Document of The World Bank

FOR OFFICIAL USE ONLY Public Disclosure Authorized

ReportNo. 2070a-TH

THAILAND

STAFF APPRAISAL REPORT Public Disclosure Authorized OF A

FIFTH RAILWAY PROJECT Public Disclosure Authorized

December 26, 1978

Transportation Division Public Disclosure Authorized Project Department East Asia and Pacific Regional Office

This documenthas a restricteddistribution and may be used by recipientsonly in the performanceof their official duties. Its contentsmay not otherwisebe disclosed withoutWorld Bank authorization. CURRENCY EQUIVALENTS

Currency Unit Baht (B) (1 Baht = 100 Satangs) US$0.0490 = B 1.00 US$1.00 = B 20.45 US$49,020 = B 1 million

SYSTEM OF WEIGHTS AND MEASURES

Metric British/US

1 centimeter (cm) 0.033 feet (ft) 1 meter (m) = 3.2808 feet (ft) 1.0939 yard (y) L, kilometer (km) = 0.6214 miles (mi) i metric ton (ton) 0.9841 British long tons (lg tons) 1 kilogram (kg) = 2.2 pounds (lb)

ABBREVIATIONS AND ACRONYMS

A - Ampere c.i.f. - Cost, insurance, freight CPCS - Canadian Pacific Consulting Services hp - Horsepower ICB - International Competitive Bidding KV - Kilovolt KW - Kilowatt p.a. - per annum SRT - State Railway of Thailand V - Volt

FISCAL YEAR

October 1 to September 30 FOR OFFICIAL USE ONLY

THAILAND

STAFF APPRAISAL REPORT OF A FIFTH RAILWAY PROJECT

Table of Contents

Page No.

I. TRANSPORT SECTOR ...... 1

A. Transport System ...... 1 B. Transport Demand ...... 3 C. Transport Policy, Coordination and Investment. 4

II. RAILWAY SUBSECTOR ...... 5

A. Background and Past Bank Group Assistance to the Railways ...... 5 B. SRT Organization ...... 6 C. Facilities ...... 7 D. Traffic ...... 9 E. Operations ...... 12 F. Tariffs and Costs ...... 12 G. Budget, Accounting and Audit ...... 13 H. Revaluation of Assets ...... 14 I. Uneconomic Lines and Services ...... 14

III. INVESTMENT PLAN AND PROJECT ...... 16

A. Investment Plan ...... 16 B. Project Definition and Loan ...... 17 C. Project Description ...... 18 D. Cost Estimates ...... 20 E. Financing Plan ...... 21 F. Project Implementation ...... 21 G. Action Plan ...... 21 H. Procurement ...... *...... 23 I. Disbursements ...... 23

IV. ECONOMIC EVALUATION .C.E.A.T.O.N...... 24

A. SRT's'Transport Role ...... 24 B. Evaluation Summary ...... 24 C. Evaluation Details ...... 25 D. Sensitivity Analysis and Project Risks ...... 26

This report was prepared by Messrs. C. Buratti (Engineer), 0. Murthy (Consultant), L. Seigel (Financial Analyst) and A. Weckerle (Economist). rThis documenthas a restricteddistribution and maybe usedby recipientsonly in the performance of their official duties. Its contents may not otherwise be disclosedwithout World Bank authorization. Page No.

V. FINANCIAL EVALUATION ...... 27

A. General...... 27 B. Past Financial Performance ...... 28 C. Assumptions for Financial Projections...... 31 D. Forecast Financial Performance ...... 33 E. Sensitivity Analysis and Financial Risks ...... 36

VI. AGREEMENTS AND RECOMMENDATIONS ...... 37

ANNEXES

1. Past Bank Group-Financed Transport Projects 38 2. Selected Documents and Data Available in the Project File 40

TABLES

1. Estimated and Projected Public Passenger Traffic for 1976-91 2. Estimated and Projected Freight Traffic by Modes for 1968-91 3. Public Transport Investments during the Third and Fourth Five-Year Development Plans 4. Estimated Investment Requirements for Transport Infrastructure in 1977-91 5. SRT Track and Infrastructure - Details as on September 30, 1977 6. Rails in Meter Gauge Line Tracks 7. Inventory of SRT Motive Power and Rolling Stock as of September 30, 1977 8. SRT Passenger Traffic from 1967-81 9. SRT Freight Traffic (CL) by Commodities for 1972-81 10. Selected Operating Statistics 1972-77 11. SRT Passenger Tariffs 12. SRT Freight Tariffs (Car-Load Rates) 13. SRT Income Accounts: 1974-82 14A. SRT Investment Plan, 1977-81 14B. SRT Investment Plan: Cash Requirements 15. Project Composition and Cost 16. Physical Content of the Project 17. Acquisition of New Diesel Locomotives for Freight Service in 1977-81 18. Replacement of Hitachi Locomotives with "Other" Diesel Locomotives 19. Diesel Locomotive Utilization 20. Passenger Car Acquisition in 1977-81 21 Requirements of Additional Passenger Cars in 1977-81 22. Requirements of Freight Cars 1977-81 23. Track and Bridge Rehabilitation Program, 1977-81 24. Makkasan and Districts Workshops: Machinery and Equipment Financed by the Loan 25. Implementation Schedule, 1977-81 26. Procurement Schedule for Bank-financedItems 27. Estimated DisbursementSchedule 28. Economic Returns on 1979-81 Investments 29. SRT Cash Flow Data: 1974-82 30. Operating Revenues and Costs: Effects of Inflation, 1972-1977 31. SRT Balance Sheets: 1974-82 32. Long-term Debt as of September 30, 1977

CHART

Chart No. 18916 - OrganizationChart of State Railway of Thailand

MAPS

IBRD 13621 - Transport System IBRD 13622 - Track Rehabilitationand Signalling ImprovementSchemes

I. TRANSPORT SECTOR

A. Transport System

General

1.01 Thailand'stransport system is a mix of traditionaland modern modes, principally(in order of importance)roads, the railways and inland waterways. The highest concentrationof traffic is over the main arteries constituted by national roads, railways and river navigation. National roads generally run in close proximity to railway lines and, in the Chao Phya basin extendingnorth from Bangkok, all three principalmodes are represented. Total length of the transportnetwork is adequate for the next decade, but its quality, in particularthat of secondaryand tertiary roads, needs sub- stantial upgrading.

Roads

1.02 By traffic volume, network length and value of sunk investments, roads are the most important transport infrastructure. National highways, the primary road system, total nearly 13,000 km which is more than three times the length of the railways (about 3,800 km). Like the railway lines, they radiate from Bangkok to the national borders. More than 90% of national roads are paved.

1.03 Provincialroads, the secondaryroad system connectingprovincial towns and other major populationcenters with national roads, total more than 22,000 km. Despite increasingtraffic requirements,most provincial roads are in very poor condition. About 60% (13,000 km) are unimprovedand often not passable in rainy weather. Of the remaining 40% (9,000 km), half are paved and half have graveled surfaces. National highways and provincial roads primarily serve the rural population,as do inland waterways and the railways. The responsibilityfor constructionand maintenance of the national and provincialroad systems is vested in the Departmentof Highways in the Ministry of Communications. A program for upgrading secondary roads is underway.

1.04 Tertiary roads are defined as roads not classified as national, provincialor urban. They include cycle tracks and, in some cases, even footpaths. Estimates place their length at between 40,000-60,000km, but inventorydata are incompleteand sketchy. Although a few thousand km of these roads have been improved in recent years, maintenance has been limited. Regional coverage of these roads is not balanced. Tertiary roads connect villages and hamlets with the primary and secondaryroad systems, railways and inland waterways. They are administeredby a number of over-lapping national, provincialand local agencies - a system which needs rationalizing. Appropriate steps for improving tertiary roads are under study (para. 1.14).

Inland Waterways

1.05 The inland waterways system consists of the rivers and canals in the central plains and some sections of the Mekong river. Navigable waterways in the central plains comprise about 1,600 km in the rainy season and 1,100 km -2-

in the dry season. During the rainy season (July to December), barges up to 80 tons and two meters draft can negotiate the waterways from the gulf of Thailand to Uttaradit (about 700 km). In the dry season (January to June), navigation is restricted to the section from Bangkok to Nakhon Sawan, halfway between the capital and Uttaradit. The principal rivers in the waterways system are the Chao Phya, which is navigable up to Nakhon Sawan; the Nan River, linking Uttaradit to Nakhon Sawan; and the Pa Sak River between Ayutthia (on the Chao Phya) and the Rama VI dam. Apart from a string of landing places, built mainly for private use, no river port facilities exist. The fleet of mostly wooden barges numbers about 7,000, of which about 50% exceed 40 tons and 10% (steel barges) have a dead weight range of 100-300 metric tons. Most of the fleet is privately owned. Public investment in waterways transporthas been very limited in the past; a project to improve the system is currently under preparation (para. 1.14).

Sea Ports

1.06 There are some 35 sea ports in Thailand, which can be broadly divided into two groups according to location, size and function. The first group includes Bangkok, Si Racha and Sattahip - all of which are within 200 km of the capital and serve as Thailand's principal external trade outlets. Bangkok, the country's most important port, dominates internationalwaterborne traffic, accounting for 90% of dry cargo imports and exports except bulk agriculturalexports handled at deep water anchorage off Si Racha. Si Racha is the port of discharge for most oil imports, and Sattahip, built as a military facility, handles some containerizedcommercial cargo at present. However, the Government has decided to develop Sattahip as a major commercial deep sea port, and the first investments are scheduled for the early eighties. The second group consists of the southern ports, which are scattered over 750 km of the southern peninsular coast between its northern tip and Malaysia. These ports have primarily regional significance. About half of them serve,exclusively as fishing ports, while the other half combine coastal transport, imports and exports and fishery functions. Songkhla and Pattani on the east coast of the peninsula and Phuket and Kan Tang on the west coast are the largest of the southern ports. Only Songkhla and Pattani have the potential for deep sea port development. Domestic transport to, from-and within the southern peninsula is predominantlyland based. Thus coastal shipping plays a limited role in the transport sector. The extent to which coastal ports can assume larger transport functions, is under review (para. 1.14).

Civil Aviation

1.07 Thailand's internationaland domestic air traffic are centered at Don Muang airport, in the vicinity of Bangkok, which serves as a joint civilian and military facility. The feasibilityof creating a second major airport serving the capital has been studied for more than ten years. Outside Bangkok, there are about 40 air fields of various sizes; of these, close to half receive scheduled flights. Domestic air transport competes with long distance road and rail passenger traffic and, though not comparable in volume to these modes, serves an essential transport function. The domestic air carrier, Thai Airways Co. Ltd., is owned by the Government and -3-

has a defacto monopoly on internal routes. Thai InternationalAirline Co. Ltd., of which the Government is the principal shareholder,carries all internationaltraffic.

B. Transport Demand

1.08 Roads are the dominant mode of transport for passengersand freight in Thailand (Tables 1 and 2). In 1976, combined public passengertraffic outside Bangkok for railways and roads was about 40 billion passenger-km,of which the roads' share was 85%. Combined freight traffic for rail, roads and inland waterways was estimatedat about 50 million tons and over 13 billion ton-km,of which the roads' share was about 70%. By tonnage carried, inland waterways (8.5 million tons) ranked above rail (5.4 million tons), while in ton-km, the positionswere reversed (2.5 versus 1.4 billion ton-km),reflecting the longer haul traffic handled by the railways.

1.09 Freight traffic is concentratedin the corridor between the gulf area around Bangkok and northern Thailand and, to a lesser extent, along the transportaxes radiatingsouth and northeast from the capital to the national borders. Roads and railways share all trunkline traffic,and in the Chao Phya basin inland waterwayshave captured a sizeable portion of this traffic. Directionand size of the flows reflect Bangkok'scentral location and dominance as a port and national consumptioncenter, the rural character of the outlying provincesand the advanced agriculturaldevelopment of the central plains. An estimated one-thirdto one-half of the country'stotal 1976 freight was composed of agriculturalproducts, of which approximately 50% were exported. Imports (excluding those destined for Bangkok) and exports combined total about 40% of all tonnagemoved in Thailand.

1.10 Annual growth over the last ten years for the combined freight traffic of road, rail and inland waterwayswas about 9%, as compared to an average real growth in the GDP of 7%. Allowing for sustainedgrowth of the economy and for aggregate freight traffic to continue to advance faster than the GDP, transportin Thailand can be expected to increase at about the same rate until the early 1990s. Provided sufficientcapacity is made available, these growth rates would result in a tripling or quadruplingof traffic over the next 15 years.

1.11 The distributionof freight traffic between roads, rail and water- ways over the 1980's can be expected to follow the general trend of the last ten years. Inland waterwaysand the railways will continue or complete their transformationinto medium or long distance bulk carriers,and roads will increasinglydominate short haul and low volume traffic. Inland waterways traffic,which is confined to the Chao Phya river basin, is projected to grow by about 2.5% p.a. during the 1980's.Railway freight traffic is expected -4-

to grow by about 4-5% p.a. over the same period, while rail passenger traffic is projected to experience somewhat slower growth. Roads would absorb the largest part of freight transportbecause of the competitivenessand flex- ibility of the trucking industry, its ability to economicallyhandle small consignments,and the continued dispersion, growth and diversificationof agriculture. While railways and inland waterways traffic would grow, their combined share of freight transportwould drop by about one half from the present 30%.

C. Transport Policy, Coordinationand Investments

1.12 Enhanced by a steady supply of new transport infrastructure, passenger and freight transport growth have aided Thailand's economic and social development. The road transport industry is vigorous and competitive, the railways are operationallyefficient, and inland waterways have retained a significant share of the central plains' transport. While public passenger transport is regulated (e.g. the licensing of routes and the control of schedules for road transport), freight transport is essentially unrestricted. There is no evidence of significant inter-modaldistortions and regulatory restrictions. To verify this favorable conclusion,however, a study of road user charges will be undertaken under the Sixth Highway Project, and the marketing policy of the State Railway of Thailand (SRT) will be reviewed under this project (para 4.02). A taxation policy for inland waterways transport will also be devised under the waterway improvementstudy included in the Sixth Highway Project. To enable the transport sector's good perfor- mance in the economy to continue, future transport policies should be aimed at two principal objectives: maintaining the present sector arrangement, which is characterizedby the parallel existence of efficient, competitive and complementarymodes; and providing transport capacities which are in line with demand.

1.13 The Government currently is reviewing the size and composition of infrastructureinvestments for the ongoing Plan (1977-81, Table 3). Transport expenditure targets during the last Plan period (1972-76)were about US$1.04 billion equivalent,with 80% allocated to roads and 12% to railways. Transport accounted for 20% of development expenditures. To accommodate the projected growth in transport demand, and to support the Government policy of upgrading conditions in rural Thailand, future transport investmentsmust be considerably increased. By tentative calculations,public expendituresunder each of the Five-Year Plans 1977-81, 1982-86 and 1987-1991should reach an average of US$ 1.9 billion equivalent (in 1977 prices, Table 4), an 80% increase over the 1972-76 amount. Railways would receive US$120-150 million in each Plan period, representing 11% of the combined public investment for rail, road and waterways transport. By 1991, the railways' share should be about 17% for public passenger transport (rail and roads combined), and 10-12% for freight transport (ton-km of rail, road and inland waterways traffic combined). SRT's Investment Program and the project is consistent with the railway's projected market share of the transport sector. -5-

1.14 The Bank presently is involved in all transportmodes, except civil aviation, for which Thai developmentcapabilities are adequate. The Bank is currently providing assistanceunder the Sixth Highway Project for the upgrading of approximately700 km of provincial roads, improvinghighway maintenance,and strengtheningplanning in the Departmentof Highways and the Ministry of Communications(Transport Planning Unit). Studies are included in the same project for the preparationof rural roads, provincial roads, inland waterways and coastal ports projects. At the request of the Government,the Bank is also providingassistance for the preparationof a port developmentproject at Sattahip.

II. RAILWAY SUBSECTOR

A. Backgroundand Past Bank Group Assistance to the Railways

2.01 Since the early 1950's, the Bank has made four loans totalling US$52 million to the State Railway of Thailand (SRT): 35-TH, signed in October 1950, for US$3 million; 128-TH signed in August 1955 for US$12 mil- lion; 280-TH signed in April 1961 for US$22 million; and 898-TH signed in June 1973 for US$15 million. The Bank's objective in these railway projects was to enable SRT to exploit its inherent advantagesin long distance haul of bulk traffic. After an initial phase of postwar rehabilitationunder the first loan, SRT endeavoredduring 1962-71 to modernize its equipment and replace its overaged assets. Assisted by the Bank's second loan, SRT acquired 30 diesel locomotivesand improved its telecommunications. The Bank's third loan enabled SRT to acquire 20 additionaldiesel locomotivesand 1,650 freight cars, replace 600 km of track rails, and improve signallingand telecommuni- cations. The fourth loan (for rehabilitationof track and bridges, acqui- sition of rolling stock, and modernizationof workshop facilities),emphasized reduced operating costs through the eliminationof steam traction.

2.02 The first two railway projects were completed on schedule. About US$7.5 million of the third loan, earmarked for the purchase of 40 locomotives, was cancelledwhen the Borrower chose to purchase the locomotives through procedureswhich were not in conformancewith Bank Group Guidelines. About 80% of the fourth project was completedby the scheduleddate (September30, 1976), but delays in procurementhave deferred the manufacture of part of the rolling stock and the replacementof about 200 km of track to the 1977-81 investmentprogram. US$14.5 million of the original US$15.0 million loan amount has been disbursed;the US$0.5 million balance, representingthe retentionmoney on disputed contracts together with the cost of two shunting locomotives,has been cancelled at the request of the Borrower. Cumbersome procurementprocedures have been a prime cause of past delays in the above Bank projects. Steps have been taken, or have been agreed to by SRT (para. 3.10), to prevent similar occurences in future. -6-

B. SRT Organization

Legislation

2.03 Under the State Railway of Thailand Act of June 5, 1951, SRT took over the functions of the Ministry of Communications'Railway Department,and became a separate legal entity. Two amending acts (June 11, 1959 and July 19, 1966) introducedminor modifications to the 1951 Act. The 1959 amendment gives overall supervisorypower to the Minister of Communications,including veto power over any action by SRT which is deemed inconsistentwith Government policy. A Board of Commissioners(consisting of a chairman and four to six members), appointed by the Council of Ministers, formulates policy and super- vises the general affairs of SRT. The Council of Ministers approves the capital budget, the constructionor abandonmentof railway lines, the sale of immovable property, the borrowing of money, and the setting of standard rates and charges.

