Document of

The World Bank FILE COPYFOR OFFICIAL USE ONLY

Repot No. P-2800-TH

REPORT AND RECOMENDATION

OF THE

PRESIDENT OF THE

INTERNATIONAI BAINK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED LOAN

TO THE

ELECTRICITY GENERATING AUTHORITY OF THAILAND

WITH THE GUARANTEE OF THE

KINGDOM OF THAILAND

FOR THE

MAE MOH LIGNITE PROJECT

May 1, 1980

This doment bu a restricted distbution and may be used by recipients only It the performance ofther offkMc dtis. 1ts coentents may net ohrwise be discoSd withou World Bank authorization.

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C46130/J60475/D1661/30

CURRENCY EQUIVALENTS

Current unit = Thai baht (B)US$1.00 = B 20.00B 1.00 US$0.05

WEIGHTS AND MDEASURES

1 meter (m) = 3.281 feet (ft)I cubic meter (cu m) - 35.315 cubic feet (cu ft)

1.308 cubic yards (cu yd)1 kilometer (km) = 0.622 miles (mi)1 bank cubic meter (cu bm) = 1.308 bank cubic yards (cu byd)1 kilogram (kg) = 2.205 poundsI metric ton (t) 3 1.1 short tons (st)1 metric ton per year (tpy) 1.1 short ton per year (stpy)1 Kilocalorie (kcal) = 3.97 British thermal units (BTU)Kilocalorie per kilogram (kcal/kg) = 1.805 British thermal units

per pound (BTU/lb)I kilowatt (kW) = 1,000 watts (W)1 megawatt (MW) = 1,000 kilowatts (kW)1 gigawatthour (GWh) = 1,000,000 kilowatthours (kWh)

(106 x kWh)

ABBREVIATIONS AND ACRONYMS

ADB = Asian Development BankDMR - Department of Mineral ResourcesEGAT - Electricity Generating Authority of ThailandMEA - Metropolitan Electricity AuthorityNEA = National Energy AdministrationOSP OPEC Special FundPEA = Provincial Electricity AuthorityPTT - Petroleum Authority of ThailandSFD - Saudi Fund for DevelopmentUNDP - United Nations Development Programme

THAI FISCAL YEAR

October 1 - September 30

THAILAND FOR OFFICIAL USE ONLY

MAE MOH LIGNITE PROJECT

Loan and Project Summary

Borrower: Electricity Generating Authority of Thailand (EGAT)

Guarantor: Kingdom of Thailand

Amount: $72 million equivalent

Terms: 20 years, including five years of grace, with interestat 8.25% per annum.

ProjectDescription: The project forms part of a national development strategy to

reduce the country's high dependence on oil imports by deve-loping indigenous energy resources such as natural gas, ligniteand hydropower. The expansion of lignite production at Mae Mohmine is required to meet the incremental demand of the Mae Mohpower generating facilities up to and including the 150 MW Unit4 scheduled to be commissioned by January 1984. Productionwill need to increase from 1 million tons of the run-of-minelignite in 1979 to 2.8 million tons per year in 1984.

The project scope for the Mae Moh lignite mine includes theengineering, procurement and erection of mining and relatedequipment, technical assistance, training and civil works. Themining equipment comprises four 15 cu yd electric rope shovels,thirty four 85 t rear end dump trucks, one coal crushing,conveying, stacking and reclaiming system, and ancillaryequipment. The project also includes expansion of the main-tenance workshop and office and the mine power supply system.

The net foreign exchange savings over the 30 year life of PowerUnits 4 and 5 (300 MW) to be supplied by lignite are expectedto average about $16 million annually in 1979 terms, takinginto account the impact of debt service. This is of particularimportance in Thailand where foreign exchange scarcity is aconstraining factor. Other benefits of the project willinclude technological transfer through technical assistance andtraining and institutional improvement within EGAT's MiningDepartment; increase in economic activity in the remotenorthern region of Thailand through increased employmentopportunities at Mae Moh and indirect employment in thesurrounding areas for providing supporting services andfacilities. The project will further benefit the area by theresettlement program to be undertaken by EGAT, under whichabout 300 squatter families would be resettled in a villagewith a school, health center, water supply, electricity andother amenities which would represent improvements in theirliving conditions.

This document has a restricted distribution and may be used by recipients only in the performance |of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

The only major risk of the project could result from the

sulphur dioxide emissions from the associated power plant

development. EGAT is undertaking an air pollution study which

will be furnished for the Bank's review not later than end

1981. ADB has agreed to finance this study and the pollution

monitoring equipment. This risk is therefore considered to be

adequately covered by these measures.

Estimated Cost: Local Foreign Total- $ million ------

Land,resettlement, civil works 2.6 - 2.6

Mining equipment 14.2 37.5 51.7

Freight and erection 2.0 6.4 8.4

Prestripping costs 17.4 - 17.4

Engineering and Training 0.3 1.2 1.5

Working capital 0.1 - 0.1

ContingenciesPhysical 3.6 4.2 7.8

Price 15.3 10.7 26.0

Total Proiect Costs 55.5 60.0 115.5

Interest During Construction 2.8 12.0 14.8

58.3 72.0 130.3

Financing Plan:

Government 19.9 - 19.9

EGAT 32.7 - 32.7

IBRD 72.0 72.0

Commercial banks 5.7 - 5.7

Total 58.3 72.0 130.3 /a

Estimated Disbursementsfrom Bank Loan: Bank FY 1981 1982 1983 1984

------------ ($ million) ------------

Annual 29.7 17.5 15.4 9.4

Cumulative 29.7 47.2 62.6 72.0

Rate of Return: About 14%

Appraisal Report: Report No. 2722-TH, dated April 18, 1980.

/a Including interest during construction of $14.8 million.

REPORT AND RECOMMENDATION OF THE PRESIDENT OF THEINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT

TO THE EXECUTIVE DIRECTORSON A PROPOSED LOAN TO

THE ELECTRICITY GENERATING AUTHORITY OF THAILANDWITH THE GUARANTEE OF THE KINGDOM OF THAILAND

FOR THE MAE MOH LIGNITE PROJECT

1. I submit the following report and recommendation on a proposed

loan to the Electricity Generating Authority of Thailand (EGAT), with the

guarantee of the Kingdom of Thailand, for the equivalent of $72 million to

help finance the Mae Moh Lignite Project. The loan would have a term of 20

years, including 5 years of grace, with interest at 8.25% per annum. EGAT

is also seeking commercial loans of about $5.7 million.

PART I - THE ECONOMY

2. A Basic Economic Report entitled "Thailand - Toward a Strategy of

Full Participation" (2059-TH) was distributed to the Executive Directors on

September 18, 1978. The Report concludes that Thailand's rapid economic

growth over the past 15 years has led to a significant reduction in absolute

poverty, but that certain income groups have lagged behind this progress. It

identifies the essential characteristics of these groups and points to the

need for continued overall development as well as the initiation of specific

measures to deal with the poverty problem, particularly in rural areas. It

further discusses the constraints on the successful implementation of these

policies. Country data are given in Annex I.

Recent Political Developments

3. The frequent changes at the top levels of government, which have

characterized recent political developments in Thailand, have mainly reflected

differences in view about Thailand's external relations and about the politi-

cal decision-making process within the country. The government formed in

November 1977, under the prime ministership of General Kriangsak Chomanan,

moved to strengthen relations with Thailand's ASEAN partners and tried to

stabilize and improve relations with its Indochinese neighbors. Progress in

the latter was, however, affected by Vietnam's involvement in Kampuchea and

the flood of Khmer refugees into Thailand. These developments and thenecessary actions related to caring for the refugees have diverted a consi-

derable amount of high-level Government attention and led to significant

increases in military and other expenditures. General Kriangsak formed his

second administration in April 1979 but came under mounting criticism in theNational Assembly for his economic policies, particularly the petroleum price

increases and his handling of the refugee problem. Faced with waning

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political support and public demonstrations, General Kriangsak undertook anextensive cabinet reorganization in February 1980. However, this failed toengender the necessary political stability, and facing a no confidence voteprecipitated by petroleum price and electricity tariff increases, hisgovernment resigned on February 29.

