationale behind this is owing to the Announcement of the National Executives Council No. 58 dated January 26, 1972, which authorizes the MOT to monitor train operations, and the MOI to monitor operations. The MOI has since assigned the duties and responsibilities for tram transit in the Bangkok Metropolitan Area to BMA. Due to the separation of regulatory bodies for public transit in Thailand, when coordination among the said regulators is needed, there shall be the order from the Cabinet in a form of Cabinet resolution. A good example of this is the Cabinet resolution on future MRT systems which has been amended from time to time since 2006. The most recent Cabinet resolution on future MRT systems concludes that MRTA shall be responsible for the Blue Line and Purple Line, while SRT shall be responsible for the Red Line and Airport Rail Link, and BMA shall be responsible for the Dark Green and Light Green Lines. Figure 5.1 has illustrated the overall operations of the public transit systems in the greater Bangkok Metropolitan Area. The complicated relationship between the mass rapid transit regulators as well as the different construction and operating costs, however, creates obstacles in having differing systems execute a uniform fare or exempt flag- fall charge when making transfers. To solve this problem, the previous study proposed a single authority called the Bangkok Integrated Transit Authority (BITA) to be established to assist the government in improving the integration of public transportation development and management. Laws and regulations which in turn promote the integration of metro systems are unfortunately absent from most acts promulgated in Thailand, with the exception of the MRTA Act, which authorizes MRTA to access other metro lines. However, the term “access” may be interpreted as meaning only having a physical connection to other lines, whereas the issue of integrated ticketing may not be of any concern. Therefore, new legal instruments specifically ensuring the integration of Bangkok’s MRT systems in relevant aspects are also needed.

5-1 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Cabinet Technical Assistance Consultant’s Report

PM

Office of PM MOS/NECTEC Ministry of Finance (MOF) Ministry of Transport (MOT) Committee Ministry of Interior (MOI)

Budget Bureau Electronic NEC 58(B.E.2515) – Non-bank NEC 58 1972-Train (B.E.2515) Cabinet NEC 58 1972-Tram (B.E.2515) B.E.2502 Transaction Ministerial Notification on E-money Resolution Act B.E.2544 B.E.2549 Royal Decree BOT on e-Payment Ministerial OTP PPP Committee B.E.2551 Marine Notification on MRT Finance and Department SOE E-money Operation Cabinet Resolution Royal Decree on B.E.2549 E-Payment B.E.2551 Regulators

BMA MRTA SRT BMTA ETA Note: CTC MRTA ACT B.E.2543 SRT ACT B.E.2494 Royal Decree on NEC 290 BMA ACT CCC BMTA B.E 2519 B.E.2528 B.E.2551 2008 B.E.2549 2006

B.E.2544 2001

B.E.2543 2000 Operators B.E.2528 1985 Blue line Purple line Red line Airport Rail Express way BUS CPEX/Ferry BTS B.E.2519 1976 (BMCL) Cabinet Cabinet Link Navigation B.E.2515 1972 Cabinet Resolution Resolution Cabinet in Thai Resolution B.E.2549 B.E.2549 Resolution Welfares Act B.E.2502 1959 B.E.2549 B.E.2549 B.E.2456 B.E.2494 1951

B.E.2456 1913

Figure 5.1: Governance Structure of the Common Ticketing

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5.2 Laws and Regulations for an Integrating Ticketing Organization Two new laws concerning the e-payment business have recently been enacted. The first is known as the Ministerial Notification issued by the Ministry of Finance (MOF) under Clause 5 of the Announcement of the National Executives Council No. 58, and the second is the Royal Decree Regulating of Electronic Payment Services 2008 issued under the Electronic Transaction Act 2001. Under the MOF’s Ministerial Notification, the business operator who issues e-Money (except for a financial institution and business operation who issues e-Money for its own goods and service) has to apply for the e-Money license to the MOF through the Bank of Thailand (BOT). In this regard, the said business operator has to meet the qualifications established by BOT, and has to have its paid up registered capital as required by law to be not less than 200 million Baht. In addition, if the business operator has multiple purposes for e-Money, or performs a clearing or settlement business, or switches to more than one system, then it has to apply for an e-payment business license under “Category C” to the Electronic Transaction Committees through BOT. According to the above laws, all e-payment businesses related to the integration of MRT systems via the issuing of a common ticket will hence be affected by these regulations simply because the common ticketing system requires operators to perform money switching and settlement as per the e-transaction. Therefore, this act would regulate all MRT operators to consolidate the number of tickets if needed so that the tickets may be used for multiple purposes. In addition, the e-payment business which intends to handle the CCH shall be prohibited from carrying out its operation unless the license is issued from the relevant authorities through BOT before the financial transaction business starts. And another item of particular concern is the possibility that the e-payment laws may actually discourage the willingness of promoting a common ticketing system because no license is needed for the operation of a single or an intra-system ticketing system. For the e-money issuers, to be a qualified applicant for obtaining a license through BOT, compliance with the following BOT rules, procedures and conditions are required; 1. The e-money issuer must issue e-money in Thai Baht only 2. As the e-money is a pre-paid card business, the e-money issuer is not allowed to issue e-money by lending or advance credit. 3. The e-money issuer can join the bank that issues a credit card but has to separate its prepaid chip from the credit chip. 4. The deposit should be put into a designated account separated from the e-money issuer’s account and can be used only for liquidation. 5. The e-money issuer declares service fee and expense for e-money cards at specific times according to the ordinance of BOT. 6. The e-money issuer should declare the fee of the customer refund. Any changes should be informed to customers at least 14 days in advance. As for the MOT aspects, there are no specific laws and regulations that govern the development of common ticketing. A proposed public transit act was in discussion and should have the following requirements for ticketing operations: 1. The public transit corporation should operate as an enterprise. 2. The public transit shall charge the full-fare to passenger, except for the discounted fare set by the law and subsidized by the government. 3. The fare structure is determined by the governance authority.

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4. Fare rate is determined by formula set by the central government authority. 5. Actual fare is determined by the fare rate formula and the fare should be approved by the local government authority. 6. Change of fare should follow the same process. 7. To attain general public interest, the government may order the operators to integrate routes, fares and ticketing systems for a joint transit system. The governing authority of the public transit is the local and central government, except for special municipalities with separate regulations. Currently, the Bangkok MRT is under net-cost concession with the central government. Funding the MRT with the net-cost scheme is determined by concession agreement. Each operator has three major schemes and they are funds from public and private investment, subsidiary business development and land development. The smartcard business is quite similar to the advertisement which is classified into subsidiary business development. Unless the smartcard can be used for e-money or e-payment business, the pure ticketing function is no less than an ID card that allows you to travel within an MRT line. The government should constantly supervise the management, maintenance and safety of the MRT operation, and the management should offer a ticketing business which ensures passengers that they will be entitled to having valid ticketing for a fair transportation service. There is no single law in Thailand that governs the integration of the Mass Rapid Transit or the integration of the Common Ticketing. Table 2 in Appendix 10 is the list of existing laws and the draft of law which are relevant to the operation of MRT and the implementation of common ticketing systems. For the future MRT lines, almost all are under the supervision of MRTA. Under MRTA Act B.E. 2543, MRT shall have rights to grant the concession to the operators of MRT and shall have rights to push the integration of the MRT among those operators. For the implementation of the Common Ticketing, there are 2 main legislations pertaining to the operation of E-business. One is the Ministerial Regulation of MOF issued under the Announcement of the National Executives Council No. 58 which shall regulate any business which issue E-Money card, and the other is the Royal Decree regulating of Electronic Payment Services B.E. 2551 which has just been promulgated lately under the Electronic Transaction Act B.E. 2544. The Royal Decree required the business operator which does the multi purpose e-money to be registered with the Bank of Thailand and requires the business operator which intends to do the clearing of settlement business to apply for the license from the BOT. For the draft of legislations prepared by various government agencies, the most interesting is the Draft on the MRT Act B.E. 2543. The purpose of this draft is to set the common law which shall be a guideline for the implementation of mass transit among the different government authorities. Under the draft, the mass transit operators shall be able to integrate their systems together and shall have the same standard of the relevant services, i.e. safety, hygiene. In addition, the Mass Transit Committee shall be set up and shall have a right to advise the Minister of Transportation in issuing the regulations on the integrating of MRT, the structure of fare ticket, the service fee, the collection system, and the standard of services. In order to answer to the question on the single regulatory body, the suggestion on this draft is the setting up of the new entity to oversee the integration of MRT and all modes of transportation, including the development and management of the said integration. The other main task of the new established entity is to support the use of common ticketing among all public transportation modes and to protect the public interest on other relevant issues, i.e. data protection, consumer protection. This new entity may be set up as one department under the MOT and can be acted as the secretariat of the Mass Transit Committee, or can be set up independently as a new entity like BITA. However, the consideration on the proper structure of this new entity might need further exploration on the budget and human resources of the relevant Ministries.

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5.3 Supervision of the Operations of the Common Ticketing Company Unlike other ad-hoc committees set up by the Cabinet resolution for the specific purpose of driving the MRT network, the Committee for the Management of Land Traffic is set up by the Act on The Committee for the Management of Land Traffic B.E. 2521. Its duties and responsibilities are to propose the fundamental plan of land traffic to the Cabinet, set up the standards on the management of land transportation to the Cabinet, set up the proper measures in order to solve the problems related to land transportation, and engage in other land transportation activities as assigned by the Cabinet or Prime Minister. The members of the Committee are the Prime Minister, Deputy Prime Minister, Minister of Prime Minister Office, Minister of Transportation, Minister of Interior, Permanent Secretary of Ministry of Interior, Permanent Secretary of Ministry of Transportation, Director of Budget Bureau, Secretary General of NESDB, Governor of Bangkok Metropolitan Area and expertise of not more than 6 persons. The Director of OTP is Secretary of the Committee. The latest assignment from the previous Cabinet to the Committee is to monitor the implementation of the MRT network which was approved by the previous Cabinet resolution. Therefore, in order to revive the process of the common ticketing project, the OTP as a Secretary of the Committee may propose the Common Ticketing Plan to the Committee and pass it on to the Cabinet for approval. Upon approval, the CTC will be set up, and the Committee shall monitor CTC’s overall management and strategy to be the bridge to consolidate the ticketing issues for the public transit. However, as the Committee for the Management of Land Traffic comprises of high level of executive government officers, to expedite the starting of the common ticketing project, the subcommittee should be set up in order to help the Committee for the Management of Land Traffic to determine the common ticketing policy and the CTC plan. The subcommittee shall comprise of the representatives from relevant authorities, such as MRTA, SRT, BMA, PDMO, BOT and its secretariat should be OTP. The subcommittee’s responsibilities shall include the considering on an appropriate model for CTC and a suitable executing agency for this CTC establishment. In addition, the subcommittee shall provide a direction on the implementation according to CTC plan and an instruction on CTC monitoring and supervision.

5.4 Model of Establishing a Common Ticketing Company Three models were evaluated for building up a Common Ticketing Company (CTC) and they are Public and Private Partnership (PPP), Design Build (DB) and Design Build Operate Maintain (DBOM). For the PPP model, the funds from private sectors, along with the public sectors should be joined for the establishment of the company and its ticketing system. Since the private sectors care about more financial returns, the CTC would have a mission to generate reasonable profit. However, under the gross-cost strategy of the MRT concessionaire, the integrated ticketing system serves more social functions, instead of financial or commercial functions. In addition, at the beginning stage, the CTC would suffer the burden of having a huge investment of equipment and low income of transaction charges, and would not attract potential investment for the company. Thus, the PPP model would not be practical. For the DB model, the public sector designs and builds the system and transfers it to a CTC for operations and maintenance. The model works well for conventional projects, such as freeways and . However, the smartcard business involves expertise of new technology which may not be found on the market. It would be a great risk to hand over the system with sophisticated intelligence to the common people.

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The DBOM model will resolve the disadvantages of the DB model by introducing the construction team as the future operating and maintaining team. Some of the CTC shares will be reserved for the system providers who should also be responsible for the system operation. This will keep all skilled team members in the CTC for a smooth transition to operation and system maintenance. Since the DBOM model is recommended, the fund for construction mainly is from the government sources. Based on this study, there is a possible source of funding via an investment loan from ADB. Primarily, the loan will help the Thailand government to quickly resolve problems of the multiple ticketing and the non-interoperability of the MRT. The loan will be paid back for about 8 years and the future goals for the operations can expect to be successfully achieved after reaching a sizable volume of smartcard issuance and expanding into other business applications such as micro-payment.

5.5 Implementation Plan The timeline of the common ticketing project is suggested in Figure 5.2. Program Management Services (PMS) will begin at Q2 2010. As part of its scope, the PMS Consultant will assist in forming the CTC which will start up at Q4 2010. Then, the CTC will begin the system procurement in which the system construction will be scheduled to begin at Q1 2012. After one and half years of system construction, testing and acceptance, the CTC will start the common ticketing operation services at Q3 2013. The PMS Consultant will assist the CTC during the periods of system procurement, construction, testing and acceptance, as well as service operation. The PMS Consultant will complete its services after one year of operation at Q3 2014. For new MRT lines, some lines may begin their services before the issuing of common tickets begins. During this period, only single journey tickets can be in operation. For current MRT lines (ARL included), the common ticketing service will likely begin after 2014. It is suggested that the transition period should last at least one year for decreasing any inconvenience of holders of current cards as much as possible. During the transition period, both common tickets and current cards can be used in current MRT lines. Figure 5.2: Timing Plan for the Common Ticketing Project

2010 2011 2012 2013 2014 2015~ CTC CTC Starts Back-end system Operation begins construction begins PMS PMS starts PMS ends

New MRT Lines MRT services begin Common tickets begin Current MRT Lines Common tickets begin Current tickets end

The period when new MRT Lines use stand alone ticketing systems (only single journey tickets, no common ticket cards. The period when current MRT Lines use both current and common ticketing systems.

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The roadmap of the common ticketing for the government has three major phases. For Phase 1, the preparation stage, the government should focus on how to set up a CTC. The actions include finding suitable agents that are legal to expend its services to common ticketing business. Then, a committee or subcommittee under joint ministries determines the responsible lead agent to lead the preparatory team of the CTC. The team should help the CTC to file the application of obtaining e-transaction and e-money licenses and should seek funding sources for building the CTC and its related ticketing system. Meanwhile, the targeted new MRT lines should have a contract with the CTC under gross-cost concession agreement. This ensures that the new MRT line will be the first customer of the CTC. For the Phase 2, the construction phase, the CTC would tender system providers for its core ticketing system as the MOT/OTP/MRTA employs consultants for Program Management Services. Once the system has been completed and licenses have been acquired, the CTC will enter the next stage of operation and maintenance. For Phase 3, three activities have been included which (1) introduce the common ticketing system to the new MRT lines, (2) implement the common ticketing system to the existing lines and (3) contract operation and maintenance services. The system, then, expands gradually to buses, ferries, toll roads, and even micro-payment. The potential agents involved in the construction and operation have been listed in Table 5.1 and the expected length for implementation is also included. The mobilization of the construction of a CTC would heavily rely on funding level and responsible department are determined.

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Table 5.1: Activities and Actions for the Government to Implement the Common Ticketing System 1. Preparation Stage Activities Rationale Actions Agents Length 1.1 Propose to set 1. The common 1. The preparatory -MOT 6 to 12 months up a CTC ticketing should have a department formed by -MOI legitimate company to the government -MOF operate the system. committee should obtain -OTP 2. In order to expedite approval from the -MRTA the procedure and regulatory department. -SRT reduce the potential 2. Finding possible -BMA obstacles, a SOE CTC subcommittee under under current MRT MOT, MOI and MOF regulators is for evaluations of the recommended. CTC application. 1.2 Establish a CTC After the approval of 1. The regulatory -Regulatory 3 to 6 months the regulatory department should seek department department, the CTC financial support for (e.g., MRTA, SRT, would be established to building up this company BMA, or build up its potentially by a Composite organization. government budget or a committee under loan from other sources MOT) 1.3 Gross-Cost The new MRT lines are 1. New GC concessions -Regulatory To be (GC) Concession recommended to adopt are for the new MRT department determined by for MRT “GC” concession so lines. (e.g., MRTA, SRT, the that a uniform fare 2. Existing Net-Cost BMA, or governmental structure without (NC) concession can be Composite policies flag-fall charges may be renegotiated. committee under implemented. MOT) 2. Construction Stage Activities Rationale Actions Agents Length 2.1 Contracting a 1. The CTC needs 1. Tender a PMS for the -MOT 6 months Program expertise from following tasks -OTP Management consultants to prepare -Define standards and -MRTA Service (PMS) a tender for system interface, referring to the construction. previous TAs from ADB 2. In addition, the and OTP/MRTA consultant served as a -Define Standard technical assistant to Operating Procedure design operation and (SOP) for the CTC management (O&M) -Verify the rules and after system regulations that affect completion the CTC -Analyze the financial conditions -Supervise construction of the ticketing system -Test system and check for acceptance 2.2 Apply for The CTC should have Apply the licenses from -CTC 3 to 6 months e-transaction and proper status of Bank of Thailand (BOT) -BOT e-money license operating the ticketing -MOF business

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2.3 Tender a With assistance from 1. Construct a ticketing -CTC regulator 2 1/2 to 3 ticketing system PMS, the CTC could system according to the -CTC years provider for system establish its core standards by the -PMS construction system by contracting a regulator and CTC. system provider. 2. The construction includes front-end and back-end equipment.

3. Operation and Maintenance (O&M) Stage Activities Rationale Actions Agents Length 3.1 Apply to the The CTC would be New common tickets -MRTA To be new MRT line first to use for the new would be able to travel in -New MRT determined MRT lines under GC the new MRT lines. concessionaires concession -CTC

3.2 Apply to existing 1. Use of GC contracts Regulators of existing -MRT regulators To be MRT lines for the existing lines MRT lines should seek -MRT operators determined should be the same as contract renegotiation -CTC the new MRT lines. for adopting the GC 2. Use of NC contracts concept may involve with complicated clearing activities. 3.3 Contract O&M Although the CTC Contracting system -CTC To be provider would be capable of providers determined O&M of the system, CTC may seek assistance from other sources

ADB-TA OTP Apply for e-transaction OTP-TA and e-money licenses Provide Preparatory BOT MOT information Team MRTA SRT Committee OTP CTC CTC contracts system implementation CTC Regulator MOI BMA OTP/MRTA contracts Program Management Service (PMS) Assist CTC in system tendering MOF Common and supervision Ticketing PMS System Committee TA Provider members

Figure 5.3: Common Ticketing Road Map for the Government

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6. Terms of Reference (TOR) for Program Management Services 6.1 Introduction 1. Current Conditions There are two MRT lines currently operating in Bangkok and both systems have deployed automated fare collection system. Although similar contactless smartcard technology has been used, the smartcards from one system cannot be accepted by the other system. Nevertheless, the fare structures of two MRT lines may prevent ticketing integration. Besides this, the Airport Rail Link (ARL) which is under construction will possibly develop another ticketing system, creating more complex ticketing situations which may decrease the number of MRT riders who may pay extra fares for transfer. In Bangkok, the biggest inconvenience for MRT riders is to make transfers between MRT lines where a flag-fall charge would be imposed. Without the ticketing integration and uniform MRT fare rates, the ridership of MRT may remain unchanged and street traffic may be still jammed. Thus, a common ticketing system is proposed and is hoped to increase the ridership of MRT in Bangkok. 2. Major Issues Two main issues related to ticketing systems are shown: (1) Integrated ticketing issues: A. How to establish ticketing standards? B. How to integrate the existing ticketing system? C. How to meet the future ticketing demands? (2) Ticketing company issues: A. How to establish a ticketing company? B. How to build an operating system for the company? D. How to define functions and specifications of the system? E. How to operate and maintain the system? F. How to develop business strategies for the company? Due to the nature of the complexity of an integrated ticketing system, a team composed of experts in smartcard technology and system procurement should be identified to assist a construction team for the common ticketing system. This technical assistance from the professional team will be defined as the Program Management Services (PMS) that require multi-disciplinary experiences and have significant influences on the procurement of a ticketing system. 3. Reasons for seeking Program Management Services (PMS) (1) Coping with the complexity - Ticketing integration is a complicated matter which involves specialties of transportation, finance, law and technology. Experiences from previous ticketing integration would greatly be appreciated by the ticketing company that opts for a better ticketing system. Expertise can be easily found in Asian cities, such as Hong Kong, Singapore, Tokyo and Taipei for their successes in ticketing integration. In Bangkok, smartcards have been used by MRT for years, but there is no actual experience of smartcard integration. Thus, in order to reduce potential risks and avoid similar mistakes in other systems, the government should seek for technical assistance from international consultants who should have experience in ticketing integration. (2) Improving quality of procurement – Unlike conventional ticketing systems that involve mostly human labor, the smartcard system requires artificial intelligence that may need

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considerable investment and encounter unpredictable risks. With the technical assistance of the PMS Consultant, the ticketing company may lower the risk of failure in ticketing integration, such as delays in system deployment and poor system performance. During the system construction, the PMS Consultant, being familiar with the requirements and specifications, would assist the ticketing company in system procurement and system testing for acceptance. If any errors occur without being timely corrected, this would result in system re-design that would affect the completion of the ticketing system. For the worst condition, the ticketing system may fail to reach the functional requirements. (3) Avoiding vendor’s lock-in – As a ticketing system requires a considerable investment; the ticketing company would need a consultant who has experiences from other ticketing systems to assist it in avoiding unreasonable costs for system implementation. The implementation costs cover system procurement and follow-up system operations and maintenance. Thus, an experienced consultant would prevent the situation of vendor’s lock-in and save a great deal of investment. For example, the functions and specifications of the back-end system suggested by different consultants would cost a wide range of investment. Sometimes, a back-end system with an incredible price could have a limited capability of clearing transactions, or, a back-end system following out-of-date specifications could not be expanded for future demands. Thus, technical assistance from the PMS consultant can provide an unbiased recommendation and supervise the construction of the ticketing system to avoid potential vendor’s lock-in. In the supervision of the construction, the PMS consultant must help to verify the standards of interoperability. Otherwise, it is estimated that more than USD 3.5 million may be wasted if the CTC would have a back-end system that is hard to operate, maintain and expand in the future. (4) Satisfying a short-term demand of experts - The ticketing integration project, including the establishment of a ticketing company and its operating system, is considered as a short-term project. There is no need for the government or the ticketing regulator to have a permanent team to continuously work on the ticketing integration. It would be more efficient that the government finds an expert team from the ticketing industry to assist in carrying out the integration task. Once the ticketing company is established and begins its operations, the technical assistance of the PMS Consultant can transfer the duties such as supervision of operations to the ticketing regulator. (5) Gaining other real-world experiences – Although the estimated cost of the PMS consulting services is about USD 5 million due to the requirement of international experts, the benefits generated by the ticketing integration are much greater than the investment of hiring a PMS consultant. The benefits include time and money saved for the construction of the ticketing system and the induced MRT passengers of ticketing integration. In addition, the time reduction of queuing for purchasing tickets and passing through the ticketing gates, as well as the reduction of MRT customer services would also post significant benefit. As the example of the Taipei MRT, with a population reaching nearly 7 million, the Taipei public transportation system has reached an average daily volume of 3 million trips per day. Among the 3 million trips per day, MRT accounts for 1.2 million trips and the bus system accounts for the remaining 1.8 million trips. Currently, the smartcard using rate reaches 90% of total trips and almost 2.8 million ticketing transactions are done by the smartcard. Thus, the time saved in monetary value for the improved ticketing system is about USD 0.055 per transaction and amounts to USD 48 million a year, aside from the USD 10 million saved by the MRT and bus operators for the needs of customer services. Other benefits include the increase of total transit trips and improved ticketing services that enhance the overall impression of the city. Thus, an international expert team familiar with ticketing technologies with hands-on experiences would be much appreciated to assist in the establishment of the integrated ticketing system in Bangkok.

6-2 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

In summary, it would be worthwhile to have to implement international technical assistance for carrying out the program management services of the ticketing integration, and especially advised for the consulting team to have related experience in ticketing systems. It is highly recommended to recruit consultants that are creditable by international funding agencies such as the Asian Development Bank (ADB), World Bank and European Bank for Reconstruction and Development (EBRD). 6.2 Project Schedule The Program Management Services (PMS) will be divided into seven main stages of work. Upon the commencement of PMS, the first stage of work will begin to set up the ticketing integration plan within 3 months. The second stage will be to assist the government in establish the Common Ticketing Company (CTC), which will take approximately 3 months. The third stage will then be to assist in preparing the bidding plan and tender documents, which will take 4 months. After that, the fourth stage of work will be to assist in the procurement of the back-end system, which will take 12 months, while the fifth stage of work is to supervise and assist during the construction of the system, which will take approximately 12 months. After the construction of the ticketing system has been completed, the sixth stage of work is to verify and accept the system, which will take around 6 months. Finally, the PMS Consultant will assist to supervise and adjust the operation of CTC in the final stage of work, which will take about 12 months. The project schedule could be flexible according to the actual situation. Figure 6.1 shows the proposed project schedule.

6-3 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Stage 6 Stage 7 System Construction Improvement System O&M (3 years) Prepare to Bid opening & procure System evaluation Supervision Test & Accept CTC Operation Recruit PMS ADB, OTP Review Develop Assist to Prepare Assist in Assist to oversee Assist to test Assist CTC Integration set up system procurement construction and accept operation Plan CTC procurement procedure

2009.10 2010.04 2010.10 2011.02 2012.02 2013.02 2013.08 2014.08 06 12 2010.07 18 22 34 46 52 64 15 PMS CTC Procurement Construction Construction CTC PMS Starts Starts Starts Starts Completed Operation Ended

Starts

By PMS By CTC By Awarded bidder

Figure 6.1:Project Schedule

6-4 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

6.3 Scope of Services PMS will be contracted by the government to assist the government as well as the MRT operators in implementing the integrated ticketing project. The scopes of the services cover front-end devices and back-end clearing systems for the integrated ticketing system. The PMS team will advise government and coordinate system providers during the stages of implementation, supervision, and evaluation. The related duties for PMS shall cover preparation, tendering, implementation and operation of the ticketing system. Figure 6.2 shows the scopes of the program management services.

Government Tender for

Assist to set up CTC Supervise CTC operations PMS Front-end System

Common Ticketing Company AFC A Assist to tender Assist to supervise construction Assist to accept AFC B

Back-end Ensure integration AFC C System between front-end and back-end systems

Figure 6.2:Scopes of Program Management Services

The program management services will engage in the following key activities: 1. Develop a ticketing integration plan (1) Review and refine the previous TA reports, including policy, bidding, financial and legal strategy. (2) Develop an integration strategy and plan. (3) Revise the integration schedule that is fit for the actual situation. 2. Assist to establish the Common Ticketing Company (CTC) (1) Assist the government to set up the CTC, including strategies and goals, structure of the company, the business scope of the company, registration, pay-in capital, articles of incorporation, shareholders, etc. (2) Assist CTC to determine the Standard Operating Procedures (SOP), including system operation and maintenance, account management, card management, new equipment testing, customer service, etc. (3) Assist the CTC to set rules of card usages, including card type, card sale, card reload, travel

6-5 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

deposit, card refund, card hold, and other related issues. 3. Manage the procurement of the integrated ticketing system (1) Develop a procurement plan, including procurement method and procedures. (2) Draft bidding documents of the back-end system for CTC. (3) Assist to select the appraisal agency for evaluating bids. (4) Assist to evaluate technical proposals and price proposals of bidders, including VfM (Value for Money) analysis. (5) Record the progress of the procurement process of the integrated ticketing system and report to the government agencies. 4. Supervise and assist the construction of the system (1) Review construction documents, including construction plan and schedule. (2) Supervise the implementation of ticketing related systems for CTC. (3) Ensure seamless integration of interfaces between front-end and back-end systems. (4) Draft the system testing and acceptance plan. 5. Assist to test and accept the system (1) Check and test hardware and software of the system. (2) Record the testing results and prepare testing reports. (3) Assist in system integration testing for front-end and back-end systems. (4) Review documents of technology transfer and training. 6. Supervise the operation of CTC and Feedback (1) Assist to oversee the operation of the CTC, provide suggestions, and adjust operation rules. (2) Plan the development of CTC, including setting up the Key Performance Indicator (KPI), satisfaction indicator, fee settlement efficiency and accuracy. (3) Review and adjust the operation rules and SOP for CTC. (4) Report to the government about the operations of the CTC, including card issuing volume, transaction volume, usage rate of common ticket cards…etc. (5) Draft the Final Report of the integration project. 6.4 PMS Works of Each Stage It is suggested that the PMS Consultant team be recruited by the CTC Regulator. The consultant team mainly reports to and is supervised by the CTC Regulator. The CTC Regulator makes decisions by considering the requirements and opinions from other government agencies, MRT operators and banks, and professional suggestions raised by the consultant team. The relationships among different stakeholders are shown in Figure 6.3.