Management

2.04 The Board appoints, with approval of the Council of Ministers, a General Manager who is responsible for the management and administrationof SRT and serves as an ex-officio Board member. Chart 18916 shows SRT's present organization,which generally is on a functional department basis. In 1976, top management was reorganizedto place day-to-day operations under two Deputy General Managers reporting to the General Manager.

Staff

2.05 SRT staff training facilities, located at a Railway Training Center in Bangkok, are generally adequate. For training in specializedfields, SRT sends a limited number of staff to local universitiesand foreign training institutions. The number of supervisorystaff trained in costing, marketing and planning has so far been critically low, but SRT is now making satisfac- tory arrangementsto address this problem. In 1979, several railway officers will be sent abroad for academic or professionaltraining, and similar training programs are planned for subsequentyears.

2.06 SRT has competent officers and staff discipline is good. Staff size was 29,900 employees at the end of fiscal year 1977, including 28,500 permanent and 1,400 temporary (generallyunskilled) employees. Productivityper man was 287,000 traffic units (ton-km + passenger-km)in 1977, having increased at an average of 8% per annum during the past five years; this compares favorably with the record of other railways in the region. Although total staff has decreased by about 4,000 employees since 1972, SRT will explore the scope for further reductions in staffing levels.

2.07 Labor-managementrelations, which had been excellent up to 1973, were disturbed in 1974/75 by disputes over wage compensationfor abnormal increase in the cost of living. Liberalizedallowances and a general pay - 7 -

raise restored satisfactoryrelations; further, a labor welfare division was set up in the personnel department to deal with staff grievances. SRT salaries, which have kept pace with the consumer price index since 1972, are generally higher than those for correspondinggrades in Government service, but lower than those in private industry.

C. Facilities

The System

2.08 As of September 30, 1977, SRT operated about 3,800 route-km of meter gauge system (Table 5). Except for 90 km of double track between Bangkok and Ban Pachi junction on the northern line, the route is single track. Four trunk lines radiate from Bangkok: north to Chiang Mai, northeast to the Laotian border, east to the border of Kampuchea, and south to the Malaysian border. The Maeklong line of 67 route-km serves the west side of the Bangkok area and is isolated from the main network. As of 1977, SRT had 9 branch lines with a total route length of about 660 km, including part of the eastern and Maeklong lines (Map 13621); one of them (29 km route length), was closed down in 1978. The Government is consideringconstruction, under its own financing,of a new 130 km line connecting Chacheongsao(a station 61 km from Bangkok on the eastern line) to the deep sea port and proposed industrial area of Sattahip. The merits of the rail line extensionwill be reviewed under a study of Thailand'seastern seaboard development,which is included in the Bangkok Traffic Management Project.

Track

2.09 Except for about 250 km near Chiang Mai, where the maximum gradient and the minimum curve radius are 2.6% and 180 m respectively,the main lines of SRT are laid with less than 1% gradient and curve radii greater than 400 m. Curve length representsabout 12% of total track on the system. There are 2,000 m of tunnels, and 2,467 bridges, of which 834 are wooden; SRT plans to gradually rebuild the latter with concrete structures,and to strengthen or replace weak steel bridges. Of the 3,920 km of main line track (including 90 km of double track), 2,598 km are laid with 70 lb/yd rails, 393 km with 80 lb/yd rails, and 732 km with 60 and 50 lb/yd rails. Table 6 details the dispositionand age of rails. SRT's plans to replace the 60 lb/yd rails on the main line with 70/80 lb/yd rails. About 61% of the main line rails are welded of 42-144 m lengths. Welding of rail joints is being extended, and a few experimentalrail lengths, continuousbetween stations,have also been installed. Sleepers on the main running tracks (spaced 65 cm between centers) are 90% wooden, with or without tie plates; the balance which are fabricatedfrom prestressedconcrete are manufacturedlocally. The ballast consists of crushed stone, 20 cm in depth. Maximum permissibleaxle load on the main lines is now 14 tons, and maximum speed is 80 km/hr. However, there are a large number of permanent speed restrictionsdue to weak bridges and sharp curves. The roadbed is generally stable, and track maintenanceand riding quality are good. -8-

Signalling

2.10 Signalling and interlockingarrangements at SRT's 450 stations vary from modern, all-route-relayinterlocking and color light signalling (in the Bangkok area), to hand-operatedpoints with no signals. Standard equipment for the main lines is mechanical interlockingwith warner, home and starter semaphore signals. In the past five years, SRT has installed full interlocking at 85 stations and tokenless block instrumentsat 35 stations. Despite this, about 15% of the stations on the northern line and about 36% on the southern line are not fully interlocked,and many stations are worked only by hand- operated, key-locked points. SRT plans to further improve signallingand interlockingunder this project (para. 3.17).

Telecommunications

2.11 The SRT telecommunicationsnetwork consists mainly of three-channel carrier telephonesat 13 dispatching offices and a telephone network. The Bangkok area also has a 300-line telephone exchange, which is more than 25 years old. There are frequent breakdowns on the network, and spare parts are generally unavailable. Under the proposed project SRT plans to replace the old telecommunications equipment with a 12-channel carrier telephone system and a 500-line telephone exchange (para 3.16).

Motive Power and Rolling Stock

2.12 Between 1972 and 1976, SRT withdrew 192 steam locomotivesfrom service. As of September 30, 1977 (Table 7), its fleet consisted of 243 diesel locomotives (203 main line, 40 shunters), 39 steam locomotives in emergency reserve, 102 rail cars (53 powered, 49 trailers), 1,052 passenger cars (1,045 bogies, 7 four-wheelers)and 9,267 freight cars (6,621 four- wheelers, 2,646 bogies). SRT's 1977-81 investment program includes pro- curement of another 30 main line diesel locomotives,130 passenger cars and 273 freight cars (paras. 3.06-3.09). The freight and passenger cars will be manufacturedat SRT's Makkasan workshop.

2.13 Twenty-sevendiesel locomotives(950 hp), supplied by the Hitachi Company of Japan, are more than 17 years old. Their performanceand relia- bility are poor. After the manufacturerstopped production of the engine some years ago, the old parts were locally repaired, resulting in further reduced performance. Such repairs are becoming increasinglydifficult and an estimated 19 of the locomotives are being replaced under the project (para.3.06). About 39 passenger and 1,360 freight cars (about 20%) are 40 or more years old. Under the project, the 39 passenger cars will be replaced. Together with the overaged freight cars and surplus steam locomotives (ex- cluding those in emergency reserve), they will be sold.

Workshops and Sheds

2.14 SRT's mechanical workshop facilities include a central workshop at Makkasan, which handles major overhauls of locomotives (includingrail cars) and rolling stock, together with the manufacture of passenger and freight cars. There are three regional workshops at Uttaradit, Korat and Thung Song. These handle some unscheduled repairs, as well as overflow heavy repairs from the Makkasan workshop. With the increase of diesel locomotives in SRT's fleet, the repair and overhaul facilities at Makkasan (which originallyserviced only steam locomotives)were organized on a makeshift basis to accomodateboth steam and diesel engines. After the eliminationof steam traction, a better arrangementof the work flow for diesel locomotive overhaul became possible. However, the building which was formerly used for steam locomotiveoverhaul has recently been dismantled because it was unsafe; it will be replaced under the project by a new structurewith overhaul facilites for diesel locomotives,including new overhead travellingcranes (para. 3.18).

2.15 Daily maintenance of diesel locomotivesis provided at four main depots: Bang Sue, Uttaradit,Had Yai and Nakhon Ratchasima with the shop at Bang Sue being the largest and best equipped. Annual maintenance of diesel locomotives,formerly undertaken at Makkasan, has been temporarilyshifted to the regional locomotivesheds. On the whole, facilities for the maintenance and overhaul of motive power and rolling stock are well organized. With the new building and some equipmentadditions included in the project, the facilities will be adequate for some time to come.

Other Property

2.16 The major marshalling yard at Bang Sue has been modernized and equipped with mechanical retarders; the capacity of regional yards at Sila At, Had Yai and Thung Song has been increased. The buildings,stations and offices and general plant of the railway are well maintained.

D. Traffic

Passengervs. Freight Traffic

2.17 Passenger transport traditionallyhas dominated SRT operations and revenues. In 1977, it accounted for 56% (16.2 million) of total revenue train-km,with freight and mixed trains claiming 31% (8.9 million) and 13% (3.7 million) respectively. Passenger traffic also earned 54% of total revenues,while freight yielded 40% and other sources 6%. However, these ratios could gradually change in the future. Some passenger services appear vulnerableas road sections paralleling rail lines are nearing completion, and costs and tariffs of rail passenger services,on the average, place SRT in a tight competitive position. Freight traffic, by contrast, appears to have an establishedmarket based on cost-advantagesover competitors. Freight and passenger growth rates projectedfor 1977-81 reflect this assessment (paras. 2.22 and 2.25). A profitabilityanalysis of rail services is included in this project (para. 4.02) to provide SRT with a rational basis for its future service and marketing policy. - 10 -

Passenger Traffic

2.18 From 1967-78, passenger traffic increased from about 46 million passengers and 3,600 million passenger-km to 59 million passengers and 6,100 million passenger-km (Table 8). Growth was steady through 1974 (passengers) or 1975 (passenger-km), but the number of passenger-km has been stagnant between 1975 and 1977, and the number of passengers in these years was equal to or below the 1974 level. The main reason for this development was a sharp tariff increase in 1975 (para. 2.28), the first in more than 20 years. On average, passengers and passenger-km have increased since 1967 by about 2% p.a. and 5% p.a. respectively.

2.19 Third class traffic represents 98% of the total number of passengers and 90% of passenger-km. First and second class traffic share the remainder. Average distance travelled by third class passengers is 90 km; the other two classes range from 500 to 800 km. Charges per passenger-km for second and third class travel are approximately 64% and 40% respectively of the amount charged for first class travel.

2.20 Urban Bangkok with its main railway terminal and Sam Sem, Bang Sue and Thon Buri stations generates about 12% of all passenger trips on SRT's network. The Greater Bangkok area which includes urban Bangkok, about 90 km of the northern line up to Ban Pachi, and the entire eastern line contributes about 24% of total traffic (trips). The northern line, from Ban Pachi northward generates 25% of all journeys; the northeastern line extending from the same station 21%; and the southern line 30%. Greater Bangkok generates about 33% of passengers-km, 80% of which originate in urban Bangkok. The north-eastern line has 18%, the northern line 21%, and the southern line 28%. Thus, passenger transport is distributed fairly evenly over the networks' principal lines. SRT caters largely to the rural population: less than 7% of all trips on SRT can be classified as Bangkok urban and commuter traffic. In passenger-km, Bangkok urban and commuter traffic amounts to only 2%.

2.21 Passenger traffic in recent years has been determined by the steady rise in the real incomes of the population, the progressive build-up of the national and provincial road networks, the highly competitive bus transport system and the tariff policy of SRT. Railway tariffs have had the most visible effect. When raised in 1975 by a weighted average of about 26%, for the first time in more than 20 years, the number of passengers fell by about 7% the following year, and passenger-km growth levelled off.

2.22 Future passenger traffic will be conditioned by the same factors noted above. Over the 1977-81 Plan period, the network of national and provincial roads running in proximity to the railways will be nearly completed. Rail tariffs will need periodic adjustment to meet financial and economic targets. For the remainder of the Plan period, therefore, the appraisal mis- sion projects an overall traffic growth of no more than 3-4.5% p.a. system- wide. Growth rates are expected to vary with travel classes, origins and destinations, and the level of road competition. The aforementioned growth rates in overall passenger traffic are at variance with SRT's own estimate of about 6% p.a., which is based on the assumption that rates could be kept almost constant in nominal terms implying a substantial decrease in real - 11 - terms over the Plan period. In fact, there remains considerableuncertainty about the future rate of passenger traffic growth, and future rail traffic will to a large measure depend on SRT's future marketing policy (para. 4.02) and ability to keep its cost in check. This project is designed to support SRT in these undertakings.

Freight Traffic

2.23 SRT's carload traffic, representingabout 95% of total freight traffic, has grown from 4.7 million tons and 1,900 million ton-km in 1967 to about 6.2 million tons and 2,800 million ton-km in 1978 (Table 9). Average growth rates over the period have been 2.5% p.a. and 3.6% p.a. respectively, compared to a nationwidegrowth in transportedgoods of 9% p.a. over the same period. Between 1972 and 1975, total transport stagnateddue to the de-escalationof the Vietnam war, but a renewed rise began in 1976 and 1977. The 1978 traffic declined because of the economic effects of a severe drought, but growth is expected to be resumed from 1979 on.

2.24 Over the 1967-1978 period, petroleum products, cement/marland rice have dominated SRT's freight traffic. While their combined share of total ton-km has remained constant (at slightly over 50%), their share of total tonnages has risen from 53% to about 69% over the period. Forestry and agriculturalproducts, including rice, accounted for about 28% of total 1978 ton-km; followed by petroleum products with 26%, and cement/marlwith 14%. In contrast to passenger traffic, which is more evenly distributed over the four principlerail lines, 66% of all freight traffic (in ton-km) was concentratedin 1976 on the northern line. The southern line followed with 23%, and the northeasternline with 11%; the eastern line carried only negligible freight. Average haul for all goods transportedis about 480 km: average distance for petroleum products is 470 km; for cement and marl, about 200 km; and for rice, about 750 km.

2.25 SRT freight traffic is dominated by bulk goods carried in carloads over medium and long distances. This is appropriate,in view of the competi- tion from road transportover shorter distances, the capacity of waterway transport in the central plains, and SRT's economies of scale. Average rail freight costs including transshipmentcosts (B 0.24/ton-km)are well below those of road transport (B 0.33/ton-km). Over the 1977-81 period, SRT expects to expand its total freightmarket by 6.5% (tons) p.a. and 4.7% (ton-km) p.a. Annual growth in petroleum products transportwould be about 5.8% (tons) and 9.5% (ton-km),and cement and marl tonnages would grow by about 10.5% and 6.7% respectively(Table 9). These targets are realistic and reflect SRT's competitive strength and the successfulwork of its Marketing Departmentestablished in 1975. To project freight traffic, SRT separatelyanalyzed each of the 12 most importantcommodities, which together represent 80% of all freight tonnage. Particularcare was taken in the forecast of petroleum products and cement, which was based on projected origin - destinationmatrices. The results were consistent with the respec- tive industries'production targets.

2.26 The forecast beyond 1981 is for continuedgrowth in SRT freight transport even taking into account that the trunk road system along SRT's northern line (which carried 66% of all rail freight in 1976) will be - 12 -

completed in the early 1980s, and that inland waterway improvementsare scheduled to be completed around the same time. Implementationof the proposed project will improve rail efficiency. Further impetus will come from the expanding role of SRT's Marketing Department.

E. Operations

2.27 Table 10 summarizes SRT operations for 1972-77. Operating effi- ciency has significantlyimproved since the completion of the dieseli- zation program in 1976. The average turnaround time for freight cars has improved from 9 days in 1975 to 7.3 days 1977. During the same period, the average load per car has increased from 12.4 tons to 13.0 tons. Further, net ton-km per available box car (four-wheeler),an important index of efficiency, has also risen from 239,000 ton-km to 302,000 ton-km per annum. During 1972-77, the car-km per available car day has increased by 9% and 31% for freight and passenger cars respectively,and the average speed of freight trains has improved by 27%. On the other hand, expected increases in the availabilityof locomotivesand freight cars have not wholly materialized: availabilityat 81% and 92.5% respectively,is lower than the feasible targets of 85% and 95%. Better workshop and shed facilities, planned under this project, should improve the situation. Operational targets are given in para. 3.23.

F. Tariffs and Costs

2.28 Tariffs are uniform throughout the entire railway system. The tariffs consist of standard rates plus variations from these standard rates. Changes in standard rates require Cabinet approval, while Section 39 of the State Railway of Thailand Act of 1975 vests the authority for certain standard rates variations in SRT's Board of Commissioners. However, in prac- tice all tariff changes require the approval of SRT's Board of Commissioners, the Minister of Communications,various Government agencies, and the Cabinet. This lengthy rate change procedure together with Government'sconcern for the inflationaryimpact of rate increaseshad resulted in tariffs remaining largely unchanged for twenty years until November 1975, when standard rates were substantiallyincreased. Freight rates will again be increased in January 1979.

2.29 Details of the October/November1975 and January 1979 tariff in- creases are set forth in Tables 11 and 12. The fiscal 1976 tariff changes yielded a 26% increase in revenue/pass-kmand an 18% increase in revenue/ton- km in 1977 relative to fiscal 1975. The resulting incremental revenue of 270 million Baht in 1977 enabled SRT to return to profitabilityafter three con- secutive years of operating deficits (Table 13). The January 1979 tariff in- creases represent an approximately9.5% average increase in revenue/ton-kmof general freight together with an estimated B 40 million increase in petroleum revenue in fiscal 1979. Further tariff increases will be necessary to fully restore and maintain SRT's financial viability (para. 5.08). - 13 -

2.30 Due to improvedoperating efficiency,SRT costs per trafficunit have decreased in real term by 25% over the past five years (para. 5.04). An analysis of the average fixed and variable costs of transportingpassenger and freight traffic in fiscal 1976 was completedby SRT with the assistance of consultantsin December 1977. Unit variable costs extractedfrom this study are presentedbelow together with unit revenue comparisons.

Passenger Freight (per pass-km) (per ton-km)

Unit revenues 0.139 0.203

Unit variable costs (ex-depreciation) 0.091 0.134

Variable costs as % of revenue 65% 66%

As can be seen, the relativecash profitabilityof moving additional passengers and additionalfreight are approximatelyequal. Applying historical alloca- tions of the fixed costs to passengerand freight traffic, average fully distributedcosts in 1976 (includingdepreciation on an historic basis and excludinginterest charges)were approximatelyequal to correspondingrevenues. Concerningfreight services,there appears to be scope for substantialprofit- ability in that unit costs for railway freight traffic are well below those for trucking. Using bus tariffsas a proxy for costs, it appears that the cost advantageof rail passengerover bus traffic is more limited. However, SRT's passengertraffic is comprised of a wide spectrum of profitability levels. Therefore,to obtain a proper understandingof its profit structure, SRT has agreed to undertakea profitabilityanalysis of its services under the project (para. 4.02).