4. General Prem Tinsulanonda was elected to succeed Kriangsak as PrimeMinister by the National Assembly after receiving the support of nearly allmajor political parties. General Prem's new government, formed on March 14,included leaders from the political parties which supported him. On March 28,1980, General Prem announced his government's policies on a number of issuesincluding economic and social development. The statement places high andimmediate priority on accelerating rural development, raising rural incomesand on measures to improve health and education. Particular emphasis is givento generating more jobs and it is expected that a rural public works programsimilar to the 1975/76 Tambon Program will be a major element in thisstrategy. The Government also intends to exert efforts to contain inflationand a more gradual adjustment of energy prices is foreseen besides developingdomestic energy resources. Reforms in monetary and fiscal policy and effortsto improve the trade balance through improved export performance are alsocalled for. As discussed below these reforms are critical to increasingresource mobilization (especially in the public sector) and reducing thecurrent account deficit.

Past Trends and Recent Changes

5. Thailand's economic performance since 1960 has been good. Theaverage annual growth of real GDP from 1960 to 1979 was 7.9%, or about 4.8%per capita. Real agricultural growth of nearly 5% was a leading factorsustaining this expansion. The cultivated area increased by about 4% a year,water control was improved, irrigation was expanded and the cultivation ofrelatively new crops, including maize, cassava, kenaf, sugar and rubber, grewrapidly. Agriculture has also been a major contributor to export growth.Until recently, the Government was able to maintain economic stability butinflation is now accelerating. As a share of GDP, domestic savings fluctuatedbetween 19% and 24%, and total investment between 20% and 27%. The high levelof private investment contributed to a real industrial growth of 10% per yearsince 1970. All this was achieved with a limited inflow of external resourcesand, until recently, the resource gap remained at about 5% of GDP.

6. The rate of GDP growth declined in the 1970s to 7.6% p.a from 8.1%in the 1960s. In addition to external factors (the oil price increase of 1973and its aftermath), the major domestic factor responsible for this decline hasbeen the increasing scarcity of land. Production has been pushed into lessfertile soils causing a decline in the rate of agricultural growth to about4.6% p.a. since 1970 compared to 5.7% in the 1960s. During 1973 and part of1974, this deceleration was partly obscured by a domestic investment boom.

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This was accompanied by rapid domestic inflation, however, which led theGovernment to curtail sharply the public investment program in 1974 and 1975.Inflation in subsequent years has continued to rise, reaching an estimated 13%for 1979, and projected at 13-15% in 1980. Substantial growth of theagricultural sector contributed to rapid expansion of 11.7% of the economy in1978, but a combination of poor agricultural output and adverse effects ofexternal factors, primarily the oil price increase, reduced 1979 growth to anestimated 6.7%, with little improvement expected for 1980. The budget deficitis expected to exceed $1.0 billion in FY80 as a result of increased militaryexpenditures, an increase in civil service pay, and increased subsidies topublic enterprises as a result of the failure to raise electricity tariffssufficiently to offset fully oil price increases.

7. Thailand's terms of trade and prospects for agricultural export arenow less favorable than in the early 1970s. Thailand is facing severerestrictions on two of its major exports to the European Economic Community,cassava and canned pineapple, and its sugar exports are limited by theInternational Sugar Agreement. The balance of payments, which recordedsurpluses in 1973-74, has since been running large deficits. The currentaccount deficit reached $1.1 billion, or 5% of GDP in 1978 and is estimated tobe $2.2 billion in 1979, or about 8.0% of GDP. The overall balance-of-payments deficit for 1979 is estimated at nearly $600 million. The Governmenthas significantly increased its foreign borrowing from traditional sources,from the Eurodollar market and from IMF to finance these deficits. Foreignexchange reserves have also been used extensively. To contain thebalance-of-payments deficit, the Government, in March 1978, raised tariffs on141 "nonessential" imports and increased excise taxes on a number of items,most notably gasoline. The prices of petroleum products were raised inJanuary 1979, July 1979, and February 1980, for a cumulative increase of about100% for gasoline. The current price of gasoline is the equivalent of about$1.80 per gallon (US). After a proposed power tariff increase of about 55%was rejected in November 1979, a lesser tariff increase of about 38% wasfinally implemented in February 1980. This is insufficient to cover theincreased cost of fuel, and subsidies from the oil fund (partly funded byrevenues from other petroleum products) continue. Apart from raising prices,the Government has also taken some energy conservation measures to contain theoil import bill which is expected to jump by $1.0 billion in 1980 despitealmost no increase in the volume of imports. With a view to encouragingdomestic savings and curtail the flight of capital abroad, the Governmentraised interest rates by 3 percentage points at the beginning of 1980.

8. The growth in incomes has not been equitably distributed throughoutthe country, and at present there are very significant regional differentialsin incomes and access to economic and social infrastructure. The regions arevery different in terms of topography, climate, soils, urbanization, etc., andpresent quite distinct problems for future development. The Central Region,including Bangkok, has the highest per capita income and is better served byroads, telecommunications, schools, public health and other services than the

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other three regions, the North, Northeast and South. Within the regions also

there is considerable variation: farmers who have diversified into cash crops

have generally enjoyed substantial growth in real incomes while the incomes of

those who have been unable or unwilling to shift out of subsistence rice

culture have stagnated. Recent research has shown that inappropriate cropping

patterns and agricultural techniques are major factors in much of the rural

poverty. This is most conspicuously the case of the rainfed rice farmers in

the Northeast and North. Since there is a well functioning labor market, the

low incomes of this large group have tended to depress unskilled wages

throughout the economy.

9. Real concern over the plight of the poor is growing, and observable

improvements in rural living standards is being seen as a major factor in

promoting political stability. In the past several years the Government has

initiated efforts to increase the flow of public resources to the poor rural

areas, including the Tambon program of direct transfers to villages in 1976,

the drought relief program in 1977, the flood relief program in 1978, and the

new village development program in 1979. These programs have been designed to

produce quick and tangible political as well as economic results, but consid-

erably more attention and resources need to be devoted to rural development if

these programs are to have lasting impact. The Government is strongly

committed to rural development and raising rural incomes and is expected to

launch a major public works program in the near future. While the absorptive

capacity in rural areas has increased since the Tambon program of 1975-76,

there is some concern about the efficacy of crash programs in view of theresource constraints facing the budget and the limitations of implementationcapacity at various levels of government.

Development Prospects and Constraints

10. In the coming decade, many of the positive features which helped

sustain rapid economic growth over the past two decades will continue to

contribute to future growth. These factors include a relatively equitabledistribution of rural land, responsiveness of Thai farmers to improved

technology, provision of infrastructure by the Government, and the dynamism of

the private sector in both industry and agriculture. Also major gains have

been made in family planning in recent years, slowing the annual rate ofpopulation growth from about 3% during the 1960s to an estimated 2.2% in 1979.

The target for 1981 is 2.1%.

11. Some less favorable domestic factors are emerging, however. As a

result of very rapid population growth in the 1960s, projected labor force

growth of 3% p.a. necessitates a high rate of job creation. Past growth has

benefited households unevenly and created further income disparities that

could threaten the social cohesion of the country. At the same time,

additional fertile land, which has supported the growth of agriculturalproduction and exports in the past, is becoming increasingly scarce. In view

of these factors, continued reliance on the past pattern of development may

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lead to a deceleration of agricultural and overall growth in the next

decade; persistently large balance-of-payments deficits; higher rates of

unemployment or underemployment; and stagnating or declining real incomes of

the poorer segments of the population, especially in rural areas and amongunskilled workers. These internal factors are complicated by the external

factors of rapid oil price increases and recession in developed countries.