6-6 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Government

Banks Tender for MOT MRT operators Requirements CTC Regulator PMS

Assist

Set up CTC Assist CTC

Figure 6.3:Relations between Government Agencies and the PMS

Five main points of the program management services are considered for each stage of work, namely; (1) objectives, (2) activities, tasks, and required consultants, (3) outcomes, (4) Level of Effort (LOE) and (5) program management methodology. Each of these main points for each stage of work are described as follows: Stage I - Strategy Preparations (1) Objective The major objective at this stage is to draw up the ticketing integration strategies suitable for the current conditions and future development in Bangkok. Such strategies will serve as references for ticketing strategy planning made by the government. The contents include: the usage conditions of public transportation in Bangkok, short-term, mid-term and long-term ticketing development strategies, ticketing promotion and business models, the establishment of CTC as well as the integration method of back-end and front-end systems. (2) Activities, Tasks and Required Consultants During the preparation stage, it is necessary for the PMS Consultant to review the current conditions of ticketing integration development in Thailand and draw up ticketing integration development strategies suitable for Bangkok based on the practical situations and the requirements for ticketing integration specified by the government. In addition, confirmation should be made on the organization and establishment of the CTC. For ensuring the integration between back-end and front-end systems, it is required to set up related card standards. The following descriptions reveal the primary activities, tasks and required consultants during the preparation stage: A. Review of projects related to ticketing integration, data collection and interviews: First, the PMS Consultant has to review if the ticketing integration strategies drawn up in the project (refer to Chapter 2 “Fare Policy and Integrated Ticketing Strategy”, Chapter 4 “Determine Financing Requirements and Funding Strategy” and Chapter 5 “Governance Structure and an Implementation Plan”) meet the current conditions of development. For speeding up the PMS Consultant’s comprehension in the purpose of CTC establishment, CTC financial planning and the role of the government in ticketing integration, the CTC Regulator should provide the information showing ticketing integration development conditions. Meanwhile, the PMS Consultant will study the requirements and expectations from the government on ticketing integration through interviews with the CTC Regulator, OTP, transportation

6-7 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

operators, etc., and their views on setting up the CTC. In addition, the CTC Regulator has to provide the overall schedule for ticketing systems of MRT lines, including Automated Fare Collection (AFC) bidding, setup, testing and formal operations of the five new MRT lines. If the AFC system for some MRT lines has been contracted or completed by this time, then the CTC Regulator has to provide the documents of system design or transaction data specifications made by the contractor as a reference to the PMS Consultant. The entire ticketing integration program management services will require the task of negotiating with local authorities, suppliers or operators. Therefore, it is suggested to recruit a “Project Management” consultant who is familiar with local ticketing conditions and has valuable local relations so as to enable the overall ticketing integration works to meet the anticipated schedule. As to the back-end or front-end system technology, the related documents may mainly be written in Thai since all CTC operations are in Thailand. Therefore, it is suggested that local consultants who are familiar with both back-end and front-end systems are more suitable for being the system consultant so as to optimize the efficiency of consultancy works. In addition, it would be easier to communicate with Thailand government or local suppliers in technologies upon bidding. B. Draw up ticketing development strategies The short-term, mid-term and long-term ticketing development strategies for Thailand government should be drawn up based on the outcomes derived from the interviews previously mentioned and the information related to the ticketing integration plans in the past. It is required to define the roles which the government and other ticketing related agencies should play, and describe the authorities and accountabilities between the government, operators and the CTC, and define transaction data of cash and information flow. Besides this, the concepts revealed from gross cost concession and DBOM model (refer to Sec. 5.4 “Model of Establishing a Common Ticketing Company”) should be reviewed so as to ensure compliance with the strategic objectives previously planned. A set of strategies which effectively help supervise and manage the MRT operators and CTC should also be mapped out based on the government’s requirements and responsibilities. For example, payment terms of subsidies, transparent and impartial transaction data, and the accuracy rate of clearing works are included. For ensuring that the implementation of gross cost concession and DBOM strategies conforms with the laws of Thailand in the future, it is required to evaluate the feasibility and risks of the strategies. If there are difficulties in implementation, the consultants are required to propose a substitute strategy or solution to the CTC Regulator for reference. International consultants with transportation background and more than 5 years of experience in transportation planning and e-ticketing are required for drawing up ticketing strategies. As to the team leader, 10 years of experience in transportation planning is required. The international consultants may offer experiences in ticketing integration implemented in other cities in the past for reference. Meanwhile, they can provide the government consultancy services and help to avoid possible factors influencing the outcome of ticketing integration. Additionally, the consultants familiar with private participation in the finance, procurement and legal affairs concerning public construction in Thailand are required. It is suggested that the consultants should have at least 5 years of experience in the consulting field and participation in public construction. System procurement, future establishment of CTC and releasing of stocks are several crucial parts of ticketing integration. Therefore,

6-8 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

the consultants for procurement and legal affairs are required to have at least 7 years of experience in their own fields. C. Prepare for organizing the CTC During the preparation stage, the consultant team has to confirm the details of establishing the CTC Company. The team is required to assist related consultancies based on the CTC establishment schedule planned by the CTC Regulator. Meanwhile, the team has to interview with the banks, transportation authorities, MRT operators, etc., in order to map out the future CTC business scope, development strategies and the business model. The team has to review the CTC financial plans based on the conditions at that time so as to adjust hypothetic parameters and survey the rationality of the rates to secure the CTC break even. The team will also propose methods for the sustainable operations of the back-end system to the CTC Regulator. Moreover, it has to consider the legal affairs regarding partial release of 100% government-owned shares to the private sector mentioned in Sec. 4.3.2 “Funding Options”. The consultants required by this work are suggested to have experience in being a project manager for a corporate organization and equity transfer and specialization in financial and legal affairs. D. Set up the specifications for back-end and front-end systems for common ticket It is necessary to follow the card standards developed by the government. The standards have to include card format, key, and communication protocols. If the card standards are not developed, then the PMS Consultant shall develop the card standard for the government. If the front-end AFC system has been contracted or established, the PMS Consultant shall take the documents showing the system design or transaction data format as a reference. The reviewing by the technical consultants familiar with card format and front-end facilities, and reference to the specifications that have already been contracted or established, will help to define the specifications of the common ticket, key management plan, communication protocol and the information of interface to be carried out to minimize the range of AFC system adjustment and correction for complying with the requirements of the common ticketing project. This work requires familiarization with ticket specifications, expertise in ticket planning and valuable experiences in developing software for the front-end ticket validation facilities. It would be better if the consultant has taken part in several AFC development projects. The consultant should be able to provide assistance in key control and security mechanisms and setup of the specifications of system information flow so as to comprehensively draw up the specifications that both back-end and front-end devices can follow. (3) Outcome and outputs Produce a report of “Ticketing Integration Development Strategies and Plan for the Bangkok Area” during the preparation stage. The contents cover the following five aspects: A. Usage conditions of mass transportation in Bangkok Annual bus and MRT ridership Annual possession rate of private transportation modes and mass transportation usage rate Circulation volume of MRT stored value cards, daily transaction volume, and transaction amount Future mass transportation planning (inclusive of transportation modes and passenger volumes)

6-9 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

B. Middle and long term ticketing development strategies for Bangkok Ticketing integration strategic planning Encouraging usage of mass transportation and e-ticket strategies Expansion strategies of e-ticket applications C. Ticketing promotion and business model Fund and information flow planning under gross cost concession and DBOM strategies Authority and accountabilities shared by the authorities in relating to e-ticket and MRT system Relationships between the government, transportation operators, CTC and system constructor D. Preparations for CTC establishment Purpose of establishment Scope of business operations Development strategies Business models Financial plan Future methods of releasing stocks E. Approaches of integrating front-end and back-end systems Card standard planning (if not developed by the government) The methods for the government to manage the keys, and the keys that are applied and distributed Communication protocol and related interface data for data transmission between front-end and back-end systems (4) LOE It is estimated that three months are needed for preparations. Upon the commencement of the PMS project, the team leader, international transit ticketing consultant and local transport economist/planner should be devoted to this project to apprehend the overall ticketing development conditions in Bangkok and confirm the implementation direction for follow-up ticketing integration. Additionally, it is necessary to review the OTP integrated ticketing project and the documents indicating the possible design specifications in order to avoid technological gaps. Therefore, the international and local procurement consultants are required to join in the project from the beginning of this stage. The experts for ticketing, key security management and back-end system have to take part in the project for three months to set up specifications. It is suggested that the financial consultant should join in the project from the beginning to the end at this stage because he/she plays a very important role. The financial consultant has to assist in confirming the organization and release of stocks for CTC as well as the business model of DBOM. The legal consultant is required to spend one month to deal with legal issues. The following table shows the number of persons and work months required, as well as the job contents for each consultant at this stage.

6-10 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 1 1 1 Local work month 3 0 3 1 3 3 3 3 Inter- number (person) 1 1 1 national work month 3 3 3 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology The first report produced by the consultants shall be submitted to the CTC Regulator in the second month of the preparation stage. Then the consultants shall revise and amend the report based on the comments made by the CTC Regulator. A workshop serving as the first-stage review meeting will be held by the CTC Regulator in the third month. The CTC Regulator will lead the review and invite related governmental authorities (such as the department of transportation planning or rail transportation), experts specializing in transportation or smart card and system constructors to participate. The PMS Consultant shall make responses according to the questions raised by the review commissioners in the meeting. The CTC Regulator will give comments if there is any supplement or revision needed in the meeting. The PMS Consultant will revise the report based on the above said comments and submit it to the CTC Regulator to determine if the first-stage report is accepted.

Stage II - Establish the Common Ticket Company (1) Objective The main objective which the PMS Consultant has to achieve in this stage is to assist the CTC Regulator to establish the CTC and help CTC set up related operational regulations and SOPs in order to ensure that CTC, without having any experience in ticketing integration, can smoothly step into normal operations. (2) Activities, Tasks and Required Consultants During the stage of establishing the CTC, the PMS Consultant is required to help the CTC Regulator to prepare the documents for the application of corporate establishment and set up an annual work outline after CTC establishment. Following the approval of the application, it is necessary to recruit and train the personnel. The major activities, tasks and required consultants are described as follows: A. Prepare documents for the application of CTC establishment The major work during this stage is to draw up a CTC investment plan. With 100% of the investment made by the government, the operation of CTC should be based on public benefits. On the other hand, CTC is required to be able to make sustainable operations. According to the experiences in different countries, a ticketing company has to reach a certain economic scale in order to break even. In the meantime, partial release of CTC equity by the government in the future should be taken into consideration. Therefore, it is necessary to consider the advantages such as high use rate, high ticket circulation, etc., possessed by CTC which may attract private investors. The strategies stated in the CTC investment plan will be mapped out based

6-11 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

on the objectives stemmed from the above rationale. The characteristics of business invested, market scale, anticipated market share, competitive advantages, operational strategies and models, capital amount, structure of shareholders, equity ratio, etc., should be covered in the investment plan. There has not been any independent ticketing company for issuing ticket cards and ticketing clearing and settlement in Thailand in the past. Therefore, upon the early establishment of CTC, the PMS Consultant will prepare materials for presenting CTC for the purpose of introducing itself to related government agencies or business operators. Such materials shall be made in the section of “Objectives and Prospects of CTC Establishment” in the investment plan. It is proposed that the team leader shall dominate the operational strategies and models made in the investment plan during this stage. The local financial consultant shall assist CTC in making financial plans and risk assessment while related market analysis shall be made by the international ticketing consultant. B. Assist CTC in Commercial Operations The major work during this stage is to assist the newly established CTC in stepping into normal operations. A newly established company may not have similar experiences for reference, so the experienced PMS Consultant can help outline the important works to operate in the first year. The works, for example, cover supervision of back-end system setup, business development, marketing projects, etc., for the convenience of scheduling CTC’s follow-up works. Meanwhile, it is necessary to draw up the descriptions of using the card, such as type of ticket cards, requirement for deposit, selling price of the card and usage methods for the convenience of CTC’s future marketing and promotion. Additionally, the PMS Consultant has to assist CTC in setting up daily SOPs before bringing forth CTC to step into normal operations. The SOPs are briefly described as follows: SOPs for Project Development and Management The early work of the project focuses on back-end system setup and management. In the future, CTC may develop the applications to other transportation or non-transportation fields. Therefore, CTC is required to separately carry out project development and management works. The procedures for management should cover: project setup, budget listing, requirement analysis, design and setup (the management over contractors’ works should be made if outsourcing), testing, online operations, budget management, etc. Management of card life cycle The card producer or CTC can be in charge of initializing after the card is produced (the PMS Consultant shall evaluate the security management ability of the card producer if the CTC outsources this work). On the other hand, the works of sale, add-value and return of card can be handled by CTC customer service centers, or by outsourcing MRT operators or convenience stores. Attention should be paid to the verification procedure for the above mentioned services. Such procedure will serve as the basis for the request of payment. In the meantime, the provision of the most convenient services to the public should be considered. SOPs for the management of warehouse, including purchase, delivery and inventory The SOPs for procurement in relating to corporate assets should prevent routine purchase and delivery as much as possible. For instance, direct delivery

6-12 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

to the distribution channels from card manufacturer can be taken into consideration upon outsourcing card initializing in order to optimize the space in the warehouse and reduce manpower for checking the inventory. SOPs for accounting and requests of payment Guided by the gross cost concession strategy, CTC does not have any direct cash flow with MRT operators. Only checks and adjustments of transaction data are involved between the two parties. The concept of gross cost concession is shown in Figure 6.4. The PMS Consultant shall assist in setting up SOPs relating to requests of payment and checks of transaction data. CTC requests for payment to the governmental appropriation department based on the operational report every day. The calculation of clearing charge either based on the number of transactions or transaction amount shall be determined. If the charge is calculated on a basis of transaction amount, the discount provided by the government to the disabled or seniors should be taken into consideration. On the other hand, the procedures for dealing with the discrepancies between CTC and transportation operators upon cross-checking transaction data or loss of transaction data should also be taken into consideration. A fair and honest principle shall be applied to set up such procedures in relating to cross-check and accounting adjustments. The above mentioned procedures and future recognition of transaction data shall be approved by the governmental appropriation department or the CTC Regulator.

operation report MRT Operators clearing charge service charge CTC Government Operator A

management Operator B

Fundpool Operator C

uploading transaction data

daily check of transaction statement

Figure 6.4 Gross Cost Concession Concept for Accounting and Requests of Payment Customer service CTC is required to offer card holders inquiry and claim services. The PMS Consultant will assist in setting up SOPs in the early stage. The cases connecting with customer service may vary in different stages, which is a part to consider upon setting up the SOPs. Therefore, all customer service cases should be classified so as to serve as a reference for establishing the voice customer service system and reducing the impacts brought about by the continuously increasing customer service manpower due to the expansion of application and circulation volume of cards. Meanwhile, a recording function should be covered as a means

6-13 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

to provide evidence for solving disputes. New equipment testing Since the induction characteristics (for example, effective distance, strength of magnetic field, etc.) between cards and card readers are associated with the electric characteristics of the card, stricter card inspection and test criteria should be set up by CTC in charge of the card end. Consequently, there will be clear ideas for developing and designing the specifications of card readers. Loose card specifications make it difficult to follow while designing card readers. In addition, the AFC system should be sent for testing in order to confirm if the frond-end equipment meets the original specifications of card readers while the front-end equipment is going online or in replacement for maintenance. It is suggested that senior international ticketing system specialists with related experience be in charge of the work. It would be even better if the specialists have once worked for a ticketing company. In that case, the specialists can provide valuable experiences and suggestions toward the SOPs for the internal customer service. Meanwhile, the consultants or specialists with local ticketing experience are suggested to assist CTC staff to become familiar with the conditions regarding the part of customer service and SOPs. The customer service and SOPs should be properly adjusted and corrected to meet the customs and styles of Thailand. (3) Outcome and outputs During this stage, a “CTC Operational Plan” shall be produced by the PMS Consultant. The plan is required to cover the following four parts: A. Investment Proposal Company profile Business prospects and organizational management Description of product characteristics Analysis on laws and regulations Industrial and market analysis Operational strategies and business model Operational effects Marketing plan Business progress and critical schedule Financial plan Risk assessment B. CTC Introduction Report Objectives and prospects of the establishment Capital stock and structure of shareholders Business scope Operational strategies and business model Short, middle and long-term development plans C. Ticket Card User’s Manual Name of ticket card Type of ticket card Ticket card expiration

6-14 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Descriptions for card selling, inclusive of selling price, available amount, with or without card deposit, etc. Descriptions for value adding, inclusive of value adding amount, upper limit of available amount, etc. Regulations for return of card and refund, indicating if any handling charge is required or if the deposit can be refunded. Transaction methods, how to take MRT with the card Cautions for card storage, for example, avoiding high temperature, damage, using multiple cards at the same time, etc. Provision of card inquiry and claim services, for example, service hours, locations, corporate website, customer service lines, etc. D. SOPs for project development and management Card production, initializing and distribution SOPs for warehouse, such as purchase, delivery and inventory, etc. SOPs for request of payment Account management Customer service New equipment testing (4) LOE The time period for establishing CTC requires three months. The major work involves the production of the investment plan, card user’s manual and related SOPs. Therefore, the international transit ticketing consultant is required to take part in the work from the beginning to the end of this stage so as to apply their valuable experience in a transit ticketing company to assist CTC in its establishment and future operations. The team leader shall participate for three months in order to lead the progress and development of this stage. The legal consultant shall participate for two months to assist in setting up the CTC. The financial consultant shall be in charge of the financial plans. The financial consultant should have the experience in successfully making an investment plan in a related company. It would be best if the consultant has the experience in governmental reinvestment and planning the release of corporate stocks. The financial consultant is required to take part in the project for two months. The SOPs for this stage shall be set up concurrently by a local project management consultant and a local transport economist/planner, who are familiar with local conditions, as well as an international project management consultant and a transit ticketing consultant so as to cope with both international experience and domestic habits. The above mentioned four consultants are required to take part in the project from the beginning to the end of this stage. The local transit ticketing consultant shall lead the works of SOP establishment and organization. Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 Local work month 3 0 2 0 3 Inter- number (person) 1 1 1 national work month 3 3 3 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

6-15 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

(5) Program management methodology The PMS Consultant should produce an investment plan in the first month of this stage for the CTC Regulator to carry out the establishment of CTC. The “CTC Operation Plan” will be submitted in the second month of this stage. The PMS Consultant will correct the plan based on the CTC Regulator’s comments. The CTC Regulator will hold a workshop as the second-stage review meeting in the third month. The CTC Regulator will lead the review and invite related government agencies (such as transportation planning department, rail transportation department, etc.), experts and specialists in transportation, smart cards, mechanics and electronics, frond-end facility suppliers, card makers, etc., to join in the review meeting. The PMS Consultant has to respond to the questions raised by the commissioners in the review meeting. The PMS Consultant has to complete any supplements or revisions to the plan within one month. The standards to assess if the PMS Consultant is qualified to pass this stage lie in: if CTC could be smoothly established, if the establishment meets the expected schedule by the CTC Regulator and then the evaluation on the plans.

Stage III - Preparation for System Procurement (1) Objective The Common Ticketing Company (CTC), a newly established ticketing company, could be lacking of experience for system procurement. Nevertheless, the ticketing system is very important to the CTC and it is a core for the CTC to handle the daily operations in both transportation and non-transportation applications. Thus, the PMS Consultant should carefully draft a procurement plan for the ticketing system, especially in the back-end system. The procurement plan should cover items such as procurement articles, method of procurement, procurement schedule and potential risks. (2) Activities, Tasks and Required Consultants During the preparation of the procurement, the PMS Consultant should review the procurement procedure documented in this report and analyze the demands from the CTC. An informative meeting should also be held by the PMS Consultant to further disseminate the procurement plan. Suggestions and recommendations from industry will be captured and considered if improvement can be made for the procurement process. Once the final procurement plan has been completed, it will be sent to government agencies and the CTC for final verification and approval. A. Review of suggestions of the system procurement The PMS Consultant has to review the recommendations for the ticketing system procurement, including the back-end system described in this report. This report has provided the following recommendations: Articles procured (equipment and specifications for back-end system) Method of procurement (open bidding or international bidding processes) Method of tender decision (most advantageous tender or most advantageous tender decision) Procurement schedule Moreover, the PMS Consultant has to refer to the other experiences of large-scale system procurement in Thailand. Gathering the procurement experiences from the existing two MRT ticketing systems is also recommended. The PMS Consultant is also required to discuss with the members of the government agencies, such as the CTC Regulator, OTP and the CTC to collect appropriate information on procurement procedure and requirements. After assembling the comments and suggestions given

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by mentioned agencies, the PMS Consultant can initialize the following procurement procedures. The government agencies may be required to provide historical examples of procurement and the operating information on the existing ticketing systems to the PMS Consultant for shortening the preparation of bidding documents. Also, the CTC Regulator should encourage related government agencies to discuss about the requirements and directions with the PMS Consultant. The CTC should have representatives to participate in all procurement meetings for gathering useful information. In this stage, the related governmental agencies should actively communicate to each other as the preliminary direction for the system procurement becomes clear. All of the team members, including team leader, transit ticketing consultant, procurement consultant, transport economist/planner, project management and procurement consultants are required to participate at all meetings. Based on the duties being discussed, the team leader should call for periodic meetings for status communications. The PMS team members and related government agencies are invited to the meeting. Comments from the meeting will be given to the procurement and project management consultants for reference in order to satisfy the requirements. B. Drafting a procurement plan The PMS Consultant will prepare a system procurement plan based on the information collected from the other system procurement experiences and the periodic meetings. The contents of the procurement plan should have the following: articles procured, budget estimation, method of procurement, method of tender decision, procurement schedule, risk assessment and countermeasures. It is suggested that the PMS Consultant should refer to the system specifications and requirements specified in this report. However, the actual procurement may not take place until several months after the completion of this report. Thus, the PMS Consultant will have to ensure that the requirements from the government agencies and the CTC where some updates of the system specifications may be required have been put in place. In addition, the budget estimation shall be supplied by the PMS Consultant. The budget includes the costs of hardware and software setups and the costs of system updates and system maintenance. For the procurement methods and tender selections, the PMS Consultant should refer to the terms and conditions of this report. As per the recommendations in the report, the procurement procedure shall be transparent and impartial so that the CTC would have a suitable ticketing system that meets its requirements. During the tender selection, the scores of each evaluation criterion can be re-adjusted based on the recommendations of the CTC Regulator. For the tendering scheduling, the governmental agencies should allow generous time for the system providers to prepare bidding proposals. It may be reasonable to synchronize with the opening schedule of new MRT lines for initial deployment of the new common ticketing system. Regarding the risks to the system procurement, the PMS Consultant should list all potential risks and their countermeasures, such as incapability of the system providers and delays of system construction. The committee assembled by government agencies will determine the supervision and administration agency known as CTC Regulator for the procurement of ticketing system. The Regulator should provide information on laws and regulations and the procurement budgets of the ticketing system. During the procurement process, should any government agencies have comments and suggestions, the CTC Regulator should notify the PMS Consultant for changes of the procurement. If the PMS

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Consultant has difficulty in responding to the comments and suggestions, the CTC Regulator should assist it to find alternative solutions. The procurement plan prepared by the PMS Consultant is quite important. The team leader and transit ticketing consultant are required to take part in the entire process. The team leader is in charge of integrating the comments suggested by the team members and the government agencies. In addition, the team leader should review the procurement plan constantly. There are one international and one local procurement consultant required in the PMS team. The local consultant should have procurement knowledge of the existing ticketing system procurement and should be familiar with Thailand’s laws and regulations. The international consultant in charge of ticketing system procurement must minimize potential risks, such as delays in system construction. The project management (PM) consultant will be in charge of updating the functions and specifications required by the government agencies and the CTC. The PM consultant may refer to the experience of ticketing integration from other ticketing systems. A local legal consultant is required to confirm if the procurement plan can be practical under Thailand’s laws. The transport economist/planner has to confirm if the plan is consistent with the directions set by the CTC Regulator. C. Holding a meeting for dissemination of the procurement plan After the procurement plan is completed by the PMS Consultant and has been approved by government authorities, the PMS Consultant is required to hold a procurement meeting. There are two major reasons: The government shall make a public announcement to local ticketing system providers for the procurement. The government shall seek for international ticketing system providers for joining in the system construction. The meeting intends to collect the suppliers’ comments and suggestions and ensures the completeness of the procurement plan. The intention of procurement should be disclosed to all system providers for attracting them to participate in the tendering. Additionally, the ticketing-related government agencies and specialists will also be invited. The comments and suggestions from the procurement meeting will be collected by the PMS Consultant for further revision if necessary. Consequently, the PMS Consultant shall submit the procurement plan to the CTC Regulator for the review and approval. The following step of the system procurement shall be carried out in accordance with the procurement plan. The CTC Regulator shall be in charge of holding the procurement meeting and make an announcement to the related system providers and experts who are interested in this procurement. The meeting time, location and program shall be determined as per the general agreement from related agencies. The PMS Consultant should provide assistance for the procurement meeting. The team leader is required to take part in the entire process and the team leader, on behalf of the government agencies and the CTC, will make a brief presentation for the procurement plan and respond to questions and comments from the participants. The procurement plan might need to be revised if improvements can be made. As for the required staff for the meeting, the procurement, project management and transit ticketing consultants are recommended to participate and help the team leader to answer comments and suggestions. The legal consultant will also be invited to confirm the procurement plan before submitting the plan to the CTC Regulator and the CTC.

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(3) Outcome and outputs The outcomes derived from this stage serve as the basis for subsequent procurement for the CTC. The major deliverable is a copy of the report which is the “Back-end System Procurement Plan”. The report includes: A. Articles procured System items System requirements System specifications Follow-up maintenance and service B. Budget estimation Estimation on costs of system hardware and software setup Estimation on costs of system operation and maintenance C. Method of procurement Bidding method (sources of law and method description) Bidding procedures (the sequences of every step and government agencies involved) D. Method of assessment Methods of establishing an assessment committee Setup of system providers’ qualifications Assessed criteria and weights E. Procurement schedule Estimated schedule for each procurement stage F. Risk assessment and related reactions Forecast of possible risks arising from system procurement Risk avoidance and countermeasures (4) Level of Effort (LOE) Four months of labor are needed for this stage. It will take 1 month to review, 2 months to draw up a plan and 1 month to prepare a procurement meeting. The manpower required by the PMS Consultant includes 1 team leader, 1 transit ticketing consultant, 1 transport economists/planner, 2 procurement consultants, 1 legal consultant and 2 project management consultants. Drawing up a procurement plan is the key work carried out by the PMS Consultant. Such a plan will have influence on the follow-up system procurement. Therefore, the team leader and the transit ticketing consultant have to spend additional efforts during this stage. These two persons have to mutually cooperate to go through the entire process so as to understand the needs of the government agencies with respect to the local procurement culture. The transport economists/planner and legal consultant will assist in reviewing the documents and provide related suggestions to the team leader, which takes about 2 months. Two procurement management consultants are required to participate in the entire process of this stage to complete the procurement plan, since they have to review the suggestions, draw up strategies and explore suppliers’ opinions. The 2 project management consultants shall be familiar with the system so as to be able to update the system specifications with complying with the requirements of the CTC. They also have to assist in laying out strategies, organizing the comments and suggestions from the procurement meeting and offering advisory services. It is suggested that the 2 project management consultants will spend 3 months to complete the tasks.

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Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 Local work month 2 4 2 3 Inter- number (person) 1 1 1 1 national work month 4 3 4 3 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology The procurement plan provided by the PMS Consultant shall be submitted to the CTC Regulator and the CTC for review within a timeframe of three months. The CTC Regulator shall coordinate the suggestions and comments made by related governmental agencies and the CTC before the PMS Consultant makes any adjustments. A procurement meeting will be held after completing the procurement plan and the PMS Consultant will revise or supplement the procurement plan based on the requirements. The final revised procurement plan will be submitted to the CTC Regulator for review and approval. The procurement meeting, the outcomes of the meeting and the final version of the procurement plan are the crucial milestones to see whether the PMS Consultant could pass this stage.