G. Budget,Accounting and Audit

Budgets

2.31 SRT prepares detailed annual operatingand capital budgets. While the capitalbudget has to be approved by the Cabinet, the operatingbudget requires approval of SRT's Board of Commissionersand is submitted to the Cabinet for informationonly. There is reasonableflexibility in subsequently reallocatingfunds among existing items in the capital budget; however, managementhas limited flexibilitywith regard to the addition of items not already included in the Cabinet-approvedcapital program. Capital expend- itures are carefullycontrolled in relation to the approved program by the Bureau of the Budget.

Accounting

2.32 The accounting system follows commercialaccounting practice, and the staff in the AccountingDepartment is experiencedand qualified. Depreciationof fixed assets is based on original cost and estimateduseful - 14 -

life; the cost of rail replacements is charged to a renewals fund which is maintained on a satisfactory basis. Manual accounting procedures are being replaced successfully by computer processing.

2.33 Final annual accounts are prepared within three months of the end of the fiscal year. For more timely financial and traffic information, SRT management receives a monthly report termed the Quick Report. Assembling the information takes about 32 days from the end of the period covered. To increase its usefulness in controlling SRT's operations, SRT will shorten its production time to three weeks.

Audit

2.34 External auditing is the responsibility of the Government's Audit Council whose staff conducts a continuous audit of SRT's annual financial performance. Section 5.02(a) of the Loan Agreement of Loan 898-TH requires SRT to furnish the Bank with audited financial statements within five months of the end of each fiscal year. The period has been extended to six months under this project to allow for additional time, which proved necessary in the past.

H. Revaluation of Assets

2.35 Since SRT's assets have not been revalued for about 25 years, the present depreciation charges distort SRT's financial results. Accordingly, SRT has agreed to revalue its assets not later than March 31, 1980 and every four years thereafter.

I. Uneconomic Lines and Services

2.36 As of mid-1978, SRT operated eight branch lines with a total length of about 630 km (mostly on the southern line), including part of the eastern and Maeklong lines. As the profitability of operating these branch lines was seriously in doubt, technical assistance was provided under Loan 898-TH to identify uneconomic services, establish a methodology for evaluating losses, and estimate losses on two typical branch lines. The consultants (CPCS) established the required methodology and estimated 1975 losses on the Nang Pla Duk-Nam Tok and Bangkok-Aranyaprathat lines. The methodology will enable SRT to determine losses on the other branch lines, and to approach the Government regarding compensation for operating those branch lines to be retained for social and political reasons. In fact, the Government has approved, in prin- ciple, a subsidy of approximately 210 million Baht for losses on uneconomic branch lines over the 1977-81 Plan period. SRT has (i) reaffirmed Section 3.05(b) of the Loan Agreement of Loan 898-TH requiring it to make arrangements with the Government for adequate compensation for operating uneconomic branch lines, and (ii) agreed to complete the analysis of the remaining six branch lines by the end of fiscal 1979 to expedite such compensation. In turn, the Government has agreed to establish a procedure under which SRT will be promptly reimbursed for branch line losses. - 15 -

2.37 The Cabinet has directed the National Economic and Social Develop- ment Board, together with the Ministry of Communicationsand SRT, to study in detail the costs and benefits of discontinuingeach of the existing uneconomicbranch lines. The study will include recommendationsrelating to alternativemethods of providing services handled by such uneconomicbranch lines. Studies on individualbranch lines will be forwarded to the Bank for its informationand comments.

2.38 Under the technical assistanceprovided under Loan 898-TH, the consultants examined also the question of consolidatingfreight booking stations, taking note of the recent closing of a few stations by SRT. They concluded that, for less than car loads, consolidatingstations might not result in significanteconomies while depriving customers at remote and wayside stations of a useful service. Regarding carload traffic, they recom- mended consolidationof freight booking points to reduce uneconomicoperation where road and trucking facilitiesare available. Accordingly,SRT is reviewing the scope for further traffic consolidation. - 16 -

III. INVESTMENT PLAN AND PROJECT

A. InvestmentPlan

3.01 SRT's 1972-76 Investment Plan sought to achieve the complete dieselizationof the locomotivefleet, the strengtheningof track, and the expansion of SRT's capacity to meet expected traffic increases. These objectives were largely accomplished. The 1977-81 Investment Plan will further improve operationalefficiency by replacing worn out and obsolete assets and expanding transport capacity in line with projected demand.

3.02 The 1977-81 Investment Plan was carefully designed by SRT and jointly reviewed by SRT and the appraisalmission. Compositionand size were tentativelyagreed during appraisal,and subsequentlyfinalized to reflect most recent data changes. The Plan is well justifiedand within SRT's implementationcapabilities. It will be financed jointly by SRT, the Government,the Bank and bilateral sources. During the Plan period, SRT will also strengthenplanning and marketing as an important complement to physical and operationalimprovements. The 1977-81 InvestmentPlan is summarized below, and a year-by-yearbreakdown is given in Tables 14A and 14B.

Summary of SRT 1977-81 InvestmentPlan

Local Foreign Total Local Foreign Total % of total Baht Million ------US$ Million ---- expenditure

Acquisition of motive power and rolling stock 279.96 881.19 1,161.15 13.69 43.09 56.78 50

Track rehabilitation 348.76 365.55 714.31 17.05 17.88 34.93 30

Improvementof tele- communicationand signalling 23.10 81.61 104.72 1.13 3.99 5.12 4

Workshop improvement 35.27 30.92 66.19 1.73 1.51 3.24 3

Other investment items 117.79 - 117.79 5.76 - 5.76 5

Subtotal 804.88 1,359.27 2,164.15 39.36 66.47 105.83 92

Contingencies 115.40 66.84 182.24 5.64 3.27 8.91 8

Total 920.28 1,426.11 2,346.39 45.00 69.74 114.74 100 - 17 -

B. Project Definitionand Loan

3.03 The project consists of the last three years of SRT's 1977-81 In- vestment Plan; its estimated cost, includingcontingencies, is about US$101 million equivalentwith a foreign exchange componentof about US$63 million equivalentor 63%.

3.04 The loan will cover the foreigncurrency cost of: new materials for the productionof passengercoaches; procurementof monoblock concrete ties and of fasteners for two block concrete ties; replacementand strengthenifig of steel bridges; and improvementof telecommunications,signalling and workshops. The remainingforeign currency cost, principallyfor rail and locomotiveswill be financed through Government funds and bilateralsources.

3.05 Cost of the total project and the items included in the loan are summarizedbelow. Details are given in Table 15 and the physical content of the project is described in Table 16.

Project Cost and Loan Summary

Total project cost Local Foreign Total Loan /a ------US$ million…

Acquisition of motive power 6.25 32.44 38.69 -

Acquisition of rolling stock 4.50 6.29 10.79 3.60

Track rehabilitation 13.47 15.82 29.29 4.30

Improvementof tele- communicationand signalling 0.94 3.99 4.93 4.00

Workshop improvement 1.68 1.51 3.19 1.50

Other investment items 5.07 - 5.07 -

Contingencies 5.64 3.28 8.91 3.30

Total 37.55 63.32 100.87 16.70

/a Figures are rounded. - 18 -

C. Project Description

(a) Acquisitionof Motive Power and Rolling Stock

Locomotives

3.06 The project provides for the acquisitionof 30 1,800 hp locomotives. Concurrentlyabout 19 Hitachi locomotives,whose engines can no longer be repaired, will be withdrawn from service. After these locomotivesare retired, SRT will redeploy the existing motive power; of the new locomotives,26 will be utilized on freight and 4 on passenger trains. Table 17 shows the calcula- tion of the number of locomotives required to carry the projected freight traffic. Tables 18 and 19 show how the Hitachi locomotiveswill be replaced and the disposition of all locomotivesin 1981.

Passenger Cars

3.07 SRT's investment program 1977-81 includes the manufacture of 130 passenger cars. Of these, 59 third class coaches, 8 second class sleepers and 12 second class air conditionedcars form part of the project. Some materials procured under the 1972-76 Plan, are already in stock, and the required balance of US$3.6 million will be imported under the project.

3.08 The breakdown of the passenger car acquisitionsin replacements and additions are shown in Table 20. The stock to be retired is old and repairs are not possible without complete rebuilding at the cost of new cars. Table 21 gives the compositionof rolling stock capacity to meet 1977-81 traffic growth. In addition to new car construction,new rolling stock capacity will be generated through redeploymentof cars from surplus districts, and conversion of first and second into third class cars. Acquisitionof second class air conditionedand sleeper coaches included in the project is a means of improving SRT's service quality.

Freight Cars

3.09 The 1977-1981 investment program includes the manufacture of 273 freight cars for handling additional traffic. Of these, 30 oil tank and 73 cement hopper cars are included in the project; in both cases, SRT provides only bogie flat chassis, and the tanks are supplied by the oil and cement companies. Table 22 shows car requirementsfor 1981.

3.10 Because of earlier overbuying,SRT has sufficientmaterials in stock for the manufacture of all freight cars up to 1981, and even thereafter, there will be a small surplus of steel channels,plates and sheets. During 1978, procurement procedureshave been sufficientlystreamlined to safeguard against similar overstockingwhile speedingup procurement.In addition,SRT has agreed to effect any further measures, which may prove necessary, to ensure timely availabilityof material and adequate material control. The ratio of inventoriesto annual material use will be gradually reduced during the project implementationyears. - 19 -

(b) Track Rehabilitation(Table 23; Map 13622)

Rail Replacement

3.11 This project item covers rail replacementor rehabilitationof 919 km of track. Details are given in Table 23. The principal investment benefits are reduced track maintenance and wear of rolling stock and increased track capacity. Two hundred and thirteen km on the southern and 203 km on the northern line will receive new rails. Renewal on the southern line was justifiedunder Loan 898-TH, but deferred to the 1977-81 Plan because of delays due to the diversion of funds for the procurementof rolling stock material and to prolongedprocurement procedures. The new rails have already been ordered and are being financed by the Government.

Sleeper Renewal

3.12 Replacementof deterioratedwooden sleepers to avoid track dete- rioration is a continuousoperation. Because wooden sleepers are becoming increasinglyexpensive and scarce, the project provides for manufacture by SRT of 150,000 two block prestressedconcrete sleepers and purchase of 125,000 monoblock concrete sleepers. The life of concrete sleepers is 40 years as compared to 10 years for wooden sleepers.

Bridge Rehabilitation

3.13 Train speed is severely restrictedon 176 steel bridges which do not have sufficientcarrying capacity to cope with the 13.75 ton axle load of SRT's new diesel locomotivesat the line speed limit. Sixty-nineof the bridges with a combined length of 2,875 meters are included in the 1977-81 InvestmentProgram, and 60 of the bridges form part of the project; the remaining bridges will be strengthenedin the next Plan.

3.14 SRT has 834 timber bridges with speed restrictionsbecause of train safety. Their replacementwith reinforcedconcrete slabs or girders is part of an ongoing program which is carefully coordinatedwith the other elements of track rehabilitationand signalling. The project provides for rehabilitating 118 of the high priority timber bridges with a combined length of 4,482 meters.

Equipment for Track Maintenance

3.15 Seven motor trolleys and 18 trailers will be acquired for quicker movement of track maintenance equipment,material and men.

(c) Improvementof Telecommunicationsand Signalling

Telecommunications

3.16 SRT's telecommunicationssystem, which consists of a carrier telephonenetwork and teleprinterfacilities, is over 20 years old and inadequatefor the growing needs of administrationand train operation. - 20 -

SRT's 300-line telephoneexchange at Bangkok is 25 years old and spare parts are unavailable. Consequently,there are frequentcommunications breakdowns. The project providesfor the installationof a 12-channelcarrier telephone network, 51 sets of teleprinterequipment and a 500-linetelephone exchange at Bangkok, to replace the existing old equipment.

Signalling

3.17 Only 220 of SRT's stationshave mechanicalinterlocking with adequate signalling. On 60 stations (7 on northern and 53 on southern line), interlockingis achieved throughhand-operated key locked points and consequentlytrain operationsare slow and unsafe. Installationof full mechanicalinterlocking at 15 stationsand tokenlessblock instruments and color light signalsat 30 stationsare included in the project. As a result, there will be an average gain of two minutes per station in train passingwhere tokenlessblock instrumentsare installed,and time gains will be even greaterwhere mechanicalinterlocking is introduced.

(d) Workshop Improvement

3.18 This item consistsof (a) reconstructionof the old steam locomotive shop (at Makkasan),dismantled in 1977 because it was unsafe; and (b) procure- ment of two new 25-ton capacity overheadcranes and other essentialequipment for diesel locomotiveoverhaul (Table 24). Investmentsunder (a) and (b) are expected to reduce the time for major locomotiveoverhaul from the present 23 days to 18 days and to improve locomotiveavailability from 81% to 84%.

(e) Other InvestmentItems

3.19 The principalcomponent under this investmentcategory is earth filling for a secondmajor passengerterminal at Bangkok. The existingmain station is used close to capacityand cannot be expanded. The main works on the new terminalwill be undertakenunder the 1982-86Plan. Other, minor investmentitems are installationof barriers at 62 road crossingsas a public safetymeasure, constructionof staff quarters,provision of offices and purchaseof office cars.

D. Cost Estimates

3.20 Project costs (Table 15) are based on estimatedquantities and prices as of June 1978, adjusted for inflationand physical contingencies. Physical contingenciesof 10% were includedfor all items, except for locomotives,and new 80 lb/yd rails (for which contractshave been awarded). Most projectitems (rolling stock manufacture,rail renewals,two block concrete sleepermanufac- ture and bridge rehabilitation)have been undertakenby SRT in the past; costs and quantities,therefore, are well-controlled. Price contingencieshave been included for all items, except new 80 lb/yd rails, locomotives,and material in stock for the manufactureof rolling stock. Assumedannual price increases for local currencyexpenditures are 7.5% in 1978 and 1979, and 7% in 1980 and 1981. - 21 -

For foreign.currency expendituresthe assumed increasesare 6.5% in 1978 and 1979, and 6% in 1980 and 1981. Physical and price contingencieson all items total about 9% of project cost.

E. Financing Plan

3.21 P'roposedfinancing of project cost, estimatedat US$100.9 million equivalent,will be as follows:

Amount including contingencies (US$ million)

IBRD loan 16.7 Bilateralfinancing (locomotives) 32.4 Government 34.2 SRT 17.6

Total 100.9

F. Project Implementation

3.22 SRT will be responsiblefor implementingthe project. Table 25 shows the project execution schedule and Table 26, a detailed procurement plan. Rolling stock will be manufacturedin SRT's workshop with imported material and components;manufacturing costs, including local taxes, will be, on average, about 25% lower than c.i.f. costs of imported stock. Monoblock concrete sleepers will be manufacturedby local contractors, while SRT will produce the two block concrete ties, for which they have adequate productioncapacity and expertise.

G. Action Plan

3.23 Locomotiveand rolling stock requirementsduring the Investment Plan period (1977-1981)are based on traffic forecastsin Tables 8 and 9, and on the followingoperational targets: - 22 -

Actual Forecast (end) 1977 1979 1980 1981

(1) Average availability (%) 1800 hp main line diesel locomotives 82 83 85 85 Other main line diesel locomotives 81 82 83 83 Diesel railcars 93 90/a 91/a 93 Passenger cars 87 90 91 93 Freight cars (box and tank cars) 92.5 93 94 95

(2) Net ton-km per annum of available 1800 hp freight locomotive (million) New acquisitions - - - 65 Existing locomotives 65 65 65 65/b

(3) Locomotive-km per annum per available locomotive (000) Freight service 132 136 140 144 Passenger service 242 245 245 245

(4) Net ton-km per train-km 1800 hp locomotive 400 410 416 422

(5) Passenger car-km per available passenger car per annum (000) 190 195 200 204

(6) Net ton-km per serviceable box car available (4-wheeler equivalent) per annum (000) 395 405 415 424

(7) Net ton-km per serviceable oil tank car available per annum (000) 680 710 750 795

(8) Turnaround of freight cars (days) 7.3 7.1 6.8 6.5

/a Overdue heavy overhauls will be carried out in 1979-80 with an average of three sets always under repair; consequently, railcar availability will decrease in this period.

/b Because of redeployment of locomotives and traffic flows, new 1800 hp locomotives may produce less than 65 million net ton-km p.a.

During negotiations, SRT agreed to draw up an action plan which will be the basis for achieving the operational forecasts indtcated above. Measures to be included in such plan are:

(a) Reduction of locomotive accident rate from actual 6% of tne fleet to less than 3% in 1981 through: - 23 -

(i) strictly enforcing train working regulation;

(ii) training new staff and retrainingpermanent staff on accident prevention;

(iii) increasinginspections of Traffic Department Officers riding trains to control services in line, stations and yards; and

(iv) installing barriers in level crossings that record higher accident frequency following the agreed program (62 grade crossing barriers in the 1979-81 period).

(b) Iiiprovementof service efficiencythrough:

(i) decreasingmixed trains services from 3.6 million km in 1977 to less than 3 million in 1981;

(ii) analyzing factors that influence service efficiencybeginning with trains for major commoditiesand introducingrules that assure sufficientflexibility to modify train formation,time- tables, locomotiverosters so as to adapt services to market fluctuations;and

(iii) improving average speed of passenger and freight trains through the implementationof the track rehabilitationprogram co- ordinatedwith bridge strengthening,signalling and telecommuni- cation improvementin major sections of the northern line.

H. Procurement

3.24 All items to be procured under the loan except monoblock concrete sleepers and associatedmachinery and minor items not exceeding US$5,000 inLvalue each, will be subject to internationalcompetitive bidding (ICB), in accordancewith Bank guidelines. In bid evaluation,Thai equipment manufacturerswill be allowed a preferentialmargin of 15% of c.i.f. cost of competing imports or the relevant prevailinglevel of customs duties, which- ever is lower. Because of high ocean transportcosts, concrete monoblock sleepers will be procured under local competitivebidding proceduresaccept- able to the Bank. Imported machinery and materials required to manufacture these sleepers will be purchased through negotiationwith qualifiedsuppliers to assure quality and safety of the sleepers. Together,loan financingof monoblock sleepers will amount to US$2.2 million. Purchase of minor items not exceeding US$5,000 each and US$250,000in the aggregatewill be carried out in accordancewith local procedures.