The oil price increase alone will add about $1 billion to the 1980 importbill, even with no increase in volume, and the current account deficit is

estimated to be at least 9% of GDP. In 1980 major structural adjustments and

a shift in the development pattern is necessary for social as well as economicreasons. The unfavorable external situation will require major domestic

adjustments and it is unlikely that the overall growth rate will exceed about

6% in the coming years.

12. Thailand must shift its economy from a pattern of growth based on

the extension of land under cultivation and on import-substituting industriesto one based on increasingly intensive use of land and on industries producing

for domestic and export markets under competitive conditions. At the same

time it must reduce its current account deficit and increase public savings.Effective policies and programs will be necessary to ensure that economic

growth is maintained and income disparities reduced, or at least not widened

during this period of transition. In the past, the Government's role hasfocused primarily on short-term economic management and the provision of basic

economic and social services. In order to achieve a relatively smoothtransition, the Government will now have to undertake more coordinatedlong-term policies and actions in areas of resource management and balanced

regional development.

13. Agriculture will continue to be the dominant sector since it

directly generates 30% of GDP, provides about 60% of total exports, and

employs 75% of the labor force. However, future growth of the sector willrequire more intensive utilization of cultivated areas, continued diversifica-

tion of crops, improved cropping patterns and farming practices, and easier

access to agricultural inputs including credit. All of these imply anincreased government role in the rural sector. But while growth in the

agricultural sector may be expected to remain fairly rapid for some time to

come, the burden of sustaining future growth will have to shift progressivelyto the industrial sector. Industry, construction and services will have to

provide an increasing share of employment for the growing labor force. In

1979, industrial production accounted for about one-fourth of GDP and aboutone-third of total exports. Manufactured output, which accounted for 90% of

industrial production, achieved an export growth of 24% in 1979, almost doublethe growth rate of total exports. While continued growth of manufacturedexports is essential, the large domestic market also offers opportunities for

a balanced industrial growth based on production of consumer goods, agri-cultural inputs and processing of agricultural outputs for urban consumption.Our policy dialogue will concentrate on efforts to reduce price distortions,increase availability of credit, and eliminate impediments to efficient

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production for domestic and foreign markets so that the dynamic private sectorcan realize its potential for spurring growth and creating jobs.

14. The principal objectives of the Government's Fourth Plan (1977-81)are to achieve 7% real growth, equitable distribution of income, reduction inthe rate of population growth, faster generation of employment opportunitiesand balanced regional development. Projected public sector developmentexpenditures amount to $12.5 billion for the Plan period, a 90% increase inreal terms over the Third Plan. However, the Plan addresses sectoral issuesand strategies only in broad terms, and concrete policies and programs to meetthe Plan's economic and social objectives are defined only in general terms.The Government has now embarked on the preparation of the Fifth Plan (1982-86)and the agencies of the Government are undertaking a number of studies to helpensure that the Fifth Plan would provide an unambiguous basis for theallocation of resources and the formulation of development policy and program.These studies may help identify possible areas of Bank lending for structuraladjustment.

Financing Requirements

15. The implementation of policies needed for a satisfactory rate ofeconomic and social progress will necessitate a steady increase in publicexpenditures over the next few years. This will require much greater effortsto mobilize both domestic and external resources than in the past. Governmentdomestic revenue as a percentage of GDP (13.5% for 1975-79) is low compared toother developing countries at similar levels of development due to low taxrates, high exemptions and a somewhat below-average rate of compliance. Withexpenditures rising, the overall budgetary deficit in fiscal year 1979/80 isestimated at above $1.0 billion, or over 4% of GDP. The Government hasachieved a modest improvement in resource mobilization through revision of thetax structure and improved collections but much greater efforts will be neededin the future.

16. During the coming years, the demand for external resources willincrease. Despite an average real growth of exports of over 10% and increaseddomestic production of primary energy, the projected rise in the price ofimports - led by the price of petroleum - implies that large trade and currentaccount deficits are expected to persist through the mid-1980s. It is esti-mated that a 6% overall growth rate can be maintained and the current accountdeficit reduced to 4-5% of GDP by 1985 if appropriate policy is followed,including greater efforts in implementating energy saving measures, promotingagricultural growth and exports, reducing distortions and excessive protectionin industry, promoting more labor-intensive exports, and postponing majorcapital intensive investments until the economy can afford them. This impliesan average current deficit of $3 billion per year in 1980-85, which willrequire very large amounts of external borrowing totalling about $18 billionnet over the period.

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17. Official donors, particularly Japan and the development banks, havebeen expanding their programs to meet a part of the growing resource require-ments. The rest has been financed in the Eurodollar market and bond markets,and by the utilization of IMF resources for 1978/79 totalling about $200 mil-lion, and Thailand is considering even larger drawings under standby arrange-ments. The Government has established a Foreign Loan Policy Committee tocoordinate and approve all foreign borrowing by the public sector. The Bankof Thailand is establishing procedures for recording private borrowing abroadin order to keep track of total foreign debt. Current estimates of Thailand'sexternal borrowing requirements exceed those discussed at the last Consulta-tive Group, and the need for continued concessional aid is perhaps now moreacute. In addition, external agencies, including the Bank Group, have inrecent years increasingly concentrated project lending to Thailand in theagricultural and social sectors that have high social benefits, but lowforeign exchange savings or earnings. To achieve the level of externalresource transfer that is now required, it is necessary, in selected projectswhere the foreign exchange component is low, to finance some local currencyexpenditures. Program and structural-adjustment lending should also be con-sidered.

18. By 1985, net disbursements will more than double in current termsfor both public and publicly guaranteed borrowing and private borrowing. Thedebt service ratio on public debt (4.6% in 1979) will exceed 10% by 1985, butshould decline thereafter. Assuming a significant level of concessionalassistance, the debt service ratio on total public and private civilianborrowing (currently about 15%) will rise to about 25% before declining.Given the diversification of Thai commodity exports and the rapid expansion ofmanufactured exports, these debt service requirements should be sustainable ifrapid export growth continues and economic stability is maintained.

PART II - BANK GROUP OPERATIONS IN THAILAND

19. Thailand first borrowed from the Bank Group in 1950 for a railwayproject and, as of February 29, 1980 had received 53 loans amounting to about$1,600 million, net of cancellations. The sectoral distribution of theseloans has been as follows: $311.5 million for transportation; $316.4 millionfor irrigation; $498.7 million for power/energy and rural electrification(including $65.8 million for a dual purpose power and irrigation project);$153.0 million for telecommunications; $144.2 million for agricultural andrural development; $79.6 million for urban development; $52.3 million foreducation; and $42.5 million for industry. Thailand has also received six IDAcredits: two credits totalling $54.5 million for education; one credit of$25.0 million for rural development; two credits totalling $12.5 million forirrigation improvement; and one credit of $33.1 million for a populationproject. In general, Bank Group-financed projects have been carried outsatisfactorily and in accordance with expectations. Annex II contains a

summary statement of Bank loans, IDA credits and IFC investments as well asnotes on the execution of ongoing projects as of February 29, 1980.

20. Over the past five years, the Bank has shifted its lending toThailand from a program dominated by investments in traditional infrastruc-ture projects (accounting for over 80% of the lending through FY74) to aprogram which places increasing emphasis on assisting the Government's effortsto reach the poorer segments of its population more directly. Since FY75,investments in transportation, power, water supply, telecommunications andindustry have accounted for only about 50% of Bank Group lending and morethan half of these, in dollar terms, were for projects specifically designedto benefit the rural population. The proportion of Bank lending to theagricultural/rural development sector has trebled, accounting for about 35%of lending operations since FY75. The design of projects in this sector hasalso changed, from exclusively large irrigation projects to a more balancedprogram covering irrigation (including land development and support servicesto the farmer) and a variety of innovative projects to assist farmers outsidethe central flood plain (rubber replanting, livestock, agricultural exten-sion, and rural development). Projects in the social sectors which prior toFY75 were limited to three in education accounting for 6% of the program,have both diversified and grown. In recent years education, population andlow-income housing projects have accounted for about 15% of the program.