Stage IV – System Procurement (1) Objective The objective of this stage is to provide an appropriate method with a reasonable price in assisting CTC to develop a ticketing system which is able to fulfill its operational and future expansion needs in Bangkok’s MRT systems. To achieve this objective, the PMS Consultant needs to assist CTC in the system procurement to ensure that it is carried out according to the procurement plans. The PMS Consultant is also required to give advice and make recommendations to CTC with regards to the possible problems and risks. (2) Activities, Tasks and Required Consultants During the tendering of the system bid invitation, the PMS Consultant is required to prepare the relevant documents, including; Notice of Tender, Request for Information, and Draft of Contract, etc. It will assist CTC in forming a procurement committee; after which, it assists the committee in evaluating the credentials of the companies, preparing technical proposals, and price list, etc. Lastly, the process and results of procurement is recorded and put in order for the reference of the government in similar system developments in the future. A. Prepare Tender Documents After the bid proposal has been confirmed, the PMS Consultant will begin to write tender documents which include Notice of Tender, Request for Information, and Draft of Contract. The contents of the Notice of Tender include general provisions (the objective of the bid, the organizers, and the policy), credentials of the bidders (the fundamental credentials, the credentials supporting the ability to honor the bid, and other specific credentials), bid bond (the amount, form of payment, method of payment and handling), the procedure of bid, the selection criteria, the bid

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decision, bond to honor the bid, signing the Contract, and other miscellaneous matters; Request for Information contains the job policies (the scope of the system, the implementation policy, the application policy, the policy on the use of information, the duration of set-up, risk analysis and management), the functions of the system, the needs of the operation, the transfer of technology, the related matters on the writing of the proposals, the selection procedure, confirmation of the Contract and signing of the Contract; the contents of the Contract Draft include the scope of system setup, the duration of Contract, the price of Contract and the method of payment, the bond to honor the bid, quality control and method of verification, duration and method of warranty, transfer of technology, issues on copyright, infringement and termination of the Contract, alterations and amendments on the Contract, management of dispute, and other related articles. Other than the transportation planner, the current stage of work requires the cooperation of all of the consultants of the PMS team; i.e. the procurement, system and legal advisors to work together in the paperwork of the three documents of Notice of Tender, Request for Information, and Draft of Contract. Considering the large volume of work required in the paperwork and the time limitation, the PMS Consultant may outsource part of the documents to other relevant professionals with the condition that the contents will be verified by the PMS team. Lastly, only after the examination and approval by the team leader and the ticketing consultants, can the three documents be submitted to the CTC Regulator and CTC. If the CTC Regulator and CTC have any doubts or clarifications on the contents of the documents, the PMS Consultant will be required to make explanations or make amendments as needed. After the final confirmation, CTC can then announce the contents of the documents. B. Convene the Tender Conference After the announcement of the Notice of Tender and Request for Information by CTC, the PMS Consultant is required to assist CTC in its call for the Tender Conference in which the objective is to disclose and make transparent the bid. After the disclosure of the tender documents is made public, there should be a request for interested bidders’ opinions so as to correct and amend any mistakes or flaws in the tender documents and minimize disputes in bidding and during the implementation of the Contract. At the same time, it also helps interested bidders in their early preparations of the relevant tender documents. The Tender Conference will be hosted by CTC. In the Conference, the PMS Consultant will briefly explain the contents of the relevant documents and at the same time record any opinions given by the interested bidders. The time, venue, and number of conferences will be determined by CTC. It is suggested that the Conference should be carried out twice with intervals of at least three weeks in between the two occurrences. This will attract more interested bidders to engage and invest in the project in order to obtain the most appropriate system. The CTC Regulator should assist CTC in organizing the Tender Conference as well as inviting interested bidders in the country and abroad to take part in the bid. Related tender documents will be prepared by CTC. The Conference will be attended by the team leader, ticketing consultant, procurement consultant, system consultant, and project management consultants. If there is a need to amend the tender documents, the amended copy will be examined by the legal consultant and announced by CTC. The related procurement procedures can be found in Chapter 3 of this report. C. Assist to set up the Appraisal Committee After the announcement of the Notice of Tender, CTC will have to set up an

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Appraisal Committee (the details of which can be found in Chapter 3 of this report). The members of the committee are selected from candidates provided by the government or CTC. After examining the particulars of their personal background, the PMS Consultant will suggest a list of candidates for selection which will be finalized by the government and CTC. The task of the PMS Consultant at this stage is to provide the background and professional suggestions which are required in the selection of the Appraisal Committee, for the government or CTC to examine the candidate list in order to choose the most suitable committee members. Based on the suggestions by the PMS Consultant and considering its own requirements, the government will list the preliminary candidates for the Appraisal Committee which will be cross-checked with the suggestions given by the PMS Consultant. The government will then need to decide the final list of the selected committee members. The committee should be professional, objective, and should not be related to or have any interests or relation to the companies, either directly or indirectly, so as to avoid any bias selection. The suggested background of the Appraisal Committee as well as the verification of the preliminary candidate list will collectively be the responsibility of the team leader, transit ticketing consultant, procurement consultants and project management consultants. The suggested list will have to be approved by the PMS Consultant, and submitted to the CTC by the team leader. D. Assisting in the Evaluation of the Bidder’s Proposals During the procurement process, the bidders are first required to submit their credential certifications. Only the companies that meet the credentials will be qualified to enter phase 2 of the proposal selection where they are required to submit technical proposals and price proposals to be evaluated by the Appraisal Committee. The scope of the evaluation that the PMS Consultant assists in includes the three areas mentioned above (1) credentials, (2) technical proposal and (3) price proposal; the information of the bidders includes the background of the company, company revenue, and proofs of performance, etc., the technical proposals include system specifications, plans and schedule of setup, method of warranty and maintenance, transfer of technology, etc., and the price proposal will include information such as the price of the system software and hardware, operation and maintenance fee, etc. The PMS Consultant will be required to verify the information provided by the bidders, to question or give comments to the technical proposals, to classify the strengths and weaknesses of every bidder, and to provide their recommendations for the Appraisal Committee to make the final decisions. This is the key point of the procurement procedure. Besides assisting in the evaluation as mentioned above, the PMS Consultant shall also respond to any related problems in the procurement procedure brought up by the Committee. If there is a need for further explanation of the bidder’s proposal, the Bidder may also be requested to attend a meeting in order to enable the Committee to have a better understanding of the matter at hand. The Appraisal Committee will be responsible for the selection of the bid. They shall submit all documents provided by the bidders to the PMS Consultant, and shall notify the PMS Consultant in written form should there be a request to make a clarification on the bidders’ documents. It is suggested that this stage of work is to be participated by all members of the PMS team. After receiving the related documents, the team leader should appoint the members of the team according to their professions to provide opinions, questions and recommendations. After gathering the recommendations of the members, the team leader shall present them in an official report to be referenced by the Appraisal

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Committee. (3) Outcome and outputs The results of this stage of work will be used as reference in the preparation of the procurement documents to ensure that the result of the procurement is carried out successfully according to the requirements. The main contents of the outcome include Notice of Tender, Request for Proposals, Draft of Contract, the results of the Tender Conference, suggested list of the Appraisal Committee, and the results of the evaluation of the bidders’ proposals. A. Notice of Tender General Provisions (The objective of the bid, the acquiring department, and the policy) Credentials of the Bidders (The Fundamental Credentials, the Credentials Supporting the Ability to Honor the Bid, and other Specific Credentials) Bid Bond (The Amount, Form of Payment, and Method of Payment and Handling) The Procedure of Bid, the Opening of the Bid, the Selection Criteria Bond to Honor the Bid, Signing the Contract Miscellaneous matters B. Request for Proposal Job Policies (the Scope of the System, the Implementation Policy, the Application Policy, the Policy on the Use of Information, the Duration of Setup, Risk Analysis and Management) The Functions of the System and the Requirements Transfer of Technology Related Matters on the Proposals’ paperwork by the bidders The Selection Procedure Negotiation of contract and Signing of the contract C. The Draft of the Contract The Scope of System Set-up The Duration of Contract The Price and The Method of Payment The Bond to Honor the Bid Quality Control and Method of Acceptance Duration and Method of Warranty Transfer of Technology, Issues on Copyright Infringement of the Contract, Termination of the Contract, Alterations and Amendments on the Contract, Management of Dispute, etc D. The Outcome of the Tender Conferences The time, venue, and the list of the participating companies of the Tender Conferences The gathered recommendations of the companies and the response to their questions and clarifications The revealing of the outcome by the chairman E. The list of the suggested candidates of the Appraisal Committee

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The professionalism and qualifications required by an Appraisal Committee member The list of the Appraisal Committee members (including the name list and reasons of selection) Other related matters F. The Evaluation Results of the Bidders’ Documents The evaluation results of bidders’ credentials (the evaluation is focused mainly on the previous experience of the company in ticketing systems) The evaluation report of the technical proposals submitted by the bidders (includes the eligibility of the specifications, the ability to honor the bid, the analysis on the strengths and weaknesses of the companies) The evaluation report on the price proposal submitted by the bidders (the price of construction, price of after operation and maintenance services) (4) LOE This stage of work is estimated to be completed within 6 months; i.e. the preparations of tender documents will take up to 2 months; the Tender Conference and forming of the Appraisal Committee will take up another 2 months; the evaluation of the information will also take up to 2 months. The actual schedule will follow the procurement programs (or refer to Chapter 3 “Procurement Method and Procedure” in this report). As for the consultants, the consultants required are as listed in the table below. The team leader and the transit ticketing consultant will be required to evaluate the procurement documents written by the team members, to participate in the Tender Conference, and to evaluate the bidders’ proposals. Since they participate partially in every stage of work, the total duration of participation is proposed to be 4 months. As two of the procurement consultants are required to prepare the tender documents, participate in the Tender Conference, and evaluate proposals, and their works are all the key points affecting the final procurement outcome, both of them are suggested to participate in full. The financial consultant is required to assist in the paperwork of the tender documents and evaluate proposals. As such, his/her proposed duration of work is 2 months. The legal consultant is required to verify the accuracy and legitimacy of the tender documents, as well as to provide legal advice during the procurement procedure. The proposed duration of work he/she requires is 5 months. As the two project management consultants are familiar with the system set-up, they can assist in the evaluation of the tender documents, participate in the Tender Conference, as well as evaluate the proposals. Their proposed duration of work is 5 months.

Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 1 1 Local work month 6 2 3 5 5 5 5 Inter- number (person) 1 1 1 1 national work month 4 4 6 5 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology

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The tender documents provided by the PMS Consultant should be sent to CTC one month prior to the CTC’s official announcements. Amendments, if any, should be made according to the CTC comments. The announcements of the tender documents should be handled according to the schedule in the procurement plan. The results of the Tender Conference should be sent to CTC two months from the date of the announcement. The background requirements and suggested name list of the Appraisal Committee, however, are decided by the CTC and submitted by the specified time. The PMS Consultant’s evaluation results of the bidders’ documents will be sent to CTC six months after the PMS Consultant has received the information. In addition to make certain the contents of the documents conform to the requirements, another important principle of the work at this stage would be the submission of documents on schedule. It is the duty of the PMS Consultant to ensure a smooth procurement according to the determined schedule. The committee will evaluate the completion of stage 4 by the PMS Consultant based on the contents of the documents, the schedule of submission, and the final procurement.

Stage V - System Construction (1) Objective For this stage, the main objective of the PMS Consultant is to assist CTC in supervising the setup of the back-end system by the contractor. Furthermore, the PMS Consultant shall be required to (1) assist CTC in demand analysis, (2) assist in the evaluation of the system design documents to ensure that the back-end system is able to conform to the demands anticipated by CTC and the government plus have flexibility for future expansion, (3) prepare the system testing proposals and set the standards of verification to be used as a reference for future operation tests, and (4) assist in supervising and verifying the transfer of technology and the results of learning and training. This is to ensure that the CTC will be able to self-operate in the future without needing to rely on the contractor. (2) Activities, Tasks, Required Consultants The main activities, job descriptions and the required consultants at this stage are as follows: A. Assisting CTC in the Supervision of the System Construction In the early stage of the CTC establishment, the technical personnel in the company have little knowledge of the concept and operation of a back-end system. Hence, the PMS Consultant is required to participate in the demand interviews between the contractor and CTC, CTC Regulator, other related government agencies, or MRT operators. This will help supervise the contractor in order to prevent them from giving excuses to conform to the operational needs of related units in their attempts to reduce the complexity of the construction. The PMS Consultant can also provide the contractor and CTC with its previous experiences whenever it is necessary; e.g. designing a different cut of date (the starting time of each operation day) according to operation requirements of each MRT operator. The Consultant may also design unique parameters according to the operation strategy or the anticipation of a ticket promotion in order to cater to the increasing demands in the future. In the system construction, the team leader should participate in the regular meetings between the contractor and CTC at least once a month in order to be able to keep up with the progress of the back-end system construction. Project management consultants, on the other hand, should participate in all regular meetings between CTC and the construction contractor. Based on the matters discussed, they should increase

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the attendance of the card specialists, key security management specialists, and back-end system consultants to sit in as counselors at the meeting. When faced with problems that will affect the future SOP in CTC, project management consultants should report them to the international transit ticketing consultant, the local transport economist/planner, and discuss the problems with CTC. They should also send request proposals to the contractor or amend SOPs as required. B. Evaluating the Technical Documents of the System Construction Starting from the phase of construction, the contractor will continually discuss the requirement analysis with CTC, the CTC Regulator, government agencies, and the PMS Consultant, etc. The confirmation on requirements should be done in the first month, and the specification design documents by the end of the third month. After the design documents are submitted, any changes to the designs will have to be applied for by written form. The drafts of the requirement documents and specifications design documents by the contractor should be submitted to CTC; and thereafter CTC to the PMS Consultant so that an evaluation on the design documents can be carried out. The evaluation will assist CTC in determining whether the designs conform to the requirements and at the same time ensure flexibility for future expansion; e.g. the application of e-money may be used. The evaluation of the back-end system technical documents is most appropriately to be led by the international consultant who is experienced in ticketing system construction and possesses knowledge on the operation of KMS, CIM, and CCH. It is also suggested that the international project management consultant and the professionals who have experience in security management of the access key should work together to evaluate the access key security design documents of KMS and CIM. Besides that, CIM and the clearing system will be taken charge of by the international project management consultant and other professionals who are familiar with the initialization procedure of the cards, AFC, or the transmission of information flow in the clearing systems. C. Draft System Test Plan and Define Verification Standards During the system construction, besides participating in the meetings with regard to the technical aspect or the progress of the construction, the PMS Consultant also needs to prepare the system test and verification plan. The proposed plan will be submitted by the PMS Consultant to CTC and the CTC Regulator. CTC will then invite the contractor, the CTC Regulator, the government, and the operators, etc., to hold an official discussion at a selected time. The PMS Consultant will be required to give a report on the test and verification plan and the standards of verification will be confirmed at the same meeting. In the system test program, the PMS Consultant should plan testing items, testing methods, and acceptable quality level of CCH, CIM, and KMS respectively, according to the function requirements set in the tender documents. In addition to the unit test, cross-system integration test, simulation test, and pressure test should also be performed. The PMS Consultant ought to come up with integrated testing methods and verification models for the back-end system and the front-end system. With that, the KMS, the CIM, and the CCH systems can be tested in a series of system integration tests and situation simulation tests can be set up. This will reflect any unexpected situation or problem in the actual operation of the system in the future. As it needs to guarantee that the back-end system is able to cope with the sudden tremendous volume of information flow in the future operation, the PMS Consultant needs to carry out the pressure test.

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In the system verification, the software is tested on its function, and the hardware on its inventory and specifications. Transfer of technology and learning and training will be focused on the training documents, machine operations, training hours, and post-training results of the trainees. Since the DBOM model is recommended (please refer to Sec. 5.4 of this report), the CTC can either self-operate and maintain its back-end system or authorize the construction company to handle operations and maintenance. In order to prevent the price increase of the O&M by the contractor, CTC needs to master the core technology of the clearing system and familiarize itself with the clearing procedures. This will ensure that the CTC can operate and maintain the clearing system by itself and will not be constrained by the contractor. This stage of work is required to be carried out by the system development engineers who have the experiences of cross system integration tests in a ticketing company, who know the verification method well, and who know how to set up the situations for tests, so as to ensure the accuracy and stability of the back-end system in the future. Thus, the international project management consultant will lead the paperwork of the tests and verification program. The experienced professionals who specialize in key access, the making of the cards, and the clearance process will evaluate and give recommendations on the specification design documents by the contractor, and propose the tests and verification plans for KMS, CIM, and CCH. These documents will be submitted to CTC and the CTC Regulator as a reference after they are organized by the project management consultants. (3) Outcome and outputs For the back-end system construction, the PMS Consultant is required to produce two main documents; one is the evaluation and comments for the system requirements and design documents, and the other is the system test and verification plans. The main contents of the report include the following four items: A. The evaluation and comments for the system requirements and design documents B. System test plan Test items Test methods Anticipated outcome C. Suggestions to the methods of verification Verification list Methods of verification i. Verification methods for software, including functions of the software, the documents, and licenses, etc. ii. Verification methods for hardware, including inventory checks and verification of specifications. iii. Verification methods for the transfer of technology, learning and training, including the hardware assembling and software installation, training documentation, machine operation, training hours, and post-training results of the trainees. The Contractor should provide these materials to the CTC and then they are evaluated by the PMS Consultant. (4) LOE The construction of the CTC back-end system is estimated to take up to 12 months. As the main tasks focus on the technical part of the construction, every technical consultant in each system needs to work for at least 12 months. The overall construction progress is controlled by the international and local project system construction consultants

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who back each other’s up. It is recommended that both international and local project management consultants to participate fully in this stage of work. Other professionals, such as the card specialists, the specialists on the security management of the access key, and the back-end system consultants, are also required to work for 12 months. Besides this, the development strategies proposed by the team leader, international transit ticketing consultant, and the local transport economist/planner in the earlier stage need to be continually observed to ensure that they meet the required progress and direction. Thus, it is recommended that each of these specialists should work in this stage for at least 6 months. This will ensure that any shortcomings in the earlier works will be remedied and the work direction will be amended if needed. It may also provide an opportunity for CTC to proceed earlier with the matters related to the preparation of actual operation.

Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 1 1 1 Local work month 6 0 0 0 12 12 12 12 Inter- number (person) 1 1 1 national work month 8 7 12 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology The main works at this stage are to assist CTC and the government in handling the control of the construction progress, consideration of the future ticketing demands, and rights and benefits assurance of CTC. So, it should take into consideration if the PMS consultant takes the responsibility to control the construction schedule, and if the test and verification plans meet with CTC’s actual demands or the local situation. As for the O&M, the evaluation results of the trained CTC staff members can be used as one of the PMS Consultant evaluation factors. The remaining aspects will include the evaluation by the CTC and the Regulator for the test plan documents, evaluation report of the design specifications, etc., made by the PMS Consultant to conclude whether the expectations of the program management services are being met.

Stage VI – System Testing and Acceptance (1) Objective The main objective of this stage is to test and perform the acceptance check of the established back-end system in order to make sure that the back-end system operates quickly and correctly. Thus, CTC will be able to provide a complete ticketing service in Bangkok. (2) Activities, Tasks, and Required Consultants The major activities, tasks and required consultants are described as follows: A. System Verification System verification is to verify the system specifications and system functions. The PMS Consultant has to verify the system according to the specifications in the

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contract. The specifications of each item of equipment have to be superior to or equal with that listed in the contract. The PMS Consultant will test and verify the system functions according to the specification design documents. The tests include KMS system function verification, CIM system function verification, and CCH system function verification, etc. In order to test and verify the system functions, the PMS Consultant shall be familiar with the system specifications, system design and development, and procedures of system procurement and acceptance. B. System Testing and Production of Test Reports Before applying for the system test and verification to the CTC, the contractor shall ensure that the related hardware equipment, software and testing environment have all been set up and arranged for testing. After receiving the application, CTC shall request the PMS Consultant to perform the tests and verifications. Based on the system test plan in the prior stage, the PMS Consultant processes the system verification and system integration test. The PMS Consultant shall record the test results, combine the results with related documents into reports, and submit them to the CTC. Based on these reports, CTC will be able to obtain a complete understanding of the system and request system constructors to make improvements. The CTC can also use the reports as references for future system acceptance. The test reports must be described in detail according to different systems specifically, such as KMS, CIM, and CCH systems, and should also be produced based on the integrated operation of the three systems. The degree of the details and correctness in the test reports will affect the amount of time that the CTC will spend to manage the system completely when it takes over the system in the future. Therefore, the PMS Consultant needs to have system testing specialists with extensive experiences in producing the test reports. C. System Acceptance In addition to assisting CTC to perform the system verification and test, the PMS Consultant needs to assist CTC to perform acceptance checks of the system; that is, (1) the acceptance of software which is mainly focused on functions, (2) the acceptance of hardware, which is focused on quantity and specifications, and (3) the acceptance of technology transfer and training, which is focused on the technology transfer documents (provided by the contractor) and the evaluation of the trainees. If part of the function test result does not reach the acceptance standard, but the contractor believes it would not affect the system operation, the contractor may apply for partial acceptance to the CTC, plus set a deadline for the completion of improvements. The CTC shall decide whether or not to agree to the partial acceptance after discussing the situation with the government, contractor and PMS Consultant. If the function could not reach the acceptance standard, but will affect the system operation, then the contractor shall improve the system and request for another system verification and test. If the contractor could not complete the system test and verification for subsequent acceptance checks by the PMS Consultant, then the contractor shall be penalized according to the contract. The type of penalty shall be derived by the CTC and PMS Consultant in Stage IV and be clearly stipulated in the contract. The tasks of this stage demands people who have experience in the review of system development documents and the verification of system software. The consultant shall also have extensive experience in the development of equipment software. It would be preferred if the consultant has previously participated in many

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back-end system development projects. Besides this, the tasks also demand for experts who are familiar with key security management and system information flow. (3) Outcome and outputs According to the test and verification of the back-end system in this stage, the report from the PMS Consultant shall include: A. Report of back-end equipment standard test and verification The report of KMS equipment standard test and verification The report of CIM equipment standard test and verification The report of CCH equipment standard test and verification The test plan and test report of KMS system function B. Test plan and test report of CIM system function C. Test plan and test report of CCH system function D. The integration test and situation simulation plan E. System pressure test plan F. System integration test report G. Report of system test and acceptance (4) LOE In order to conform to the integration test plan, the PMS Consultant has to mobilize more system related experts in this stage. The experts have to develop the test plan, test the system, and provide recommendations for improvements of the system. The separated tasks for the experts and their duration of work in this stage are as shown in the following table.

Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 1 1 1 Local work month 4 2 2 0 6 6 6 6 Inter- number (person) 1 1 1 national work month 4 4 5 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology The PMS Consultant has to submit the back-end system test and verification plan in the first month. After the CTC confirms the plan, the PMS Consultant has to test the system from the second month to the fourth month. The PMS Consultant will adjust the system based on the test results and begin pressure tests. After all of the tests have been performed, the PMS Consultant shall submit the test results report in the fifth month. Then, the CTC will review and examine the acceptance documents in the final month. The PMS Consultant shall respond to the questions that the examining committee members ask in the examination meeting, and the chief examiner of the committee will decide what items should be altered. The Consultant shall revise the report based on the chief examiner’s instructions and then submit it to the regulator to decide if whether or not the tasks of this stage are completed.

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Stage VII - CTC Operation (1) Objective The objective of the CTC Operation Stage is to review the results of the ticketing integration plan so that the CTC can smoothly perform its operations and make improvements in the future. Therefore, the PMS Consultant should (1) establish an operation performance index for the CTC, (2) review the operating conditions in the CTC, (3) provide adjustment suggestions to the CTC, and (4) plan a long term development direction for the CTC so that it can provide better services to the public in the future. (2) Activities, Tasks, and Required Consultants In the operation period, the PMS Consultant is mainly responsible for the related tasks of assisting the CTC to put its operation into practice, which includes the review of the operation procedures and the performance of the ticketing system. The main activities, tasks contents, and required consultants are as follows: A. Establish operation index and report operation conditions of CTC Before reporting operation conditions to the CTC Regulator, the PMS Consultant has to establish an operation performance index which should include as follows: card usage index (cards issuing and usage condition which include monthly cards issuing volume, daily average transaction volume, daily transaction amount, and monthly average transaction amount), related financial index (financial reports which include the balance sheet, income statement, comparison between budget and expenditure, business income and gross profit analysis, operation cost, non-operation revenue and cost, and net profit before tax), operation performance index (operation data analysis which includes system failure rate, system reliability, punctuality rate of clearing and settlement, transaction uploading rate, correctness rate of transaction data, data loss rate, and correctness rate in clearing and settlement). The CTC, on the other hand, has to provide the PMS Consultant with related information to be recorded according to the operation index that the PMS Consultant has established. The PMS Consultant, in this stage, has to invite the CTC Regulator, CTC and MRT operators to hold an operation discussion workshop to analyze the operation conditions, analyze the problems they face, locate possible solutions to the problems, and discuss the conditions of the tackled problems. So, the PMS Consultant shall gather all of the relevant information recorded in order to submit the “Analysis Reports of CTC Operation Conditions” each quarter to the CTC Regulator and CTC for their reference. Operation indexes have to be established by the international consultants who are familiar with ticketing company operation index, and by those experts who are familiar with transportation planning, in order to include the possible and practical indexes that may be reviewed in the future. Moreover, system operation performance indexes have to be established by back-end system consultants who are familiar with the clearance system, while related indexes of financial performance conditions in CTC have to be established by the local financial consultant. In the meantime, the operation conditions workshop should be attended by the consultants mentioned above. The analysis report of CTC operations shall be submitted by the team leader and ticketing consultants after the workshop. B. Review CTC Operation Procedures After the operation of CTC has been running for six months, the PMS Consultant will have fully understood the operation conditions of the CTC, and the CTC Regulator will have a good command of the operation conditions of CTC. This is the time for the PMS Consultant to adjust the operation procedures of CTC tasks.