I. Disbursements

3.25 Disbursementswill be made on the followingbasis:

(a) 100% of the foreignexchange cost of imported equipment and material; - 24 -

(b) 100% of ex-factory cost of locally manufactured equipment and material if local bidders are successful in ICB; and

(c) 65% of total expenditures for items procured locally.

Bank disbursements are expected to be completed by June 30, 1982. An estimated quarterly schedule of disbursements is given in Table 27.

4. ECONOMIC EVALUATION

A. SRT's Transport Role

4.01 Over the last 20 to 30 years road transport has become the leading mode in Thailand. Its dominance is expected to increase during the 1980s on account of its cost and service characteristics and the continued growth and dispersion of agriculture. Railways (and inland waterways transport) will also continue to expand but at a slower pace. The railway's best prospects are in bulk and trunkline freight traffic. The development of future rail passenger transport is more uncertain in view of the road sectors competitive strength. Until a few years ago, SRT provided monopoly passenger service in several transport corridors, but the competitive situation has since changed. Irrespective, however, of the precise nature of future developments in transport markets, the railway will remain a vital component of Thailand's transport system, and SRT's 1977-81 Investment Plan has been defined on this premise.

4.02 To reduce the uncertainty about future transport markets and to assure a rational service and marketing policy, SRT has agreed to: undertake not later than December 31, 1979, a profitability study of its services; and implement the study's recommendations in agreement with the Bank. The study will include an examination of the profitability of each of the 12 commodities with the largest yearly tonnages by line, distance, class and car and train load transport. The analysis of passenger traffic will distinguish between mixed, ordinary rapid and express trains, and between lines and distances.

B. Evaluation Summary

4.03 The 1977-1981 Investment Plan is well prepared, justified and within SRT's implementation capabilities. About 55% of the Plan focuses on rehabilitation or replacement of assets - track infrastructure, telecommuni- cations, signalling, workshops, rolling stock and locomotives. The remaining 45% of investments are primarily for acquisition of rolling stock and locomotives to accommodate traffic increases. Because of Plan's composition, and the care taken in traffic estimation, the investments are well shielded against potential variations in traffic growth. - 25 -

4.04 Economic returns on the Investment Plan were computed for the fiscal years 1979-81, the project period. All costs used in the economic analysis are financial costs less taxes. The overall return for the evaluated items, representing about 73% of the 1979-81 program (paras. 4.04, 4.07 and 4.08) is 17% with a range of 11 - 64% for major components (Table 28). Traffic projections were discussed earlier and details of the economic evaluation are given below.

C. Evaluation Details

Acquisition of Motive Power and Rolling Stock

4.05 Thirty locomotives will be procured under the project. Eight will replace intermediary locomotives (Table 18), which, in turn, will be shifted to passenger and mixed trains run primarily on branch lines. Since these lines are recognized as uneconomic and the Government is committed to reimburse SRT for losses incurred in their operation, no economic return has been computed for these 8 locomotives. An economic evaluation has been made, however, for the remaining 22 units (paras. 4.05 and 4.06); three of them will replace existing freight haulage capacity, 15 will meet freight and 4 passenger traffic growth.

4.06 Benefits from investments in passenger trains were calculated on projected rail fare receipts and corresponding Long Run Marginal Costs (LRMC). For example, fare receipts are about B 0.14 (1977) per passenger-km on the average, and LRMCare about 70% of fares. Receipts and LRMCvary with travel classes, train categories and services. By comparison, travel charges for ordinary intercity buses are B 0.11 (1977) per passenger-km, and for airconditiorted buses, tariffs are about B 0.20. Bus fares are thought to follow closely bus costs. A twenty year investment life was assumed for the motive power and rolling stock. On the basis of these data, the overall economic returns are 36% for replacement investments in coaches, and 15% for the investments (4 locomotives and rolling stock) to accomodate new traffic. The high ret:urns for replacement investments (coaches) are achieved through the use of existing motive power.

4.07 Calculation of economic returns for investments in freight locomo- tives and wagons was based on a comparison of road and rail haulage costs. Average economic cost of moving freight by rail (1977) is about B 0.24 per ton-km, including capital cost of rolling stock and motive power. Comparative road transport costs about B 0.33 per ton-km, including truck investments. A 20-year life was again assumed for rail investments. For the 3 new replacement locomotives, the rate of return is 20%; for new traffic carrying capacity (15 locomotives and freight wagons), the return is 19%.

Track RehabiLlitation

4.08 Track rehabilitation under the project consists of replacing and reconditioning rails, substitution of concrete for wooden sleepers and the - 26 -

strengtheningor replacementof timber and steel bridges. Investments in new rails on the southern line are carried over from the previous Plan; these were found justifiedunder the Fourth Railway Project and have been excluded fromnthe present economic analysis. Quantified benefits from track rehabilitationare savings in infrastructuremaintenance cost, increased track capacity and faster operationsresulting in reduced rolling stock requirements. Nonquantifiedbenefits, excluded from the calculation,are safer train movements. The overall return is 12%; with returns for the principal componentsin this investmentcategory ranging from 11% to 13%.

Improvementof Telecommunication

4.09 SRT's present telecommunicationsequipment was installed over 20 years ago and has frequent breakdowns. Administrativeaction is often delayed by inadequate communication,and train movements are occasionally hindered. A new telecommunicationssystem, therefore,is amply justified.

Improvementof Signalling

4.10 Introductionof new signallingwill increase operationalsafety and line capacity, resulting in reduced locomotiveand rolling stock requirements. Sections where the new system will be installedpresently carry 30 trains per day; installationwill save about 40 train-hoursper day. Without quantifying increased train safety, the economic return on the investmentis 27%.

Workshop Improvements

4.11 Workshop improvementsconsist of two distinct investments: (a) reconstructionof the central workshop building and installationof new cranes at Makkasan; and (b) purchase of new equipment for overhauling locomotives. Benefits of both (a) and (b) derive from increased availability of locomotives,estimated at about 2% and 1% respectivelyfor the entire fleet. Rates of return are 64% and 48% respectively.

D. SensitivityAnalyses and Project Risks

4.12 Costs of SRT's planned investmentsare unlikely to deviate by more than 10% from estimates for each major investmentcategory. Cost variation, in turn, would have only a minor effect on economic returns. Unit benefits have an expected confidencerange of 10%, except for those benefits derived from investments to increase or maintain freight capacity. in this case, benefits could vary up to 20% or 30%, due to a corresponding variation in road haulage costs; the economic returns, however, would not fall lower than 10%. Thus, a benefit reduction of 20% coupled with a cost increase of 10% is a reasonablemeasure of the project's riskiness. On this basis, the overall return would fall from 17% to 11%, indicatingthat the investmentshave a low risk factor in addition to a good expected return. - 27 -

V. FINANCIALEVALUATION

A. General

5.01 During the 1972-76 period, SRT's operating costs per traffic unit decreased in real terms as a result of improved operations. However,due to insufficienttariff relief, SRT's increasedoperating costs in these years outpaced revenues,with resulting operatingdeficits in each of the fiscal years 1974-76. Further, overbuyingof materials for the constructionof freight/passengercars (para. 5.05) and delayed Governmentsubsidy for operating deficits (para. 5.03) resulted in a rapid deteriorationof SRT's liquiditythereby impairingcurrent operations. More recently,SRT, assisted by tariff increasesand limited wage awards, has returned to profitability. There has also been an improvementin SRT's liquidity as a result of the receipt in 1977/78 of Governmentfunds for past operating deficits. SRT's financialhealth may be further improved through a program of tariff adjust- ments and timely injectionof Governmentfunds as discussed in para. 5.11. The projected cash flow will then be sufficientto service debt, finance current operations,and make a meaningfulcontribution to the Investment Plan. - 28 -

B. Past Financial Performance

5.02 The profit and loss statements for the fiscal years 1974-77, are set forth in Table 13 and summarized below. The financial ratios reflect the earnings of that period:

1974 1975 1976 1977 ------Baht million ------…

Total Operating Revenue 1,088 1,178 1,403 1,567

Less: Working Expenses 1,040 1,280 1,345 1,306 Depreciation 123 135 158 163

Total Operating Expenses 1,163 1,415 1,503 1,469

Operating Surplus (Deficit) (75) (237) (100) 98

Interest Charge 39 65 76 74

Other Revenue/Expenses 31 16 6 -

Net Revenue Surplus (Deficit) (83) (286) (170) 24

Ratios: Operating 107 121 107 94 Times Interest Earned (1.9x) (3.6x) (1.3x) 1.3x Debt Service Coverage 0.6x (0.7x) 0.3x 1.2x Return on Net Fixed Assets (1.2%) (3.6%) (1.5%) 1.5%

Ratios required under Loan 898-TH:

Debt Service Limitation 1.5 1.5 1.5 1.5 Return on Net Fixed Assets 2% 2% 2% 2%

Financial performance in 1974-76 was substantially weaker than the appraisal forecast of the Loan 898, and the returns on fixed assets in use were consistently less than the 2% required under Section 5.05 of the Loan Agreement for Loan 898. SRT's unsatisfactory financial experience in these years can be largely explained by the Government's failure to increase tariffs sufficiently to offset increases in operating expenses. From 1973-75, revenues followed traffic - 29 -

closely, while working expenses increased about 66% due primarily to the impact of inflation, with fuel expense increases of 129% and staff expense increases of 59%. As a result SRT incurred operating deficits in 1974-76. The loss in fiscal year 1976 includes non-recurring costs of certain heavy repairs to passenger coaches. Although the health of SRT's operating finances was substantially restored through the November 1975 tariff increase and limited wage awards, the financial ratios for fiscal 1977 (Tables 13 and 29) need further improvement. Appropriate steps to further strengthen and maintain SRT's financial position are discussed in paras. 5.08 and 5.12.

5.03 Section 43 of the State Railway of Thailand Act of 1951 specifies that the Government will subsidize any annual operating deficit incurred by SRT. However, during the period 1974-76, the aggregate operating deficit as defined by the Act was 412 million Baht, while the matching Government subsidy paid during the period was only 105 million Baht, thereby contributing to SRT's diminishing cash balances (para. 5.05). The aforementioned difference between the operating deficit and the actual subsidy paid is due to a delay of up to two years between the end of a fiscal year and receipt of the Government subsidy. The delay is largely caused by SRT's inability to meet the deadline for submission of operating deficit information to the national budget because of the Government's requirement that such information must first be verified by an audit. Therefore, to expedite compensation for any future operating deficits, the Government has agreed to accept SRT's estimate of operating deficits for the purposes of presentation in the national budget; appropriate adjustments would be made thereafter upon receipt of SRT's year-end audit.

5.04 Tab:Le 30 depicts the impact of inflation on costs and revenues. Working expenses per traffic unit increased nominally from 11.6 satang in 1972 to 15.3 Satang in 1977, but decreased in real terms to 8.8 satang in 1977. The reduction resulted from improved operations due primarily to SRT's transition from steam to diesel motive power, which was one of the main objectives of Loan 898-TH. Average revenue per ton-km and per passenger-km, although enjoy- ing the benef:its of the fiscal 1976 tariff adjustments, decreased in real terms by 38% and 27% respectively over the 1972-77 period.

5.05 Balance sheet data for fiscal years 1974-77 are presented in Table 31 and summarized below: - 30 -

1974 1975 f976 1977 ------Baht million------…---

Current Assets 1,065 848 766 861 Net Fixed Assets 6,318 6,777 6,980 6,962 Investments and Other Assets 915 867 882 904

Total Assets 8,298 8,492 8,628 8,727

Current Liabilities 266 292 371 220 Long-Term Debt 964 1,270 1,304 1,188 Reserves and Other Liabilities 1,047 1,057 1,113 1,160 Net Equity 6,021 5,873 5,840 6,159

Total Liabilitiesand Equity 8,298 8,492 8,628 8,727

Ratios: Liquid 2.Ox 0.7x 0.4x l.lx Current 4.Ox 2.9x 2.1x 3.9x Debt/Equity 14/86 18/82 18/82 16/84

Although the current ratio remained in the satisfactoryrange of 2.1x - 4.0x, the liquidityratio diminished sharply over the 1974-76 period, from 2.Ox to 0.4x, reflecting a deteriorationof the cash account from 391 million Baht in 1974 to 25 million Baht in 1976. (The ratio improved to 1.lx in 1977 as a result of SRT's receipt of Government compensationfor past operating deficits.) The diminution in cash was paralleledby an unhealthygrowth in the material purchasedfor the constructionof freight/passengercars, pri- marily accounted for by procurementdifficulties referred to in para. 3.10. Cash resourceswere further strained by an increase of about 20% in operating inventoriesover the 1974-76period. Steps to ensure appropriatelevels of liquidity through streamliningprocurement procedures, limiting inventories and maintainingadequate minimum cash balances are discussedin paras. 3.10 and 5.11.

5.06 Although SRT's long term debt increasedabout 25% from 1974 to 1977, the debt/equityratio remainedmodest, rising from 14/86 in 1974 to only 16/84 in 1977. The increase in the outstandingdebt was largely due to the drawing down of loans already negotiated,such as Bank Loan 898-TH and loans related to the purchase of locomotives. The total debt outstandingat the end of 1977 is set forth in detail in Table 32 and summarizedbelow: - 31 -

Source of Loan Amount (Baht million)

USAID 16 IBRP loans 387 Exim Bank (Japan) 142 Government and commercial Banks (Germany) 110 Government and commercial Banks (France) 477 GDvernment and commercial Banks (Thailand) 126

Total 1,258

5.07 A detailed cash flow for 1974-76 is presented in Table 29. As shown, insufficienttariff relief over the period prevented SRT from making a contributionto the investment program from its internal resources. Similarly, aggregate net revenues in 1974-76 could only marginally contribute to aggregate debt service. For SRT to have met, on average, the target rate of return of 2% over the period, tariffs would have needed an additional increase of about 22% commencing in fiscal 1974. Such an increase would have allowed SRT to finance approximately 25% of the investment plan from internal resources. The net revenues in 1977, enhanced by the fiscal 1976 tariff increase,covered debt service 1.2x.

C. Assumptions for Financial Projections

5.08 Freight tariffs will be increased by an average of 9.5% (Table 12) as of January 1, 1979. However, if SRT is to achieve an adequate financial position not later than fiscal 1980 as well as generate sufficient funds internally to make a meaningful contributionto the 1977-81 Investment Plan, further tariff increases are essential. The need for tariff increases is reinforced by the requirement that revenues cover marginal costs on grounds of sectoral efficiency. The tariff increases assumed by the Bank in developing the financial forecasts are presented below:

Assumed tariff increases /a Passenger Freight

September 30, 1979 15% 12% September 30, 1980 7% 7% September 30, 1981 5% 5%

/a Forecasts include effect of January 1979 tariff increase.

These tariff increases are meant to be illustrativeof the order of magnitude of rate adjustmentswhich would be required to achieve the agreed annual rates of return in 1980 and thereafter (para. 5.12). The above scheduleof tariffs is strongly dependent upon the traffic and working expense assumptions discussed in para. 5.09. The resulting forecasts which provide a sound financialprofile are set forth in Tables 13, 29 and 31 and discussed in paras. 5.10 -. 5.13. - 32 -

5.09 The methodology, principal bases and other assumptions underlying the forecasts are presented below:

(a) Income Accounts:

(i) Revenues: Passenger revenues are based on the Bank's passenger traffic forecasts (Table 8). Freight revenue projections are based on agreed commodity by commodity traffic forecasts (Table 9). Revenues are computed by applying the average 1977 revenues per ton-km for each commodity and the average 1977 revenues per pass-km. Adjustments are made to include the effect of the proposed tariff increases.

(ii) Working Expenses: Forecasts of working expenses are based on a detailed costing exercise undertaken by SRT with consultative assistance. The study separated major working expense categories into fixed and traffic-dependent costs. Labor costs assume that the staff level will remain unchanged throughout the forecast period. The increase in working expenses in nominal terms has been projected on the basis of an 8% annual inflation in 1979-1982.

(iii) Depreciation is calculated on original cost at 3.3% of the annual value of gross assets, excluding land and rails. The cost of rail replacements is charged to a renewal fund at 2.9% of original cost.

(iv) Interest Charges were projected on the basis of: existing debt, the new Bank loan at 7.35% p.a. (repayable over 20 years, including 5 years grace) and two sources of foreign debt at 2% p.a. and 7.5% p.a. to finance the purchase of locomotives (repayable over 30 years, 10 years grace and 10 years, no grace respectively).

(b) Balance Sheets

(i) Receivables are proportional to freight traffic;

(ii) Inventories which represented approximately two years of "other materials" in 1977 expense are assumed to diminish over the forecast period to 1.6 years of "other materials" expense in 1981; - 33 -

(iii) Accounts payable vary with working expenses; and

(iv) A minimum cash requirementof approximatelyone month of working expenses plus debt service expenses is assumed.

(c) Cash Flow

The cash flow is based on the above assumptionstogether with the schedule of annual Government funding presented in Table 29.