21. The findings of the recent Basic Economic Report verify theappropriateness of the shift mentioned above, and underscore the need tomove even further in designing programs which help the rural population,particularly those farmers in rainfed areas who have been largely bypassed byrecent economic growth. In the agricultural sector, therefore, the Bank isredoubling its efforts to develop an approach which will help to lift therainfed farmers out of a subsistence existence. A combination of education,agricultural research and extension, credit and improved infrastructure isforeseen. However, the major problem is the absence so far of a viablepackage for the poorest and most remote farmers. Expansion and improvementof irrigation systems will continue, with increased emphasis on reachingthose farmers with irrigation potential in the northern, northeastern andsouthern regions. The program of transportation, electrification, watersupply and telecommunications projects will also continue to have a ruralfocus. A key element of the strategy outlined in the Basic Economic Reportis the creation of jobs and stimulation of increased economic activityoutside of Bangkok. The bulk of the Bank Group's urban and industriallending will, therefore, be directed to projects which enhance theattractiveness of regional cities as service centers for the agriculturaleconomy of those regions. Selected projects in Bangkok will be aimed atstrengthening agencies providing essential services to the urban populationand the development of low cost, replicable programs to meet the demands ofthe urban sector, particularly the urban poor, without diverting scarceresources from other high-priority development needs.

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22. The Bank's strategy of placing an increasing share of its programinto projects alleviating poverty and promoting rural development will bedifficult to execute without considerable technical assistance toward projectpreparation. The Bank's regional mission in Bangkok will continue to playa vital role in helping to identify and prepare such projects. Promotingoverall growth also has a high priority in Thailand and is a necessary elementin the poverty alleviation strategy. The resource requirements for infra-structure development, particularly for developing energy and its domesticprimary sources, are large, and the Bank is concentrating its remainingfunds in projects where it can have a catalytic role in effecting policychanges, mobilizing other resources, and directly facilitating growth inrural areas. The Bank is also expanding its support of the industrial sectorthrough its economic and sector work as well as selected projects in orderto help promote industrial policy which favors more labor-intensive anddispersed activities to complement Thailand's efforts in poverty alleviation.

23. Bank loans and IDA credits, disbursed and outstanding, amounted to$459.3 million, as of December 31, 1978, representing about 26% of publicexternal debt (disbursed and outstanding). This is not excessive in view ofThailand's modest overall public external debt (8.3% of GDP in 1978). Inaddition, although the level of Bank commitments is expected to increase overthe next five years, the Bank Group's share is below 30% of total publicexternal debt as Thailand has diversified its borrowing program. The BankGroup's share in total debt outstanding is expected to fall below 20%, andits share of total debt service would not exceed 10%.

24. As of February 29, 1980, IFC had made commitments totalling about$83 million in nine projects in Thailand. IFC's investments have beenprimarily in industry and in the development of financial institutions aimedat mobilizing domestic resources and providing financing to smallerenterprises. Prospects for increased IFC operations in Thailand have beenenhanced by expanding private sector investment activity; consultations withthe Government have identified several areas where IFC's assistance may beneeded. These areas include very large and complex projects such as aproposed sponge iron project and a soda ash project to serve the ASEANcommunity; projects in the petroleum and downstream petrochemical sector;and projects in the agricultural sector. In addition, IFC expects tocontinue to help traditional manufacturing projects and to assist infinancial institutions and money market developments.

PART III - THE ENERGY SECTOR

Energy Consumption

25. Total energy consumption in Thailand has increased from 7.4 mil-lion tons of oil equivalent in 1970 to over 14.4 million tons in 1978, anaverage annual growth rate of 9.0%. In 1978, petroleum products accounted

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for almost 70.6% of total energy; hydro and lignite (low grade coal) forabout 4.6% and 1.9% respectively; and charcoal, firewood, paddy husk andbagasse for the remaining 23%. The price of oil products has increasedalmost five-fold since 1973 and has become a heavy burden on the Thaieconomy. Between 1972 and 1977, the oil import bill rose in volume by 25%and in value by 635%. In 1978, oil imports, which were about $1,150 millionin value, absorbed 29% of export earnings, leaving Thailand with asubstantial current account deficit. The impact of oil prices will be evengreater following the 1979 increases. Preliminary estimates indicate that in1980, Thailand's oil import bill will increase to $2.7 billion, absorbingover 30% of total export earnings and contributing to a current accountdeficit of more than $2 billion.

Potential Energy Resources

26. Natural Gas. Significant reserves of natural gas have been dis-covered in the Gulf of Thailand which are projected to come on stream in mid-1982. The proven recoverable gas reserves are 1.6 trillion cubic feet (tcf)of good quality gas and 1.3 tcf of lower quality gas. Probable recoverablereserves are estimated at a further 4.7 tcf. Two overseas groups, Union OilCompany and Texas Pacific Oil Company, will undertake the development of gasreserves, and the Petroleum Authority of Thailand (PTT) will take delivery atthe offshore production platforms. In the initial years much of the gasoutput will be contracted to the Electricity Generating Authority of Thailand(EGAT), while a small proportion will be available to ind,bstries. The Bankmade a loan of $107 million (Loan 1773-TH) in FY80 for the first phase ofdevelopment of the natural gas pipeline.

27. Lignite Reserves. Substantial increases in Thailand's lignitedeposits have been indicated by recent drillings. The present known lignitereserves total 770 million metric tons (Mt) located at Mae Moh (650 millionMt), Krabi (100 million Mt), and Li (20 million Mt). Of these, 175 million Mtare proven reserves that can be economically exploited, and the remainderrequire proving. About 57 new occurrences of lignite have been identified inthe northern and southern regions, among which 13 have been investigated bythe National Energy Administration (NEA) and 6 by EGAT. Lignite is the lowestquality coal with a heating value of about 3,880 kcal/kg or lower (2,700kcal/kg at Thailand's Mae Moh mine). Lignite is uneconomical to transport dueto its high moisture and ash content, and unsafe to store due to its tendencyto decompose and self-ignite in open air. Hence, lignite is not traded and isused almost exclusively in Thailand, as elsewhere, for large-scale powergeneration at mine-mouth sites.

28. The proven and probable lignite reserves at Mae Moh are capable ofsupporting a generating capacity of about 1,500 MW during the 1980s which,together with the presently installed 60 MW capacity at Krabi, wouldconstitute approximately 22% of EGAT's total energy generation in 1990.Under EGAT's development plan (1979-1990) annual production at Mae Moh minewould expand from 1 million Mt of lignite in 1979 to 9.8 million Mt in 1988thus maintaining the share of lignite among its primary energy sources.

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29. Other Energy Resources. Thailand's other energy resources includehydro, fuelwood, and oil shale. Domestic hydro potential is about 9,300 MW,of which about 910 MW are in operation and another 2,200 MW will be installedby 1990. The international rivers, the Mekong, which forms the border betweenThailand and Laos and then flows through Kampuchea, and the Salween in Burma,together have an estimated hydro potential, in nine potential projects, ofabout 24,000 MW with an annual energy output of 144,000 GWh. This representsabout 12 times Thailand's electricity consumption in 1978 and 3.5 times theforecasted electricity requirement in 1990. The Mekong Secretariat had beeninstrumental in helping to complete project preparation studies but seriousresettlement and political problems will have to be addressed if these hydroresources are to be developed. Oil shale reserves at Mae Sot are estimatedat 2,500 million tons, but these are uneconomic to develop at presentprices. Fuelwood resources, once plentiful, are rapidly being depleted anddeforestation is becoming a serious problem.