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During this period, there may be other MRT operators who would like to join to entrust the CTC to do the clearance. Therefore, there could be necessary amendments or new operation procedures resulting from the new demands from these operators. In case of outsourcing of O&M, the related SOP rules established by the CTC shall be reviews and amended if necessary. If there is something inappropriate or some rules that need to be adjusted, the contractor should bring it to the attention of the CTC. Meanwhile, the PMS Consultant should review and adjust the operation procedures about six months after the operation has commenced. The PMS Consultant should convene the meeting of operation procedures amendments while inviting the CTC Regulator, CTC, contractor, new and original MRT operators to discuss together how to amend the task procedures. After their demands and problems-to-be-solved are fully understood, the software and hardware could be amended to a certain extent in addition to the amendments of operation procedures. The whole direction of amendments shall be based on the original objective of the ticketing integration strategy. The operation procedure amendments require discussion with government departments, the contractor and MRT operators. It is recommended that the work should be the responsibility of those consultants who are familiar with the local E-ticketing conditions, have a good relation with local agencies, and also have project management experience. The ticketing consultant and project management consultants have to confirm the needs of the government and MRT operators, and have to review the necessity of amending the procedures, while system consultants should be responsible for the procedure amendments which then will have to be reconfirmed by the team leader. After that, the amendments of operation procedures will be submitted to the CTC for reference. C. Plan for future development of CTC After the CTC amends the operation procedures and operates smoothly on track, the PMS Consultant should begin to prepare a future development plan which includes (1) the integration with current MRT ticketing systems, (2) methods to attract other transit operators to join, and (3) methods to step into non-transit fields. Some parts of the strategies of integration have been discussed in this report (please refer to Chapter 2), so the PMS Consultant could develop methods of integration and the integration schedule based on the ticketing operation conditions and the applicable government plan. At the same time, in order to achieve the objective of ticketing integration, preferential proposals could be offered so as to attract other public transportation operators, such as bus and ferry companies to join in. Furthermore, the PMS Consultant also needs to work out a plan to explore non-transit approaches, such as convenience stores and chain restaurants with micro-payment, etc. However, these works should be only put into practice after the operation of transportation fields is quite steady and the card circulation amount reaches a designated volume. In this stage of work, the PMS Consultant will need to spend more time discussing and communicating with government departments, transportation operators, and even non-transportation operators so as to map out a concrete strategy and method of implementation. At the same time, the government could refer to the PMS Consultant’s suggestions in order to establish related policies to coordinate with the CTC and thereby expand the operation range of the CTC so that the public would benefit from the convenience. To complete these tasks, the team leader, ticketing system consultant, transit economist consultant and financial consultant have to formulate a task force which can establish the development direction based on their experiences in other ticketing

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companies. The transportation economist/planner and financial consultant would review the feasibility. Meanwhile, the local project management consultant shall communicate with the operators and fully comprehend their recommendations in order to assist the CTC to plan a direction for development in the near future. D. Report of the results of the ticketing integration project The PMS Consultant should collect the results of the ticketing integration plan and organize a report. The report contents should include (1) the results and effects in ticketing integration project (the PMS Consultant could compare the expectations of the original ticketing integration plan with the subsequent performance results to analyze its effects, efficiency, and drawbacks), (2) CTC establishment and operation conditions (record problems encountered from CTC establishment to operation and subsequent developing conditions of those problems), (3) the procedures and results in system procurement (procurement methods, review of the procedure, comparison between system performance and its anticipated demands), (4) the problems and methods to be dealt with during the project, and (5) the future development direction of ticketing integration as well as (6) recommendations to the government. The report of the ticketing integration is not only a record of the project findings, but also a critical reference document for the government that would subsequently proceed to establish or integrate ticketing systems in other areas. All of the members of the PMS team have to contribute to the report to compile the contents while the team leader should first outline the directions and assign the tasks to the members who are in charge. After the transit ticketing consultant and transportation economist/planner gather and arrange the reports from team members, the team leader should review the report and submit it to the CTC Regulator and CTC. The tasks that the PMS Consultant is responsible for would be completed after the examination of the committee and CTC. Thus, the government would acquire many new experiences while cooperating with the PMS Consultant and would be able to facilitate the development of smartcards in Thailand in the future. (3) Outcomes and output In this stage, the PMS Consultant shall prepare the final report of the project which contains five main items as follows: A. Establishment of operation indexes and operation condition report Cards usage indexes: Card issuing and its usage condition which includes card issuing numbers per month, month average daily transaction volume, and month daily average transaction amount. Related financial indexes: Financial report which includes balance sheet, income statement, comparison between income and expenditure and budget, income and profit margin analysis in operation, operation expenditure, income and expenditure besides operation, net profit before tax, etc. Operation performance indexes: Operation data analysis which includes malfunction percentage, system reliance degree, punctuality rate in daily clearance task, transaction uploading rate, transaction data correctness, omission percentage, and correctness rate in clearance tasks. Other indexes: which include the problems and solutions to the problems that CTC faces, and the requirements of operators and government agencies. B. The review report of CTC operation procedures The review and analysis of current operation conditions The new requirements added according to the newly joined operators

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The amendment of task procedures (which includes amendment causes, amendment ranges, and amendment effects) C. Future development report of CTC The usage condition in other cities in ticketing The integration plan between the CTC’s and existing ticketing systems The method to attract other transportation operators to join The method to step into non-transportation fields D. The results of the ticketing integration project The results and effects in the ticketing integration project (the PMS Consultant could compare the expectations of the original ticketing integration plan with the subsequent performance results to analyze its effects, efficiency, and drawbacks) CTC establishment and operation conditions (record problems encountered from CTC’s establishment to operation and subsequent developing conditions of those problems) The procedures and results in system procurement (procurement methods, review of the procedure, comparison between system performance and its anticipated demands) The problems and methods to be dealt with during the project The future development direction of ticketing integration Recommendations to the government (4) LOE This stage of work will take up approximately one year, but the actual time schedule can be adjusted depending on the CTC operation, other operators who wish to participate in the project, and the government plan. The schedule recommended is to have the first half year as an observation stage, two months of operation procedure amendments, two months of CTC future development planning, and the last two months of reporting the results of the overall project. The observation of the operations of CTC will require participation by the team leader, transit ticketing consultant, transportation economist/planner, financial consultant, and project management consultants to draw up the operation index and review the conditions of operation. Among them, the tasks of the team leader and ticketing consultant are heavier than the rest. However, the actual duration of work will depend on the actual conditions of operation. The financial and local project management consultants are responsible for assisting in the formulation of the operation index as well as for providing recommendations. The other consultants, like the transportation economist/planner, international project management consultant, and system specialists, will assist and are required to work for at least one month. The operation procedure reviews are to be participated by the team leader, transit ticketing consultant, transportation economist/planner, financial consultant, project management consultants, and system specialists. The team leader, transit ticketing consultant, and the project management consultants are responsible for confirmation of requirements and the need for procedure amendments. The other consultants, such as the system consultants, financial consultant, project management consultants only assist in the amendments of the operation procedure. The future expansion plans of CTC will affect the future integration of ticketing systems and the public’s livelihood; thus, it is recommended that the team leader, transit ticketing consultant, transport economist/planner, financial consultant, and the project management consultants should take part in this stage of work. By combining the international experience with local demands, the future direction of the expansion of CTC can be planned. In the preparation of the final report, the team leader, transit ticketing

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consultant, and transportation economist/planner will be required to give a comprehensive report of their work accomplishments.

Type of specialist TL TT TP PR FC LC S-C S-K S-B PM number (person) 1 1 1 1 1 1 1 1 Local work month 8 1 6 1 5 5 5 5 Inter- number (person) 1 1 1 1 national work month 11 11 1 5 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

(5) Program management methodology In this stage of work, the PMS Consultant is required to submit an analysis report of CTC operation conditions every quarter, call for monthly reviews on the operation conditions, and adjust the operation procedures. In the later part of this stage, the PMS Consultant is required to submit reports on the future expansion of CTC and the results of the project. Throughout this stage of work, the CTC Regulator should organize quarterly workshops (or in coordination with the submission of the operation analysis report) inviting each and every related unit to participate in the evaluation. In the workshop, the PMS Consultant is required to brief the attendants, to explain the contents of the reports, and to answer any queries brought up by the participants. The chairman will, at the meeting, point out the contents that require replenishment or amendments, and the PMS Consultant will be required to revise the reports according to the required amendments and re-submit the report to the CTC Regulator. The same reporting procedure is used in the last stage of the reporting on project results. The final report will be submitted to the CTC Regulator, which thereby concludes the Program Management Services. 6.5 Skills, Experience Requirements and Tasks of PMS The PMS Consultant team members will assist the government and CTC during the entire ticketing integration project. The members shall have experiences in ticketing integration or related consulting work, and be comprised of two transit ticketing consultants, one as team leader and the other as deputy, one transport economist/planner, two procurement consultants, and one financial consultant and one legal consultant. On the technical side, there will be two project management consultants who have experiences in ticketing systems, and three ticketing system consultants who are specialized in smart card, key management, and back-end systems. The team leader shall assign consultants work based on their experiences and professions. The organizational structure of the PMS team is shown in Figure 6.5. Required qualifications and an outline of the terms of reference for each of the individual consultants are presented below.

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Team Leader

Transit Ticketing Consultant (International) Deputy Team Leader

Transit Ticketing Consultant (International)

Transport Economist/Planner Project Management Project Management (Local) Consultant Consultant (International) (Local)

Procurement Financial Legal Smart Card Key Security Back-end Consultant Consultant Consultant Specialist Management System (International) (Local) (Local) (Local) Specialist Specialist

(Local) (Local) Procurement Consultant (Local)

Figure 6.5:Structure of PMS consultants

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1. Transit Ticketing Consultant/Team Leader (International, 37 person-months) The team leader of this consultancy team will be served by a transit ticketing consultant. It is suggested that this consultant shall have the experience in a ticketing company for more than 10 years and have served as the consultant for marketing and sales manager and levels above. Moreover, it will be preferred if the consultant has the experience in preparing and organizing ticketing companies and serving as a ticketing specialist in other cities. The team leader should be responsible for the internal communications of this team, and adjust the job contents specified in the TOR plan made by the PMS Consultant. The team leader needs to duly confirm the progress and development of job contents of respective specialists. The team leader can allot the works in advance or consider outsourcing if regarding specialties are out of the background of the consultancy team or urgency or lack of manpower. If the consultancy team needs support from related sectors, it is necessary for the team leader, as a representative, to communicate with government agencies, contractors or MRT operators; therefore, the team leader has to stay on site in Bangkok for more than twelve weeks every quarter in order to manage and control the development of this project. The main responsibilities of the international transit ticketing consultant or team leader in each stage are described as follows: Stage I - Strategy Preparations Assign team members to review the final report of this PPTA project Interview and communicate with relevant agencies, to confirm requirements of the government Explore the current ticketing situations in Thailand Obtain the system design documents, specifications and transaction data for systems already contracted out. Set up methods to integrate front-end and back-end systems, Lead preparations of CTC establishment and study the possibilities and measures of future release of company shares with the local financial and legal consultants. Stage II - Establishment of the ticketing company Lead the writing of the CTC investment plan with the help of the local financial consultant, local transport economist/planner and international transit ticketing consultant. Set up the first annual work outlines and introduction report to CTC and assist in preparing online operations. Stage III - Preparation for System Procurement Evaluate and confirm the procurement plan proposed by the procurement consultant before submitting it to the CTC Regulator and CTC. Present the procurement plan and respond to questions and comments from the participants in the procurement meeting which is hosted by the CTC. Stage IV- System Procurement Review the tender documents prepared by the procurement consultant, including Notice of Tender, Request for Proposal, Draft of Contract etc., the documents will be sent to CTC for approval and confirmation before the announcements are made. During the bid announcements organized by CTC, the team leader may assign the international or local project management consultant to present the contents of the procurement and collect any recommendations given by the interested bidders. Depending on the situation, the team leader may discuss any need to make amendments to the tender documents with the CTC Regulator and CTC. With the list of candidates provided by the government, the team leader may suggest

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evaluation committee members based on their background experiences. After companies place bids, the team leader will assist the committee in the evaluation of the bidders’ credentials, technical proposals and price lists. The team members will review the documents based upon their respective areas of expertise. The evaluation report will be organized and submitted to the Appraisal Committee. Stage V - System Construction Manage the process of the back-end system setup with the support of the international transit ticketing consultant and local transport economist/planner. Assist CTC in verification of the requirements and take part at least once a month in the regular meetings with the contractor, CTC, and the CTC Regulator in order to comprehend the progress of the back-end system setup. If the contractor requests for changes in the specification design documents after the approval, the team leader should be able to suggest to CTC the effects of the changes to the operation afterwards or the expansion in the future. Stage VI - System Testing and Acceptance Hold regular discussions with technical consultants of the team so as to control the back-end system testing conditions. Hold regular meetings with CTC and the contractor whenever necessary to provide recommendations and to coordinate any problems arising. Stage VII - CTC operation Review the operation index established by the team. Analyze the operations based on the index. Provide CTC and the CTC Regulator with the operation condition report. Call for meeting to discuss the operation conditions to assist CTC in improving the operation. Work together with the transit ticketing consultant and transport economist/planner in planning for the future expansion of CTC.

2. Transit Ticketing Consultant (International, 35 person-months) It is necessary to have another transit ticketing consultant to assist the team leader. It is suggested that this consultant should have the experience in a transit ticketing company for more than 5 years and be familiar with the operating procedures of a transit ticketing company. It would be preferred that the consultant has the experience in preparing and organizing the transit ticketing company. When the team leader is off site, the consultant needs to serve as the deputy to assist the consultancy team in communicating with the government, contractor, and MRT operators and to attend relevant meetings. When the team leader returns to the site, the consultant is required to hand over relevant work progress. The consultant has to be on site in Bangkok for at least 10 weeks every quarter. The main responsibilities of the international transit ticketing consultant in each phase are described as follows: Stage I - Strategy Preparations Review Chapter 2 “Integrated Ticketing Strategy” in this report. Clarify the role the government plays in the ticketing integration project so as to confirm the purpose of CTC establishment, DBOM, gross cost concession model, etc. Assist the local transport economist/planner to draw up the ticketing development strategies. Stage II - Establishment of the ticketing company

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Assist the team leader in drawing up an investment plan. Set up ticket card user’s manual, discussing if the manual conforms to the SOPs set up by the project management consultant with the local transport economist/planner, local and international project management consultants. Report the relevant progress to the team leader of the plan. Stage III - Preparation for System Procurement Assist the team leader in evaluation of the procurement plan. Stage IV- System Procurement Assist the team leader in review of the proposed tender documents. Assist the team leader in organizing Tender Conferences. Assist the team leader in suggesting members of the Appraisal Committee. Assist the team leader in evaluating the bidders’ credentials, technical proposals, and price list. Stage V - System Construction Work together with the team leader to assist CTC in confirming requirements. Adjust SOPs to meet with changes of system design. Stage VI - System Testing and Acceptance Assist the team leader in supervising the back-end system test conditions, studying the influence of the test results on the future operation of CTC, and deciding whether the acceptance should be passed. Stage VII - CTC operation Evaluate the operation index drawn up by team members. Write the analysis report of the operation conditions. Assist the team leader in calling for CTC operation discussion workshops. Assist the team leader in planning for the short term, mid-term, and long term expansion of CTC.

3. Transport Economist/Planner (Local, 12 person-months) The transport economist/planner should be familiar with the ticketing situations in Thailand and have valuable connections with the government and MRT operators. This consultant should have a background related to transport with relevant experience in transport economy and transport planning for more than five years. It would preferred if this consultant has experience in the assistance of releasing government-owned stocks or financing plan for operational expansion. The main responsibilities for the consultant in each stage are described as follows: Stage I - Strategy Preparations Review Chapter 5 ”Governance Structure and an Implementation Plan” in this report. Draw up the ticketing development strategies in Thailand with the assistance of the international transit ticketing consultant and local financial consultant. The strategies shall include the implement direction for DBOM and gross cost concession, in addition to the method and purpose of releasing partial stocks from the 100% government-owned stocks to private sectors in the future. Stage II - Establishment of the ticketing company Assist the team leader in drawing up the investment plan. Assist the international transit ticketing consultant in setting up ticket card user’s

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manual issued by CTC in the future. Discuss with other team members if the SOPs set up by project management consultants are met with the contents of the manual. Stage III - Preparation for System Procurement Assist the team leader in evaluating the procurement plan to make sure that it conforms to the overall direction of the ticketing system. Participate in the meeting for dissemination of the procurement plan and assist the team leader in answering the questions of the attendants. Assist the team leader in amending the procurement plan after collecting all of the recommendations of the attendants at the meeting. Stage IV- System Procurement Evaluate the procurement documents written by the team members. Evaluate the bidders’ proposals. Stage V - System Construction Assist the team leader in verifying the requirements of CTC. Assist the team leader in verifying the requirements concerning the management of the ticketing system or the expansion of the public transport plan by the government. Assist the team leader in suggesting to CTC the effects of the changes to the operation afterwards or the expansion in the future if the contractor requests for changes in the specification design documents after approval. Stage VI - System Testing and Acceptance Assist the transit ticketing consultant and participate in the related discussions. Understand well the test conditions of the back-end system. Understand well the impacts of the ticketing strategies in the development of the public transport in the future. Decide whether the system acceptance should be passed. Stage VII - CTC operation In aspects of transportation planning and economy, the consultant is required to draw up the operation performance index of CTC. This will be used as a reference by the government in supervising the operation conditions of CTC. The consultant is required to write the operation conditions of CTC. Participate in review meetings. Plan the role and expansion of CTC in Thailand in the future.

4. Project Management Consultant (International, 37 person-months) It is necessary to have a project management consultant familiar with the whole ticketing system in connection with card, back-end system, operation of front-end system and daily operations. Moreover, there is no CTC relevant operation experience in Thailand, so it is suggested to invite an international consultant who has served for setting up project management with experiences in a ticketing company and ticketing integration for more than five years. It is preferred for the consultant to have experience in setting up a relevant system or managing projects of large-scale system development. Since quite a lot of the technical parts involve the Thai language, local technical specialists shall be invited for other consultant positions. The consultant has to assist the team leader in managing and controlling relevant technical works, and flexibly adjusting the job contents shared by the technical specialists according to their background and experience. It is also necessary to duly make a report relevant to the technical progress to the team leader and to attend relevant meetings with him.

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The main responsibilities shared by the project management consultant in each stage are described as follows: Stage I - Strategy Preparations Assign the back-end system specialist, specialist for key security management, card specialist, and local project management consultant to review the OTP ticketing integration project. Follow the ticketing integration approaches and directions proposed by the project and make supplements if necessary. Draw up the common back-end and front-end ticketing system specifications with the assistance offered by other technical specialists. The outcomes will serve as the basis for future procurement of interfaces between the back-end and front-end systems. Stage II - Establishment of the ticketing company Set up relevant SOPs. Discuss duly if these SOPs conform to the ticket card user’s manual. A report of the relevant progress shall be made to the team leader. Stage III - Preparation for System Procurement Assist the procurement consultant in drawing up the preliminary specifications of the system which is mentioned in the procurement plan. Consider the requirements of the government and CTC and the current ticketing system specifications in other cities and update the system specifications. Participate in the meeting for dissemination of the procurement plan and answer any questions with regard to the system brought up by the attendants. Gather these recommendations and discuss them with the team leader, CTC, and the committee to decide whether amendments of tender documents are required. Stage IV- System Procurement Assist in writing the chapters regarding the system in the tender documents. Gather the specifications provided by the system consultants into the tender documents. Participate in the tender conference explaining the requirements and specifications of the system and answering any questions brought up. Gather the questions asked and discuss them with the team leader, CTC, and the committee to decide whether amendments of the tender documents are required. Suggest the members of the Appraisal Committee for procurement. After the announcements, assist in the evaluation of the bidders’ credentials, technical proposals, etc. Provide the evaluation results on the system specifications and maintenance service of bidders’ proposals. Stage V - System Construction Fully participate in assisting CTC, the CTC Regulator and the contractor in the requirement analysis and matters related to the setup by providing professional advice. Assist CTC in the evaluation of the specification design documents submitted by the contractor and discuss them with the local project management consultant, the card specialists, the specialists in the access key security, and the back-end system consultant before putting the results of discussions together. Work together with the technical consultants to write out the test plan and the standards of verification. Stage VI - System Testing and Acceptance When the contractor applies for verification from CTC, the project management

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consultant and CTC will first verify that the facilities and environment have met the requirements. They will then proceed with the test, which is to be performed by the technical staff as stated in the test and verification program. He is required to control the progress of the tests, follow up with the amendments of the details or recommendations which are to be done by the contractor, report the collected data regularly to the team leader, and lastly, include the data in the final test reports and submit to CTC for reference. Based on the verification plan, he is required to discuss the results with all of the internal consulting experts before deciding whether or not to pass the back-end system verification results. Stage VII - CTC operation Set the operation index for CTC and use the standard set to evaluate the operation condition of CTC. Participate in review meetings and assist the team leader in planning for the development and application of CTC with his experience in ticketing development and application.

5. Project Management Consultant (Local, 36 person-months) The ticketing integration project may involve abundant ready-made documents in Thai language, or it may be necessary to communicate the relevant technical situations with local suppliers. It is suggested that a local project management consultant should be invited to join in this consultancy team. The consultant should be familiar with the ticketing system operation and MRT daily operations. It is suggested that the consultant should have served to set up relevant project management for more than 5 years in an MRT company. It is preferred for the consultant to have experience in various system developments and project management. This consultant needs to assist the international project management consultant to support relevant technical works and to attend relevant meetings together. The main responsibilities for local project management consultant in each stage are described as follows: Stage I - Strategy Preparations Assist the international project management consultant to review the OTP ticketing integration project; to refer to the design of the front-end systems which have already been under bidding; to jointly draw up the ticketing system specifications applicable to both back-end and front-end systems; and to draw up the common back-end and front-end ticketing system specifications with the assistance offered by other technical specialists. Stage II - Establishment of the ticketing company Assist the international project management consultant to set up relevant SOPs for CTC and duly discuss with the international transit ticketing consultant, local transport economist/planner and international project management consultant if the planning direction is consistent with each other. Stage III - Preparation for System Procurement Verify the requirements of the government and CTC Assist the procurement consultant in drawing up the specifications required in the beginning stage of the system which is mentioned in the procurement proposal, Participate in the meeting of dissemination of procurement plan and answer and gather recommendations which are brought up by the attendants. Work with the team leader, CTC, and the CTC Regulator to discuss whether amendments to the system specifications in the procurement plan are required. Stage IV- System Procurement

6-42 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Assist in writing the chapters regarding the system in the tender documents. Gather the specifications provided by the system consultants into the tender documents. Participate in the Tender Conferences explaining the requirements and specifications of the system in the procurement and answering any questions brought up. Amend the tender documents as required. Suggest the members of the Appraisal Committee for procurement. After the announcements, assist in the evaluation of the bidders’ credentials, technical proposals, etc. Provide the evaluation reports on the system specifications and maintenance service. Stage V - System Construction Fully participate in assisting CTC, the CTC Regulator and the contractor in the requirement analysis and matters related to the set-up by providing professional advice. Invite technical specialists to attend meetings whenever the topic of discussion is related to their professionalism. Assist CTC in the evaluation of the specification design documents submitted by the contractor. Work together with technical specialists to write out the test plan and the standards of verification. Discuss regularly with the team leader, the international transit ticketing consultant, and the local transport economist/planner about matters on the operation or the progress of setup. Stage VI - System Testing and Acceptance Assist the international project management consultant in preparing test plans, test reports, and other works related to system verification. When necessary, the consultant is also a communication bridge between the technical consultants and the local companies. Stage VII - CTC operation Gather the data required in the operation index in order to report on the operation conditions of CTC. Participate in reviews, provide recommendations for operation procedure improvements based on the national sentiments Assist the team leader in planning the development and application of CTC.

6. Smart Card Specialist (Local, 31 person-months) The specialist should be familiar with ticket card specifications and good at ticket card planning. The specialist should have experience in software development of front-end equipment. It is preferred for the specialist to have participated in several projects for development of smartcard readers. It is suggested that the specialist should have relevant experience for more than 5 years. The main responsibilities shared by the local card specialist are as follows: Stage I - Strategy Preparations Based on the assignment by the international project management consultant, review the OTP ticketing integration project. Refer to the design documents of the AFC system which may have already been under

6-43 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

bidding as well as assist the international project management consultant in setting up ticket card specification documents. Stage IV- System Procurement Write out the CIM system specifications and verification and test methods in the tender documents based on the requirements of CTC. Attend the meeting for dissemination of the procurement plan to answer questions related to the system. Assist in the amendments of the contents regarding the specifications of the system in the tender documents. After bidding, evaluate the proposals submitted by the bidders and provide recommendations for the evaluation. Stage V - System Construction Assist CTC, the CTC Regulator, and the contractor in the requirement analysis and designing the columns relating to information transmission in the card format. Assist the project management consultant in the evaluation of the specification design documents submitted by the contractor. Participate in the related discussions and assist the project management consultant in drawing up the test plans and setting up the standards of verification. Stage VI - System Testing and Acceptance In this stage, the card specialist will be required to participate in full. Provide a lot of possible ticket transaction data, including the normal and abnormal data to be used in the back-end system test and the CIM system functions test. Be responsible for writing out the test report, evaluating the verification documents, and holding regular discussions with the project management consultant. Stage VII - CTC operation With the professional knowledge on contactless smartcards, the card specialist will draw up the operation performance index for the CIM system and other matters regarding the card. The specialist will also attend review meetings and provide recommendations for the improvement of operation procedures.

7. Key Security Management Specialist (Local, 31 person-months) The specialist should have clear ideas about the mechanism of key, the algorithm for the encryption and decryption relevant to the key management, and methods for key security. It is suggested that the specialist should have relevant experience for more than 5 years. The main responsibilities shared by the local specialist for key security management in each stage are as follows: Stage I - Strategy Preparations Based on the assignment by the international project management consultant, the specialist has to review the OTP ticketing integration project. Refer to the design documents of the AFC system which may have already been under bidding as well as assist the international project management consultant in setting up a key management planning report. Stage IV- System Procurement Write out the KMS system specifications and verification and test methods in the tender documents based on the requirements of CTC. Attend the meeting for dissemination of the procurement plan to answer questions related to the KMS system. Assist in the amendments of the contents regarding the

6-44 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

specifications of the system in the tender documents. After the bidding, evaluate the proposals submitted by the contractor and provide recommendations of evaluation. Stage V - System Construction Assist CTC, the CTC Regulator, and the contractor in the requirement analysis and designing of the KMS system. Assist the project management consultant in the evaluation of the specifications design documents submitted by the contractor. Participate in the related discussions and assist the project management consultant in drawing up the test plans and setting up the standards of verification. Stage VI - System Testing and Acceptance In this stage, the card specialist will be required to participate in full. Evaluate the security of the program code. Test and verify the system function of KMS. Be responsible for writing out the test report, evaluating the verification documents, and holding regular discussions with the project management consultant. Stage VII - CTC operation Draw up the operation performance index for the KMS system. Attend review meetings and provide recommendations for the improvement of operation procedures.

8. Back-end System Specialist (Local, 31 person-months) The back-end system specialist should be familiar with the management and development regarding MIS, networks and database. It would be a plus if the specialist has experience in AFC or system information flow transmission. It is suggested that the specialist should have relevant experience for more than 5 years. The main responsibilities shared by the back-end system specialist in each stage are as follows: Stage I - Strategy Preparations Based on the assignment by the international project management consultant, the specialist has to review the OTP ticketing integration project. Refer to the design documents of the AFC system which may have already been under bidding as well as assist the international project management consultant in setting up communication protocol and interface specifications between front-end and back-end systems. Stage IV- System Procurement Write out the CCH system specifications and verification and test methods in the tender documents based on the requirements of CTC. Attend the meeting for dissemination of the procurement plan to answer questions related to the CCH system. Assist in the amendments of the contents regarding the specifications of the system in the tender documents. After the bidding, evaluate the proposals submitted by the contractor and provide recommendations of evaluation. Stage V - System Construction Assist CTC, the CTC Regulator, and the contractor in the requirement analysis, the back-end system structure, network security and transaction data transfer, verification of the accuracy of transactions, and non-repudiation of transaction data. Assist the project management consultant in the evaluation of the specification design

6-45 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

documents submitted by the contractor. Participate in the related discussions and assist the project management consultant in drawing up the test plans and setting up the standards of verification. Stage VI - System Testing and Acceptance In this stage, the card specialist will be required to participate in full. Evaluate the security of the program code. Test and verify the system function of CCH. Be responsible for writing out the test report, evaluating the verification documents, and holding regular discussions with the project management consultant. Stage VII - CTC operation Draw up the operation performance index for the CCH system. Attend review meetings and provide recommendations for the improvement of operation procedures.

9. Procurement Consultant (International, 12 person-months) The major work in this project for the consultant is to assist CTC in the back-end system procurement. Since the procurement is an arduous task and time is limited, it is suggested that there will be two procurement consultants joining this consultancy team in order to finish the procurement procedures under the expected objectives and timeline. Also, the procurement operations may follow the procurement methods carried out by Thai government or international procurement practices. Therefore, it is necessary for both international and local procurement consultants to take part. The team leader will assign the international procurement consultant leading in the procurement operations. The international procurement consultant needs to have procurement experience for more than 7 years and have participated in large-scale system setups. It would be preferred for the consultant to have joined procurement (DBOM model) for public construction with the participation of the local private sectors in Thailand, to have assisted in releasing government-owned stocks or financing from the private sectors for operational expansion. The main responsibilities shared by the international procurement consultant in each stage are as follows: Stage III - Preparation for System Procurement In this stage, the consultant will be required to participate in full. Make a review of the draft system procurement documents in this PPTA report and refer to international cases related to the ticketing system procurement. Based on the requirements of the government, CTC and the actual local conditions, the consultant will work together with the local procurement consultant in writing out the back-end system procurement plan. Participate in the meeting for dissemination of the procurement plan and answer any questions brought up. Gather any recommendations related to the procurement procedure and have them discussed in meetings before deciding any amendments to the procurement plan. Stage IV- System Procurement Base on the CTC requirements and the specifications given by the system consultants, write out the back-end system tender documents conforming to related laws. After the disclosure of tender documents, participate in the tender conferences to assist in the explanation of the contents of the tender documents. Amend the contents of the documents according to the decisions made at the conferences. Stage VI - System Testing and Acceptance and Stage VII - CTC operation The consultant is required to stand by for the process of acceptance.

6-46 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Resolve any dispute between CTC and the contractor after the operation has started.

10. Procurement Consultant (Local, 12 person-months) The local procurement consultant is required to have the procurement experience for more than 7 years. It would be preferred for the consultant to have joined procurement (DBOM model) for public construction with the participation of the local private sectors in Thailand, to have assisted in releasing government-owned stocks or financing from the private sectors for operational expansion. The main responsibilities shared by the local procurement consultant in each stage are as follows: Stage III - Preparation for System Procurement In this stage, the consultant will be required to participate in full. Make a review of the draft system procurement documents in this PPTA report and refer to international cases related to the ticketing system procurement. Refer to valuable procurement cases in Thailand, and cases of the two ticketing systems of the current MRT systems. Work together with the international procurement consultant in the preparation of the back-end system procurement plan. Participate in the meeting for dissemination of the procurement plan and answer any questions brought up. Gather any recommendations related to the procurement procedure and have them discussed in meetings before deciding any amendments to the procurement plan. Stage IV- System Procurement Based on the CTC requirements and the specifications given by the system consultants, work with the international procurement consultant to write out the back-end system tender documents so as to conform to related laws. After the disclosure of tender documents, participate in the tender conferences to assist in the explanation of the contents of the tender documents. Assist the international procurement consultant to amend the contents of the documents according to the decisions made at the conferences. Stage VI - System Testing and Acceptance and Stage VII - CTC operation The consultant is required to stand by for the process of acceptance. Resolve any dispute between CTC and the contractor after the operation has started.