D. Forecast Financial Performance

5.10 The 1978-81 income account forecast is set forth in Table 13 and summarizedbelow:

Estimated Forecast 1978 1979 1980 1981 (Baht million)

Operating Revenues 1,601 1,780 2,119 2,352 Operating Expenses 1,518 1,753 1,931 2,113

Operating Surplus 83 27 188 239

Interest Charge 72 82 90 96 Interest Earned 15 15 11 12

Net Revenue Surplus (Deficit) 26 (40) 109 155

Operating Ratio 95 98 91 90 Times Interest Earned 1.2x 0.3x 2.1x 2.5x Debt Service Coverage 1.1x O.9x 1.7x 1.9x

The financiaLratios which are marginal in 1978 are projected to weaken measurably in 1979 due to an expected increase in salaries and wages of more than 15%; thereafter,following the assumed schedule of tariff increases (para. 5.08), the operating ratio would improve from 98 in 1979 to 90 by 1981; the interest coverage ratio would rise from 0.3x in 1979 to a satis- factory 2.5x in 1981; and the debt service coverage ratio would strengthen from 0.9x in 1979 to l.9x in 1981. SRT has reaffirmedSection 5.04 of the Loan Agreement for Loan 898-TH, which requires SRT not to incur additional debt if its met revenue is less than 1.5 times the maximum debt service requirements. - 34 -

5.11 The estimated balance sheet summaries for 1979-81 are presented in Table 31. The debt/equity ratio remains modest throughout the forecast period. The scheduled investmentof Government funds (Table 29) enables the current ratio and liquid ratio to maintain ample levels in excess of 3.7x and 1.lx respectivelythroughout the forecast period. Thus the forecast current position is favorable,with working capital more than adequate to finance current operations. The Government has agreed to supply sufficient funds to enable the sum of SRT's cash balance and short-termdeposits to be greater than 8% of the prior year's combined working expenses and debt service requirements.

5.12 The rates of return on SRT's average net fixed assets in use as projected by the Bank are 0.4% in fiscal 1979, 2.5% in fiscal 1980, and 3.0% in fiscal 1981. SRT has agreed, in light of its projections,that it shall earn not less than 1% in fiscal 1979, 2.5% in fiscal 1980, and 3.0% thereafter. For purposes of the rate of return computation,net fixed assets are to be defined relative to the existing asset base as presentlyvalued plus subsequent additions. Following SRT's revaluationof assets (para. 2.35), the schedule of required annual rates of return would be appropriatelyadjusted in a manner agreeable to SRT and the Bank. The rate of return of 1% in fiscal 1979 representsa compromisebetween divergent viewpoints of SRT and the Bank. While SRT is confident it will achieve a rate of return well in excess of 1%, the Bank, primarily due to its lower projectionsof passenger traffic combined with its higher working expenses expectations,has forecastedonly 0.4%. The resulting projected shortfall in achieving a 1% return in fiscal 1979 is less than 2.5% of expected revenues. The agreement on a 1% rate of return in 1979 respects SRT's confidence in its capability to attract addi- tional traffic and to limit expenses. Should SRT's projectionsprove optimis- tic as fiscal 1979 evolves, SRT is committed to undertake all measures, including the adjustmentof tariffs, necessary to achieve the agreed 1% annual rate of return in 1979. Also, to assist in attaining the target rates of return, SRT has agreed to carry out an annual review of its tariffs commencing in fiscal 1979 and to submit such reviews for the Bank's informationand comments. Further, the Governmenthas reaffirmed Section 3.03 of the Guarantee Agreement of Loan 898-TH, which requires it to take all necessary action to set and maintain tariffs at appropriatelevels. The agreed rates of return reflect a balance between the Government'spolicy of inflation control and SRT's requirement for an adequate cash flow (para. 5.13).

5.13 Overall, the projected cash position of SRT is healthy. A detailed cash flow for the 1977-1981 period is presented in Table 29 and summarized below: - 35 -

(Baht million) %

Cash Required

Proposed Investment (1977-81) 2,284 Increase in Cash Balance 190 Increase in Working Capital 303 Payment to SpiecialFunds 8

2,785 100

Cash Available

Internally Generated Cash 1,765 Less: Debt Siervice 1,137 Internal Cash Available for Investment 628 23 Loans 1,022 37 Government Funds 135 40

2,785 100

According to the financing plan for 1977-81, SRT would be able to finance a satisfactory 23% of its investment from internallygenerated funds. Most of the net cash 'willbe generated in the final two years of the Plan (Table 29) as SRT's earning power improves; during the early years (fiscal 1977-79), SRT will contributeonly modestly (10%) to the 1977-79 investmentcost and will rely heavily on government funds (56%) and foreign borrowing (34%). The adequacy of SRT's cash flow is based on the assumption that its capital expenditureswill not exceed the planned program. Accordingly,SRT has agreed to limit its capital expenditureson items outside the InvestmentPlan to within 20 million Baht annually. - 36 -

E. Sensitivity Analysis and Financial Risks

5.14 The financial projections were tested for sensitivity to changes in the values of these key variables: freight/passenger traffic, staff size, inventory levels, and tariffs (timing and levels). The various alternatives are defined below. In each of the alternatives, a single variable has been altered from the base case assumptions with all other factors remaining unchanged. The changes in the key variables examined do not represent expected deviations from forecast levels and are used only for the purpose of the sensitivity exercise.

Alternative 1: 50% reduction in freight traffic growth over the 1979-81 period;

Alternative 2: Passenger traffic is assumed to remain constant at the 1978 level (base case assumption: 3% p.a. growth rate);

Alternative 3: Labor force growth rate of 1.0% p.a. in 1979-81 (base case assumption: staff level remains unchanged);

Alternative 4: Inventory levels rise from the 1977 level of about two years to 2.5 years of "other materials" in 1981 (base case assumption: steady decline to 1.6 years of "other materials" in 1981);

Alternative 5: Freight tariffs are not increased in fiscal 1980; tariffs for fiscal 1981 are as presented in para. 5.08; passenger tariffs are increased by 10% on September 30, 1979 (base case assumption: freight tariff increase of 12%; passenger tariff increase of 15%); and

Alternative 6: Six month delay in each year in effective date of assumed tariff increases (para. 5.08).

The effect of these alternatives on cash requirements is illustrated in tabular form below:

Total 1979 1980 1981 1979-81 ------Baht million------

Additional Government Funds Needed Over Base Case

Alternative 1 17 40 66 123 Alternative 2 22 42 63 127 Alternative 3 9 19 33 61 Alternative 4 117 149 180 446 Alternative 5 - 153 167 320 Alternative 6 - 119 72 191 - 37 -

The foregoing analysis indicates that under Alternatives1-3, SRT would still be able to service debt and make a significantcontribution to the Investment Plan. However, expanding inventories as described in Alternative 4 could pose an excessive drain on SRT's resources, reinforcing the need for SRT to control inventory levels over the Plan period. Alternatives5 and 6 emphasize the importanceof adequate tariff action.

VI. AGREEMENTSAND RECOMMENDATIONS

6.01 Under agreements reached with the Bank at negotiations, SRT will, inter alia:

(a) in reaffirmationof Section 3.05(b) of the Loan Agreement of Loan 898-TH, make arrangementswith the Government for adequate compensationfor operating uneconomic branch lines; and complete the analysis of all uneconomic branch lines by the end of fiscal 1979 (paras. 2.36 and 2.37);

(b) revalue its assets not later than March 31, 1980 and every four yeairsthereafter (para. 2.35); and

(c) take all required measures, including tariff adjustments,to earn an annual return on net fixed assets of not less than 1% in fiscal 19793,2.5% in fiscal 1980 and 3% thereafter (para. 5.12).

6.02 Undtsragreements reached with the Bank at negotiations,the Govern- ment will:

(a) take all necessary measures under which SRT will be promptly reimbursed for branch line losses (para. 2.36);

(b) supply sufficient funds to allow the sum of SRT's cash balance and short term deposits to be no less than 8% of the prior year's combined working expenses and debt service requirements(para. 5.1L); and

(c) enable SRT to meet its rate of return requirements(para. 5.12);

6.03 The project is suitable for a Bank loan of US$16.7 million equivalent to SRT for a l:ermof 20 years, including a grace period of 5 years. - 38 - ANNEX 1 Page 1

THAILAND

FIFTH RAILWAY PROJECT

Past Bank Group-Financed Transport Projects

1.01 The Bank Group has financed 13 previous transportation projects in Thailand. Four loans have been for railways: 35-TH, signed in October 1950, for US$3 million (First); 128-TH, signed in August 1955, for US$12 million (Second); 280-TH, signed in April 1961, for US$22 million (Third) and 898-TH, signed in June 1973, for US$15 million (Fourth). There have been three loans for ports: 37-TH, signed in October 1950, for US$4.4 million (First); 151-TH, signed in October 1956, for US$3.4 million (Second); and 702-TH, signed in August 1970, for US$12.5 million (Third). The six highway loans were: 341-TH, signed in June 1963, for US$35 million, (First); 455-TH, signed in June 1966, for US$36 million (Second); 535-TH, signed in May 1968, for US$29 million (Third); 626-TH, signed in June 1969,, for US$23 million (Fourth); 870-TH, signed in December 1972, for US$28.6 million (Fifth); and 1619-TH, signed in March 1978, for US$110 million (Sixth).

1.02 All four railway projects were completed satisfactorily, but about US$7.5 million of the loan amount for the Third Project was cancelled in respect of equipment which the Borrower preferred to purchase through proced- ures which did not conform to the Bank Group Guidelines. The first two port projects were completed on schedule, and the third project was completed in May 1976, over two years behind schedule largely because of delays in awarding civil works contracts.

1.03 The first four highway projects were satisfactorily completed and with substantial savings in cost compared with the estimates. In the case of the First Highway Project about US$13.1 million of the loan amount was cancelled at the Government's request when some road sections were removed from the project. On the Second Highway Project US$4.9 million was cancelled as most of the contingency allowances were not needed; however, the closing date was extended 22 months as construction of some road sections and detailed engineering of one road took longer than scheduled. On the Third Highway Project US$6.1 million was cancelled as the bid prices were substan- tially lower than estimated, probably because of intense competition among contractors at the time; the closing date was extended by six months mainly because of construction delay on one road section caused by flood. On the Fourth Highway Project, US$6.2 million was cancelled, again because of low bid prices and general price stability prior to the bidding and while most of the construction was carried out; however, the closing date was extended by 21 months to complete work on one road where construction conditions were exceptionally difficult. On the Fifth Highway Project, the bid prices, and contracts awarded in late 1971 through mid-1973, were in line with the cost estimates. However, the sharp price rise for petroleum products in 1973-75, accompanied by general inflation, led to disputes with the contractors and a virtual stoppage of work over several months. The Government eventually offered increased payments to partially offset higher costs of the alterna- tive of terminating the contracts. The offer was accepted on three contracts, - 39- ANNEX 1 Page 2

while on four contracts the contractorselected to terminate. The remaining two contracts had already been completed at that time. Rebidding produced relativelylittle interest from foreign firms, and new contracts for the uncompleted wor7-swere awarded to domestic firms, at approximatelydouble the original prices. As a result, there will be a cost overrun of about 30% on the entire project. The project is now expected to be completed by about mid-1979 with a delay of about 18 months. The Sixth Highway Project became effective in June 1978, and constructionworks, the main project component, are in progress on 8 of the 11 project roads. - 40 -

ANNEX 2

THAILAND

FIFTH RAILWAY PROJECT

Selected Documents and Data Available in the Project File

A. Recent Reports and Studies

A-1 Report by CPCS on the final stages of dieselization of SRT (1974).

A-2 Follow-up report by CPCS on Selected Topics (1977).

B. Working Papers

B-1 Unit prices for project items.

B-2 Back-up documentation for economic analysis of project items (including benefit and cost streams). 41 -

Table 1

THAILAND

FIFTH RAILWAY PROJECT

Estimated and Projected Public Passenger Traffic for 1976-91

Share of Year Rail /a Road (bus) /b Total roads (x)

A. Passengers (million)

1976 57 1981 63 1986 70 1991 77

B. Passenger-km(million)

1976 5,600 33,300 38,900 86 1981 6,200 36,800 43,000 1986 6,800 40,600 47,400 1991 7,500 44,800 52,300 86

/a 1976 figures are actuals. Assumed growth rate from 1976 onward were 2% p.a.

/b Bus traffic projectionswere based on conservativegrowth rate of 2% p.a. Actual rates are likely to be higher.

Source: Thailand - Outline of a Transport DevelopmentPlan for 1977-91 (World Bank Draft), March 1978.

December 1978 - 42 - Table 2

THAILAND

FIFTH RAILWAY PROJECT

Estimated and Projected Freight Traffic by Modes for 1968-91

Inland Share of Year Rail /a Road waterways Total roads (%)

A. Tons (million)

1968 5.0 13.5 8.0 26.5 51 1973 5.0 25.0 8.0 38.0 66 1976 5.4 37.0 8.5 50.9 73 1981 7.1 59.4 - 66.4 8.5 75.0 - 82.0 79 - 81 1986 9.1 90.9 - 112.9 10.0 110.0 - 132.0 83 - 86 1991 11.6 138.9 - 189.9 11.5 162.0 - 213.0 86 - 89

B. Ton-km (million)

1968 2,000 3,500 1,300 6,800 51 1973 2,000 6,500 1,300 9,800 66 1976 2,500 9,700 1,400 13,600 71 1981 3,400 15,200 - 17,100 1,400 20,000 - 21,900 76 - 78 1986 4,300 23,400 - 29,300 1,700 29,400 - 35,300 80 - 83 1991 5,500 35,600 - 49,300 2,000 43,100 - 56,800 83 - 87

/a 1968-1976 figurs are actuals. Assumed growth rates thereafter were about 5% p.a. on the average.

Source: Thailand - Outline of a Transport Development Plan for 1977-91 (World Bank Draft), March 1978

December 1978 - 43 -

Table 3

THAILAND

FIFTH RAILWAY PROJECT

Public Transport Investmentsduring the Third and Fourth Five-YearDevelopment Plans (US$ million)

Third Fourth DevelopmentPlan DevelopmentPlan Mode 1972-76 1977-81

Roads National 402 435 Provincial 333 553 Local 78 105

Subtotal 813 1,093

Railways 121 193

Inland waterways& ports 45 79

Civil aviation (incl airports) 44 140

Total 1,023 1,505

Transport as percentage of developmenitexpenditures 20 12

Source: Departmentof Highways,Thailand.

December 1978 - 44 -

Table 4

THAILAND

FIFTH RAILWAY PROJECT

Estimated Investment Requirements for Transport Infrastructure in 1977-91 (US$ million at 1977 prices)

Annual Mode 1977-81 1982-86 1987-91 1977-91 Average

Rail 120 150 130 400 27

Roads

(a) Tertiary 250 250 250 750 50 (b) National and pro- vincial

(i) Upgrading 1,250 1,250 1,250 3,750 200 (ii) Rehabilitation 200 200 200 600 40

Subtotal Roads 1,700 1,700 1,700 5,100 340

Inland Waterways 15 20 5 40 3

Sea Ports

(a) Primary (deep-sea) 75 125 100 300 20 (b) Secondary (coastal) 10 20 20 50 3

Subtotal Sea Ports 85 145 120 350 23

Overall Total 1,920 2,015 1,955 5,890 393

Source: Thailand - Outline of a Transport Development Plan for 1977-91 (World Bank Draft), March 1978.

December 1978 45 - Table 5

TRAILAND

FIFTH RAILWAYPROJECT

SRT Track and Infrastructure - Details as on September 30. 1977 (Meter - Gauge Lines)

M1ini. Total Route Maximum curve curve Maximum Maximum Sleeper type Line length gradient radius length axle load speed Wood Concrete Remarks (ka) (Z) (a) (km) (tons) (km/hr) (S) (1)

I. Northern Line A. Main Line 1. Bangkok-Ban Phechi 90 0.6 600 6 15 80 98 2 Double track. 2. Ban Phachi-Sila At 398 0.83 300 22 15 80 71 29 3. Sila At-Chiang Kai 263 0.60 180 77 15 80 99.9 0.5

B. Branch Line 1. Ban Dara-Sawankhalok 29 0.5 400 5 15 55 100 -

II. Eastern Line A. Main Line 1. Bangkok-Aranyaprathet 255 1.00 400 7 15 80 99.9 0.1

B. Branch Line 1. Makkasan-Mae Nam 5 0.6 600 1 15 50 100 -

III. Northeastern Line A. Main Line 1. Ban Phachi-Kaerg Kai 35 0.7 700 3 15 80 100 - 2. Kaeng Koi-Bua lai 250 1.24 400 41 15 80 100 - 3. Eaeng Itoi-Nakorn Ratchasima 139 2.40 200 24 15 80 100 - 4. Nakorn Ratchasima-Ubon Ratchathani 311 1.00 900 7 15 80 100 - 5. Thanon Chira-Ncrng Khai 358 1.02 300 26 15 80 100 -

IV. Southern Line A Main Line 1. Bang Sue-Taling Chan 15 0.55 400 3 15 70 94 6 2. Thon Buri-Thung Song 756 1.00 300 70 15 70 95 5 3. Thung Song-Hat Yai 172 1.95 300 17 15 70 76 24 4. Hat Yai-Sungai Kolok 214 1.48 500 29 15 70 48 52 5. Hat Yai-Padang Besar 45 1.00 800 6 15 80 - 100

B. Branch Line 1. Suphan Buri 77 0.3 500 4 15 50 100 - 2. Kanchana Buri 130 3.20 160 27 15 60 100 - 3. Rhiri Ratthanilom 31 1.00 1,000 3 15 60 100 - 4. Kantang 93 1.00 500 14 15 60 100 - 5. Nakhon Si Thamsarat 35 0.7 400 3 15 60 100 - 6. Songkhla (Closed as of Jul.78) 29 1.00 800 4 15 60 100 -

V. Maeklong Line 67 0.5 400 5 15 60 100 - Total 3,797

Source: SRT and Bank Staff.