30. Energy Investment Program. Large investments are required to meetThailand's energy demand in the 1980s. The annual cost of the energyinvestment program will be in excess of $300 million for oil and gas, $100million for refineries and $50 million for lignite development. By contrast,the power program will cost $800 million annually, less than 10% of which isfor hydro. These figures exclude the possibilities in international hydro.Other investments in energy production and conservation will be needed toreduce the country's dependence on imported energy in the future.

The Sector Entities

31. Electricity Enterprises. Thailand has three autonomous state enter-prises. The Electricity Generating Authority of Thailand (EGAT) has respon-sibility for generation and transmission; it sells energy in bulk to largeindustrial consumers and to the two power distribution authorities; theMetropolitan Electricity Authority (MEA) is responsible for distributingelectricity in the Bangkok metropolitan area, and the Provincial ElectricityAuthority (PEA) supplies electricity to the rest of the country. EGATaccounted for 95% of all electricity generated in 1978, the balance beinggenerated by PEA in areas not yet connected to the grid, and by self-generating industries.

32. A new Ministry of Science, Technology and Energy was createdrecently for the development of nonconventional energy and new uses of exist-ing energy sources, but, so far, it has played a minor role in the largersector issues. The National Energy Administration (NEA) within the PrimeMinister's Office, while responsible for overall energy policy, has concen-trated mainly on collecting energy data. NEA is currently planning to carryout an Energy Master Plan Study, with the assistance of Asian Development Bank(ADB) and UNDP financing, to define a program to meet Thailand's energyrequirements up to the year 2000. The Petroleum Authority of Thailand (PTT)was established in December 1978 to undertake all petroleum business anddevelop related energy policies. Under the Second Natural Gas DevelopmentProject (Loan 1773-TH), PTT will receive technical assistance to undertake:(a) a refinery expansion study; (b) a gas utilization study; and (c) energy

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conservation studies. These efforts, in addition to NEA's program, should

provide an initial framework for the development of a comprehensive energystrategy for the country.

Sector Coordination

33. In 1977, the Committee on Power Policy and Development (CPPD) wasformed to oversee the functioning and development of the sector and to provide

overall coordination. However, CPPD has not developed into a decision-makingbody with sufficiently broad competence to exercise control or to provide therequired focus for sector planning. The Government has agreed to undertake a

study to improve sector coordination. This study would be financed under the

Khao Laem Hydroelectric project (approved on November 27, 1979, but not yetsigned), and the recommendations of the study would be implemented during

1980/81.

Sector Financial Position and Tariffs

34. Tariff levels proved adequate throughout the late 1960s and the

early 1970s, and the financial position of the sector remained strong. Duringthe sixties and early seventies, the electricity sector enjoyed substantialeconomies of scale, shifts to hydro and large steam generation coupled withrapid increases in demand and numbers of consumers. Tariffs were reduced from

time to time during these years. The fuel crisis and economic slowdown of1973/74 necessitated large increases in tariffs but the political changes in

Thailand, which coincided with those developments, left the country ill

prepared for fully implementing such increases. Tariff increases took placein 1974 (50%) and 1977 (29%) but were not sufficient to ensure the financial

viability of the sector even though at the time it was anticipated that thenext tariff increase would only be needed in 1979 to be effective for FY80.

35. Recent Developments. Severe droughts in 1977 and 1978 adverselyaffected the thermal/hydro generation mix; while, in 1979, fuel oil pricesincreased some 116%. The last 15 months there has been a steady decline in

the overall financial position of the sector. In an attempt to cushion theimpact of accelerating inflation, the Government chose to delay passingthrough the rising costs of electricity to consumers. In 1978, prices of

petroleum products were adjusted so that a greater proportion of the oil priceincreases were borne by gasoline consumers to the benefit of fuel oilconsumers, mainly the Electricity Generation Authority of Thailand (EGAT).However, by mid-1979 this subsidy proved inadequate to cover the increasingcosts of fuel oil to EGAT, and the Government, faced by mounting criticism ofits handling of the economy, introduced direct budgetary subsidies, estimated

to cost about $7.0 million a month. These budgetary subsidies were seen as a

temporary measure to be removed when the political climate improved. TheGovernment's attempts to raise tariffs in November, 1979 by about 56% were

thwarted by strong political opposition and widespread public demonstrations.These tariff adjustments were required as a condition of effectiveness of theBang Pakong thermal power loan (1690-TH), approved in April 1979, and as a

condition of signing the Khao Laem hydropower loan approved in November 1979.

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36. In an effort to gain political support for the necessary tariffadjustments, the Government set up a parliamentary committee in November 1979

to study the question of tariffs. The committee met through January 1980 but

failed to reach a consensus. Nonetheless, the Government decided that a

further postponement of tariff action was unacceptable and raised tariffs 38%

at the retail level on February 1, 1980. While this increase was insufficient

to remove the budgetary subsidies, senior officials of the Government advised

the Bank that further increases would be implemented to remove these subsidies

by May 1980. In light of these positive steps, on February 8, the Bank

invited EGAT and the Government to negotiate the proposed loan for the Mae Moh

lignite project and asked the Government to bring to negotiations its program

for removing the budgetary subsidies and restoring the sector to financial

viability. At the same time, the Government announced increases in the prices

of gasoline, diesel, kerosene and cooking gas ranging from 24-51%. These

increases were met with overwhelming opposition in the National Assembly and

by the public and the Government, threatened with a vote of no-confidence,

resigned on February 29, 1980.

37. In presenting its proposals for dealing with the sector's financial

difficulties, the Thai delegation to the mae Moh lignite loan negotiations

explained that the new Government was committed to removing all budgetary

subsidies and reestablishing the sector on a sound financial footing.However, in light of the recent political instability in the country, thedelegation requested that the Government be given time in which to develop a

workable energy pricing strategy. Accordingly, it was agreed that all

budgetary subsidies to the power sector would be removed by January 1, 1981,

and that the sector would earn a rate of return of 2% in FY81 and 8% in FY82

and thereafter (Section 5.05 of the draft Loan Agreement and Section 3.02 of

the draft Guarantee Agreement). To meet these objectives, the Government and

EGAT agreed to carry out an Action Plan consisting of the following specificsteps:

(a) adjustment of electricity tariffs for bulk power (totalling

about 56%) in two or more steps to remove all oil subsidiesto the sector not later than January 1, 1981;

(b) a tariff increase of about 19% for bulk power around April 1,

1981 to achieve a 2% rate of return for FY81;

(c) procedures to avoid infrequent and large-scale tariff adjust-ments in the future, whereby the Government, together with the

Bank and EGAT, would review every six months, commencing fromOctober 1980, the tariff requirements of the sector for the nexttwo quarters and introduce agreed adjustments; and

(d) adjustments to the tariff schedules of the three utilities (MEA,PEA and EGAT) through the respective fuel adjustment clauses,to be introduced promptly after oil price increases are

announced by the Government.

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38. Amendments to Previous Agreements. While these arrangements will

lead to somewhat lower earning levels than envisioned under the Bang Pakong

and Khao Laem projects, they will enable the sector to reach a rate of return

of 8% in FY82 as stipulated under these loans. It is proposed that the ratesof return in para. 37 above, namely 2% in FY81 and not less than 8% in FY82

and in each of the fiscal years thereafter will supercede the relevant

provisions in the Guarantee and Loan Agreements of (a) the Accelerated Rural

Electrification Project (Loan 1527-TH); and (b) the Bang Pakong Thermal Power

Project (Loan 1690-TH). It is also proposed that Section 5.04 of the Loan

Agreement for the Khao Laem Hydroelectric Project (approved but not yet

signed) would be modified in accordance with the provisions of Section

5.05(a), (b), (c) and (d) of the draft Loan Agreement for the proposed Mae Moh

Lignite Project before it is executed; similarly Sections 3.02 and 3.05 of the

Guarantee Agreement for the Khao Laem Hydroelectric Project (approved but not

yet signed) would be modified in accordance with Section 3.02(a) and (b) and

Section 3.03(a), respectively of the draft Guarantee Agreement of the proposed

Mae Moh Lignite project. In addition, while no retroactive financing was

envisaged when the Khao Laem Hydroelectric Project Loan was approved by the

Executtve Directors in November 1979, after approval, EGAT requested that it

proceed to award the main civil works contract and procure some construction

equipment in order not to delay project implementation until the condition of

signing could be met. The Bank agreed to this request with the understanding

that Bank financing for any eligible expenditures incurred would be at EGAT's

risk if the loan was not signed. It is estimated that these expenditures will

total about $12 million from December 1, 1979 to the expected signing date end

May. It is therefore proposed that paragraph 4 of Schedule I of the Khao Laem

Hydroelectric Project Loan Agreement be modified accordingly and that it be

executed with such modification.