11. Financial Consultant (Local, 15 person-months) The financial consultant should have the relevant financial backgrounds with experience for more than 5 years. The consultant should have successfully planned new companies or have experience in undertaking an investment plan. It would be preferred to have joined the relevant financial plans for public construction with the participation of local private sections in Thailand, or to have assisted in releasing government-owned stocks or financing from the private sector for operational expansion. The main responsibilities shared by the local financial consultant in each stage are as follows: Stage I - Strategy Preparations Review Chapter 4 ”Determine Financing Requirements and Funding Strategy” in this PPTA report. Propose a financial plan for CTC. Suggest the mechanism of stock releasing, DBOM, and experience for gross cost concession model.

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Assist the local transport economist/planner in completing the drawing up of ticketing development strategies. Prepare the setup of CTC. Analyze and provide suggestions regarding the financial mechanism of CTC stocks releasing in the future (for example, the payment plan for the loan from ADB, the protection of the cardholders’ rights and interests, and promotion of ticketing integration after stock releasing). Stage II - Establishment of the ticketing company Assist the team leader in drawing up the parts of financial plans and possible risks in the investment plan. Stage IV- System Procurement Follow the instructions of the team leader to review the tender documents, especially on the price list. The consultant is required to estimate the cost of operation in the future based on the capital invested and provide recommendations to the transit ticketing consultant. Stage V - System Construction Assist the contractor in determining the format and columns of the financial statements in the requirement analysis and specification design. Stage VI - System Testing and Acceptance Verify the transaction and account data or reports produced in the back-end system in conforming to the requirements of payment request by CTC and the requirements of audit with MRT operators and the government. Stage VII - CTC operation Set the financial performance index for the future CTC operations, which will be used as a reference by the CTC Regulator in its evaluation of the operation performance. Write out the operation report after the operation has started. Assist CTC in making improvements to the weaker parts of operation.

12. Legal Consultant (Local, 9 person-months) The legal consultant should have relevant legal background and experiences for more than 7 years. It would be preferred if the consultant has joined the public construction procurement (especially DBOM model) with the participation of the local private sectors in Thailand, assisted in releasing the government-owned stocks or assisted in releasing government-owned stocks or financing from the private sector for operational expansion. The main responsibilities shared by the local financial consultant in each stage are as follows: Stage I - Strategy Preparations Assist the local transport economist/planner in drawing up ticketing development strategies. Prepare the establishment of CTC. Analyze legal issues of how the CTC government-owned stocks will be released to the private sectors in the future. Stage II - Establishment of the ticketing company Assist in the legal issues in setting up the CTC. Make sure that every procedure conforms to the rules and regulations in Thailand. Review the development strategies proposed by the transport economist/planner in the previous stage to make sure that the future expansion of CTC abides by the law. Stage III - Preparation for System Procurement Verify the procurement plan (as well as the amended procurement proposal) to make

6-48 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

sure that the procedure and schedule of the procurement conform to the local laws or the international regulations. Stage IV- System Procurement Based on the procurement plan and other procurement related documents, the Legal Consultant will assist in writing the draft of contract in the tender documents. Assist in the evaluation of other procurement documents to make sure that the procurement is transparent, fair, and conforming to the local rules and regulations. After the bidding, the legal consultant will follow the instructions of the team leader to evaluate the documents submitted by the contractor and to provide recommendations which will be gathered by the transit ticketing consultant. Stage V - System Construction Assist the consulting team in any contract or legal related matters. Stage VI - System Testing and Acceptance and Stage VII - CTC operation Assist in any legal matters or disputes between CTC and the contractor. Table 6.1: Skills and Experience Requirements for PMS Professional Min. Years Inter- Background Local Knowledge of Exp. national Required: Transit ticketing consultant, used to be senior manager in marketing or Transit Ticketing management of ticketing company Consultant Additional: 10 1 (Team Leader) Experiences in company establishment, used to be consultant for other ticketing project Required: Transit ticketing consultant, familiar Transit Ticketing with company operation procedure Consultant Additional: 1 Experiences in company 5 (Deputy Team Leader) establishment, used to be consultant for other ticketing project Required: Familiar with local ticketing situation, good relation with government and operator and Transport Economist / constructor, experiences in transportation planning or transport 5 1 Planner economy Additional: Experiences in company share release or financing plan for operational expansion Required: Experiences in international/local large-scale procurement projects, Procurement Consultant (for international/local consultant) 7 1 1 Additional: Experiences in procurement of DBOM model

6-49 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Professional Min. Years Inter- Background Local Knowledge of Exp. national Required: Financial background, experiences in planning new companies or undertaking an investment plan Additional: Financial Consultant Experiences in relevant financial 1 plans for public construction with 5 the participation of local private sectors in Thailand, or assist in releasing government-owned shares, or financing from the private sector for operational expansion Required: Legal background, experiences in procurement (DBOM model) for public construction with the participation of the local private Legal Consultant sectors in Thailand, the 100% 7 1 experience in organizing a company, has assisted in releasing the government-owned stocks, or financing from the private sectors for operational expansion. Required: Familiar with ticket card specifications and good at ticket card planning, experiences in Smart Card Specialist software development of the 1 front-end card validation equipment 5 Additional: Experiences in lots of project development of card validation equipment. Required: Has clear ideas about the Key Security mechanism of smart card key, 5 1 Management Specialist familiar with the key security management and the encryption/decryption algorithm. Required: Familiar with the management and Back-end System development regarding MIS, network and database. 5 1 Specialist Additional: Experiences in AFC or system information transmission Required: International consultant shall be familiar with the whole ticketing system in connection with card, Project Management back-end system, operation of 5 1 1 Consultant front-end AFC system and daily operations. Local consultant shall be familiar with the ticketing system operation and MRT daily operations Additional:

6-50 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Professional Min. Years Inter- Background Local Knowledge of Exp. national Experiences in setting up relevant system or project management of large-scale system development for international consultant. Experiences in various system development and project management for local consultant. Total 4 8

6.6 Level of Efforts and Outputs 1. Level of Efforts (LOE) Based on Sec. 6.4, the LOE of the PMS Consultant is summarized in Table 6.2. Table 6.3 shows the LOE of each international and local consultant. Table 6.2: Schedule and Level of Input for Program Management Team-1 Duration Stage Person-months (month) TL TT TP PR FC LC S-C S-K S-B PM Total 1. Prepare Integration Plan 3 3 3 0 3 1 3 3 3 6 (I) Review, data collection and interviews 1 1 1 1 (II) Draw up ticketing development plan 1 1 1 1 28 3 (III) Prepare for establishing the CTC 1 1 1 1 1 0 (IV) Set up standards for common ticket 3 3 3 6 2. Establish the CTC 3 3 3 0 2 2 1 1 0 6 (I) Prepare related documents 2 2 2 2 2 3 21 3 (II) Assist CTC in Commercial Operations 1 1 1 0 0 1 1 3 3.Prepare tender for back-end system 4 3 2 8 0 2 0 0 0 6 1 1 1 2 0 2 (I) Review of system procurement 25 4 (II) Draw up the procurement plan 1 1 1 4 1 2 (III) Convene procurement plan conference 2 1 2 1 2 4. System Procurement 4 4 0 12 2 3 5 5 5 10 (I) Prepare Tender Documents 1 1 4 1 2 2 2 4 (II) Convene tender conferences 1 1 2 1 1 1 2 50 12 (*) (III) Assist in selecting appraisal committee 1 1 2 1 (IV) Assist in evaluation 1 1 4 2 1 2 2 2 4 5.System Construction 8 7 6 0 0 0 12 12 12 24 3 3 2 4 4 4 8 (I) Supervise system construction 81 12 (II) Review construction documents 2 2 2 4 4 4 8 (III) Draw up test and accept plan 3 2 2 4 4 4 8 6.System Test and Acceptance 4 4 4 2 2 0 6 6 6 11 1 1 1 2 2 2 4 (I) System test and verification 45 6 (II) System test and report production 2 2 2 1 1 2 2 2 4 (III) acceptance 1 1 1 1 1 2 2 2 3 7. CTC Operation 11 11 8 2 6 1 5 5 5 10 64 12 (I) Develop operation index and report 3 3 3 1 1 2 2 2 3 3 3 1 1 2 2 2 3 (II) Review and adjust CTC operation

6-51 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Duration Stage Person-months (month) TL TT TP PR FC LC S-C S-K S-B PM Total (III) Plan future development 2 2 2 1 2 1 1 1 1 2 (IV) Final Report 3 3 2 2 2 Total 37 35 26 24 15 9 32 32 31 73 314 52 Unit: Person-months (*) In stage 4, the duration is 12 months, but the PMS Consultant will only participate in 6 months. TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant Table 6.3: Schedule and Level of Input for Program Management Team-2 International Local Stage Month TL TT PR PM TP PR FC LC S-C S-K S-B PM 1 Prepare Integration Plan 01~03 3 3 0 3 3 0 3 1 3 3 3 3 2 Establish CTC 04~06 3 3 0 3 3 0 2 2 1 1 0 3 3 Prepare Tender 07~10 4 3 4 3 2 4 0 2 0 0 0 3 4 Tender 13~22 4 4 6 5 0 6 2 3 5 5 5 5 5 Construction 23~34 8 7 0 12 6 0 0 0 12 12 12 12 6 Test and Acceptance 35~40 4 4 1 6 4 1 2 0 6 6 6 5 7 Operation 41~52 11 11 1 5 8 1 6 1 5 5 5 5 Total Month 37 35 12 37 26 12 15 9 32 32 31 36

TL TT TP PR FCLC S-C S-K S-B PM total International 37 35 12 37 121 Local 26 12 15 9 32 32 31 36 193 Total 37 35 26 24 15 9 3232 31 73 314 Unit: Person-months

2. Outputs Based on Sec. 6.4, the outputs of the PMS Consultant are summarized in Table 6.4.

6-52 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Table 6.4: Outputs Stage Report Workshop 1 Preparation z Ticketing Integration Development Ticketing Integration Plan Integration Strategies and Plan Workshop Plan -Usage conditions of mass transportation (3 months) -Middle and long term ticketing development strategies -Ticketing promotion and business model -Preparations for CTC establishment -Approaches of integrating front-end and back-end systems 2 Establish CTC z CTC Operational Plan CTC Operation Plan (3 months) - Investment Proposal Workshop - CTC Introduction Report - Ticket Card User’s Manual - SOPs for project development and management 3 Prepare tender z Back-end System Procurement Plan Procurement Plan for system - Articles procured Dissemination Meeting (4 months) - Budget estimation - Method of procurement - Method of assessment - Procurement schedule - Risk management and related reactions 4 System z Tender Documents Tender Conference Procurement -Notice of Tender (12 months) -Request for Proposal -Draft of Contract z Result of tender conferences z List of suggested bidding committee z Evaluation results of bidders’ documents 5 System z Review of construction plan System Test and Acceptance Construction z System Test Acceptance Plan Report Plan Workshop (12 months) 6 Test and z Test and Verification Report System Test Result Acceptance -System Specification Report Workshop (6 months) -System Pressure Test Plan -Report of System Test Results -Report of System Acceptance 7 CTC Operation z Report of Ticketing Integration Ticketing Integration Result (12 months) -operation index Workshop -review for CTC operation procedures -future development of CTC -ticketing integration result

6.7 Service Cost The total service cost for Program Management Services is estimated to be USD 5,046,870 (equal to TB 173,057,172), which is comprised of USD 3,447,000 (equal to TB 118,197,630) for remuneration and USD 1,589,870 (equal to TB 54,516,642) for out-of-pocket expenses.

6-53 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Summary by Costs LOAN No 2009-XYZ Program Management Services Asian Development Consulting

Competitive Components: $ USD

Remuneration National 1,395,550 International 2,051,500

Out-of-Pocket Expenses 1,589,870

Sub-Total 5,036,870

Non-Competitive Components:

Provisional Sums 10,000

Contingencies

Sub-Total 10,000

Total1 5,046,870

1 Competitive and Non-Competitive Components

6-54 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Remuneration International Home Office Field Rate Expert Currency Rate/Mo P-Months Amount Rate/Mo P-Months Amount Total Tony A USD 0 0 0 17,500 37 647,500.00 647,500 Team Leader Mike B USD 0 0 0 17,000 35 595,000.00 595,000 Transit Ticketing Consultant John D USD 0 0 0 15,000 12 180,000.00 180,000 Procurement Consultant Alan H USD 0 0 0 17,000 37 629,000.00 629,000 Project Management

National Home Office Field Rate Expert Currency Rate/Mo P-Months Amount Rate/Mo P-Months Amount Total Ann B USD 7,500 26 195,000 0 0 0.00 195,000 Transport Economist/Planner Simon C USD 7,500 12 90,000 0 0 0.00 90,000 Procurement Consultant Mike E USD 7,500 15 112,500 0 0 0.00 112,500 Financial Consultant Jacky F USD 7,000 9 63,000 0 0 0.00 63,000 Legal Consultant Harold F USD 7,000 32 224,000 0 0 0.00 224,000 Smart Card Specialist Bruce G USD 7,000 32 224,000 0 0 0.00 224,000 Key Security Management Specialist John G USD 7,000 31 217,000 0 0 0.00 217,000 Back-end system Specialist (Include MIS ,database and Network) Sean H USD 7,500 36 270,000 0 0 0.00 270,000 Project Management

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Breakdown of Reimbursable Expense Loan 1999-XYZ Rehabilitation of Irrigation Systems Asian Development Consulting Unit Amount Qty Unit Cost (USD) Descriptions 4 international consultants, stay 121 months, each day per person Per Diem, International 3,630 day 199 722,370 usd199 4 international consultants, one flight for each per month, total 52*4 International Air Travel 208 RT 550 114,400 flights, each time usd550 Miscellaneous Travel Expense 208 RT 150 31,200 travel expenses for each person each time Land Transportation, Vehicle Hire, etc. 52 month 3,600 187,200 usd10 for each person each day, 30 days per month, 10*30*12 usd2,000 per month for office rent fee, usd500 per month for other Office Operations, LC 52 month 2,500 130,000 office miscellaneous Communications 52 month 60031,200 including phone bill and other communication fee 11 reports(see 6.4), usd1,000 for each report, including print and Report Preparation, Production and Transmission 11 lump sum 500 5,500 deliver fee Other 52 month 2,000 104,000 usd2,000 per month for meeting with related agencies Workshops 7 lump sum 2,000 14,000 7 workshops, usd2,000 for preparation of each workshop Cost of Subcontract 1 lump sum 250,000 250,000 part of PMS's work may be outsourced Total out-of-pocket Expenses 1,589,870

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7. Conclusions

This report covers the following tasks and analyses: Detailed fare policy Integrated ticketing strategy Draft tender documents for system procurement Preparation of program management services Financial requirements and funding strategy Governance structure and implementation plan The major findings are that: 1. The proposed gross-cost concession for the MRT operation would benefit the public transit operation by setting up a uniform and distance-based fare structure, and eliminating flag-fall charges of transfers. This can be achieved by adopting a common ticketing system. Although the revenue from MRT will go directly to the government, the common ticketing system will serve as a platform where different regulators could possibly team up for providing integrated MRT services to the passengers. 2. For the analyses of the fare policy, a discounted fare attracts passengers and creates no reduction in total revenue. Simply, the price elasticity of the MRT fare shows potential passenger increases as the fare decreases. In addition, under the strategy of the gross cost concession, passengers would pay their trips according to distance traveled regardless of number of transfers. 3. The common ticketing system used for MRT is proposed to be a contact-less smartcard system which can expedite passenger handling at MRT stations and can achieve a higher standard of security. The re-useable smartcards recording passenger transaction data have been greatly accepted in major urbanized cities and have been proven to be a robust technology in assisting transit operations. However, the smartcard system requires a centralized computer center to clear and settle transactions that is the core business of the common ticketing company (CTC). 4. Setting up a new CTC would involve efforts from multiple agencies. But, the process of setting up the CTC may be hugely different depending on which agency is in charge of setting up the CTC. If the CTC is under an administrative level, such as MOT, the CTC may require a new law and regulation for obtaining permission to set up the company, which seems to be quite difficult. Thus, finding a suitable government agency possessed with lawful conditions for setting up a subsidiary company would reduce the time and effort. Furthermore, a major part of the business of a CTC involves money transactions; hence, e-transaction regulations would require the CTC to acquire a license from the Bank of Thailand (BOT). 5. The CTC would not be financially profitable until obtaining better service charges. Initially, the CTC under the situation of the gross-cost concession would be considered as part of public goods in which CTC provides necessary services to promote a better public transit environment instead of gaining profits. Thus, a private public partnership (PPP) model is not recommended for setting up a CTC, and a state owned enterprise (SOE) would be the proposed model which should be regulated and established by suitable agencies. 6. The CTC is responsible for the construction of the back-end systems. The back-end system includes the components of Card Issuing Machine (CIM), Central Clearing House (CCH) and Key Management System (KMS) that will be procured by the CTC according to the standards set by the OTP. The front-end equipment items which will possibly be procured by the MRT operators may be installed by the CTC, depending on the situation. A Design Build Operate

7-1 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Maintenance (DBOM) model is recommended for the procurement of the back-end system since the system can achieve a stable and reliable operation when the construction members are still on board during the operation and maintenance phases. 7. The recommended integrated ticketing strategies (1) Single System. All smartcards and equipment items follow the standards prescribed by the MOT for a strict ticketing integration. (2) Single Issuer. To ensure the security of the smartcard and prevent tampering by hackers, only the CTC can issue the smartcards. (3) Multiple Vendors. To increase the use of smartcards for MRT, smartcards can be purchased at authorized vendors who can provide services and earn service fees from the CTC. The vendors can also design the appearance of the smartcards to further enhance the smartcard sales. 8. Volume of smartcard sales and usages would highly affect the investment efficiency of the CTC. If the number of transactions is too low, the clearing cost per transaction would be quite high and would cancel out the benefit of deploying the smartcard system. Using the cost analysis with a FIRR over a 10-year operation, the CTC would have the possibility of being self-balanced at a later stage of operation once an estimated number of transactions (e.g. 1.5 million per day) are achieved. However, the transaction fee under gross cost scenario is more like a book-keeping activity, since the operating and maintenance fee are paid by the government. Only when the incomes generated by transaction fees from ticketing, micro-payment and e-money service charges could surpass the operating costs, the shares may be sold to the interested private investors. The income of selling shares of the CTC could be used to pay off the loan of the CTC. 9. Since ticketing integration is a complicated matter which requires professionalism in different fields and related experience, MOT may contract Program Management Services (PMS) for ensuring the quality of the system and the smoothness of transition into operation. The PMS team will take an important part in the building process. They will help the government to set up the company, and assist the procurement and verify the ticketing system. The estimated service period for the PMS is around 52 months and the total service cost is about US$5 million. 10. Four workshops were held to illustrate the results of the ticketing policy, institutional and governance issues, procurement procedures, and program management services. Government agencies, transport service operators and other stakeholders were invited to attend the workshops. Comments and suggestions from the participants were also reflected in the conclusions of this project.

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References and Bibliography

1. Asian Development Bank (2006a), “Integrating Mass Rapid Transit in Bangkok”, Options Report, ADB TA 4676-THA, February 2006. 2. Asian Development Bank (2006b), “Integrating Mass Rapid Transit in Bangkok”, Resource Report, ADB TA 4676-THA, July 2006. 3. Asian Development Bank (2007a), “Integrating Mass Rapid Transit in Bangkok”, Phase II: Final Report, ADB TA 4904-THA, July 2007. 4. Balcombe, R (Editor) (2004), “The Demand for Public Transport: a Practical Guide”, UK, TRL, TRL Report TRL593. 5. Office of Transport and Traffic Policy and Planning (OTP) (2008a), “Executive Summary Report, Transport Data and Model Center VI: TDMC VI”, 2008. 6. Office of Transport and Traffic Policy and Planning (OTP) (2008b), “Annual Report 2007”, 2008. 7. Todd Litman (2004), “Transit Price Elasticities and Cross-elasticities”, Journal of Public Transportation, Vol. 7, No.2, 2004.

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Appendix

Appendix 1 Report and Recommendation of the President to the Board of Directors, Proposed Technical Assistance Loan

Report and Recommendation of the President to the Board of Directors

Sri Lanka Project Number: TA No. 7044-THA February 2009

Proposed Technical Assistance Loan Kingdom of Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Program Management Service Project

CURRENCY EQUIVALENTS (as of 11 November 2008)

Currency Unit – baht (B)

B1.00 = $ 0.0292 $1.00 = B34.29

ABBREVIATIONS

ADB – Asian Development Bank BOT – Bank of Thailand CTC – Common Ticketing Company MOT – Ministry of Transport MRT – Mass Rapid Transit MRTA – Mass Rapid Transit Authority of Thailand O&M – Operation and Maintenance OTP – Office of Transport and Traffic Policy and Planning MOF – Ministry of Finance PDMO – Public Debt Management Office SOP – Standard Operation Procedure

NOTE

(i) In this report, "$" refers to US dollars unless otherwise stated.

Vice-President Director General Director

Team leader Team members

CONTENTS Page

LOAN AND PROJECT SUMMARY i MAP I. THE PROPOSAL 1 II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES 1 A. Performance Indicators and Analysis 1 B. Analysis of Key Problems and Opportunities 2 III. THE PROPOSED PROJECT 2 A. Impact and Outcome 2 B. Outputs 2 C. Special Features 4 D. Project Investment Plan 4 E. Financing Plan 4 F. Implementation Arrangements 5 IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS 6 V. ASSURANCES 7 VI. RECOMMENDATION 7 APPENDIXES 1. DESIGN AND MONITORING FRAMEWORK 8

i

LOAN AND PROJECT SUMMARY

Borrower TBD

Classification TBD

Environment TBD Assessment

Project Description TBD

Rationale TBD

Impact and Outcome TBD

Project Investment Plan TBD

Financing Plan TBD

Allocation and Relending TBD Terms

Period of Utilization TBD

Estimated Project TBD Completion Date

Implementation TBD Arrangements

Executing Agency TBD

Procurement TBD

Consulting Services TBD

Project Benefits and TBD Beneficiaries

Risks and Assumptions TBD

Mapi

Map of 5 New MRT Lines in Bangkok

1

I. THE PROPOSAL

1 I submit for your approval the following report and recommendation on a proposed loan to the Kingdom of Thailand for the Bangkok Mass Rapid Transit Integrated Ticketing Program Management Services Project.

II. RATIONALE: SECTOR PERFORMANCE, PROBLEMS, AND OPPORTUNITIES

2 Since the beginning of operations of Mass Rapid Transit (MRT) services in Bangkok, the incompatibility of the ticketing systems of BMCL (Bangkok Metro Public Company Ltd.) and BTS (Bangkok Mass Transit System, or Skytrain) has been creating an inconvenience for residents and visitors traveling in the city. Passengers have to purchase at least two forms of tickets and pay additional flag-fall charges when making transfers. This payment mechanism not only creates confusion at gates when riding BMCL or BTS, but also prevents passengers to transfer between both systems. As Bangkok’s MRT systems grow, this problem will get worse and persuade people to drive private vehicles.

3. The previous Technical Assistance (TA) project1 from Asian Development Bank (ADB) suggested that an integrated ticketing system can improve the quality of MRT service. Following the concept of a “gross cost” concession contract, the new MRT concessionaires may provide service according to the service agreement instead of expected profit. Subsequently, all of the income would go to the Government and then be distributed to the operators according to their service provided. Such a process may require a Central Clearing House (CCH) that audits the performance of the MRT services. The process of planning and designing a back-end system, which includes a CCH, for a new ticketing company (the Common Ticketing Company) will be the primary task in this project.

A. Performance Indicators and Analysis

1. Current Mass Rapid Transit (MRT) Systems in Bangkok

4. Current Bangkok Mass Rapid Transit (MRT) systems are separated by two different systems and three lines. Opened in 1999, BTS (Bangkok Mass Transit System) or Skytrain is the elevated Metro system operated by Bangkok Mass Transit System Public Company Limited (BTSC). BTS consists of two lines, Dark and Light Green Lines, with a combined distance of 24 km and 23 stations. Since 2004, BMCL (Bangkok Metro Public Company Ltd.) has run the underground Blue Line with a distance of 20 km and 18 stations. Currently, BTS and BMCL have 3 interchange stations: (1) Saladaeng/ Silom, (2) Asok/ Sukhumvit, and (3) Mochit/ Chatuchak Park.

2. Future MRT Systems in Bangkok

5. Four MRT lines are currently under construction, including the Airport Rail Link (Suvarnabhumi Airport – Makkasan, 28 km, scheduled to open in 2009), Dark Green Line Extension (Saphan Taksin – Bang Wa, 8 km, scheduled to open in 2012), Light Green Line Extension (On Nut – Bearing, 5 km, scheduled to open in 2010) and a segment of the future Red Line (Bang Sue – Makkasan – Hua Mak, 19 km scheduled to be opened no later than 2012). The Airport Rail Link will provide two types of services, a City Line and an Express Line, but each line will have separate gates and different tickets.

6. In November 2006, the Government approved a plan for five new MRT lines in the Bangkok Metropolitan Region. The plan is scheduled to be finished by 2012 with a total

1 ADB 2007. Integrating Mass Rapid Transit in Bangkok, Phase II. Bangkok (TA 4904-THA).

2 length of 118 km rail lines to be constructed. After these new lines are finished, the entire MRT network in the Bangkok Metropolitan Region (BMR) will reach a length of 222 km and the estimated ridership of the MRT network will be 2.4 million trips per day in 2012.

3. Ridership of MRT

7. MRT systems (BTS and BMCL) had a total ridership of 679 thousand trips per day (485 thousands for BTS and 194 thousands for BMCL) in 2007, which occupied 10% of total public transportation trips. The estimated ridership in 2012 will be more than 3 times of the 2007 ridership. However, MRT systems are still forecasted to occupy only 28% of total public transportation trips.

4. MRT Payment

8. With regard to payment, both BTS and BMCL adopt MIFARE 1k smartcards for their stored value cards. In 2008, approximately 1.5 million BTS smartcards were in circulation. The volume of smartcard transactions is around 330k per day and amounts to around 2/3 of the total transactions. The remaining 1/3 transactions come from magnetic strip card trips for single journey tickets and one-day passes. For BMCL, approximately 1 million smartcards were in circulation. The volume of smartcard transactions was around 125k per day and amounted to around 3/5 of the total transactions. The remaining 2/5 transactions come from IC token trips for single journey tickets.

B. Analysis of Key Problems and Opportunities

9. Current MRT ticketing systems are incompatible to each other. Passengers have to purchase at least two forms of tickets and pay additional flag-fall charges when making transfers. This payment mechanism not only creates confusion at gates when riding BMCL or BTS, but also prevents passengers to transfer between both systems. As Bangkok’s MRT systems grow, this problem will get worse and persuade people to drive private vehicles.

10. A new common ticketing system is proposed for new and current MRT systems. The system will firstly unify ticketing systems for new MRT systems and then replace the ticketing system of existing MRT systems. People only need one single card issued by the ticketing system to ride all MRT systems. In the future, the integrated ticketing system can be expanded to other public transport systems such as buses and ferries. Due to the complexity of the common ticketing project, a program management service is suggested to help the government to execute the project.

III. THE PROPOSED PROJECT

A. Impact and Outcome

11 The common ticketing system will improve the efficiency of payment system for MRT systems in Bangkok. The expected impact of the TA is the implementation of a complete smart card system that will enable Bangkok to make a greater improvement in the ticketing systems of mass transit, while providing a more convenient tool of payment. The direct outcomes are

(1) Procurement and implementation of a ticketing system based on a single contactless smart card for rail MRT in Bangkok (2) A Common Ticketing Company is established to manage the common ticketing system (3) Policy and regulatory framework for a common ticketing system

3

12 The outline terms of reference for the transaction advisor are in Appendix 9 of the Final Report.

B. Outputs

13 The Program Management Services (PMS) work will be carried out in seven phases: developing ticketing integration plan, preparation of setting up the Common Ticketing Company (CTC), preparation of tender for the ticketing system, assisting in tendering procedures, supervision during system construction, assisting to test and accept the system, and assisting in company operations.

Phase I: Developing a ticketing integration plan

14 The PMS consultant will develop the ticketing integration plan based on requirements of the government and the actual situation, including tasks such as (i) review related ticketing projects, (ii) draw up ticketing development strategies, and (iii) prepare for setting up the CTC.