December 1978 - 465 - Table 6

THAILAND

FIFTH RAILWAYPROJECT

Rails in Keter Gauge Line tracks /a (End of 1977)

weight (lb/) yRailand age (years) 80 Ib/y 74-75_Ib/ 70 lb/y 60 lb/y 0l/ leos than less than more than more than Grand Years 10 21-30 10 11-20 21-30 Total 11-20 21-30 30 Total 30 Total

I. Northern Line A. Main Line 1. Bangkok-ban Phachi 4 - - - 176 176 - - _180 2. Ban Phachi-Sila At - - - 308 90 398 - - _ _ _ 398 3. Sila At-Chiang Mai - - - 263 - 263 - - - - - 263

S. Branch Line 1. Ban Dara-Sawankhalok ------29

II. Eastern Line A. Main Line 1. Bangkok-Aranyaprathet - - 61 - - 61 - 100 - 100 94 255

S. Branch Line 1. Makkasan-Mae Narn - - - 5 - 5 - - - - 5

III. lortheastern Line A. Main Line 1. Ban Phachi-Kaeng Koi 35 ------35 2. Kaeng Koi-8ua Yai - - - 250 - 250 - - - - - 250 3. Kaeng Koi-Nakorn Ratchasima 66 - - 16 - 73 - - - - - 139 4. Nakorn Ratchasima-Ubon - - - 311 - 311 - - - - - 311 Ratchathani 5. Thanon Chira-Nong Khai - - - 303 55 358 - - - - - 358

IV. Southern Line A. Main Line 1. Bang Sue-Taling Chan - - - 15 - 15 - - - - 15 2. Thon Ruri-Thung Song - - 42 502 - 544 - - 212 212 - 756 3. Thung Song-Rat Yai 73 - - 99 - 99- 172 4. Hat Yai-Sungai Kolok 214 - - - - - 214 5. Hat Yai-Padang Baser - - - 45 - 45 - - - - -45

B. Branch Line 1. Suphan Buri ------77 - 77 - 77 2. Kanchana Buri - 130 -- - - 130 3. Khiri Ratthanikom ------31 - - 31 - jl 4. Kantang ------93 93 5. Nakhon Si Thaarat - 35 ------.35 6. Songkhla (closed as of July '78) ------24 24 5 29

V. Kaeklong Line ------33 - 33 34 o7

Total 392 165 160 2,117 321 2,598 31 210 236 477 255 3.887

Ia Quantities in track-km.

Source: SRT and Bank Staff.

December 1978 - 47 - Table 7

TNAILAiD

FIFTH RAILWAYPROJECT

Inventory of SRT Motive Power and Rolling Stock as of September 30. 1977 /a

Steam locomotives Diesel locomotives Diesel railcars Passenger cars Freight care Mainline Shunting Mainline Shunting Powered Trailers 4-wheelers Bogies 4-wheelers llg.

Total in fleet (on book) Units serviceable 39 - 203 40 53 49 7 1,045 6,621 2,t

Subtotal 39 _ 165 32 50 47 6 911 5 699 2,4

Percentage 100 - 81 80 94 96 86 87 86

Out of service Under repair - - 26 5 3 2 - 91 326 1] Awaicing repair - - 12 3 - - - 9 84 Awaiting scrapping at Kakkasan workshop - - - - - 1 34 512 4

Subtotal - - 38 8 3 2 1 134 922 19

Percentage - - 19 20 6 4 14 13 14

Condition Good - - 54 - - - - 504 551 1.19; Fair 39 - 109 33 46 42 - 495 4,U45 1,352 Poor - - 40 7 7 7 7 46 2,025 97 Age Steam locos less than 20 years Between 21 and 25 years - Between 26 and 30 years 29 Over 31 years 10

Diesel locos Lass than 5 years 54 Between 6 and 10 years 31 - Between 11 and 15 years 78 5 Between 16 and 20 years 25 - Over 21 years 15 35

Diesel railcars Less than 5 years Between 6 and 10 years 46 42 Over 11 years 7 7

Passenger and freight cars lAss than 10 years - 499 552 1.197 Between 11 and 20 years 1 211 2,U71 998 Between 21 and 30 years 2 289 1,974 329 Between 31 and 40 years - 6 799 25 Over 41 years 4 40 1,226 97

Carrying capacity of freighic cars Less than 10 tons 421 1 Between 11 and 13.5 tons 4,137 - Between 14 and 19 tons 2.063 1,060 Between 20 to 25 tons - 356 Over 26 tons - 1,229

/a Excluding Mae Elong Line.

Source: SRT and Bank Staff.

December 1978 - 48 -

Table 8

THAILAND

FIFTH RAILWAY PROJECT

SRT Passenger Traffic from 1967-81 /a

Passengers (million) Passenger-km(million) Year Class I-II Class III Total Class I-II Class III Total

1967 550 3,064 3,614 1972 1.1 50.9 52.0 554 3,858 4,412 1973 1.1 54.4 55.5 570 4,124 4,694 1974 1.1 60.3 61.4 594 4,782 5,376 1975 1.1 60.5 61.6 618 5,022 5,640 1976 1.1 56.1 57.2 658 4,970 5,628 1977 1.1 56.9 58.0 600 5,050 5,650 1978/b 1.2 57.9 59.1 650 5,450 6,100 1979 1.3 60.5 61.8 675 5,700 6,375 1980 1.3 62.3 63.6 700 5,870 6,570 1981 1.3 64.2 65.5 720 6,040 6,760

/a Actuals for 1967 and 1972-78, projections for 1979-81.

/b Breakdown of number of passengers into classes according to 1977 ratio. Passenger-kmbased on 11-months actuals.

Growth rates for all type of traffics: 4.5% p.a. for 1978-79 3% p.a. for 1979-81. Average distance travelled (1977): Class I-II: 496 km Class III: 89 km Average: 98 km

Source: SRT and Bank staff.

December 1978 THAILAND

FIFTH RAILWAY PROJECT

SRT Freight Traffic (CL) by Comodities for 1972-81 (Actuals for 1972-78, forecast for 1979-81)

T 0 N S ('000) T 0 N - K I L 0 M E T E R S ('000.) 97 Commoditiese 1 2 1973 1974 1975 1976 1977 1..7.. . 979 980 ;981 1972 1973 1974 1975 :976 1977? 978/a !979 1980 1981

Petroleum products 1,465 1,468 1,080 1,188 1,203 1,324 1,327 1.452 1,542 1,657 783,462 758,626 595,549 620,371 594,340 646,788 655,172 732,205 778,968 930,969 Cement 918 955 883 852 1,026 1,456 1,465 1,784 1,847 2,578 297,612 252,449 210,702 206,908 208,735 326,254 295,881 410,094 434,084 445,500 Marl 594 555 553 583 447 551 553 500 500 500 61,716 59,829 61,458 63,873 52,253 58,824 61,135 55,000 55,000 55,000 Gypsum 74 76 152 119 94 153 242 258 267 309 17,698 17,519 39,678 31,890 20,887 38,705 60,696 61,920 64,080 75,216 Lignite - - 34 82 83 68 15 - - - - - 20,552 50,354 50,487 41,632 8,936 - - - Kanganese 8 8 11 11 32 51 53 50 50 50 4,504 4,702 8,501 7,762 24,328 38,184 40,697 37,000 37,000 37,000 Fluorspar 140 103 103 78 45 94 97 120 120 120 100,334 73,593 75,768 58,434 34,116 69,105 63,129 88,200 88,200 88,200 Barite - - 1 19 13 12 9 13 13 13 - - 988 11,739 8,161 6,482 5,494 8,161 8,161 8,161 Metalwares 27 26 30 22 30 35 23 36 38 40 9,917 8,121 13,662 15,130 19,745 18,971 21,570 23,220 24,510 25,800 Vehicle & parts 18 16 17 16 17 17 13 19 20 21 10,694 11,157 11,903 10,420 11,110 12,525 9,479 12,635 13,300 13,965 Construction materials 53 48 51 63 80 67 48 101 109 118 27,794 24,706 27,180 37,285 44,098 40,392 32,001 55,550 59,950 64,900 Household effects 20 29 32 32 22 39 38 48 49 50 13,744 23,655 24,241 24,470 16,730 29,054 25,131 35,520 36,260 37,000 Beverage 7 14 16 17 21 23 44 28 31 34 5,332 10,860 13,336 13,420 16,607 19,593 31,391 22,400 24,800 27,200 Sugar 13 7 20 45 67 75 85 86 92 98 7,656 5,076 16,037 39,408 55,485 59,610 71,552 68,800 73,600 78,400 Rice products 454 272 424 473 470 569 328 563 580 597 264,309 163,963 287,113 361,646 374,986 428,549 258,134 427,880 440,800 453,720 Maize 215 132 213 136 190 192 104 215 230 245 105,750 85,224 126,615 95,834 158,141 157,058 106,372 163,400 174,800 186,200 Lumber & logs 272 254 289 281 316 369 226 240 250 250 164,599 150,922 176,079 169,513 183,753 216,898 136,326 140,880 146,750 146,750 Jute & kenaf 39 28 56 23 19 11 7 20 20 20 21,324 14,525 30,102 11,443 8,916 5,162 3,390 9,300 9,300 9,300 Rubber 39 55 75 52 63 80 73 80 85 90 20,640 27,635 35,168 26,441 27,350 30,970 28,609 32,000 34,000 36,000 Coconut 36 48 47 38 55 53 49 66 69 72 29,562 39,946 39,107 30,289 45,218 44,142 34,899 54,780 57,270 59,760 Garden products 47 45 94 49 55 54 41 64 67 70 32,248 36,340 82,580 45,339 54,431 52,381 41,387 63,360 66,330 69,300 Nuts 10 11 14 12 16 33 28 19 20 21 5,827 7,132 11,372 10,893 16,562 29,679 26,233 19,380 20,400 21,420 Charcoal 64 35 38 51 41 35 35 35 35 35 34,743 21,474 17,810 22,750 18,117 15,713 15,473 15,400 15,400 15,400 Salt 17 17 47 61 68 48 38 56 59 62 11,744 12,006 36,759 47,825 41,458 35,310 27,223 41,440 43,660 45,880 Fertilizer 60 66 59 60 37 42 48 55 55 55 21,608 20,084 24,125 28,486 18,683 20,997 28,970 28,050 28,050 28,050 Fish products 37 39 50 32 36 53 50 57 59 61 25,632 27,854 33,459 24,646 26,454 38,238 34,568 43,840 44,840 46,360 Livestock 19 19 15 11 28 41 47 30 30 30 7,792 8,384 5,175 3,879 9,036 13,152 15,907 9,600 9,600 9,600 Military effects 100 86 77 54 62 63 57 93 96 99 32,011 28,588 28,045 21,894 25,041 27,076 24,885 37,200 38,400 39,600 Freight forwarder's goods 89 130 145 185 241 255 189 279 293 308 47,301 98,900 108,945 139,732 189,975 198,330 160,296 217,620 228,540 240,240 Miscellaneous 173 161 209 174 279 279 294 273 287 301 77,264 77,467 134,344 121,190 149,381 192,221 206,574 188,370 198,030 207,690

Total 4,988 4,703 4,835 4,819 5,156 6,142 5,630 6,640 6a90 7,904 2,242,817 2,069,737 2,296,353 2,353,264 2,504,584 2,911,995 2,531,510 3,103,205 3,254,083 3,502,581

/a II-months actuals. Estimated 1978 traffic is about 6.2 million tons and 2,800 million ton-km.

Source: SRT and Bank Staff. December 1978 - 50 - Table 10

THAILAND

FIFTH RAILWAY PROJECT

Selected Operating Statistics 1972-77

1972 1973 1974 1975 1976 1977

System Total route (km) 3,765 3,765 3,765 3,765 3,765 3,765 Total staff 34,000 33,000 32,000 30,000 31,000 29,900

Traffic Passengers - total (M) 51.9 55.5 61.4 61.6 57.2 58.0 Metropolitan (M) 4.5 4.8 5.1 5.0 5.9 6.3 Nonmetropolitan (M) 47.4 50.7 56.3 56.6 51.3 52.0 Total passenger-km (M) 4,412 4,694 5,376 5,640 5,628 5,649 Average journey (km) 85 85 88 92 98 98 Net paying tons (M) 5.2 5.0 4.9 4.8 5.2 6.1 Net paying ton-km (M) 2,410 2,231 2,332 2356 2,507 2,923 Average haul (km) 463 446 476 491 482 479 Total gross ton-km (M) 10,320 10,084 10,920 11,366 11,519 12,203 Loaded freight car km (M)(1) 194.02 179.08 176.44 176.48 168.20 156.70 Empty freight car-km (M) 134.60 121.38 112.09 129.41 121.03 119.15 Traffic units (Pass-km & 6,928 6,910 7,817 8,132 7,974 8,670 NT km)(M)

Traffic Density Pass-km/route km (M) 1.2 12.0 1.4 1.5 1.5 1.5 Freight - net ton-km/ route km (M) 0.6 0.6 0.6 0.6 0.7 0.8

Operations Train-km (M) Passengers 16.2 16.8 17.0 17.8 18.3 18.5 Freight 10.7 9.9 9.3 9.4 9.6 10.2 Total 26.9 26.7 26.8 27.2 27.9 28.7 Loco-km (M)(2) Steam 7.3 7.2 7.5 4.0 0.8 0.08 Diesel 26.2 25.8 25.4 28.5 31.2 26.0 Diesel/loco-day available (mainline) 437 465 467 345 396 431 Railcar-km/railcar- day available 436 402 422 449 423 467

Operating Efficiency Gross ton-km/train-km (freight) 414 413 445 463 457 600 Net ton-km/train-km 265 265 283 311 332 335 Net ton-km/loaded car-km 12.4 12.5 12.5 12.4 12.9 12.95 Freight car-km (4-wheel equiv/day) 106 93 85 89 86 85 Net ton-km/freight car available (4-wheel equiv '000 p.a.) 251 223 237 239 262 302 Car turnaround time (days) 7.6 8.3 8.8 9.0 8.4 7.3 Average speed (km/h) frt train 26 29 29 30 31 33 Pass-vehicle-km/vehicle-day available (bogie equiv/km) 457 463 478 530 588 598 Pass-km/train-km (persons) 324 330 373 381 358 350 Traffic units-employee ('000) 201 207 237 275 266 287

Availability (%) Diesel locomotives 84 78 69 74 81 81 Diesel railcars 89 87 88 86 90 93 Freight cars 89 86 83 84 87 92.5 Passenger cars 89 86 83 84 87 87

(1) Excluding less than car load car-km.

(2) Excluding shunting and work trains.

Source: SRT & Bank Staff.

December 1978 - 51 - Table 11

THAILAND

FIFTH RAILWAY PROJECT

SRT Passenger Tariffs

Old Fares (Satang per km.) Present Fares (Satang per km.) (effective from Feb. 15, 1955) (effective from Nov. 20, 1975)

kn Class 3 2 1 km class 3 2 1

1-250 10 20 40 1-100 15 26 45

251-500 9 ;£ 36 101-200 12 23 41

500+ 8 16 32 201-300 10 20 38

301+ 9 18 36

Percentage of Increase of Actual Fares

Distance of Travel % Increase

(km.) 3 2 1

100 50 30 12

150 40 25 9

200 35 22 8

250 28 18 5

300 25 17 5

400 20 13 4

500 16 11 3

Source: SRT

December 1978 - 52 -

Table 12

THAILAND

FIFTH RAILWAY PROJECT

SRT Freight Tariffs (Car-load Rates)

Rates Effective June 1, 1952 (Satang per ton-km) km Class 2 3 4 5 6 7 8

1-100 35 33 28 21 18 18 13 101-200 30 24 20 18 15 12 13 201-400 20 15 12 12 10 9 13 401-600 15 12 10 10 9 8 13 600+ 12 11 9 9 8 7 13

Rates Effective October 1, 1975 (Satang per ton-km)

km Class 2 3 4 5 6

1-100 38 33 28 25 24 101-200 31 29 23 21 20 201-400 25 23 19 17 16 401-600 20 18 15 13 13 600+ 19 17 14 12 12

Rates Effective January 1, 1979 (Satang per ton-km)

km Class 3 4 5

1-100 35 29 26 101-200 30 25 22 201-400 25 21 19 401-600 21 18 16 600+ 21 17 16

Source: SRT

December 1978 THAILAND

FIFSm RAli--AY PKuJEUT

SRT Income Accounts: 1974-82 (Baht Million)

Actual Estimated Forecast 1974 1975 1976 1977 1978 1979 1980 1981 1982 Operating Revenues

Passenger 627 678 780 845 908 942 1,110 1,216 1,306 Freight 401 430 543 619 589 728 889 1,011 1,100 Other 60 70 80 103 104 110 120 125 130 Total Operating Revenue 1,088 1,178 1,403 1,567 1,601 1,780 2,119 2,352 2,536 Operating Expenses

Salaries and Wages 631 754 752 765 786 920 994 1,073 1,159 Fuel 190 227 201 225 236 255 286 324 362 Other Materials 219 299 392 316 325 390 442 495 547 Total Working Expenses 1,040 1,280 1,345 1,306 1,347 1,565 1,722 1,892 2,068 Depreciation 123 135 158 163 171 188 209 221 228 Total Operating Expenses 1,163 1,415 1,503 1,469 1,518 1,753 1,931 2,113 2,296

Operating Surplus (Deficit) (75) (237) (100)/a 98 83 27 188 239 240

Interest Earned - - - - 15 15 11 12 20 Interest Charge 39 65 76 74 72 82 90 96 92

Other Revenue/Expenses 31 16 6 ------

Net Revenue Surplus (Deficit) (83) (286) (170) 24 26 (40) 109 155 168

Ratios: Operating 107 121 107 94 95 98 91 90 91 Times Interest Earned (1.9x) (3.6x) (1.3x) 1.3x 1.2x 0.3x 2.lx 2.5x 2.6x

/a Includes non-recurring expense of approximately 90 million Baht

Source: SRT and Bank Staff

December 1978 TAILA4I)

STAFF APPRAISAL REPORT

FPFTH RILWAY POJIECT

IRT Ina at.nt Plan. 1971-81

_ _ _ _. _ . . ______1977 1978 1979 _9_1980 . local FertIleD Tonal Loyal PotIgo3 Total Local Foreignt Total Local Ponalg Total Local Foreign Total Local Forelgt ------*b.t------Total Local Foreign Tatai ----- US do1l------B.ht ------B.htf ------D.ht ------8i L-s ------AhtI ------