The Bank's Lending to the Sector

39. Sector growth has been considerable. Since 1970, electricity

demand and energy generation have increased annually by about 14% and 15%,

respectively, reaching 2,101 MW and 12,372 GWh in 1978. The Bank has helped

finance nine projects through loans to EGAT, totalling about $362 million,

a loan to PEA of $25 million, and two loans totalling $107 million to PTT.

EGAT's projects have included dam construction, equipment for hydro and

thermal power generation, transmission and substation facilities. Six

projects have been completed and are operating satisfactorily and the

seventh was virtually completed at end of February 1980; another two areunder construction. The two most recent loans to EGAT will help finance the

dual gas/oil-fired Bang Pakong thermal power station designed to use thenatural gas from the Gulf of Thailand and meet the growing demand for

electricity by the increased use of indigenous hydro resources at Khao Laem.

The loan to PEA in 1978 helped finance the first phase of the accelerated

rural electrification program. Currently about 28% of all households in the

country have electricity; by 1983 the rural electrification program is

expected to increase this proportion to 50%. Negotiations for a proposed$72 million loan for the second rural electrification project have been

substantially completed. The loans to PTT would help the development and

availability of natural gas for power production and use in industry. The

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proposed loan for Mae Moh Lignite project will enable EGAT to expand ligniteproduction from 1 million tons in 1979 to 2.8 million tons in 1984 in order tomeet the requirement of the 150 MW Power Unit 4 at Mae Moh scheduled to becommissioned by January 1984.

40. The most recent power project performance audit report, of March1978 on the South Bangkok Thermal Unit No. 4 Project (Loan 790-TH), indicatedthat the main objectives of the project had been met and that the project wascompleted on time and within the original cost estimate.

PART IV - THE PROJECT

41. The project was presented to the Bank in April 1978, followingseveral years of exploration drilling at Mae Moh which established theavailability of sufficient lignite reserves to support an increase in theinstalled power generating capacity from the existing 225 MW (Power Units1-3) to 525 MW (Power Units 4 and 5). EGAT's consultants completed afeasibility study on mining of lignite for Power Plant Units 1 to 4 in March1979. A project for the construction of Power Generation Unit 4 is beingfinanced principally by the Asian Development Bank (ADB) and was approved byADB Board in November 1979. The proposed mining project was appraised bythe Bank in April/May 1979. A brief follow-up mission to coordinate mineand power projects was made in September 1979. A staff Appraisal Reportentitled "Thailand Appraisal of the Mae Moh Lignite Project (No. 2722-THdated April 18, 1980 is being distributed separately. Supplementary projectdata are provide in Annex III. Negotiations were held in Washington, D.C.from March 10-20, 1980. The Government and EGAT delegations were headed byKhun Kraisri Chatikavanij Director General Fiscal Policy Office, Ministry ofFinance, and Khun Kaseme Chatikavanij, General Manager, EGAT respectively.

42. Objective. The project forms part of a national developmentstrategy to reduce the country's high dependence on oil imports, by developingindigenous energy resources such as natural gas, lignite and hydropower.The mine expansion is required to meet the incremental demand of the Mae Mohpower generating facilities up to and including the 150 MW Power Unit 4.

43. Location. The Mae Moh power and mine complex is located in NorthThailand in Lampang Province, approximately 650 km north of Bangkok and 12 kmeast of the town of Lampang (see Map). The site is an extensive basin withan elevation of approximately 300 m above sea level. The main land use inthe area is commercial teakwood cultivation and there is some limitedsubsistence agriculture. Population density in the basin is low and theclimate is tropical with an average annual rainfall of 1,000 to 1,500 mm.The area is adequately served by paved roads and by a rail spur line whichconnects the site with the national rail system approximately 5 km to thesouth of Mae Moh.

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44. Power and Lignite: Financing Arrangements. The Mae Moh ligniteproject (see para. 59) and the Power Unit 4 are being financed independently,but because of the important linkages between them, the financing of the twoprojects has been considered together. Total costs, including contingenciesand interest during construction, are $383.3 million, of which $206.5 millionis in foreign exchange. These costs will be met by loans from the Bank ($72.0million), ADB ($81.8 million), the Saudi Fund ($32.2 million), the SwissGovernment ($8.9 million), the OPEC Special Fund ($7.0 million), Governmentcontributions ($37.5 million), EGAT ($108.7 million), and commercial banks($35.2 million). To ensure that all financing requirements are met, theeffectiveness of ADB's loan for Power Unit 4 will be a condition ofeffectiveness of the proposed loan (Section 7.01(a) of the draft LoanAgreement). EGAT has agreed that lignite produced under the proposed mineexpansion will be used only for purposes of EGAT's power generation (Section3.11 of the draft Loan Agreement).

Description of the Project

45. The project scope for the Mae Moh open pit lignite mine includesengineering, procurement and erection of mining and related equipment,technical assistance, training, and civil works required to increase totalmine production to 2.8 million tons per year in 1984. The mining equipmentcomnprises four 15 cu yd electric rope shovels, thirty four 85 ton rear-enddump trucks, one coal crushing, conveying, stacking and reclaiming system,and ancillary equipment. The project also includes expansion of themaintenance workshop and office, as well as expansion of the mine powersupply system.

46. Mining Equipment. The selected mining equipment, together withthe existing equipment, would be sufficient to meet the lignite requirementsof Power Units 1-4 or a total of 375 MW installed generating capacity. Itssize and particularly the capacity of the conveying and crushing system,however, have been determined taking into account the scheduled constructionof a fifth power unit of 150 MW capacity to be commissioned six months afterUnit 4 thus comprising in some components a slight overcapacity for thefourth power unit, but a more economic investment for Units 4 and 5together.

47. EGAT - The Borrower. EGAT was established in 1968 by the mergerof three power utilities (the Yanhee Electricity Authority, the NortheastElectricity Authority and the Lignite Authority) with the object ofcoordinating the generation and transmission systems and increasing theelectricity supply throughout the country. EGAT has succeeded in theseobjectives to the extent that it can now be considered to be a highlydeveloped and efficient institution. EGAT's FY79-86 power developmentprogram is based on the principle of the least-cost sequence of development,following an extensive study of the alternative generation and transmissionprojects. The program is currently firm up to FY86. Beyond that year,

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further studies would be necessary on the basis of the availability of primary

energy resources and the prevailing economic conditions.

48. Financial Forecast. According to EGAT's financial forecast for the

period FY80 through FY88, its energy sales would increase at an average of 11%

annually; capital expenditures are estimated at $9.6 billion at current prices

and include the investment required to develop the lignite deposits and

interest during construction. These estimates do not include the government

contributions toward the cost of facilities for downstream benefits. For the

sector as a whole, capital expenditures for the same period are estimated at

$11.5 billion, 84% of which is EGAT's total estimated expenditure. In

addition, about $0.7 billion will be invested by PTT to construct a pipeline

to transport natural gas from the Gulf to EGAT's Bang Pakong and South Bangkok

power stations. These measures, coupled with the lignite development, are

expected to enable EGAT to reduce fuel-oil based generation from 74% in FY78

to less than 10% in FY90.