Phase II: Preparation of setting up the Common Ticketing Company (CTC)

15 The PMS consultant will assist the Government in setting up the CTC, including tasks such as (i) setting up the company structure, (ii) assisting the company to draft SOPs, and (iii) assisting the company to set rules of card usage. The PMS consultant will also advise on progress made in preparing the transaction.

Phase III: Preparation of tender for the ticketing system

16 The PMS consultant will assist the company in tendering the ticketing system, including tasks such as (i) deciding the method and procedure of the tender, (ii) drafting tender documents, and (iii) defining system requirements.

Phase IV: Assisting in tendering procedures

17 The PMS consultant will assist the company during the tender procedure, including tasks such as (i) selecting the appraisal committee and (ii) evaluating the quality of the technical proposals and competitiveness of the financial proposals.

Phase V: Supervision during system construction

18 Following the award of the contract to a bidder, the PMS consultant will supervise the system construction, including tasks such as (i) reviewing the construction plan and (ii) drafting the system test and acceptance plan, (iii) ensuring the construction is conforming to schedule.

Phase VI: Assisting to test and accept the system

19 After the construction, the PMS consultant will assist the company in testing and accepting the system, including tasks such as (i) reviewing test plan, (ii) recording test results and (iii) reviewing the technology transfer plan.

Phase VII: Assisting the company operations

20 After the company starts operation, the PMS consultant will assist in the company operations, including tasks such as (i) supervising the operation, (ii) planning the

4 development company and (iii) adjusting company operation. After the entire seven phases have been completed, the PMS consultant will draft a final report to the government.

C. Special Features

21 The TA loan is to assist the government to integrate ticketing in Bangkok. The major feature of the project is to assist the government to establish the CTC and to ensure that the CTC can smoothly step into normal operations. The CTC shall initially be a 100% government owned company. CTC will be responsible for managing the common ticket and integrating with other ticketing systems in the future. There will be a need of a team of consultants with related experience to set up this kind of company. Their works shall include setting up the business scope, company structure, operation rules, and future development plan for CTC.

22 The other major feature of the project is to tender the back-end system. The tender includes not only hardware and software, but also operation and maintenance services. The potential risks include that the back-end system may not fulfill CTC’s requirements, the construction schedule may be delayed, and the system may be locked-in by the contractor. To avoid these risks, a team of professionals with specialized knowledge and experience in different areas will be needed to assist the tender and supervise the construction and operation.

D. Project Investment Plan

23 The TA consultant cost is estimated at US$5.05 million equivalent, comprising remuneration US$3.45 million and out-of-pocket expenses US$1.59 million. Cost estimated is shown in Table 1.

Table 1: Project Investment Plan ($ million) Item Amounta A. Base Cost 1. Remuneration 3.45 2. Out-of-Pocket Expenses 1.59 Subtotal (A) 5.04

B. Contingenciesc 0.01

Total (A+B) 5.05 a Includes taxes and duties of $0.35 million. b Physical contingencies computed at x% for civil works; and x% for field research and development, training, surveys and studies. Price contingencies computed at x% on foreign exchange costs and x% on local currency costs; includes provision for potential exchange rate fluctuation under the assumption of a purchasing power parity exchange rate. d Includes interest, commitment charges and front end fees. Interest during construction has been computed at the five-year forward London interbank offered rate plus a spread of X.X%.

E. Financing Plan

24 TBD

5

F. Implementation Arrangements

1. Project Management

25 Mass Rapid Transit Authority of Thailand (MRTA) will be the Executing Agency for the TA. It will engage and oversee the transaction advice, and has agreed to assign a team of full-time stuff to assist in implementing the TA. MRTA will also be the Implementing Agency for the advisory services, and the staff and executive staff of the utilities agencies will provide additional help as and when necessary.

2. Implementation Period

26 The TA is expected to be implemented over 52 months, from April 2010 to August 2014.

3. Procurement

27 The TA will not require civil works procurement. Procurement of equipment will be undertaken in accordance with ADB’s Guidelines for Procurement (2004). Since the items required will be small and few in number － mainly computers, software, stationary and similar items － procurement will follow local competitive bidding or direct purchase procedures.

4. Consulting Services

28 A package of advisory services will be provided from a consulting firm with expertise and experiences in structuring the common ticketing company. International and national consultants financed from ADB funds will be recruited as firms under the quality-based selection method, using full technical proposals, in accordance with ADB’s Guidelines on the Use of Consultants. MRTA will be fully involved in the selection process. Consulting services will include experts in the field of transportation planning, project management, ticketing system procurement, ticketing system construction and operation, financial analysis, and legal aspects.

5. Anticorruption Policy

29 ADB’s Anticorruption Policy (1998, as amended to date) was explained to and discussed with the {Government/Borrower and Executing Agency}. Consistent with its commitment to good governance, accountability, and transparency, ADB reserves the right to investigate, directly or through its agents, any alleged corrupt, fraudulent, collusive, or coercive practices relating to the Project. To support these efforts, relevant provisions of ADB’s Anticorruption Policy are included in the {loan regulations/grant regulations (choose either or both, depending on financing arrangements)} and the bidding documents for the Project. In particular, all contracts financed by ADB in connection with the Project shall include provisions specifying the right of ADB to audit and examine the records and accounts of the Executing Agency and all contractors, suppliers, consultants, and other service providers as they relate to the Project.

6. Disbursement Arrangements

30 TBD

6

7. Accounting, Auditing, and Reporting

31 MRTA will monitor TA progress to provide a basis for reporting to the Government and ADB, and prepare progress reports on implementation. The reports will contain sufficient information to enable MRTA to monitor the progress, identify issues, and ensure compliance with the TA objectives. The reports will include progress made, problems and issues encountered and actions to resolve, and proposed project activities to be undertaken and progress expected during the subsequent implementation period.

8. Project Performance Monitoring and Evaluation

32 MRTA and ADB will monitor and evaluate TA project performance in accordance with the terms of reference. The performance evaluation will be different in each phase.

9. Project Review

33 MRTA and ADB will jointly undertake at least 3 reviews of the TA project: inception, midterm, and final reviews. The reviews will assess progress for each component, identify issues and constraints, and determine remedial action and adjustments.

IV. PROJECT BENEFITS, IMPACTS, ASSUMPTIONS, AND RISKS

1. Beneficiaries

34 When the common ticketing system is installed, MRT riders will only need a single smartcard across the entire MRT network. They will not need to buy several smartcards and store money in them as is the current situation. Besides this, they can enjoy the advantage of the elimination or discount of additional flag-fall when making a transfer between MRT systems. For future MRT operators, the back-end system (including a central clearing house and other subsystems) constructed by this project will replace their own system. Hence, the system cost will be saved. By using common tickets, the ridership of MRT systems will be increased and more service fee will be paid to MRT operators.

2. Financial Benefits and Sustainability

35 The Bangkok MRT Integrated Ticketing System should be viewed in terms of its overall impacts—on efficiency, the environment (micro and macro), energy savings, and cost to the Government.

3. Assumptions

36 The structure of the Bangkok MRT Integrated Ticketing Project assumes that a new Common Ticketing Company will handle the procurement of the back-end system and MRT operators will handle the procurement of the front-end system of the integrated ticketing system.

4. Risks

37 Major risks include the willingness of current MRT operators to join the integrated ticketing project. Without current MRT systems participation, the new integrated ticketing systems will not have enough transaction fee collected. On the technical aspect, the front- end and back-end procured by different system providers will usually produce many interfaces. These interfaces need to be carefully taken into consideration.

7

5. Environmental and Social Safeguard Issues

38 The project is not expected to have any adverse environmental or social impacts. It will ensure development of an environmentally and socially viable investment program through an intensive due diligence process. Any follow-on investment loan will be prepared in compliance with ADB’s environmental assessment requirements, social safeguards policies (on involuntary resettlement and indigenous peoples), and applicable government environment laws and regulations. The establishment of the overall ticketing system will be compliant with the same requirements.

V. ASSURANCES

39 TBD

VI. RECOMMENDATION

40 TBD

8 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Performance Data Sources/ Assumptions Summary Targets/Indicators Reporting and Risks Mechanisms Impact Assumptions The operational Availability of a single Ticket sale -The Government efficiency and service contactless smart card statistics from maintains a majority quality of the rail MRT fare medium (ticket) Common equity holding and network in Bangkok accepted on all new MRT Ticketing management leadership are improved lines by 2013 Company in a Common Ticketing Company throughout the 900 thousands Card sale and rail MRT network accumulated common transaction expansion program ticket card sales after the statistics from -The existing MRT first 2 years Common operators actively Ticketing participate in selling the 700 thousands common Company common ticket ticket transactions per day -The Government puts in after the first 2 years MRT ridership place the institutional and survey capacity to implement the Proportion of daily findings from common AFC system transfer trips to total trips OTP, transit and MRT gross cost by MRT is not less than agencies and concession policies, 10% after the first 2 years operators introduce regulations and oversee compliance

Outcome Assumptions 1. Procurement and Procurement contract ADB project -The Government adopts implementation of an award by 2012 review missions a common ticketing ticketing system system policy for MRT based on a single Testing and Meetings with -The Government adopts contactless smart commissioning by 2013 Ministries of a gross cost concession card for rail MRT in Transport and policy for the MRT Bangkok Company registered by Finance extensions 2010 -Government priorities 2.A Common and agreements on the Ticketing Company is Policy and regulatory common ticketing system established to framework effective by remain unchanged manage the common 2010 ticketing system Risk The Government’s 3.Policy and financing for regulatory framework implementation of the for a common common ticketing system ticketing system is delayed

Outputs Assumptions 1. Developing a A technological, Consultant’s -The Government takes ticketing integration institutional, legal and reports the lead in coordinating plan funding solution meeting all stakeholders value-for-money (VfM) ADB project criteria is demonstrated review missions Risks Recruitment of qualified 2. Preparation of Business charter of the Meetings with consultants for the

Appendix 1 9 setting up the Common Ticketing Ministries of project design and Common Ticketing Company agreed by the Finance and program management Company Government and ADB, Transport services is delayed. and the company is legally registered Commercial Registration 3. Preparation of Tender documents Department tender for the prepared and agreed by records of ticketing system the Government and ADB company registration 4. Assisting in Results of tender tendering procedures evaluation and contract award agreed by the Government and ADB

5. Supervision during Performance-based system construction specifications tested and proved for soundness

6. Assisting to test Contractor performs and accept the design, building, testing system and commissioning of ticketing system according to contract

7. Assisting the Policy and regulatory company operations framework agreed by the Government and ADB

10 Appendix 1

Activities with Milestones Inputs 1. Developing a ticketing integration plan • ADB: 3.5 million US 1.1 Review related ticketing projects dollars. 1.2 Draw up ticketing development strategies • Government: $1.5 1.3 Prepare for setting up the Common Ticketing Company (CTC) million US dollars. • Approximately 120 2. Preparation of setting up the CTC person-months of 2.1 Setting up the company structure international experts; 200 2.2 Assisting the company to draft SOPs person-months of 2.3 Assisting the company to set rules of card usage national experts

3. Preparation of tender for the ticketing system 3.1 Deciding the method and procedure of the tender 3.2 Drafting tender documents 3.3 Defining system requirements

4. Assisting in tendering procedures 4.1 Selecting the appraisal committee 4.2 Evaluating the quality of the technical proposals and competitiveness of the financial proposals

5. Supervision during system construction 5.1 Reviewing the construction plan 5.2 Drafting the system test and acceptance plan 5.3 Ensuring the construction is conforming to schedule

6. Assisting to test and accept the system 6.1 Reviewing test plan 6.2 Recording test results 6.3 Reviewing the technology transfer plan

7. Assisting the company operations 7.1 Supervising the operation 7.2 Planning the development company 7.3 Adjusting company operation

Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Appendix 2: Draft Contract of the Procurement of Back-end System

Clause 1. Definitions

Unless explicitly stated herein otherwise, the defined terms enumerated below shall have the meanings ascribed to them for purposes of the Project Agreement:

“Acceptance Criteria” : means document as per Exhibit B hereto heading “Acceptance Criteria”, including any other amendment and addition thereto as may be mutually agreed upon by CONTRACTOR and CTC and approved by the Steering Committee during the stage of development or implementation of the Project, stating details of procedures, guidelines, and methods for conducting UAT of the System in order for CTC to be able to decide whether the System delivered, installed, enhanced and/or customized by CONTRACTOR complies with the System Specification and meets with standard specified therein or not; “CTC” : means Common Ticketing Company “Delivery Date” : means the date on which all of the Base Software and hardware shall have to be delivered to CTC by CONTRACTOR, or any other date as the parties hereto may mutually agree upon; software include documents, installation, source code. (with a list of all software) “Enhanced and Customized : means either all or parts of the Software modified, Software” developed, enhanced and customized by CONTRACTOR pursuant to CTC’s Specification in order to have all of them functioned properly and efficiently for the accomplishment of the Project; “Live Date” : means the date on which CTC has fully and commercially used the System; “Maintenance Services” : means the Warranty Services plus the service of providing the new or upgraded releases and versions of the Software, including installation thereof, as more fully described in Clause 6 hereof; “Material Breach” : means CONTRACTOR’s failure to perform any of its duties as specified in Clauses 9.1 and 14.1; “Project Agreement” or : means this agreement including any and all of Exhibits

A2-1 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

“this Agreement” attached to this agreement; “Required Operating : means computer hardware and software described in Environment” Exhibit K hereto; “Software” : means the computer software or programs owned by CONTRACTOR; and/or licensed to CONTRACTOR which CONTRACTOR must sublicense to CTC hereunder, and other enhanced and customized software , all of which as listed in Exhibit A hereto, including any and all related end-user documentation or manual thereof; “Source Code” : means all libraries, screen files, program code, and data dictionaries that comprise the Software; “Statement of Works” : means details of obligations and services and nature of works in the Project, duties under the Project, scope of works of the Project, as well as milestones for completion of all works, all of which needed to be performed, provided and implemented by CONTRACTOR to CTC as described in Exhibit C (Statement of Works and Milestones) attached hereto. “Steering Committee” : means the committee set up by CTC having absolute power and duty to firstly resolve any dispute between the parties hereto, including the dispute as to whether the Software has passed UAT pursuant to the Acceptance Criteria or not, and also to direct the Project, all of which in order for the achievement of the Project; “System” : means all the hardware and Software listed in Exhibit A

“System Services” : means services of providing and supplying to CTC by CONTRACTOR for all of the System, including licenses thereof, as well as services of installation, training, Warranty Services and Maintenance Services in connection with the System in order for CTC to be able to use the System efficiently, all of which for the accomplishment of the Project; “User Acceptance Tests” or : means the test to be conducted by CTC in order to “UAT” determine whether the installed and/or customized System perform in compliance with the Acceptance Criteria or not; “Warranty Services” : means bug fixes, repair or remedy regardless of whether minor or major bug fixes, repair or remedy, including replacement of computer program of Software as needed by CTC pursuant to the provisions stated herein, as well as providing CONTRACTOR’s staff to give advice to

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CTC on development, improvement, supervision, correction of error and/or malfunction of the System, whether by means of telephone support and/or walking in for giving advice and/or to inspect, repair, or correct such error and malfunction, as more fully described in Clause 5 hereof and Exhibit E.

Clause 2. Software License

2.1 The Software that CONTRACTOR delivers or prepares for the Project shall be licensed directly to the CTC for its use. The CONTRACTOR agrees to grant directly to the CTC - a non-exclusive, perpetual license to use - a non-exclusive, non-transferable, perpetual license to modify

without further fee at any time, in any places, and under any way, for the sole purpose of the Project, the application software, associated instruction manuals and textual documents(collectively referred to as “software”). If the CTC instructs a third party to conduct maintenance of the Software, or a third party is requested to perform work on a portion of the Software, the third party will not constitute an infringement on the CONTRACTOR’s intellectual property rights provided that the third party uses the Software solely for the purpose of maintenance or performing work on a portion of the Software in the frame of the Project.

2.2 The CONTRACTOR shall warrant that the Software shall not invade third party’s intellectual property right, if the development of the system and the scope of work provided by the CONTRACTOR involves a third party’s intellectual property right. CONTRACTOR shall warrant that it shall indemnify and hold the CTC and its employees harmless if any infringement claim is made against the CTC on the Software as stipulated in the Agreement.

The CONTRACTOR’s obligations here above are conditional upon the CTC:

(i) Giving prompt notice in writing of any claim or proceedings being made or threatened;

(ii) Not making any admission, declaration or arrangement which may be prejudicial to the defense of such claim or proceedings;

(iii) Allowing CONTRACTOR to defend and settle under its responsibility any proceedings or claim and affording all available assistance in connection therewith.

2.3 The Source Code in respect of the Software shall also be provided to CTC on the Delivery Date by CONTRACTOR and CONTRACTOR hereby grants to CTC a perpetual, non-exclusive, non-transferable, and non-assignable license to use such

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Source Code. CTC shall have the limited right to use the Source Code in respect of the Software for its own internal support and internal development purposes only strictly in connection with intended use covered under this Project Agreement and for no other purposes whatsoever.

Clause 3. Delivery, Installation and Enhancement or Customization Services

3.1 CONTRACTOR shall deliver the System on the Delivery Date and complete the installation of the System at the location CTC required within the time specified in Exhibit C (Statement of Works and Milestones) hereto. [Installation location will be specified in Exhibit C]

3.2 In order to have the Software conform to CTC’s certain internal proprietary processes, CONTRACTOR shall also provide and complete the services to CTC in respect of the Enhanced and Customized Software within the time specified in Exhibit C hereto.

3.3 In proceeding with the implementation of the Project, if CTC finds that there should be change in the Acceptance Criteria specified in Exhibit B, CONTRACTOR shall, for purpose of the accomplishment of implementation of the Project, be obligated to provide advice to CTC. Nevertheless, it is CTC’s sole discretion to determine whether or not the said change should be made. Should there be any major changes to the Acceptance Criteria, the timeframe and the amount of fee specified in Exhibits C and D respectively will be changed accordingly as may be mutually agreed upon between the parties hereto.

3.4 The right, copyright, patent and/or any intellectual property right in respect of the Enhanced and Customized Software shall be jointly retained by both parties upon completion of such modification or enhancement.

Clause 4. UAT

4.1 The UAT for the System under this Agreement shall be conducted pursuant to the following conditions:

a) CONTRACTOR shall, at its sole costs and expenses, deliver to CTC and install the Software and complete services in respect of the Enhanced and Customized Software within the time specified in Exhibit C (Statement of Works and Milestones).

b) Should CONTRACTOR, in its delivery, installation, enhancement and customization of the Software, be unable to complete such tasks within the time prescribed in Exhibit C (Statement of Works and Milestones) due to the reasons under the control of CONTRACTOR, CONTRACTOR shall have to rectify the cause of such delay promptly and in any event, no later than 7 (Seven) days of such prescribed time. Any delay after the expiration of such 7 (Seven) days

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period shall be deemed a Material Breach where CONTRACTOR shall be subject to penalty at the rate specified in Clause 9.1 and CTC shall also be entitled to terminate this Project Agreement immediately without having to proceed with the actions specified in Clause 14.1 hereof;

c) CTC shall perform the UAT for the System delivered, installed, enhanced and customized by CONTRACTOR within the time specified in Exhibit C (Statement of Works and Milestones) and pursuant to the method and testing instruction stated in the Acceptance Criteria specified in Exhibit B. If the System could not perform in full compliance with the Acceptance Criteria, CTC shall have to inform CONTRACTOR in writing as to details of such error, defect or non-compliance with the Acceptance Criteria within 30 (Thirty) days from the date of completion of such services by CONTRACTOR. In such event, CONTRACTOR shall then correct and remedy and complete such correction and remedy within 7 (Seven) days of the date CTC has so informed the said result of testing to CONTRACTOR in writing. In case CONTRACTOR can complete the correction and remedy of all of the said error, defect or non-compliance with the Acceptance Criteria within the said 7 (Seven) days period, CONTRACTOR shall not have to pay penalty to CTC. However, if CONTRACTOR cannot complete such correction and remedy to the extent that the System could perform in full compliance with the Acceptance Criteria within the said 7 (Seven) days period, it shall be deemed a Material Breach by CONTRACTOR, and CONTRACTOR shall have to pay penalty to CTC under the conditions specified in Clause 9.1 starting from the expiration date of such 7 (Seven) days period up until the date on which such correction and remedy are completed to the extent that the System could perform in full compliance with the Acceptance Criteria. In such event, CTC shall also not be barred from terminating the Agreement immediately without having to proceed with the actions stated in Clause 14.1 hereof. In any event, CTC may not withhold an acceptance in writing if the System could perform in full compliance with the Acceptance Criteria.

4.2 If CONTRACTOR finds that there should be change in the method of implementation of the Project and/or change in the Statement of Works (as specified in Exhibit E), Acceptance Criteria (as specified in Exhibit C), and/or the Required Operating Environment (Exhibit K), which have been mutually approved by both parties, CONTRACTOR shall, for purpose of the accomplishment of implementation of the Project, be obligated to provide said advice to CTC. Nevertheless, it is CTC’s sole discretion to determine whether or not the said change should be made.

Clause 5. Warranty

5.1 CONTRACTOR warrants that for a period of 1 (One) year from the date the System has passed UAT by written acceptance of CTC, the System will (if run under the Required Operating Environment) conform to the System Specifications and

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CONTRACTOR shall provide Warranty Services without any charges in respect thereof during such 1 (One) year period; provided, however, that this warranty shall be null and void in the event that the failure of the System to conform to such specifications has resulted from abuse, modification, or misapplication by CTC or its employees, agents or representatives. The one-year Warranty Service shall not include the period that CONTRACTOR doing Warranty Services. Details of Warranty Services are described in Exhibit E hereto.

5.2 Even though CONTRACTOR shall provide Warranty Services during the warranty period specified in Clause 5.1, CONTRACTOR makes no claim, and does not warrant that the Software will perform without error in every function and in every instance. CTC acknowledges that the Software is inherently complex and may not be completely free of errors. Therefore, CTC acknowledges the need to verify the results produced by the Software. CONTRACTOR will not be liable for any damages arising from any errors in or inaccuracies generated thereby.

5.3 If CTC becomes aware of any defect, error, or inaccuracy in the System or in any result generated by the System, CTC shall notify CONTRACTOR promptly of the particulars thereof. CTC's sole and exclusive remedy and CONTRACTOR's sole obligation and liability relating to (i) any services performed; (ii) the System; (iii) CTC's use thereof; and (iv) any breach of any warranty, shall be that CONTRACTOR shall provide the Warranty Services to the extent that the System operates in conformity with the System Specification.

Clause 6. Maintenance

6.1 CONTRACTOR warrants that for a period 1 (One) year from the expiration date of the warranty period specified in Clause 5.1, the System will conform to the System Specification, and CONTRACTOR shall provide Maintenance Services without any charges other than those specified in Exhibit D (Project Price and Term of Payments) in respect thereof during such 12 (Twelve) months period. In this connection, the provisions in this Agreement relating to limitation of liability, or restriction or conditions of services to be provided by CONTRACTOR as specified in Clauses 5.1 – 5.3 shall also apply to the Maintenance Services.

6.2 CONTRACTOR also hereby grants an option to CTC to purchase the Maintenance Services for the period after the first 12 (Twelve) months period referred to in Clause 6.1 on an annual basis as specified in Clause 6.1 from CONTRACTOR at the same price specified in Exhibit D and pursuant to the conditions specified in Exhibit F hereto.

Clause 7. Training and Additional Services

7.1 CONTRACTOR shall, without any charge, provide training services at CTC’s office to CTC’s staff for operation and maintenance of the System pursuant to the details of

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number of trainers, training course, training hours and method of training as specified in Exhibit G hereto. In this connection, CONTRACTOR agrees that CTC may make either audio or video record of such training as CTC may deem suitable throughout the training period and CTC shall also be entitled to make copies of such record for CTC’s internal use.

7.2 CONTRACTOR also agrees to provide handbooks for the training stated above so that the trainees can use said handbooks as their operation manual for their efficient operation of the System. The said handbooks shall be made in English language and state the details of all operational processes of the System and shall be delivered to CTC at least 3 (Three) days prior to commencement of the training course.

7.3 In the event that after the Live Date, CTC wishes to obtain any services at CTC’s office from CONTRACTOR other than those specified herein and in all of the Exhibits attached hereto (the “Additional Services”), CONTRACTOR agrees that it shall make available to CTC at least 1 (One) of its employees or representatives having good qualification and capability to provide any of such Additional Services to CTC within 3 (Three) days from the date of CTC’s request.

Clause 8. Prices and Payments

8.1 In consideration of the System Services to be provided by CONTRACTOR to CTC hereunder, CTC agrees to pay fees to CONTRACTOR in a total amount of USD [ ______( ______United States Dollar)] pursuant to the term of payments set forth in Exhibit D hereto and CTC shall have to pay each of the amounts specified in Exhibit D within thirty (30) days from the date of its receipt of the relevant invoice from CONTRACTOR, provided, however, that CONTRACTOR may not issue any invoices to CTC prior to the date specified in Exhibit D.

The said amount of the total fee shall cover all types of services; such as, delivery, installation, enhancement and customization of the System, the Warranty Services during the period specified in Clause 5.1, the Maintenance Services during the period specified in Clause 6.1, training as specified in Clauses 7.1 and 7.2 and software licenses as specified in Clause 2.1, including any costs and expenses CONTRACTOR may incur in connection with such services; such as, traveling and accommodation costs, per diem and etc.

8.2 If CTC fails to make payment of any amounts payable under this Agreement as specified in the first paragraph of Clause 8.1, CTC shall pay CONTRACTOR a late fee equal to [1(One) percent] of the outstanding balance or portion thereof that payments are delinquent.

8.3 CONTRACTOR is well aware that CTC, in contracting CONTRACTOR to implement the Project under this Agreement, has considered the value of the Project

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specified in Clause 8.1 which was proposed to CTC by CONTRACTOR for consideration and CTC has allocated its budget for implementation of the Project according to the price quoted by CONTRACTOR. Therefore, CONTRACTOR recognizes that in implementing the Project hereunder, CTC may, save as otherwise provided herein, not agree to any request of CONTRACTOR which will increase the value or the cost of the Project specified in Clause 8.1 for whatever reasons.

Clause 9. Penalty

9.1 In the event that CONTRACTOR, due to the reasons under the control of CONTRACTOR, does not deliver, provide and complete the System Services as stipulated in Clause 4.1 b) or c), Clauses 5, 6, 7.1, or 7.2, it shall be deemed a Material Breach by CONTRACTOR where CTC may charge penalty at the rate of [1(One) percent] of the total amount per day starting from the first date of such delay until all of such services have been completed by CONTRACTOR. In such event, any amounts payable by CTC hereunder shall be reduced or deducted in the amount equivalent to the amount of such penalty. The maximum total amount of penalty that CONTRACTOR is liable for shall be limited to no more than 50% of the total Price. If CTC has previously paid all of the amounts payable hereunder, CONTRACTOR shall have to pay such amount of penalty to CTC within 7 (Seven) days of the date CTC has so requested CONTRACTOR to pay.

9.2 The aforementioned provisions of Clauses 9.1 shall not deprive the right to terminate this Agreement under Clause 14 and any other rights to which CTC may be entitled pursuant to the Agreement or the laws.

Clause 10. Representations, Warranties, Undertakings and Project Administration

10.1 CONTRACTOR represents, warrants and undertakes to CTC as follows:

a) it is a juristic person duly registered under the laws of CONTRACTOR’s Nation and is authorized to operate its business and is able to perform all of its obligations according to the purpose of this Agreement;

b) the execution of and the performance under this Agreement are lawful and consistent with the objectives and by-laws governing regulations for performance of CONTRACTOR and are not contrary to or in breach of any of its undertakings, commitments, representations which CONTRACTOR has made with or given to any other persons;

c) at present, there is no event, the occurrence or continuation of which, may affect the ability of CONTRACTOR to execute and/or perform all of its obligations under this Agreement;

A2-8 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report d) it has full knowledge, capability, skill and experience in performing all of the works specified herein; e) it shall efficiently and professionally perform all its obligations under this Agreement, so that the Project hereunder can be accomplished and meet with the standard specified by CTC; f) it is entitled to grant all licenses to use any of the Software to CTC and the use of either all or parts of the Software by CTC in compliance with the terms and conditions specified herein shall not be deemed as an infringement of any copyright or other intellectual property rights of other persons; g) in case CONTRACTOR or any of the copyright owners of the Software hereunder is under receivership under the bankruptcy law applied to said copyright owners or any copyright owners cancels, ceases, stops, or dissolves its business and/or operation of work in producing, creating, developing and distributing the Software which it has copyright thereon or transfers said business and/or operation to other persons for whatever causes, CONTRACTOR shall enable CTC to acquire all of the Source Code thereof whether by way of an escrow arrangement or otherwise, and any costs and expenses incurred in connection with such arrangement shall be borne by CONTRACTOR so long as the Warranty Services and Maintenance Services provided by CONTRACTOR hereunder are still in effect. However, in the event of the expiration of the term of such Warranty Services and/or Maintenance Services, CONTRACTOR shall not have to bear such costs and expenses for the said arrangement, but CONTRACTOR shall have to inform CTC in writing as to such costs and expenses incurred or to be incurred prior to such expiration of the term of warranty or maintenance in order for CTC to consider whether CTC requires such an escrow arrangement or not. Should CTC inform CONTRACTOR in writing as to its decision to continue having such an escrow arrangement, CONTRACTOR shall have to arrange for having the continue escrow arrangement for the term CTC may require, provided always that all costs and expenses incurred in connection with such escrow arrangement for the Source Code of the Software during the period after the expiration of the warranty and maintenance shall be borne by CTC. In the event that CTC continues using the Software even if CONTRACTOR or copyright owners of Software becomes bankrupt or is dissolved, CONTRACTOR shall then agree to provide its best and possible maintenance service to CTC for the Software at the current version used in CTC system for a further period of at least 5 years thereafter at the same maintenance rate charged by CONTRACTOR to CTC as provided in Exhibit D hereto; and h) the number and qualification of CONTRACTOR’s personnel specified in Exhibit H (Project Resource Plan) are sufficient for successful implementation

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of the System Services within the time prescribed in Exhibit C (Statement of Works and Milestones).