1. Acoolsltloo of Ratios Poaea and UHlIR Stank Laoneotloet 1.1 (30) 111.600 634.300 745.900 5.457 31.017 16.474 - - - 0.100 - 0.100 0.260 403.000 401.260 111.141 233.300 344.540 - - 1.: pot otloeole 16.270 29.030 45.300 0.796 1.420 2.216 - Sp. gfrL aat ( 1114.5361 ------1~6.170 29.030 135.427 240.395R 5.600 6.622 12.222 10.650 11.669 22.319 26.793 28.443 45.300- 55.236 24.494 30.540 55.034 19.901 29.139 45.030 32.693 39.646 72.339 1.4 Frtlgt cart (273) 37.556 82.432 119.988 1.836 4.031 5.867 6.380 14.719 21.099 16.200 34.340 SO.S40 3.000 7.105 10.105 11.976 26.268 38.244 - - Total foe Category 1 279.957 881.189 1161.146 13.689 43.090 56.779 17.030 26.388 43.418 43.093 62.783 105.876 27.754 438.645 466.399 159.387 313.727 473.114 32.693 39.646 72.339 2. Track RnhbaiitatIae 2.1 Mali spla-atn nt1ith nat nails (80 1b/yd) borth 40.583 152.249 192.832 1.984 7.445 9.429 -- - - 16.650 South 137.021 153.671 23.933 15.228 39.161 _ _ 56.360 125.000 181.360 2.756 6.112 8.868 - - - 12.229 42.000 54.229 44.131 83.000 127.131 - - _ 2.2 Rai1 r.e-eI aith old raila 4 rail Jolnt -eidioi 22.918 - 22.918 1.121 - 1.121 0.350 - 0.350 2.918 2.918 2.600 - 2.600 2.500 2.500 14.550 2.3 Proraea-ti and laying 14.550 coannnate lanpora incleding fianenera 48.382 67.183 115.565 2.366 3.285 5.651 - - 15.951 - 15.951 6.593 67.183 73.776 2.4 laidge rkhabilltatln 171.267 12.919 12.919 12.919 12.919 21.119 192.386 8.375 1.033 9.408 21.630 - 21.630 20.268 - 20.268 45.514 16.432 61.946 42.121 4.687 46.808 41.734 2.5 iqelp-ent for track - 41.734 9.252 - 9.252 0.452 - 0.452 - - - - - 9.252 - 9.252 - - - Total r 2 348.762 365.551 714.313 17.054 17.876 34.930 21.980 _ 21.980 51.366 42.000 93.366 124.740 3013636 428.376 81.473 19.915 10(1.388 69.203 - 69.203 3. L. rooerot of Teieco_.nira- aloe and Slnataiiso 3.1 Talaro eNI. anloo 0.889 64.263 65.152 0.044 3.142 3.186 0.400 - 0.400 - - 3.2 S1InallIng - 18.303 18.303 0.319 45.960 46.279 0.1)0 0.170 22.215 17.351 39.566 1.086 0.849 1.935 .000 1.000 2.499 - 2.499 - 17.351 17.351 9.863 - 9.863 8.853 - 8.853 Total toe CanSory 3 23.104 81.614 104.718 1.110 3.991 5.121 ._400 - 1.400 2.499 - 2.499 35.654 35.654 10.182 45.960 56.142 9.023 - 9.023 4. Worka iseroneat (Rakka san and ttatalr Workshops) 15.266 30.920 66.186 1.124 1.512 3.236 - - 0.879 - 0.879 34.387 30.920 65.307 _ - 5. Onhn Inntei- ens Isa 117.788 - 117.788 5.760 - 5.760 4.471 - 3.471 10.597 10.597 32.152 - 32.152 43.068 - 43.068 28.500 - 28.500 6. Total Rata Cotn 804.877 0 2 7 959.274 .164d.15L 39.357 66.469 105.826 43.881 26.388 70.269 108.434 104.783 213.217 219.033 8618.855 1 .888 294.110 179.602 673.712 139.419 39.646 179.065

7. PhyaLcal Loositat /a 45.636 35.854 81.490 2.232 1.753 3.985 - - - - 15.800 18.783 34.583 15.894 13.107 29.001 11.942 3.964 17.906 8. Totalof (6_7) 850 513 139518 2 245.641 41.589 68.222 109.811 43.881 26.388 7 0.269 108.434 104.783 13-2117 234 27-633 1f062 .471 310.004 392.7097 02.713 153.361 43.610 196.971

9. Price Cootiny /b 69.764 30.987 100.751 3.412 1.515 4.927 - - - - - 13.034 12.085 25.115 22.991 10.812 33.803 33.739 8.090 41.829 10. Total tvesateolt (8t91 I /c 20 7 1 46.IA 2.346.192 45.001 69.137 114.738 43.881 26.310 70.269 108.434 104.783 213.217 247.861 839.723 I087 .598 332.995 403.521 136.51b, 171.100 51.700 238.800

Ia Physical .n..inRancy e-ciodas tapanditlra aiceady Incurred Io aod 1977 1978, loco1--t-s and boec 35,000 ions ot -alia Lea abIch ardent heen e I-aced. /h Price toot Ingonoy e.. Idns 1977 and 1978 spod- inae, .satera Iin a.cc 6l ocatlot. and ra-1 ordarod 0t f in prints.

In 1,e 1977-81 Plan o-ladas soe- eotans fasa tha 1972-76 Plan shioh acer tersinated In 1977. Cot ol the 1977-81 Plan Ioldes -t ol sarlal in a-ock Soe-e SRT and Bank staff.

Des...t.,1978 - 55 -

Table 14 B

THAILAND

FIFTH RAILWAY PROJECT

SRT InvestmentPlan: Cash Requirements (Baht Million)

Actual Estimated Forecast 1977 1978 1979 1980 1981 1982

Investment(Table 14A) 70 213 1,088 737 239 200

Less: Materials from stock (26) (63) (24) (29) - -

charges to operating account - - (1) (14) (7) -

rail renewal expenditures - - (280) (27) (3) -

Total 44 /a 150 783 667 229 200

/a Capital inrestmentin fiscal 1977 excludes 101 million baht of investments carried over from the 1972-76 plan.

Source: SRT and Bank staff.

December 1978 - 56 - Table 15

THAILAND

FIFTH RAILWAY PROJECT

Project Composition and Cost (Millions)

Local Foreign Total Local Foreign Total Proposed loan -- -Bahts US dollars ---- US$

1. Acquisition of Motive Power and Rolling Stock 1.1 Locomotives 111.500 634.300 745.800 5.452 31.017 36.469 1.2 Spare parts for locomotives 16.270 29.030 45.300 0.796 1.420 2.216 1.3 Passenger cars 77.088 95.315 172.403 3.769 4.661 8.430 3.60 /a 1.4 Freight cars 14.976 33.373 48.349 0.732 1.632 2.364

Total for Category I 219.834 792.018 1,011.852 10.749 38.730 49.479

2. Track Rehabilitation 2.1 Rail replacement with new rails (80 lb/yd) a) Northern line 40.583 152.249 192.832 1.985 7.444 9.429 b) Southern line 44.131 83.000 127.131 2.158 4.059 6.217- 2.2 Rail renewals with old rails & rail welding 19.650 - 19.650 0.961 - 0.961 2.3 Procurement and laying concrete sleepers 32.431 67.183 99.614 1.586 3.285 4.871 3.30 2.4 Bridge rehabilitation 129.369 21.119 150.488 6.326 1.033 7.359 1.00 2.5 Equipment for track maintenance 9.252 - 9.252 0.452 - 0.452

Total for Category 2 275.416 323.551 598.967 13.468 15.821 29.289

3. Improvement of Telecommunica- tion and Signalling 3.1 Telecommunication 0.489 64.263 64.752 0.024 3.142 3.166 3.10 3.2 Signalling 18.716 17.351 36.067 0.915 0.848 1.764 0.90

Total for Category 3 19.205 81.614 100.819 0.939 3.991 4.930

4. Workshop improvement (Makkasan and District Workshops) 34.387 30.920 65.307 1.682 1.512 3.194 1.50

5. Other Investment Items 103.720 - 103.720 5.072 - 5.072

6. Total Base Cost 652.562 1,228.103 1,880.665 31.910 60.054 91.964 13.40

7. Physical Contingency 45.636 35.854 81.490 2.232 1.753 3.985 1.80

8. Total of (6 + 7) 698.198 1,263.957 1,962.155 34.142 61.807 95.949 15.20

9. Price Contingency 69.764 30.987 100.751 3.411 1.515 4.926 1.50

Total 767.962 1,294.944 2,062.906 37.553 63.322 100.875 16.70

/a Balance of US$1.061 million (4.661-3.60) of foreign exchange is covered by imported material already in stock.

Source: SRT and Bank Staff. December 1978 - 57 - Table 16

THAILAND

FIFTH RAILWAY PROJECT

Physical Content of the Project

1. Acquisitionof Motive Power and Rolling Stock

(a) Locomotives- 30 diesel locomotivesof 1,800 hp with spare parts (b) Passenger cars - Manufacture of 79 passenger cars consisting of 59 third-class,8 second-classsleepers and 12 second-class air-conditionedcars (c) Freight cars - Manufacture of 30 oil tank cars and 73 hopper cars

2. Track Rehabilitation

(a) Renewal of 416 km of 70 lb/yd rails wit new 80 lb/yd rails, 203 on Northern line and 213 on Southern line

(b) RerLewalof 40 km of 70 lb/yd rails with reconditioned70 lb/yd rails with welded joints

(c) Renewal of 193 km of 50 lb/yd rails with reconditioned60 lb/yd rails with welded joints

(d) Welding rail joints on 270 km of track to form continuousrails between stations

(e) Acquisitionand placing in track of 275,000 concrete sleepers

(f) Rebuilding 118 wooden bridges and strengthening62 steel bridges

(g) Acquisitionof 7 motor trolleys and 18 trailers for track ma:Lntenance

3. Improvementof Telecommunicationsand Signalling

(a) TeLecommunications: Replacementof existing three channel carrier telephone equipmentwith 12 channel equipment; - Replacementof 51 life expired teleprinters and 300 line old telephoneexchanges with 500 line exchanges.

(b) Signalling: Installationof mechanical interlockingat 15 stations, tokenlessblock instruments and color light signals at 30 stations. -58- Table 16

4. Workshop Improvement

(Makkasanand District - Modernizing the Makkasan workshop workshops) through rebuilding the old steam locomotive overhaul structure (dismantleddue to unsafe foundations) and providing overhead cranes and other facilities and equipment (including equipment for district maintenance workshops).

5. Other Investment Items - Miscellaneous items, including siding exten- sion, barriers installationat 62 road crossings, constructionof staff quarters and offices, earth filling works for a second passenger station in Bangkok, and acquisition of office cars.

Loan financial items are: l(b), 2e, 2f (steel bridges) 3(a)-(b) and 4.

December 1978 THAILAND

FIFTH RAILWTTAYPROJEnT

Acquisition of New Diesel Locomotives for Freight Service in 1977-81 (excluding work and mixed trains)

Forecast Forecast Freight freight increase Freight traffic carried by locomotives in service (net ton-km million) traffic traffic freight Total freight in 1977 in 1981 traffic Alsthom /a Hitachi /b Other diesel /b New 1800 HP loco /c traffic carried net ton-km net ton-km net ton-km 1977 1981 1977 1981 1977 1981 1977 1981 1977 1981 (million) (million) (million) 19 loco. 19 loco. 3 loco. nil 41 loco. 31 loco. nil 22 loco. /d 63 loco. 72 loco.

2,660 3,350 590 1,235 1,235 98 - 1,340 1,015 - 1,100 2,660 3,350

Ia According to SRT, each Alsthom locomotive hauled in 1977 on an average 65 million net ton-km, i.e. 19 locomotives hauled 65 x 19 - 1,235 million net ton-km.

/b Excluding 10 work train locomotives, other diesel locomotives (44) hauled 1,435 (2,670 - 1,235) million net ton-km per annum; thus on the average each locomotive hauled 1,435 t 44 - 32.7 million net ton-km per annum; 3 Hitachi hauled 3 x 32.7 - 98 million net ton-km per annum; 41 other locomotives hauled 41 x 32.7 - 1,340 million net ton-km per annum.

/c Most of the new 1,800 hp locomotives will be used on assignments, which will not permit formation of long-distance block trains. An annual output of 50 million net ton-km per locomotive has therefore been assumed in this calculation.

/d 22 new locomotives in service require 26 locomotives in fleet (22 - 0.85 (availability ratio)].

Source: SRT and Bank Staff. December 1978

P3 a.

I.- -4 THAILAND

FIFTH RAILWAY PROJECT

Replacement of Hitachi Locomotives with "Other" Diesel Locomotives

"Other" diesels /b 1800 hp locomotives required to replace equivalent of "other" Service on Hitachi (1977) to be replaced Hitachi locomotives diesel locomotives which Hitachi Avail- Avail- Avail- locomotives ability ability ability are in use Inservice In fleet ratio Inservice In fleet ratio Inservice In fleet ratio (%) (%) (%) (1) (2) (3) (4) (5) (6) (7) (8) (9) (10) C'

Passenger and mixed trains 10 14 70 10 13 83 7 8 85

Freight trains /a 3 5 60 3 4 83 2 3 /c 85

Total 13 19 13 17 9 11

/a Freight trains hauled by Hitachi and "other" locomotives have an annual output per train of 32.7 million net ton-km. Freight trains powered by 1800 hp locomotives carry 50 million net ton-km per annum.

/b "Other" diesels are manufactured by General Electric, Krupp, Henschel, and Davenport.

/c Rounded.

Source: SRT and Bank staff.

December 1978 (D THAILAND

FIFTH RAILWAY PROJECT

Diesel Locomotive Utilization /a /b

Locomotives Passenger and in fleet Class of locomotive mixed trains Freight trains Work trains Total in 1981 1977 1981 1977 1981 1977 1981 1977 1981 by class

Alsthom, 1800 HP 28 28 19 19 - - 47 47 54

Hitachi class 15 5 3 - - - 18 5 8

Other classes 48 58 41 31 10 10 99 99 122

New acquisition, 1800 HP - 4 - 22 - - - 26 30

Total locomotives in service 91 95 63 72 10 10 164 177 -

Total locomotives in fleet 214

/a Locomotives in service = locomotives in fleet less locomotives under repair.

/b Average availability: Average all classes 81% in 1977 and 83% in 1981 New locomotives 85% Alsthom 85% Hitachi class 67%

Source: SRT and Bank staff.

December 1978 I- - 62 - Table 20

THAILAND

FIFTH RAILWAY PROJECT

Passenger Car Acquisition in 1977-81 /a

Additions Replacement Total

Third-classcars 35 40 75 Second-classsleepers 8 - 8 Second-classair-conditioned cars 12 12 Bogie guard's vans 19 19

Total 55 59 /b 114

/a Sixteen cars were manufacturedduring 1977 and together with 114 scheduled for 1978-81 make a total of 130 cars included in SRT's 1977-81 program.

/b Total number of 59 includes 39 old cars, which cannot be repaired without complete rebuilding,and 20 third-classcars needed to form two relief rakes to service cars on 12 long distance trains used intensivelyfor 20-22 hours a day. These 20 cars do not add to existing seat capacity and have been counted as replacements.

Source: SRT and Bank Staff

December 1978 THAILAND

FIFTH RAILWAY PROJECT

Requirements of Additional Passenger Cars in 1977-81 (million)

Traffic (passenger-km) Capacity (passenger-ku)provided by Redeployment /a of Conversion /a of Acquisition /b Acquisition Ic Acquisition /a equivalent of 43 28 surplus first of 8 second of 12 second 1977 1981 of 35 third third class cars & second into class sleeper class air con- (actual) (projected) Increase class cars (from surplus dist.) third class cars cars ditioned cars Total

5,650 6,760 1,110 333 410 267 34 61 1,105

/a Passenger - km per car per annum number of seats (72) x occupancy ratio (0.65) x average distance run per day (600 km) x 365 x availability ratio (0.93) - 9.53 million.

/b Passenger km per car per annum (second class sleeper car) - Number of seats (32) x occupancy ratio (0.65) x average distance run per day (600 km) x 365 x availability ratio (0.93) - 4.24 million.

/c Passenger - km per car per annum (second class air conditioned car) - number of seats (44) x occupancy ratio (0.65) x average distance run per day (650 km) x 365 x availability ratio (0.75) - 5.09 million.

Source: SRT and Bank Staff. December 1978 - 64 - Table 22

THAILAND

FIFTH RAILWAY PROJECT

Requirementof Freight Cars 1977-81

Unit 1977 1981 Increase

Traffic Development Petroleumtraffic net ton-km (mill) 647 931 284 Cement traffic 326 446 120 Other trafficcarried in: (a) covered gen purpose freightcars 1,720 1,951 231 (b) special purpose cars 218 175 (43)

Total net ton-km (mill) 2,911 3,503 592

PetroleumTraffic Cars in fleet bogies 1,035/a 1,085 50 Availabilityratio % 92.5 95 Cars in service bogies 957 1,030 Output p/car in service net ton-km ('000)p.a. 678 900/b output of cars in service net ton-km (mill)p.a. 647 931 284

Cement Traffic /c Cars in fleet hopper cars 73 Availabilityratio Z 92.5 Cars in service 67 Output p/car in service net ton-km ('000)p.a. 1,800 Output of cars in service net ton-km (mill)p.a. 120

Other Traffic /d (coveredgen. purpose freightcars) Cars in fleet 4-wheelers 4,711/e 4,971 260 bogies (equivalent) 100/f Availabilityratio Z 92.5 95 Cars in service 4-wheelers 4,358 4,605 247 bogies (equivalent) Output p/car in service /8 net ton-km ('000)p.a. 395 424 Output of cars in service/g net ton-km (mill)p.a.1,720 1,951 231

/a A small number (100) four-wheelcars are excluded;20 cars built in 1977 are included.

/b Improvementover 1977 expectedfrom pay load increaseand reductionin turn- around time of existingfleet. Further,the pay-loadof new bogie tank cars is 31 tons, as comparedwith 27 tons for existingcars.

/c Car output based on unit train operationsbetween specificloading and delivery points.

Id Excludingless-than-car load traffic.

Ie Total includescars put into service in 1977.

/f The pay-loadof a four-wheeleris 13.9 tons and that of a bogie, 36 tons. The conversionfactor is therefore13.9/36 - 0.386. l Four-wheelers.

Source: SRT and Bank Staff.