49. To finance its construction program, EGAT intends to borrow 53% in

overseas funds to cover foreign costs and another 23% locally, obtain 3% from

the Government as equity to cover duties and taxes and provide the remaining

21% of required funds from internal cash generation. EGAT has access to

short-term borrowings from local banks that it can use to meet temporary

liquidity needs. As under previous Bank loans, EGAT has agreed to secure the

Bank's agreement on borrowings if its debt/equity ratio exceeds 60/40 or if

short- and medium-term borrowings exceed 15% of total debt (Sections 5.07 and

5.08 of the draft Loan Agreement).

50. Tariff Study. A study of tariff structures based on long run

marginal costs for the sector financed under the Pattani HydroelectricProject (Loan 1485-TH) is now expected to be completed by end December,

1980. The delay has been due to the time taken to derive demand forecasts

in the inter-agency working group and the fact that this working group had

also been occupied during the latter half of 1979 on work connected with the

required increases in tariff levels.

51. Organization and Management. EGAT's Mining Department is being

reorganized and expanded to support EGAT's plans to increase lignite

production. Of the Department's total staff of 1,079 (excluding semi-

skilled and unskilled workers at the mines), 921 are heavy equipment

operators, technicians and skilled labor mostly at the mine sites, with the

balance comprising engineers, geologists and senior supporting staff. At

present there are four divisions, namely, the Mine Operation ControlDivision, the Lignite Geology Division, the Mae Moh Lignite Mine Division

and the Krabi Mine Operation Division. These divisions will be strengthenedto intensify lignite exploration and production control of expanded mine

activities. The new organization plan, recently approved, would add three

more divisions: (a) the Mining Engineering Division for planning, technical

designs, capital and operating budgets, statistics and production cost

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analyses; (b) the Mine Equipment Division dealing with mechanicalengineering, repair, maintenance and mine equipment; and (c) the Mae MohMine Maintenance Division for on-site maintenance and repair.

52. Efficiency of Mining Operations. The Mining Department maintainsdetailed and complete records of all its operations, and expenditures arefully recorded. Nevertheless, while the Comptroller's Department determinesand analyzes the respective mines' lignite production costs, the MiningDepartment has not so far devoted sufficient attention to review and analyzethe production cost of lignite per ton for the Mae Moh and Krabi mines, andtherefore lacks continuous assessment of the efficiency of its operations,except on an end-of-the-year basis. EGAT has agreed to transfer to theMining Department responsibility for lignite production costs and for thefinancial performance of mining operation by not later than April 1, 1981.The transfer entails treating Mae Moh and Krabi mines and any other majormining operation at EGAT as mine accounting centers with the performance ofeach center measured in terms of the expenses it incurs and the charges itmakes for the lignite transferred to the power plants. The methodology forestablishing a price for the lignite produced for the consumption of thepower units has been agreed with EGAT (para. 55).

53. The new Mine Management System entails new divisional responsi-bility within the Mine Department for such functions as cost control,planning and budgeting and accounting relating to mining activities. Twodivisions will be placed within the Mining Department to handle these tasks,but will be supervised and controlled by the Comptroller's Department. EGAThas agreed to arrange a short-term training program for the relevant staffof both Mining and Comptroller's Departments in mine accounting and systemsand procedures for cost information flows, and following review by the Bank,to implement the training program not later than October 1, 1980 (Sections3.07 and 3.08 of the draft Loan Agreement).

54. The Lignite Price. In view of the importance of economicparameters to lignite pricing, and the uncertainties regarding Thailand'spotential energy resource reserves, the appropriate fuel comparator forlignite and long-term energy pricing trends, it has been agreed that EGATwill, not later than December 31, 1981 complete, with the assistance ofconsultants, a study to determine the long-term forecast price for ligniteto be used: (i) in making annual adjustments to the lignite price at MaeMoh and Krabi mines, as described below; and (ii) in preparing the mastermining plans for the Mae Moh basin and any other mining developments. Theterms of reference for the study will be agreed with the Bank and the studywill be furnished to the Bank for its comments (Section 5.06(b) of the draftLoan agreements).

55. EGAT has agreed that, upon completion of the study expected atend-1981, the price to be used at the mines will be based on therecommendations of the study, as well as, inter alia on the size of lignite

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reserves, prevailing prices of substitute fuels and possible developments inthe uses of lignite. Commencing in 1982 EGAT will consult with the Bank not

later than April 1 of each year on suitable adjustments to be carried outduring the next fiscal year in the price of lignite. In the interim, a

minimum lignite price will be set, sufficient to cover the costs of production

plus a margin to cover debt service, fixed assets replacements and explorationrequirements for each mining operation. This price will be established inconsultation with the Bank not later than December 31, 1980 and become

effective on April 1, 1981 (Section 5.06(a) and (c) of the draft LoanAgreement).

56. The Rents. The price of lignite, as in the case of other fuel

sources to EGAT, will be included in the fuel adjustment clause of its tariffschedule (Section 5.05(d) of the draft Loan Agreement). Consumers, then, will

bear the incremental economic costs implied in the pricing strategy, dampeningconsumer demand for power to the extent possible and providing EGAT withadditional resources (the rent) needed for the costly new facilities that are

likely, given the very high growth rates predicted for power usage inThailand. For the electricity tariffs to reflect the lignite price, it isnecessary to exclude the rent from EGAT's earnings and the net revalued mining

assets from EGAT's net revalued total fixed assets. These adjustments will be

made by EGAT in calculating the corporate rate of return for purposes of itsearnings covenant.

Exploration and Mining Plan

57. EGAT is presently allocating about $2.3 million per annum forlignite exploration. To facilitate the continued financing of exploration,but on a wider territorial basis, the Mining Department has agreed to prepareeach year countrywide exploration plans which will be reviewed by the Bank

(Section 3.06(a) of the draft Loan Agreement). EGAT's current mining plan isbased on proven reserves of 130 million tons at a stripping ratio of 2:1 in

the eastern part of the Mae Moh basin, a final mining depth of 120 m below thesurface and an ultimate installed generating capacity of 525 MW. It has beenagreed that this mining plan is adequate for the purposes of the proposed

project. However, the recent increase in known lignite reserves and theproposed countrywide exploration is expected to provide sufficient geologicaldata to prepare an initial outline of a new master mining plan, by September30, 1981 followed by land reclamation activities in accordance with such plan.This mining plan will be updated to take account of the recommendation of thelignite pricing study by not later than March 31, 1982 (Sections 3.06(b) and5.06(b) of the draft Loan Agreement). The plan is highly significant to theselection of technically and economically optimum exploitation methods and to

the determination of the ultimate economically recoverable lignite reserves.

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Technical Assistance

58. EGAT has selected two consulting firms with which it has had pre-vious experience, to undertake (a) general technical consulting services,including assistance in interpretation of geological data and lignitereserves, mine planning, preparation of the mine master plan, selection ofappropriate mining methods and preparation of equipment specifications forprocurement purposes; and (b) design and detailed engineering of the coalcrusher and the conveying, stacking and reclaiming system, supervisoryassistance in quality inspection and erection of equipment; update and reviewof EGAT's master mine plan and inclusion of a detailed land reclamationprogram and its implementation (Section 3.02 of the draft Loan Agreement).Signing of a satisfactory contract between EGAT and the consultants is acondition of effectiveness of the proposed loan (Section 7.01(b) of the draftLoan Agreement).