10.2 CTC represents, warrants and undertakes to CONTRACTOR as follows:

a) it is a juristic person duly registered under the laws of Thailand and is authorized to operate its business and is able to perform all of its obligations according to the purpose of this Agreement;

b) the execution of and the performance under this Agreement are lawful and consistent with the objectives and by-laws governing regulations for performance of CTC and are not contrary to or in breach of any of its undertakings, commitments, representations which CTC has made with or given to any other persons;

c) at present, there is no event, the occurrence or continuation of which, may affect the ability of CTC to execute and/or perform all of its obligations under this Agreement;

d) CTC shall appoint its representatives who will cooperate with CONTRACTOR in performing the tasks under this Agreement; and

e) CTC shall give details, information, and documents necessary for CONTRACTOR to perform in compliance with this Agreement.

10.3 Project Administration

a) Establishment of working team of each party

For the accomplishment of the Project, each party shall, prior to the start of the Project which is the subject of this Agreement, establish its working team and appoint one Project Manager to take full responsibility of the team. The number and names of persons in the working team and the Project Manager of CONTRACTOR shall be as those specified in Exhibit H (Project Resource Plan). However, if CTC considers that any one in the working team has an unreliable behavior or may cause damage to CTC in any case, CTC shall have the right to prohibit said person from working under this Agreement and/or to request the change of the said person and/or of the power and authority of said person immediately. In addition, if CTC wishes to change the person and/or power and authority of any person in the working team of CONTRACTOR for any reasonable cause, CONTRACTOR shall promptly take such action; provided, however, that mutual approval of both parties is required in regard of the request of change of any person and/or of any power and authority of the person at managerial level or higher. In any event, CONTRACTOR may not change any person and/or power and authority of any person and/or reduce the

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number of persons in the working team of CONTRACTOR without obtaining a prior written consent from CTC, which such consent shall not be unreasonably withheld.

In order for a successful implementation of the Project, CTC Project Manager shall be the primary contact person for CONTRACTOR.

The CTC Project Manager will act on behalf of CTC in respect of or as:

(i) Primary contact person to CONTRACTOR for all of CTC’s responsibilities under the Project. (ii) Managing the works performed by CONTRACTOR and arranging for payments payable to CONTRACTOR. (iii) Procurement for CTC’s personnel. (iv) Accommodation and coordination for the meeting to be held at CTC’s office. (v) Coordinating with CONTRACTOR to ensure accurate information and there is an efficient exchange of information, including facilitate timely decisions. (vi) Providing all system preparation prerequisites for implementation of the Project as described in Exhibit I (Required Operating Environment).

CONTRACTOR Project Manager will have full authority to act on behalf of CONTRACTOR with respect to:

(i) Primary contact person to CTC for this Project.

(ii) Managing CONTRACTOR’s responsibilities for the Project including coordinating and managing to deliver all the deliverables to CTC under this Agreement as agreed schedule.

(iii) Planning, scheduling and controlling the Project for the implementation of the Project in accordance with this Agreement and Exhibit C (Statement of Works and Milestones).

(iv) Arranging for any meetings needed to be held for the accomplishment of the Project, including reporting and reviewing the relevant matters.

(v) Preparing the Project’s status reports.

(vi) Coordinating and controlling any of CONTRACTOR’s business partners or subcontractors to deliver the works as specified herein under the Project. (vii) Expediting for resolution of problems arisen in the Project.

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(viii)Managing the change control procedure in compliance with those stated in certain parts of Exhibit C (Statement of Works and Milestones).

(ix) Coordinating with CTC in order to set out schedule of time, so that CTC will be able to provide all required resources; such as, personnel, information, equipment, and etc. under the Project in a timely manner.

(x) Other activities as required and stated in Exhibit C (Statement of Works and Milestones).

b) Joint team and power and authority

The working team of each party in Clause 10.3 a) and b) above shall jointly work with each other (the “Joint Team”) on the Project, and the Joint Team shall have the following duties.

(i) To co-operate in implementing the Project in order for the implementation to be in line with the procedures and details stated in the Statement of Works and this Agreement.

(ii) To consider any practical problem through out the period of implementation of the Project and/or any disagreement or conflict between the parties and to find the solution therefor or to settle the said disagreement or conflict at the initial stage. In case the working teams of both parties are unable to agree on any solution and/or to settle on any matter, the matter shall then be sent to each Project Manager of each party for consideration. In case the Project Managers of both parties cannot agree on any solution and/or any settlement, the matter shall be referred to the Steering Committee.

(iii) To perform any other duties necessary for accomplishment of the Project.

(iv) To perform any duties as may be additionally and mutually set and agreed upon by both parties in writing.

Clause 12. Confidentiality

12.1 Neither party may disclose, duplicate, copy or use any material or information which has or will come into the possession of each in connection with this Agreement for any purpose other than for the performance of this Agreement and shall treat as confidential and proprietary to each other any information which relates to the others party's research, development, trade secrets and business affairs, provided however, that the obligation to treat such information as confidential shall not apply to any information which:

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a) is publicly available prior to the date of this Agreement;

b) becomes publicly available after the date of this Agreement through no fault of the receiving party;

c) is in the receiving party's possession prior to the date of this Agreement provided that it shall not have been obtained from the other party;

d) is developed by the receiving party outside the scope of any agreement with the other party;

e) is lawfully and in good faith obtained from a third party which is not obligated to maintain confidentiality; or

f) is required to be disclosed by a court or other governmental authority after reasonable notice is given to the other party so as to permit the other party to prevent or limit such disclosure.

The parties hereby acknowledge that the receiving party shall bear the burden of proof as to the exceptions set forth in sub-clauses (a) - (f) above.

12.2 Either party shall release the confidential material and information referred to above only to its employees, representatives or agents requiring such information after having required such employees, representatives or agents to execute a confidentiality agreement concerning confidential material and information received from the other party. In the event that such an employee, representative or agent breaches said confidentiality agreement, receiving party shall indemnify disclosing party against any losses, costs or expenses, including those of litigation resulting from the disclosure of such information and shall at disclosing party's request and at receiving party's expense undertake proceedings to enjoin the dissemination of any confidential or proprietary data. CTC agrees to hold in confidence all information pertaining to CONTRACTOR's business.

12.3 The provisions of Clauses 12.1 and 12.2 shall survive any termination or expiration of this Agreement.

Clause 13. Indemnity

If any claim is made against CTC that any of the Software infringes, or that such use of the Software as contemplated by this Agreement infringes a patent, copyright or any other intellectual property right of any third party, CONTRACTOR shall then indemnify and defend CTC against such claim and pay any settlement amounts or damages awarded by a court arising out of such claim including all reasonable costs and expenses for court costs and attorney fees, provided that:

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a) CTC notifies CONTRACTOR within 10 (Ten) days of CTC receiving notice of such claim;

b) CONTRACTOR is given full control of any proceedings or negotiations in connection with any such claim;

c) CTC gives CONTRACTOR all reasonable assistance for the purposes of any such proceedings or negotiations; and

d) except pursuant to a final award, CTC has not paid or accepted any such claim or compromised any such proceedings without the consent of CONTRACTOR, which consent shall not be unreasonably withheld.

If CONTRACTOR is obliged or opts to discontinue CTC's use of the Software, it shall be deemed a Material Breach and CTC shall be entitled to terminate this Agreement immediately as specified in Clause 14.1. CONTRACTOR will not be liable to CTC or be obligated to indemnify CTC if the claim is based on modifications to the Software by any party other than those specified herein.

Clause 14. Termination

14.1 CTC shall be entitled to terminate this Project Agreement with cause immediately by way of giving a termination notice to CONTRACTOR due to an occurrence of the following events (the “Material Breach”):

a) CONTRACTOR passes a resolution for winding up or a court order is made to that effect;

b) CONTRACTOR makes any voluntary agreement with creditors in respect of its debts;

c) CONTRACTOR becomes subject to an administrative order or has a receiver or administrative receiver appointed;

d) CONTRACTOR fails to perform its obligations as specified in Clauses 9.1, 12.1, or 12.2; or

e) an occurrence of the event specified in Clause 13 where CONTRACTOR is obliged or opts to discontinue CTC's use of the Software.

In such event of termination, CTC shall be entitled to a refund from CONTRACTOR in all of the amount previously paid by CTC to CONTRACTOR and shall not have to pay for any fees due or payable thereafter. However, CTC shall return all material provided by CONTRACTOR and the Enhanced and Customized Software shall belong to CONTRACTOR.

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14.2 CTC shall be entitled to terminate this Project Agreement without cause (termination for convenience) by giving a 30 (Thirty) days prior written notice. In such event of termination, CTC shall not have to pay for any fees due or payable thereafter.

14.3 CONTRACTOR shall be entitled to terminate this Project Agreement immediately by way of giving a termination notice to CTC if:

a) CTC fails to pay any amount when due and continue to be delinquent for a period of 30 (Thirty) days after written notice by CONTRACTOR of such non- payment; or

b) CTC commits a material breach of any obligation contained herein other than that specified in a) above and such breach shall not be corrected or remedied within 30 (Thirty) days after written notice by CONTRACTOR.

In such event of termination, CTC shall have to be liable for payment in full in consideration of all works performed by CONTRACTOR up to the date of such termination.

Clause 15. Notice

All demands, notices and other communications upon or to CTC or CONTRACTOR under this Agreement shall be made in writing, and it shall be deemed duly served if personally delivered, sent by facsimile and e-mail, with a copy to follow via overnight courier, first class mail or mailed by certified mail-return receipt requested:

(a) if sent to CTC at the following address

CTC’s Address

Attention: [ ______] Fax Number: [ ______]

(b) if sent to CONTRACTOR at the following address:

CONTRACTOR’s Address

Attention: [ ______] Fax Number: [ ______]

or at such other address as shall be designated by such party in a written notice to the other parties.

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Clause 16. Transfer and Assignment

Neither party shall sub-contract, assign or transfer any rights or obligations hereunder without obtaining a prior written consent from the other party. Any purported sub- contract, assignment or transfer of the Agreement or any part thereof without such consent shall be void and of no effect.

Clause 17. Non-hiring of Employees

Neither party shall, within whole period of this project, hire on a consulting, part-time, or full-time basis any employee of the other party or induce any employee to leave their current employer without written consent from the other party.

Clause 18. Governing Law

The validity, construction and performance of this Agreement shall be governed by and construed in accordance with the laws of the Kingdom of Thailand without regard to the conflicts of laws provisions thereof.

Clause 19. Settlement of Dispute

19.1 In case there is any dispute between the parties with respect to the performance, enforcement, termination and/or provisions of this Agreement and the parties cannot agree on same, the parties agree to settle the said dispute by submitting it to the arbitrator for making decision under the arbitration rules of the Thai Arbitration Institute.

19.2 The arbitration shall be conducted in Thai in Bangkok, Thailand and the total number of arbitrators shall be 3, with each party appointing 1 arbitrator and the 2 arbitrators appointing the third. The decision or award of the arbitrators shall be deemed final and binding upon the parties.

19.3 The settlement of dispute under this Agreement shall be interpreted and governed by the laws of the Kingdom of Thailand.

19.4 The provision of this Clause 19 shall survive any termination of this Agreement.

Clause 20. Miscellaneous

20.1 Option: Any options granted by CONTRACTOR as stated in Clause 6.2 or in any Exhibits may be exercised by CTC only by way of written notice. In such event, all terms and conditions herein and therein shall bind CONTRACTOR immediately upon such notice.

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20.2 Entire Agreement and Modifications: This Agreement, including all Exhibits attached hereto, constitutes the entire agreement between the parties in connection with the System Services and supersedes all prior and contemporaneous agreements, understandings, negotiations, and discussions, whether oral or written and there are no warranties, representations and/or agreements between the parties in connection with the subject matter hereof except as specifically set forth or referred to herein. The waiver, amendment or modification of any provision of this Agreement shall not be effective unless made in writing and signed by the party against which enforcement of such waiver, amendment or modification is sought.

20.3 Severability: If any provision of this Agreement or the application of any such provision shall be held by a competent jurisdiction to be contrary to law, the remaining provisions of this Agreement shall continue in full force and effect.

20.4 Injunctive Relief: The parties acknowledge and agree that a breach of this Agreement by either of them may cause irreparable damage to the non-breaching party, that such damage would be difficult to measure, and that such damage may not be adequately compensated by monetary damages. Consequently, the parties agree that each shall be entitled to equitable relief, including injunction and specific performance, in the event of any breach of the provisions of this Agreement, in addition to all remedies available to the parties at law or in equity.

20.5 Force Majeure: A party’s performance of its obligations will be excused or the timeframe for performance will be extended as is reasonably necessary under the circumstances or event that such a party is prevented from performing its obligations in whole or in part by fire, flood, explosion, war, strike or labor disputes, embargo, unusual or short noticed government requirement, civil or military authority, act of God or other causes beyond its reasonable control and without the fault or negligence of such a party.

20.6 Exhibits List: All Exhibits listed below shall be deemed an integral part of this Agreement:

• Exhibit A – System Specification • Exhibit B – Acceptance Criteria • Exhibit C – Statement of Works and Milestones • Exhibit D – Project Price and Term of Payments • Exhibit E – Warranty Services • Exhibit F – Maintenance Services • Exhibit G – Details of Training Course • Exhibit H – Project Resource Plan • Exhibit I – Required Operating Environment

20.7 Conflict: Should there be any conflict between the provisions of this Agreement and the Exhibits, the provisions of this Agreement shall prevail.

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Exhibit A System Specification

- Please insert all Specifications and Functionalities of the System here.-

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Exhibit B Acceptance Criteria

- Please insert criteria to be used for User Acceptance Test here -

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Exhibit C Statement of Works and Milestones

Note: This Exhibit is needed to be inserted as mutually agreed upon by both parties for statement of works and the targeted dates of the Project; such as, the delivery date, the completion of installation date, the UAT date, and etc.

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Exhibit D Project Price and Term of Payments

This document contains details of the Base Software license fee, fees for delivery, installation, enhancement or customization, and training as well as Maintenance Services fee and terms of payment in connection with the Project. The grand total of USD (exclusive of VAT) [ ______( ______)] (the “Total Fee”) in consideration of the System Services shall be payable by CTC to CONTRACTOR which can be broken down for clarification purpose as follows:

(1) Base Software License Fee

No. Item Description Quantity Price (USD)

Total for Base Software Component

(2) Fees for delivery, installation, enhancement or customization, training, the Warranty Services and etc. in the amount of USD [______( ______)]; and

(3) Fee for Maintenance Services specified in Clause 6.1 of this Agreement in the amount of USD [ ______( ______)].

Term of Payment of the Total Fee (as defined above):

Term of Payment Percentage Price (USD) 1. Down Payment 5% 2. Date of Providing System Design Documents 15% Hardware Software 3. Date of Completion of System Installation 50% 0% 4. Date of Completion of UAT 25% 75% 5. Date of Expiration of Special Warranty Period 5%

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Exhibit E Warranty Services

This document describes the terms and conditions of exclusive Warranty Services provided by CONTRACTOR to CTC in connection with the System delivered and provided by CONTRACTOR to CTC under the Agreement. It also includes the Warranty Services availability, warranty period and response times for each product under the System.

All terms used herein if not otherwise specified herein shall have the same meanings as those specified in the Software License and Implementation Services Agreement (the “Agreement”).

1. Definitions

“Warranty” hereunder means repair or remedy regardless of whether minor or major repair or remedy, including replacement of the Software of the System Services as needed by CTC pursuant to the provisions stated in the Agreement, as well as providing CONTRACTOR’s staff to give support and advice to CTC on development, improvement, supervision, correction of error and/or malfunction of operation of the System or other operations relating to the System, whether by means of telephone support and/or walking in for giving advice and/or to inspect, repair, or correct error and malfunction of the System, provided that the System and/or any other computer program under the System Services are used under normal condition during warranty period.

This document includes the preventive maintenance periodically to keep system running in good condition without any extra charge. However, the Warranty does not extend to any System or any computer program that has been damaged or rendered defective (a) as a result of accident, misuse, abuse, including without limitation acts of God, fire, storm, thunder, flood or other circumstances beyond its reasonable control; (b) by modification or service by anyone other than CONTRACTOR or CONTRACTOR’s Partners or (c) any additional software as subsequently acquired by CTC, provided always that the ineffectiveness of such Warranty as a result of the events mentioned in (a), (b) or (c) above shall not extend to any Software, or any computer program under the System Services that has not been damaged as a result of such events.

“CONTRACTOR’s Partner” means authorized officers who are appointed from the following list to provide Warranty Services apart from CONTRACTOR.

Partner Product

2. Terms & Conditions of Warranty Services

CONTRACTOR shall provide or procure CONTRACTOR’s Partners to provide the service and Warranty for all equipment and computer programs provided by CONTRACTOR under the Project and pursuant to the Agreement. Professional staff with highly experience on each

A2-22 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report component shall resolve and maintain the System to be in good condition at the customer site within the response time period as agreed.

During the Warranty period, the System and/or computer program that have been supplied by CONTRACTOR shall not be modified or maintained by any unauthorized CONTRACTOR personnel without CONTRACTOR approval.

In case the System or equipment fails under the normal use, CONTRACTOR will resolve the problem by CONTRACTOR staff at CTC site. However, the Warranty does not extend to any system or equipment that has been damaged or interrupted from the external factors such as telephone line defective or fluctuation of power.

In case where CONTRACTOR could not resolve the problem at CTC site, CTC shall allow CONTRACTOR to resolve the problem outside CTC location. Even CONTRACTOR provides service outside CTC location, CONTRACTOR will not charge CTC for any service fees, equipment, labour or any additional fees during the Warranty period.

CTC shall be responsible for maintaining the facility of appropriate environment and/or specification of equipments and providing CONTRACTOR to access the equipment and/or the relevant system to perform the service, including an adequate workspace to enable CONTRACTOR and CONTRACTOR’s Partner to perform that service. In order to fix, analyze the problem or any failure quickly, CTC shall provide a local telephone line, communication facilities [and allow for remote access for CONTRACTOR to use the necessary accessories at no charge even in case of urgent problem resolution or preventive maintenance.] Details and procedure of access, contact persons will be defined and agreed by CTC in advance.

3. Support Category

Support services can be provided by several types of support as defined below.

3.1 Telephone Support

CONTRACTOR shall provide the assistance through telephone support, provide the technical support and manage the customer service call logging.

3.2 Remote Support

CONTRACTOR may need to diagnose the problem remotely in case the resolution need advice from an expert. However, the remote support may need to be applied for preventive maintenance but should get approval from CTC prior to the implementation.

3.3 On-Site Support

CONTRACTOR shall provide engineer(s) on-site support in order to assist in resolving the problems that cannot be solved remotely.

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4. Support Procedure

4.1 Priority Setting

The priority will be set depending on impact of the problem:

Severity Level Impact High The system is fail or the customer operation is disrupted. There is no workaround for the problem. Medium The system is operated but some major functions cannot operate. But there is workaround for the problem. Low The system is operated. But there are some disruption and/or some operational inconvenience. There is workaround for the problem.

4.2 Call Handling & Help Desk Services

CONTRACTOR will utilize its existing computerized call logging system to manage CTC’s service calls. The call handling will manage the call logging; the detail of problem will be escalating to the right CONTRACTOR support engineer or CONTRACTOR’s Partner for an efficient and effective service. Since the contact center system comprises with many component, to get the prerequisite information CONTRACTOR will provide the escalation form to guide CTC how to fill in the detail on the prerequisite information. CONTRACTOR shall also provide contact number of CONTRACTOR and CONTRACTOR’s Partner, electronic mail and contact personnel to CTC later, vice versa.

4.3 Response Time

The applicable response time for System is 24 hours a day and 7 days a week (both within and without the Service Hour as defined below), regardless of whether the severity level will be High, Medium or Low.

The term “Service Hour” means Monday to Friday except any Bank’s holidays during regular office hours (8:00 a.m. to 6:00 p.m.).

Subject to the aforementioned response time applicable to the Software indicated above, CONTRACTOR will provide on-site support service and guarantee resolution time to CTC with no extra cost as per the followings:

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Severity Level In the event that In the event that CONTRACTOR is aware of or CONTRACTOR is aware of or informed the problem within informed the problem without the the Service Hour Service Hour On-site Resolution On-site Resolution support time support time Service Service

High within 2 hrs. within 24 hrs. within 3 hrs. within 48 hrs. after after commence- commence- ment of ment of support service support service

Medium within 4 hrs. within 15 days within 4 hrs. within 15 days after after commence- commence- ment of ment of support service support service

Low within 6 hrs. within 30 days within 2 days. within 30 days after after commence- commence- ment of ment of support service support service

Note: All italicized provisions and wordings must be reconsidered and concluded again by CTC and CONTRACTOR.

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Exhibit F Maintenance Services

CONTRACTOR shall provide Maintenance Services pursuant to Clause 6 of the Agreement under the same terms and conditions of the Warranty Services of Exhibit E plus the service of providing the new or upgraded releases and versions of Software including installation thereof at CTC’s site.

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Exhibit G Details of Training Course

- Please insert details of training course here-

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Exhibit H Project Resource Plan

-Human resource plan must be inserted here including names and positions of all CONTRACTOR’s Project Manager and other personnel involving the Project -

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Exhibit I Required Operating Environment

-What CONTRACTOR needs from CTC for operating environment must be clearly stated in this Exhibit K so that CTC may then be able to consider whether CTC could provide such operating environment or not -

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Appendix 3: Financial Model Assumption

Items Assumption Notes Base year 2008 Project duration Construction period 1.5y Operation period 10y Exchange rate (Baht/Dollar) 34.29 BOT’s forecast in 2008 (2008/11/11) Financial structure Debt ratio 0% Equity ratio 100% From ADB invest loan Discount rate Return on equity for the 5.50% 100% owned by the Government Government The average of 10- year government bond rate in 10 years is 5.29%. It is suggested to set as 5.50% WACC (nominal) 5.50% 100% owned by the Government WACC (real) 2.23% 100% owned by the Government Return on equity for the 13% The transportation business equity return rate private sector in Thailand Financial income and expense ADB loan 3.00% 6m libor+20 bps=3.00% (2008/11/20) Deposit interest rate 2.50% The average 1 year fixed deposit rate in 10 years by BOT (2008/11/11) Taxes and duties Corporate tax rate 30% VAT 7% Imported tariff 30% 8608.00.20 Electro-mechanical equipment Service days Passenger demand 365 days CCH Service supply 365 days Asset life Hardware 5 years software 10 years Cost escalation Local 3-4% Domestic cost escalation factor 2008-2012 for southeast Asia , ADB

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Items Assumption Notes International (MUV index) 0.5-6.8% International cost escalation factors 2008-2012, ADB Others Inventory turn over rate 6 Payable period 2 months Statutory surplus 5% % of the annual earnings, until the reserve reach 10% of capital, then dividends paid after the legal reserve Cash dividend policy 70% % of the annual earnings

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Appendix 4: Projected Financial Statements

1. Income statement

( Baht Thousand) cons.1 cons.2 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023/2Q Income Statement Revenue 0 30,473 86,079 120,256 171,301 246,956 284,012 327,243 368,060 415,363 465,950 270,485 Clearing service 28,925 64,193 96,967 145,327 216,323 254,050 294,259 337,082 382,455 430,761 241,482 Card Sale profit 1,548 1,887 3,289 5,974 10,633 9,962 12,984 10,979 12,908 15,189 9,003 leasing income 0 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 O/M Costs 46,264 115,127 134,019 146,927 168,138 187,674 213,753 235,237 259,206 287,117 152,400 Depreciation and amortization 27,772 55,545 55,545 55,545 55,545 31,443 9,792 12,242 14,692 17,142 9,796 Net Profit 0 -43,564 -84,592 -69,307 -31,171 23,273 64,895 103,698 120,581 141,464 161,691 108,289 Interest income 0 296 1,312 2,568 4,850 8,911 12,716 17,675 21,868 26,799 32,600 18,019 Interest and financial charges000000000000 Profit before tax 0 -43,268 -83,280 -66,739 -26,321 32,185 77,611 121,374 142,450 168,263 194,291 126,308 Corporate tax 0 0 0 0 0 9,655 23,283 36,412 42,735 50,479 58,287 37,892 Profit after tax / (loss) 0 -43,268 -83,280 -66,739 -26,321 22,529 54,328 84,961 99,715 117,784 136,004 88,416 Note: The operation period is from Q3/2013-Q2/2023

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2. Balance Sheet

( Baht Thousand) cons.1 cons.2 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023/2Q Balance Sheet Cash 51,333 70,074 42,338 31,143 60,367 138,441 224,212 306,714 406,420 526,645 667,540 753,501 Cash(trustee) 0 23,643 52,470 102,725 193,998 356,446 508,639 707,009 874,739 1,071,942 1,303,994 1,441,533 Inventory 0 1,100 1,342 2,339 4,248 7,561 7,084 9,233 7,807 9,179 10,801 6,402 Fixed Asset 55,677 216,533 216,533 216,533 216,533 216,533 216,533 228,783 241,034 253,285 265,536 198,035 Accumulated Depreciation 0 17,982 53,947 89,912 125,877 161,842 183,496 193,287 205,529 220,221 237,364 167,408 Net Fixed Asset 55,677 198,550 162,585 126,620 90,655 54,690 33,037 35,496 35,505 33,064 28,172 30,627 net capitalized expense 52,990 88,108 68,529 48,949 29,369 9,790 0 0 0 0 0 0 Total Asset 160,000 381,475 327,264 311,777 378,638 566,928 772,971 1,058,453 1,324,471 1,640,829 2,010,507 2,232,063 Accounts payable 0 1,100 1,342 2,339 4,248 7,561 7,084 9,233 7,807 9,179 10,801 6,402 Pre paid in advanced 0 17,195 38,160 74,709 141,089 259,233 369,919 514,189 636,174 779,594 948,359 1,048,388 Short term loan 000000 0 0 0 0 0 0 Long term loan 000000000000 Travel deposit in advanced 0 6,448 14,310 28,016 52,908 97,212 138,720 192,821 238,565 292,348 355,635 393,145 Liability subtaotal 0 24,744 53,812 105,064 198,246 364,007 515,723 716,243 882,546 1,081,120 1,314,795 1,447,935 Capital 160,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 400,000 Retained earining 0 -43,268 -126,548 -193,288 -219,608 -198,205 -146,594 -65,881 28,848 140,743 269,947 353,942 Statutory surplus 0 0 0 0 0 1,126 3,843 8,091 13,077 18,966 25,766 30,187 Equity subtotal 160,000 356,732 273,452 206,712 180,392 202,921 257,249 342,210 441,925 559,709 695,713 784,128 Total Liability and Equity 160,000 381,475 327,264 311,777 378,638 566,928 772,971 1,058,453 1,324,471 1,640,829 2,010,507 2,232,063

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3. Cash flow Statement

( Baht Thousand) cons.1 cons.2 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023/2Q Cashflow Statement Operation Income 0 -43,268 -83,280 -66,739 -26,321 22,529 54,328 84,961 99,715 117,784 136,004 88,416 Depreciation 0 27,772 55,545 55,545 55,545 55,545 31,443 9,792 12,242 14,692 17,142 9,796 Ajustments for: Inventory 0 -1,100 -241 -997 -1,909 -3,313 477 -2,149 1,426 -1,372 -1,622 4,399 Cash(trustee) 0 -23,643 -28,827 -50,255 -91,272 -162,448 -152,193 -198,371 -167,729 -197,203 -232,052 -137,539 Accounts payable 0 1,100 241 997 1,909 3,313 -477 2,149 -1,426 1,372 1,622 -4,399 pre paid in advanced 0 17,195 20,965 36,549 66,380 118,144 110,686 144,270 121,985 143,420 168,765 100,028 Travel deposit in advanced 0 6,448 7,862 13,706 24,892 44,304 41,507 54,101 45,744 53,783 63,287 37,511 capitalized expense-52,990-44,9080000000000 Net Operation CF -52,990 -60,404 -27,736 -11,195 29,224 78,074 85,771 94,753 111,957 132,476 153,146 98,212 Investment Cost -55,677 -160,856 0 0 0 0 0 -12,251 -12,251 -12,251 -12,251 -12,251 Capital 160,000240,0000000000000 Short term loan 000000000000 Long term loan (debt repament)000000000000 Cash dividens 000000000000 Net CF 51,333 18,740 -27,736 -11,195 29,224 78,074 85,771 82,502 99,706 120,225 140,895 85,961 Accumulated CF 51,333 70,074 42,338 31,143 60,367 138,441 224,212 306,714 406,420 526,645 667,540 753,501

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Appendix 5: Summary of Funding Option Features

Responsibilities and (1) (2) Private enterprise risk State owned enterprise State owned enterprise (100%) (from 100-60%) (The private sector Conventional procurement Conventional procurement BOT participation) The Conditions 1. Under the common ticketing policy. 2. The common ticketing policy can be applied to the operators in years or before the CCH operation. Financing The initial investment 1. Government sources 1. Government sources the The private sector sources (inc. back-end and some capital capital at the initial time. It the capital parts of front-end 2. The expertise operation will sell shares to the system) team will operate CTC private sector, Operators. 2. The share % is reduced from 100% to 70-60% after selling shares in the project. The operation Government sourced The stakeholders sourced The private sector sources working capital working capital the working capital Delivery The initial investment 1. Government procures 1. Government procures by The private sector procures by the competitive the competitive tender by itself tender 2. CTC will enforce the task 2. The system provider on the construction team designs and builds the in the first years of the system and transfer to operation period to help CTC CTC build the skilled team that can operate CTC smoothly. CTC also can introduce the construction team as the future operating and maintaining team. The construction team will be more responsible by obtaining the CTC shares. Operation and CTC shall recruit the 1. The expertise operation Maintenance management team for the team will operate CTC ticketing operation and under the help of the maintenance. CTC may construction tem. CTC

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Responsibilities and (1) (2) Private enterprise risk State owned enterprise State owned enterprise (100%) (from 100-60%) take the risk on handing can hand over the system over the system. more smoothly. 2. CTC may control the operation and maintenance cost under the expertise team and the supervision of other investors in the future. CCH & smartcard Contracts with the MRT operators service E money license: approved by MOF through BOT Payment and funding For different models of 1. Service payment MRT lines (1) “Net cost” line: the operator pays the service fee. (2) “Gross cost” line: the government pays the service fee. 2. Fare payment (1) “Net cost” line: the fare is paid to the operator. (2) “Gross cost” line: the fare is paid to the government. Payment (funding) from If it has losses, the 1. SOE will take the financial None. the government government uses the results. budget to cover the deficit. 2. It is net cost model. 3.All stakeholders share the responsibility of funding Risk The initial investment The government transfers The government transfers The private sector takes the cost some risk to the tender via some risk to the tender via initial investment cost risk. the procurement contract. the procurement contract. O&M cost The O&M cost is higher The private sector will put The private sector takes the than the private sector more pressure on the O&M O&M cost. under the restriction of cost control and operation the government structure, performance. administration and budget. Revenue 1. The revenue risk will be 1. The revenue risk is almost 1. Transfer to the private affected by the the same as the left. sector. common ticketing 2. If it has scale economy and 2. The revenue risk is policy, the rider , the company can have the pretty high without the the smartcard usage incentive package, it may regulators’ cooperation practice and the induce operators to join to induce the operators operator’s willingness. the system. The fair fare to join the system and 2. The regulators will help and good service quality conduct the common the operators to know can collect more riders and ticketing policy.