December 1978 - 65 - Table 23

THAILAND

FIFTH RAILWAY PROJECT

Track and Bridge Rehabilitation Program 1977-81 (Map 13622)

Total 1977-81 Project quantities 1977 1978 quantities 1979 1980 1981

Rail Relace ent (km) 70 lb/yd rail recondittoning (shop welding) on: Udon Thani-Nong Kai (Northonst) 40 - - 40 40

70 lb/yd in-track rail weldinag ons Ratsisa-Rar Thani (Northeast) 280 180 100 - - - - Thanon Chirs-Ildon thani (Northaast) 335 - 65 270 90 90 90

60 lb/yd replacement vith reconditioned & welded rails on; Tung Song-Kantang (SoAtb) 93 - - 93 - - 93 Kabin Buri-Aranyapratet (eet) 100 - - 100 - 100

80 lb/yd replacement with new rails on: Bang Sue-Lopburi (North) 203 - - 203 - 100 103 Taliag Chang-Hlua Bio (South) 213 - - 213 113 100 -

Total track rehab}litation 1.264 180 165 919 243 290 386

Concrete Ties-Laeine ('O°°) R.S. two-blocks ties on: 18 km Ban Pachi-Ban Mo (North) 25 - - 25 - - 25 90 km Pak Tho-Rum Ein (South) 125 - 32 93 40 40 13

Monolithic ties on: 28 km Bangken-Klong Psngs.t 42 _ - 42 42 - - 36 km Ayuthaye-Ban Pachi 53 53 40 20 km Bang Sue-Chiang Rek 30 - - 30 - - 30

Total con( reetA 275 - 32 243 85 80 78 Repl.ac!ent of Timber Bridges la SoutherntL,!.Tine ,,r218(988) 40(221) 60(234) 118(533) 40(185) 40(184) 38(164) Northeastern Line 17(38) 17(39) Eastern Line 28(95) 28(95) - - - - -

Total of dtiaber bridg 263(1,121) 85(354) 60(234) 118(533) 40(185) 40(184) 38(164)

Strengtheoing/Replacement of kteeal Irids .a Northern Line 24(31) - 3(3) 21(28) 12(14) 9(14) - Southern Line 40(50) - 6(8) 34(42) 4(6) 15(17) 15(19) Northaetern Line 5(5) - - 5(5) 5(5) - -

Total of steel Wiidg& 69(86) - 9(11) 60(75) 21(25) 24(31) 15(19)

/a Number of bridges (No. of spans),

Source: SRT and Bank Staff. December 1978 - 66 -

Table 24

THAILAND

FIFTH RAILWAY PROJECT

Makkasan and Districts Workshops: Machinery and Equipment Financed by the Loan

Item Quantity Estimated Cost (US$ '000)

Cast Iron Brake Block productionline equipment 1 580 25 ton Overhead Cranes with running rails 2 570 Pipe Bending Machine 1 5 Complete set for repairing electrical rotating 1 machines: Dynamic balancing machine 1 ) Armature winding and Bending machine 1 ) 145 Armature lathe 1 ) Commutator bar under cutting machine 1 ) Dynamic BalancingMachine for turbochargers 1 48 Load Testing equipment for Locomotives 1 36 Dynamic BalancingMachine for Cardanshafts 1 36 Air Compressor (25 cu m/1) 1 43 Fork-lift Truck (3 tons) 1 10 Transformers(1-300 KW and 1-400 KW) 2 17 (4 units 400 A - 3.5 KV) 4 ) 22 (6 units 600 A-600 V) 6 )

Total 1,512

Source: SRT and Bank staff. December 1978. 0.rleOliioOchnnle.1977-8k

p aOJ C T #0 09 D I91 79 - I9 a 1976 oic 1970 19779 qa980 1981 th.lharN-b- Ste.. 8~~~~~~~JOJ3.-9 ~ ~~~~~9761~~~~~~9 77 0-0 ~ J-o ~~~~~~~~~~~~~A-J J. q-tooi".. 9-0 3-0 A-3 3-I 0D0 3.0 6-3 J-l 0-0 3-9 6-1 3-S

8.2 ft. 30 D8.6.L lcote. otb Spar- rt -bdding.. cotattr 30 30

1.3130P.... ft- S., I.I.- deldo.# 8.3830 tIc. .toorcnr. - ~_.aceLoi.bd 80n 6Arctntc toolato 6188 79 32 Ss 3

1.4 M~~~~~~~~273 ft.igbI .... 1~~~~~~~~~~~~~~~~~~~~03 103

2.8 "Mb8l1 r.la. th 0...80 Ob/pd .all. 1. 203 MMnsSn. - ~Laboi(north) -c.rc nd -

F. 213 -?ln Cht.ng-H_, U. 203 too 203.tn. - d.It,ntp ______~~~~~~~~~~~~~~~~283113 283

2.2 I.1te..td .ldtog-

M93 7b.M MM-u.... 100 A....:Lbl.~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~0 j.. 1~~~00 ______0. 40 - .I8 70 Itt/pd r.ronlIti...d ______9__ __

F. 2305- o-iO-Mnt fTh..i - ontO 23027008g200

2.3 M 7.06 . ....ot t... 1n21,000 NtOOOOthi ti. idding

alids- I.hblill.- Ottalltlt

2. .. 7d eat..ltink. b,0. id. 1653.41a0/369 18/1533

f o. 362 S- . ht h ctd. . .. 7 9 Zt p a . a . n r f o n1 o t______0/ 8

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S.-I.:.. d ft.kSRT S- tttaln.fo

Utrhahorifto7eoO THAILAND

FIFTH RAILWAY PROJECT

Procurement Schedule for Bank-Financed Items

E V E N T S I II III IV V VI VII VIII

Materials for manufacturing: 79 passenger cars 12/01/78 01/01/79 03/01/79 06/01/79 06/10/79 07/10/79 01/10/80 09/10/80 Concrete ties (275,000) with fasateeing 10/01/78 10/15/78 12/15/78 01/31/79 02/15/79 03/15/79 08/01/79 09/01/80 mat'!r-ila ''r Leidge strengthening/ replacement 10/01/78 10/15/78 12/15/78 02/05/79 02/15/79 03/15/79 09/01/79 09/01/81

Tel.ecomequipment 10/01/78 10/15/78 12/15/78 01/05/79 01/15/79 02/15/79 09/01/79 09/01/80

&ignallfng equipment 11/01/78 11/15/78 01/15/79 02/05/79 02/15/79 03/15/79 10/01/79 12/01/80

Workshops equipment 12/01/78 01/01/79 03/01/79 06/01/79 06/10/79 07/10/79 02/10/80 12/10/80

Events: I Bank's comments on tender documents V Bank's agreement to award of contract II Bid invitation VI Contract date III Mid opening VII Start of delivery IV lendersevaluation VIII Completion of delivery

Source: SRT and Bank Staff. December 1978

ED - 69 -

Table 27

THAILAND

FIFTH RAILWAY PROJECT

Estimated DisbursementScheduel

Disbursementat end of quarter IBRD fiscaElyear Quarter Cumulative & quarter ------(US$ million)------

1978/79

December 31, 1978 March 31, 1979 June 30, 1979 1.9 1.9

1979/80

September 30, 1979 4.4 6.3 December 31, 1979 2.3 8.6 March 31, 19B0 2.2 10.8 June 30, 1980 2.2 13.0

1980/81

September 30, 1980 1.9 14.9 December 31, 1980 0.4 15.3 March 31, 1981 0.3 15.6 June 30, 1981 0.3 15.9

1981/82

September 30, 1981 0.3 16.2 December 31, 1981 0.2 16.4 March 31, 1982 0.2 16.6 June 30, 1982 0.1 16.7

Principal Assumption

Bidding for procurement for material and equipment not later than March 1, 1979

Source: SRT and Bank staff.

December 1978 - 70 - Table 28

THAILAND

FIFTH RAILWAYPROJECT

Ecorunic Returns on 1979-81 Investments

Economic returns (S) Sensitivity analysis Percent of Best data Costs Benefits Combined capital cost of Investment item estimates +10 -10 -20S -30S variation evaluated items

A. Acquisition of Motive Power and Rolling Stock I. Passengertraffic 1. Replacement investments 36 33 33 - - 30 ) 21 2. New investments /a 15 14 14 - - 12 II. Freighttraffic 1. Replacement investments 20 18 - - 14 12 ) 37 2. Nev investments 19 17 - - 12 11

B. Track Rehabilitation I. Overall 12 11 11 - - 10 35 II. Individual components 1. Rail replacement /b 13 - - - - - 2. Replacement of timber with concrete sleepers 11 - - - - - 3. Bridge rehabilitation 13 - - - - -

C. Improvement of Telecomunication nc

D. Improvement of Signalling 27 23 22 - - 18 3

E. Workshop Improvement I. Reconstruction of buildinl and replacesent of cranes 64 55 54 - - 46 ) 5 II. Acquisition of machinery 48 40 39 - - 32

All evaluated items A-E 17 15 - 13 - 11 100 nc - not computed.

/a Withoutaccounting for additionalinvestments in motive power,the individualeconomic returns are: Third-class coaches - about 38S; Second-class sleepers - 421; Second-class air conditionedcoaches - 191.

/b The economic returns for new rails (northern line) and for reneweas with reconditioned rails are 13S and 152,respectively.

Source: SRT and Bank staff. December 1978 THAILAND

FIFTH RAIlWAY PROJECT

SRT Cash Flow Data: 1974-82

(Baht Nillion)

Actusl E:stimated Forecast 1974 1975 1976 1i77 :978 1979 1980 1981 1982 CASH BEQUIRED

A. Capital Investment 506 518 224 145 150 783 667 229 200

B. Rail Renewal 15xpenditures - - - 280 27 3

C. Debt Service

Interest 39 65 76 74 72 82 90 96 92 Repayments 46 87 94 140 150 147 142 144 99 Total 85 152 170 214 222 229 232 240 191

D. Change in Operating Working Capital (49) (28) 159 131 (41) 106 62 45 26 (otber than cash)

E. Payment to Special Funds - -- 8 -

F. Total Cash Required 542 642 553 490 331 1,406 988 517 417 e

CASH AVAiIABLE

A. Internally Generated Cash

Operating Surplus (75) (237) (100) 98 83 27 188 239 240 Depreciation 122 135 158 163 171 188 209 221 228 Provision for Rail Renewal 16 16 16 25 25 25 25 25 25 Other Income 31 16- 6 - 15 15 11 12 20 Total Internally Generated Cash 94 (73) so 286 294 255 4-33 497 513

B. Long-Tens Loans 309 288 292 - 28 529 373 92 10

C. Funds Provided by Government 21 119 120 295 140 505 195 -

D. Cash Available: Beginning of Year 509 391 86 25 116 247 130 143 215

E. Total Cash Available 933 728 578 606 578 1,536 1,131 732 738

F. Cash at End of Year 391 86 25 116 247 130 143 215 321 0 Ratios: Debt Service Coverage 0.6w (0.7x) 0.3x 1.2x 1.lx O9x 1.7x 1.9x 2.5x Return on Average Net (1.2%) (3.6%) (1.5%) 1.5% 1.2% 0.4X 2.5X 3.07. 3.0% Fixed Assets in Operation

Source: SRT and Bank Staff

December 1978 -/Z - Table 30

THAILAND

FIFTH RAILWAY PROJECT

SRT Operating Revenues and Costs: Effects of Inflation 1972-76

Actual 1972 1973 1974 1975 1976 1977

1. Index: Wholesale (local) 100 122.8 158.4 164.2 170.8 184.3 2. Consumer 100 115.5 143.6 151.2 157.5 173.7 3. Wholesale (import) 100 121.0 150.0 153.4 155.7 164.0 4. Average of 1-3 /a 100 119.8 150.7 156.3 161.3 174.0 5. Weighted average lb 100 117.1 146.3 153.2 159.2 173.8 6. Traffic: pass-km (million) 4,412 4,694 5,376 5,640 5,628 5,650 ton-km (million) 2,243 2,070 2,296 2,353 2,505 2,912

7. Total traffic units (million) 6,655 6,764 7,672 7,993 8,133 8,562

8. Revenues: Passengers 522 545 627 678 780 845 9. Freight 439 411 401 430 543 619 10. Other 41 50 61 70 80 103 11. Total revenues 1,002 1,006 1,089 1,178 1,403 1,567

Operating Expenses /c 12. Staff costs 455 473 631 754 752 765 13. Other (excl. depreciation) 314 300 409 526 593 541 14. Total working expenses 769 773 1,040 1,280 1,345 1,306 15. Depreciation 118 122 122 135 158 163 16. Total operating expenses 887 895 1,162 1,415 1,503 1,469 17. Revenue per pass-km (Satang) 11.8 11.6 11.7 12.0 13.9 15.0 18. Revenue per ton-km (Satang) 19.6 19.9 17.5 18.2 21.7 21.3 19. Adjusted revenue per pass-km (17 - 5)(Satang) 11.8 9.9 8.0 7.8 8.7 8.6 20. Adjusted revenue per ton-km (18 - 5)(Satang) 19.6 17.0 12.0 11.9 13.6 12.2

Costs Adjusted for Inflation /c 21. Staff costs (12 - 2) 455 410 439 499 478 440 22. Other costs (13 4) 314 250 272 337 367 310 23. Total working expenses 769 660 711 836 845 750

Working Expenses per Traffic Unit (Satang) 24. Current (14 -: 7) 11.6 11.4 13.6 16.0 16.5 15.3 25. Deflated (24 - 5) 11.6 9.7 9.3 10.5 10.3 8.8

/a Arithmetic average. lb Line 14 x 100 Line 23 /c Millions of Baht.

Source: SRT and Bank Staff.

December 1978 THAI IANU

FIFTH RAILWAYPROJECT

SRT Balance Sheets: 1974-82 (Baht Million)

Actual Eatimated Forecast 1974 1975 1976 1977 1978 1979 1980 1981 1982

ASSETS

Current Assets 215 321 Cash and Short-term Depun tas 39i 86 25 116 247 130 143 220 Accounts Receivable 150 119 108 135 123 t46 178 202 792 821 Inventory 524 643 633 610 593 702 751 Total CurrentAssets 1,065 848 766 861 963 978 1,072 1,209 1,362

Fixed Assets

Gross Non-Depreciable 1,650 1,750 1,798 1,798 1,798 1,798 1,798 1,798 1,798 Gross Depreciable 6,086 6.545 6,586 6,778 6,991 7.998 8,494 8,723 8.923 Subtotal 7,736 8,295 8,384 8,576 8,789 9,596 10,292 10,521 10,721

Less Accumulated Depreciation 1,449 1,580 1,654 1,817 1,988 2,176 2,385 2,606 2,834 Net Fixed Assets in Operation 6,287 6,715 6,730 6,759 6,801 7,420 7,907 7,915 7,887 Work in Progress 31 62 250 203 140 116 87 87 87 Total Fixed Assets 6,318 6,777 6,980 6,962 6,941 7,536 7,994 8,002 7,974

Investments of Special Funds 689 747 790 817 647 say 919 951 983

Other Assets and Deferred Charges 226 120 92 87 87 87 87 87 87 _

TOrAL ASSETS 8,298 8,492 8,628 8,727 8,838 9,488 10,072 10,249 10,406

LIABILITIES AND EQUITY

Current Liabilities

Current Portion of Long-term Debt 44 45 94 70 75 74 72 72 50 Accounts Payable 222 247 277 150 162 188 207 227 248 Total Current Liabilities 266 292 371 220 237 262 279 299 298

Long-Term Debt 964 1,270 1,304 1,188 1,061 1,444 1,677 1,625 1,558

Reserves

Provident and Other Funds 694 754 798 825 855 887 919 951 983 Provision for Renewal of Rails 126 133 147 172 197 (58) (60) (38) (13)

Other Liabilities 227 170 168 163 163 163 163 163 163

Equity Accounts

Government Capital 5,551 5,689 5,826 6,121 6,261 6,766 6,961 6,961 6,961 Retained Income 470 184 14 38 64 24 133 288 456 Total Equity 6,021 5,873 5,840 6,159 6,325 6,790 7,094 7,249 7,417

TOTALLIABILITIES ANDEQUITY 8,298 8,492 8,628 8,727 8,838 9,488 10,072 10,249 10,406

2 l.lx 1.6x lI.x 1.2x 1.4x 1.8x Ratios: Liquid .Ox 20.7x 0.4x 4 Current 4.ox .9x 2.1x 3.9x 4.lx 3.7x 3.8x 4.Ox .6x Debt/Equity 14/86 18/82 18/82 16/84 14/86 17/83 19/81 18/82 17/83

Source: SRT and Bank Staff

December 1978 - 74 - Table 32

THAILAND

FIFTH RAILWAY PROJECT

SRT Long-Term Debt as of September 30, 1977

Repayment (years) Amount /a Interest Grace Repayment Year Outstanding rate % period period (baht million)

USAID 1960 16 4.00 2.5 20.5

IBRD - Ln. 280-TH 1961 110 5.75 1.5 20.0 - Ln. 898-TH 1973 277 7.25 4.0 19.5

EXIM (Japan) 1969 142 5.75 5.0 15.0

Germany 1968 76 3.50 11.0 19.5

KFW 1968 34 6.00 1.5 10.5

France 1973 251 3.50 11.0 19.5

BFCE & BPPB 1973 226 7.23 .5 10.0

Thailand 1973 72 7.25 4.0 19.5

Krung Thai Bank 1974 54 10.00 - 1.0

Total Outstanding 1258

/a Estimated from fiscal 1976 audited accounts; breakdown for fiscal 1977 not yet available.

Source: SRT and Bank staff.

December 1978 THAI LAND FIFTH RAILWAY PROJECT ORGANIZATION CHART OF STATE RAILWAY OF THAILAND (asof September30, 1977)

of | Commisioners

GeneradManager Mnnr to the General

Deput Gneral Manager Deputy GeneralMcnag.r OPerations Administration

{ TraffiDepartment Adminisration Depwtment

Transportation Central Car Control Welfare& Labor Goods& Land Emplovment Passenger Public Relations & Foreign _Hotel _5 Districts Accounting& Financ Department Mechanica Engineering Department Genral Accounts _ internal Auditing

Medhanical Treaury Motive Powver Revnue Auditing 4 Districts InvestmentProject & 9udget RodlingStock Construction DihburemnentAuditing Locomotive Repair Dat Processing Rolling Stock Repair MiscelaneousAuditing _Production MarketingDeartment Civil EngineeringDepartment |

I_ Passenger Projects & Planning Freight TechnicalSurve & Design Construction Lgal BUreu Civil EngineeringDepot UMaintenanceof Way Maintenanceof Bridges& Buildings Signalling& Telecorn Rallway Training Canter Timber & Stone Districts

M~uedi ur StoresBureau B

Purchasing DevelopmentCoordinating Sureau Stores

| RailweVPolice

December 1978 World Bank - 18916

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