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Responsibilities and (1) (2) Private enterprise risk State owned enterprise State owned enterprise (100%) (from 100-60%) that the CCH system it will reduce the 3. It is not easily matched can let the operators transaction fee. the government conduct the common requirements on the ticketing policy. “gross cost” lines’ data. 4. If it can’t operate well in the transportation smartcard, it will focus easily on other e-money application businesses. Source: Mass Transit Act, MRTA Act, Electronic Transaction Law and the study.

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Appendix 6: E-Money Business Rules

1. E-Money Business The ticketing company which does E-Money business should follow “the Notification of the Bank of Thailand, Re: Prescription on the Rules, Method, and Conditions”. The related fund management rules are as follows. (1) E-Money Operator may issue E Money Card denominated in Baht for usage only in Thailand. (2) The E-Money Card features that the customer makes a prepaid payment to the E-Money Operator. The E-Money Operator shall be prohibited to issue a card in term of granting a credit. (3) The E-Money Operator shall be prohibited to do other business including granting credit. (4) The E-Money Operator shall prepare its Accounting Record by separating the money received from the customer from its revolving capital. (5) The E-Money Operator shall deposit its prepaid money received from customers in cash with the commercial bank or special financial institutions at any time for no less than the remaining balance of money the Operator received in advance from customers. This deposit shall be put in a specific account separated from other company’s accounts with no encumbrance and used only for the purpose of liquidation. (6) The E-Money Operator shall declare service fee and expense in a specific time in accordance with the form set by BOT. In case of the change in the said fee and expense, the Operator shall inform the customer beforehand for not less than 14 days. The determination of the service fee and expense shall be subject to fair competition and being fair to the consumer. (7) The E-Money Operator shall declare the value condition and the fee of the value refund of the E-Money Card. The change in the refund fee shall inform customer beforehand for not less than 14 days. (8) The business operator must follow the BOT’s terms and conditions as follows. A. Financial Management of prepaid by consumers. B. E-Money fees. C. Refund in cash. D. Security of E-Money system. E. The consumer information. F. Responding to consumer complaints. G. Preparing the accounting and report.

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Appendix 7: The Recovery Plan for the ADB Investment Loan

cons. 1 cons. 2 1 2 3 4 5 6 7 8 9 10 (Bahts Thousand ) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ADB: investment loan loan balance 160,000 400,000 400,000 400,000 320,000 240,000 160,000 80,000 - - - - interest 4,800 8,400 12,000 12,000 10,800 8,400 6,000 3,600 1,200 - - - interest and repayment 4,800 8,400 12,000 12,000 90,800 88,400 86,000 83,600 81,200 - - - capital owned by Gov. 160,000 400,000 320,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 240,000 shares selling amount 93,040 97,780 - cash dividens 0 0 0 0 0 0 0 0 0 0 0 0 buget payment- 4,800 - 8,400 81,040 85,780 - 90,800 - 88,400 - 86,000 - 83,600 - 81,200 - - -

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Appendix 8: Cabinet Resolution

March 12, 2008

1. Status of projects is as follows:

1.1 Current MRT system has two service providers. - BTSC under BMA (regulator) - BMCL under MRTA (regulator) 1.2 Two projects are under construction. 1.2.1 Airport Rail Link under SRT (regulator) 1.2.2 Extension of Green Line under BTS; Saphan-Taksin – Tanon Taksin (2.2 km.), Tanon Taksin- Bang Wa(5.3km.), On-Nut-Bearing(5.5 km.). 1.3 Three projects has been approved to construct by the Cabinet. 1.3.1 Purple line (Bang Yai-Bang Sue) 1.3.2 Red Line (Taling Chan-Bang Sue) 1.3.3 Suburban Line (Bang Sue-Rang sit) 1.4 Four projects are under study for preparing the proposal to the Cabinet: 1.4.1 Blue Line (Bang Sue- Tha Phra ) 1.4.2 Dark Green Line (Mo Chit –Phahon Yothin-Saphan Mai) 1.4.3 Light Green Line (Bearing –Samrong-Samut Prakan) 1.4.4 Red Line (Bang Sue-Hua Lumpong) 2. Direction for MRT network development under the government policy:

- Nine MRT lines are within the network development plan. 1. Purple Line (Bang Yai- Bang Sue/ Bang- Sue – Rat Burana (SukSawad) - Pom Phra Jul) 2. Blue Line (outer ring) 3. Dark Green Line (Mo Chit –Phahon Yothin-Saphan Mai-Lamluka) 4. Light Green Line (Bearing –Samrong-Samut Prakan) 5. (Bang Krapi-Bang Bamru) 6. Extensive Blue Line (Bang Khae-Phuttamoltol) 7. (Bang Krapi- Min Buri) 8. MRT system for Outer ring (Kaset Nawamin –Khae Rai- Saphan Rama V-Ratchapruk-Phu Chao Saming Prai-Sri Nakarin ) 9. Airport Rail Link (Phayathai- Suwarnaphumi Airport)

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3. Discussions

3.1 According to the Government policy, the government should speed up to start the tendering and construction processes of two projects that have obtained the approval of the Cabinet. 1. Purple Line (Bang Yai- Bang Sue/ Bang- Sue – Rat Burana (SukSawad) - Pom Phra Jul ) 2. Red Line (Talingchun-Bang Sue and Bang Sue-Rang sit-Thammasat University (Rang sit)). 3.2 For construction of the Purple Line and other lines, the government plans to apply fund from JBIC. The funding application would take 8 months, which is considerably long. Committee thinks that the government needs to negotiate with JBIC to reduce the application time in order to start the MRT project earlier. 3.3 Other important lines should be constructed in the next stages. 3.3.1 Extension of the Blue Line (Bang Sue- Tha Phra and Hua Lumpong- Bang Khae) with MRTA considerations of the Blue Line connectivity (Tha Phra-Aom Noi). 3.3.2 Extension of Dark Green Line (Mo Chit-Phahon Yothin-Saphan Mai) and Light Green Line (Bearing-Samrong-Samut Prakan) to Bangkok surrounding areas that hopes to increase overall number of passengers. -Dark Green Line: Mo Chit- Phahon Yothin-Saphan Mai extends to Lamluka Klong4 -Light Green Line: Bearing-Samrong-Samut Prakan ;Samut Prakan extends to Bang Pu and Taksin – Aom Noi 3.3.3 Extension of the Red Line: Bang Sue-Hua Lumpong, Bang Sue-Phayathai-Magasan- Hua Mak. Coordination of MRT model schemes in Bangkok and surrounding areas is needed in order to develop a better MRT system. Furthermore, feasibility study about the additional lines, which are required to focus on the transit network, effectiveness of transit system and the economic benefit, should be presented to the Cabinet. 3.4. However, the MRT system development in Bangkok and surrounding areas has to have uniform management in order to provide better services to people. Therefore, MRTA is responsible for all MRT operations, including extensive green line. Moreover, MRTA must speed up to develop their organization in order to manage and provide the services for all MRT systems effectively. 3.5 Although BMA was assigned by MOI to regulate BTS (Green Line), MRTA should have roles and responsibilities to regulate BTS. Under the situation, the government should reimburse BMA for the runways and stations construction of Saphan Sathorn-Bang Wa and On-Nut- Bearing. Moreover, the public sector may join into BTS as shareholder. 3.6 The government sector invests in infrastructure and private sectors invest in the rolling stocks and the costs of operation management. Thus, government can reduce the total investment. In addition, MOF recommends the guideline for applying fund to construct new MRT system that is estimated about 770,733 million Baht. The investment is divided into two parts: -Investment by Government Sector is about 592,717 million Baht. A8-2 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Source of funds: JBIC fund, the long term domestic bond issued by the government, and the fiscal government budget. -Investment by Private Sector is 178,016 million Baht for investing in the rolling stocks and the costs of operation management. 3.7 Government has clear policy for adding extension lines of MRT system so related agencies must promote and support to build up a MRT interconnectivity base, to increase human resource development, research and development, and technology transfer in Thailand. 4. MRT Development Committee Resolution

4.1 MOT has to speed up the MRT projects that obtained the approval of the Cabinet in order to finish projects on schedule. - Purple Line (Bang Yai- Bang Sue/ Bang- Sue – Rat Burana (SukSawad)- Pom Phra Jul ) - Red Line (Taling Chan-Bang Sue) -Red Line (Bang Sue-Rang sit-Thammasat University (Rang sit)). 4.2 MOF has to negotiate with JBIC to reduce the steps and duration of time for evaluating and tendering the projects. 4.3 MOT has to present completed project details to the Cabinet in order to comply with related laws. 4.3.1 Blue Line (Bang Sue- Ta Phra and Hua Lumpong- Bang Khae). 4.3.2 Dark Green Line (Mo Chit-Phahon Yothin-Saphan Mai). 4.3.3 Light Green Line (Bearing-Samrong-Samut Prakan). 4.3.4 Red Line (Bang Sue- Hua Lumpong and Bang Sue-Phayathai-Magasan-Hua Mak). MRTA is responsibilities for constructing the Blue, Dark Green and Light Green lines, and considering the way to adjust the Blue Line (Tha Phra-Aom Noi). SRT is responsible for constructing the Red Line. 4.4 According to the government Policy, OTP and MRTA are required to prepare a program design and feasibility study for additional lines in order to serve the public in the surrounding areas. 4.4.1 Study of MRT model schemes in Bangkok and the surrounding areas for preparing a program design and feasibility study of additional lines should be done by OTP. 4.4.2 Immediate study and design should be done for the extension dark green line (Saphan Mai to Lamlukka Klong 4) and the extension light green line (Samut Prakan – Bang Phu) by OTP. 4.4.3 Study and designing MRT system network (Outer Ring (along with Ratchadaphisek Road) should be conducted by MRTA. 4.5 MOI shall consider yielding to MRTA in regulating the BTS instead of BMA in order to develop, construct and operate the MRT system more efficiently. The government shall reimburse BMA for the runways and stations construction of Saphan Sathorn-Bang Wa and On-Nuch-Bearing. Furthermore, MOF shall consider purchasing BTS’s debts from the A8-3 Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

creditors and lenders and shall become a shareholder of BTS, shall for this efficient management will maximize the public interest. 4.6 Refer to section 4.5, it is under negotiation process with the Concessionaire (BTS) so interoperability with others MRT networks of both extension dark and light green can be conducted by MOT. 4.7 MOF requires setting up the committees to regulate the financial issues and raises funds for MRT project which is considered as a Government Mega project. The responsibilities of the committees are to study funding sources, financial planning and raising funds for the Government Mega Project. For MRT system, the government sector should invest in infrastructure and private sectors invest in the rolling stocks and take care of the operation management. 4.8 According to government policy, the extension of MRT lines shall be promoted and supported by the related agencies, such as MRT interconnectivity base, human resource, research and development, and technology transfer in Thailand.

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Appendix 9: Outlines of Terms of Reference for the Program Management Services (PMS)

A. Scope of Work The program management team will engage in the following key activities: 1. Develop the ticketing integration plan (1) Review and refine the previous TA report, including policy, bidding, financial and legal strategy. (2) Develop the integration strategy and plan. (3) Revise the schedule so as to conform to the actual situation. 2. Assist to establish the Common Ticketing Company (CTC) (1) Assist the government to set up the structure of CTC. (2) Assist CTC to determine the Standard Operating Procedures (SOP), including system operation and maintenance, account management, card management, new equipment testing, customer service SOP, etc. (3) Assist the CTC to set rules of card usage, including card type, card sale, card reload, travel deposit, card refund, card hold, and other related issues. 3. Manage the procurement of the integrated ticketing system (1) Develop the procurement plan, including procurement method and process. (2) Draft bidding documents of back-end systems for CTC. (3) Assist to select the Appraisal Committee. (4) Assist to evaluate technical proposals and price proposals of bidders, including VfM (Value for Money) analysis. (5) Record the progress of the procurement process of the integrated ticketing system and report to the government agencies and ADB. 4. Supervise and assist the construction of the system (1) Review the construction plan and schedule. (2) Supervise the implementation of ticketing related systems for CTC. (3) Ensure seamless integration between interfaces of front-end and back-end systems. (4) Draft the system test and acceptance plan. 5. Assist to test and accept the system (1) Check and test hardware and software of the system. (2) Record the test results and write the test reports. (3) Assist in system integration test for front-end and back-end systems (4) Review documents of technology transfer and training. 6. Supervise operation of CTC and feedback (1) Assist to oversee the operation of CTC, provide suggestions, and adjust operation rules. (2) Plan the development of CTC, including setting up the Key Performance Indicator

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(KPI), satisfaction indicator, fee settlement efficiency and accuracy. (3) Review and adjust the operation rules and CTC’s SOP. (4) Report to government and ADB about the operations of CTC, including card issuing volume, transaction volume, usage rate of common ticket cards…etc.. (5) Draft final report of the integration project.

B. Timeline The work in Phase I (Develop integration plan) will take 3 months. Phase II (Preparation of CTC) will take 3 months. The work in Phase III (Preparation of tender) will take another 4 months. The work in Phase IV (Tender Procedure) will be carried out over 12 months. The work in Phase V (System construction) will be completed in 12 months. The work in Phase VI (System test and acceptance) will take 6 months. The duration of the final Phase (Company operation) will depend on the actual operations. We suggest the duration could be 12 months.

C. Reporting An inception report will be submitted within 2 months after the project started. The inception report will include the review of previous TA report, integration strategy and plan. The second report, which includes business scope and structure of CTC, will be submitted in Phase II. The third report, which includes procurement plan, will be submitted during Phase III. The fourth report, procurement documents, will be submitted in Phase IV. The fifth report, review of construction plan and system test and integration plan, will be submitted before the completion of construction. The sixth report, test and integration result, will be submitted after system acceptance. The final report, which includes company operation suggestion, will be submitted before the end of the project.

D. Remuneration The total milestone-based payment will be disbursed according to the following schedule: Contract Signing ……………………….10% Submission of First Report …………….10% Submission of Second Report ………….15% Submission of Third Report ……………10% Submission of Fourth Report …………...20% Submission of Fifth Report …………….15% Submission of Sixth Report …………….10% Submission of Final Report …………….10%

E. Consultancy Requirements The program management services should include in its team of professionals international and local consultants with one team leader, one ticketing specialist, one transit planner, two project management consultants, two procurement consultant, three ticketing system consultants, one financial and one legal consultant. The input of each consultant is listed below:

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International Local Stage Month TLTT PR PM TP PR FC LC S-C S-K S-BPM 1 Develop Plan 01~03 3 3 0 3 3 0 3 1 3 3 3 3 2 Establish CTC 04~06 3 3 0 3 3 0 2 2 1 1 0 3 3 Prepare Bidding 07~10 4 3 4 3 2 4 0 2 0 0 0 3 4 Bidding 13~22 4 4 6 5 0 6 2 3 5 5 5 5 5 Construction 23~34 8 7 0 12 6 0 0 0 12 12 12 12 6 Test and Acceptance 35~40 4 4 1 6 4 1 2 0 6 6 6 5 7 Operation 41~52 11 11 1 5 8 1 6 1 5 5 5 5 Total Month 37 35 12 37 26 12 15 9 32 32 31 36 TL: Team Leader TT: Transit Ticketing Consultant TP: Transport Economist/Planner PR: Procurement Consultant FC: Financial Consultant LC: Legal Consultant S-C: System-Card Specialist S-K: System-Key Specialist S-B: System-Back-end system Specialist PM: Project Management Consultant

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Thailand: Bangkok Mass Rapid Transit Integrated Ticketing Project Technical Assistance Consultant’s Report

Appendix 10: Laws, Draft Laws and Regulations Relevant to the Common Ticketing Project

Law/ Draft Law/ Regulation Content Remark/ Status

1. MRTA Act B.E. 2543 1. (section 9) MRTA shall act under the (พ.ร.บ. scope of authority which includes the การรถไฟฟาขนสงมวลชนแหงประเทศไทย following; พ.ศ. 2543) (3)To collect fare, service fee, property usage fee and others facilitate fee (4)To set the measure for safety and for the operation and maintenance of MRT, etc. (6)Issue bond for its investment (7)Set up the company or public company to do the business in related to the business of MRT. The said company is not allowed to have the foreign shares more than 49% of its registered capital. (8)Hold the shares in company or public company which do the business in related to the business of MRT. (9)Invest or cooperate with others to do the business in related to the business of MRT. (10)grant the concession on MRT in whole or in part.

2. (section 43) MRTA with the approval of Cabinet shall have a right to grant concession in Mass Rapid Transit in a whole or in partial to the private. 3. (section 48) The Concessionaire must allow and facilitate MRTA or other concessionaires to be able to link with or jointly use the Mass Rapid Transit operation under the guidelines stipulated by the Committee. 4. (section 53) In case there is necessity to protect the public interest, the Cabinet may grant the following resolution; (1)To request the concessionaire to perform or amend any act thereof; (2)To cancel the concession in case of extreme and unavoidable situation.

Base on (1), MRTA shall notify the i i di l If

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Law/ Draft Law/ Regulation Content Remark/ Status concessionaire does not perform or make amendment as requested, the Cabinet shall have the authority to request MRTA to perform or make amendment instead of the concessionaire. The concessionaire shall be responsible for the expense thereof.

Base on (2), MRTA shall have the authority to occupy the concessionaire’s business and request the MRTA to pay the compensation to the concessionaire in the amount no more than the compensation amount as defined in the concession agreement.

In case where MRTA has to pay for compensation under Paragraph 3 or in case where the amount of compensation is not defined in the concession contract, the Cabinet shall set up a committee in order to stipulate the compensation amount. Moreover, the committee may define the opportunity cost for concessionaire as well.

2. The Notification of MOF re: the 1. (clause 2,3) The business operator who 1. This business which has to be authorized issues the E-Money (except the Notification pursuant to clause 5 of POR WOR 58 Financial Institution and the business shall be applied operation who issue the E-Money for to CCH in case ประกาศกระทรวงการคลัง its own good and service) has to apply that it issues the เรื่องกิจการที่ตองขออนุญาตตามขอ 5 for the License from Minister of common ticket. แหงประกาศของคณะปฏิวัติ ฉบับท ี่ 58 finance. 2. The aim of this (การประกอบธุรกิจบัตรเงินอิเล็กทรอนิกส) 2. (clause 4) The Business operator who Notification is issues the E-Money has to have its paid to supervise the up registered capital of not less than business 200 million Baht. operation in term of its 3. (clause 5-9) The Business operator who financial issues the E-Money has to perform in stability, the accordance with BOT’s term and creditability of condition. (i.e. the management of the its business. pre-paid money, the disclosure of fee and expenses incurred on the use of E- Money, the protection of the customer information, the restriction on the qualification of executives, etc.)

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Law/ Draft Law/ Regulation Content Remark/ Status

3. Electronic Transaction Act B.E. 2544 1. To accept the legal effect of the 1. Recently there Electronic data/ Information. is an issuance of พระราชบัญญัติวาดวยธุรกรรมทาง the Royal อิเล็กทรอนิกส พ.ศ. 2544 2. To accept the electronic signature Decree on the which meets the requirements set by Supervision of law as a reliable signature. the Electronic Payment 3. In order to maintain financial and Business which commercial stability, or for credibility requires (1) the and acceptance of electronic service business transaction system or to prevent relating to the damage to the public, there shall be the issuance of E- issuance of Royal Decree prescribing Money has to which type of service business shall be apply the subject to which level of regulation; registration prior to operate Under the law there are 3 levels of its business and supervision. (2) the service a) The notification business relating b) The Registration to the Clearing a) The License House has to apply for the license before its operation.

2. See item (4) for more detail.

4. Royal Decree regulating of Electronic 1. The law is proposed by ICT under the 1. It was already Payment Services B.E. 2551 Electronic Transaction Act B.E. 2544 reviewed and revised by (พ.ร.บ.วาดวยการควบคุมดแลธู ุรกิจบริการ 2. Pursuant to the law, BOT has to be Council of State. การชําระเงินทางอิเล็กทรอนิกส พ.ศ. 2551) responsible for the supervision of the E-Payment Business. 2. The aim of this Royal Decree is 3. Under the law, the service businesses to supervision relating to the Electronic Payment of the Business prescribed in Annex are divided into 3 operator in term categories, the business listed in each of security of category has to be subject to system, the risk notification, registration, or license as management, prescribed by law. and back up plan in the 4. The law specifies the detail of emergency case. documents and standard of operation which each service business has to 3. CCH will fall submit to the BOT for the supervision under Type 2 if purpose. it issue E- Money card, 5. Upon the consideration of BOT on the and it has to be

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Law/ Draft Law/ Regulation Content Remark/ Status attached document on the standard of registered with business operation, In case of business BOT prior to in category 3 (the clearing house): the operate its BOT will propose the case to the business. Electronic Transaction Committee to issue the License. The License for 4. CCH also falls category 3 business shall be valid for 10 in to category 3 years and shall be renew. for its clearing house business, 6. Besides the power and duties it has to apply prescribed in Electronic Transaction license from E- Act, the E-Transcation Committee shall Transaction have the additional power prescribed in Committee this Royal decree, which are to through BOT. determine the rule and condition in relevant to E-payment which includes - the Protection of personal inform of the consumer - the investigation and safety of security system - supervision on the implementation of plan and standard measure set declared by the service business - determine the Fare for the service - receive complains from the consumer, etc.

5. Draft Act on Supervision of Large 1.There shall be supervision on the Large 1. This law is Public Investment Public Investment whether it is PPP or supposed to not. replace the (รางพ.ร.บ.กํากับโครงการขนาดใหญของ existing PPP law ภาครัฐ พ.ศ. ...) 2.There shall be 3 committees set up for 1992 (which supervising the Project at each stage of shall be repealed its implementation. once this draft is (1)The Policy and Supervision promulgated). Committees who will propose the public investment plan to Cabinet 2. There is no (2)The Selection Committee who will progress on this review and approve TOR , select draft. the private sector participation, negotiation of the contract. (3)The Contract Management Committee who will monitor, supervise the performance of the PPP contract.

3. The Large Public Investment Management Office shall be set up as a department in MOF. Its responsibilities are gather information, study, analyse, prioritise projects, analyse the feasibility

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Law/ Draft Law/ Regulation Content Remark/ Status and carry out Vfm assessment of PPP for PSC consideration, monitor and supervise contract performance and report to PSC, carry out the administrative work of PSC.

6. Draft of MRT Act 1. (section 6) In order to maximize the 1. The first draft (รางพ.ร.บ. กิจการขนสงมวลชน พ.ศ. ...) efficiency of the mass transit operation, was already the Minister, in conjunction with the passed the Mass Transit Committee’s Cabinet recommendations, has the power to approval and issue the Ministerial Regulations was reviewed by concerning the following: Council of State in 2005. (1)Structures and collection systems of fare, service fee and official fee for 2. This law shall the use of goods and services of the be applicable to agency; the common (2)Common guideline for the agency ticketing project for the linkage of mass transit and shall be systems in order to provide facilitate the conformity and efficiency, including implementation stipulation of fare, service fee and of the Project. official fee for common mass transit operation; (3)Guideline for establishment of the Central Transportation Centre connecting to the mass transit systems; (4)Guideline for the concession, qualification of the concessionaire and transfer of concession on mass transit operation the Mass Transit operation.

2. (section 26) The Agency or the Concessionaire shall not collect the fare, service fee and official fee for the use of other goods and services at the rate higher than that stipulated in the Regulations.

In the event where a mass transit concession has been given, the Concessionaire shall be responsible for the guarantee of damages in accordance with Paragraph 1 instead of the Agency.

3. (section 31) For the benefit of the mass transit operation, the Agency may

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Law/ Draft Law/ Regulation Content Remark/ Status assign a Private Enterprise as the concessionaire to perform an act in the mass transit operation.

4. (section 35) In case where the operation of the Concessionaire could prejudice the service user or the public, the Agency shall have the authority to order the Concessionaire to make remedy of such situation and, in necessary circumstances, to impose a temporary suspension on the relevant part until remedy has been made by the Concessionaire.

5. (Section 36) Notwithstanding the grounds for revocation of the concession as specified in the Concession Agreement thereof, the Agency may revoke the concession if the Concessionaire:

(1)Does not comply with the standard of operation causing prejudice to the public; (2)Carry out the service operation which may cause extreme prejudice to the public.

In the event that the Agency has revoked the concession, all establishments and equipments shall belong to the State.

6.(Section 39) For the public’s benefit, the Cabinet, in conjunction with the Committee’s recommendations, shall have the authority to terminate the concession and may assign the any other agency to overtake the concession performance, whereby the State shall be responsible to compensate the Concessionaire as specified in the concession.

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