Cost Estimates and Financing

59. The total cost of the proposed project, excluding interest duringconstruction ($14.8 million), is $115.5 million; including duties and taxes of$14.2 million equivalent and a foreign exchange component of $60 million.Estimates are at August 1979 price levels and include contingencies amountingto $33.8 million, about 41% of base cost. Physical contingencies of $7.8million or 10% of base cost and price contingencies of $26.0 million, 31% ofbase cost, were calculated at the assumed annual escalation rate for foreignexpenditures of 12% in 1979, 10.5% in 1980, 9% in 1981, 8% in 1982 and 7% in1983; local cost escalation rates were assumed at 16% in 1979, 14% in 1980,13% in 1981 and 12% in 1982-83. Cost estimates are summarized in the loan andproject summary. Project costs will be met by the proposed Bank loan of $72million (which will cover the foreign exchange component and interest duringconstruction), commercial loans of $5.7 million, government contribution of$19.9 million equivalent and EGAT's cash generation of $32.7 millionequivalent.

Project Mangement and Implementation

60. Project preparation is well advanced and project-related activities,like the continuation of the drilling program and preparatory work for themaster mining plan, ecological studies, preparation of equipment specifica-tions for procurement and acquisition of land are well under way (Section3.05 of the draft Loan Agreement). Retroactive financing of up to $3 million,for eligible expenditures incurred after January 1, 1980, is proposed fordownpayments covering (a) a portion of the consultant contracts for thepreparation of the mining plan; and (b) procurement of two 15 cu yd miningshovels, which are critical for the prestripping required for Power Unit 4,and other related mining equipment as any delay in procurement would adversely

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affect the implementation schedule. The key delivery date for the third

mining shovel is July 1981 and for the fourth, January 1982. The implementa-

tion schedule appears realistic and, barring any major unforeseen difficul-

ties, it is anticipated that the mine can produce about 3 million tons of

lignite starting in early 1984, when Unit 4 comes onstream.

Procurement

61. About 97% of the total equipment to be financed under the proposed

project, will be procured under international competitive bidding in

accordance with the Bank's procurement guidelines. A preference of 15% or

the customs duties, whichever is lower, will be granted to local equipment

manufacturers. Contracts for the purchase of minor items of equipment not

exceeding the equivalent of $250,000 each, and not exceeding $1.5 million in

aggregate, will be awarded after inviting quotations of which not less than

three shall be from suppliers or manufacturers abroad.

Disbursement

62. The proposed Bank loan would be disbursed against (i) 100% of the

foreign exchange cost of directly imported equipment and vehicles,

100% of the ex-factory cost of locally manufactured goods and 60% of local

expenditures in the case of off-the-shelf procurement; (ii) 100% of

foreign expenditures for engineering, training and studies; and (iii) 100%

of the interest and other charges during construction on the Bank loan.

Rate of Return

63. The rate of return of the Mae Moh development has been calculated

on an incremental basis for the mine expansion needed to supply both Power

Units 4 and 5 and the construction of both Power Units 4 and 5 which EGAT

has planned as one development package. Capital expenditures under the

proposed project include equipment that has been sized to meet the

requirements of both Power Units 4 and 5, a new reservoir of sufficient

capacity to support the same power units, plus an additional 900 MW power

generation capacity thereafter, and a resettlement program required by the

new reservoir location and the mine expansions for Power Units 4 and 5.

Consequently the package approach to the development of Units 4 and 5 power

and mine expansion provides a more appropriate basis for analyzing the

financial return of the proposed investment. The financial rate of return

thus calculated is 14.6%, which is satisfactory and comparable to similar

types of coalfired power investments.

Ecology, Environment and Safety Factors

64. Air Pollution. Since the lignite has a relatively high sulphur

content, the major concerns regarding the ecological impact will focus on

- 22 -

air pollution caused by sulphur dioxide emissions from the stacks. Prelim-inary studies have shown that ground level concentrations up to and includingUnit 5 will be within the Bank guidelines. However, ADB's loan will financean air pollution study to analyze this problem more thoroughly and to makerecommendations also regarding any future expansions of the Mae Moh Powerplant. ADB will review and approve the stack design for Power Unit 4 inlight of the findings of the first phase of this study. EGAT will furnishthe study, when completed, for the Bank's review but not later than December31, 1981 (Section 3.09(b) of the draft Loan Agreement).

65. Resettlement, Land Reclamation and Water Quality. EGAT has presentedfirm plans for the resettlement of about 293 families which will be affectedby the mining activities. Financing for resettlement is included in theproposed loan and EGAT is presently negotiating for the required land with thecompetent government authorities. Confirmation that EGAT has acquired theselected or other satisfactory resettlement site will be a condition foreffectiveness of the loan (Section 7.01(c) of the draft Loan Agreement). Aland reclamation program will be undertaken with technical assistanceinitially provided by consultants (Section 3.06(b) of the draft Loan Agree-ment). Water quality in the area is being monitored and no major impactthrough water deterioration is foreseen. EGAT, however, has agreed toprepare contingency plans in case mine drainage water quality deterioratesto unacceptable levels (Section 3.10 of the draft Loan Agreement).

66. Pit Slope Stability. EGAT, with the assistance of the AsianInstitute of Technology in Thailand and its consultants, has carried outgeotechnical work for the determination of the slope and stability for the pitand the power plant safety pillars. The results of this work are presentlybeing reviewed by EGAT's consultants and will be furnished to the Bank withtheir assessment by not later than December 31, 1981 (Section 3.09(i) of thedraft Loan Agreement). The hydrological data generated by the drillingprogram indicate that no artesian aquifers exist in the basin and the normalinflow of groundwater and surface run-off is not expected to pose any drainageproblems.

Benefits and Risks

67. The economic costs and benefits of the proposed project have beenanalyzed in two different ways. First, the project has been analyzed in thesame manner as the financial analysis of the mine expansion and associatedPower Units 4 and 5 with appropriate adjustments to cost and benefitstreams. Second, the project has been compared with a coal-fired powerplant to evaluate the economic benefit of substitution under the assumptionthat the combined mine and power investment in both Units 4 and 5 wouldsubstitute for a 300 M4W coal-fired plant.

68. The first analysis shows a rate of return of 13.8% which wouldincrease to a relatively high 15.9% if no shadow pricing of foreign exchangeis made. The return on substitution, at recently quoted international

- 23 -

contract prices for coal ranging from US$32-36 per ton, ranges from 14-16%.Net foreign exchange savings resulting from reduction in coal imports underthe same assumptions as in the second economic rate of return analysis abovewill average US$15.0 million per year in 1979 terms taking into account theimpact of debt service.

69. Other benefits of the project will include technological transferthrough technical assistance at the mine site, and institutional improvementswithin EGAT's Mining Department. Additionally, the project will provide someincrease in economic activity in the remote Northern Region of Thailandthrough the direct employment of 265 persons at Mae Moh and indirect employ-ment in the surrounding area of persons engaged in providing supportingservices and facilities. The project will further benefit the area by theresettlement program to be undertaken by EGAT, under which about 300 squatterfamilies would be resettled in a village with a school, health center, watersupply, electricity and other amenities which would represent improvements intheir living conditions.

70. Risks. The only major risk of the project is in respect to sulphurdioxide emissions from the associated power plant development. Action pro-posed to deal with this problem is referred to in para. 64 above.

PART V - LEGAL INSTRUMENTS AND AUTHORITY

71. The draft Loan Agreement between the Bank and the ElectricityGenerating Authority of Thailand, the draft Guarantee Agreement between theKingdom of Thailand and the Bank, and the Report of the Committee providedfor in Article III, Section 4(iii) of the Articles of Agreement are beingdistributed to the Executive Directors separately. In addition to thespecial conditions which are listed in Section III of Annex III, additionalconditions of effectiveness of the proposed loan (Section 7.01 of the draftLoan Agreement) are:

(a) all conditions precedent to the effectiveness of the ADB LoanAgreement have been satisfied (para. 44);

(b) the contract between EGAT and the consultants has been signed(para. 58); and

(c) the aquisition of the resettlement site has been confirmed(para. 65).

72. In addition to the above it is proposed to (a) substitute Section5.05(a), (b), (c) and (d) of the draft Loan Agreement of the Mae Moh LigniteProject for Section 5.04 of the Loan Agreement for the Khao Laem HydroelectricProject already approved by the Executive Director on November 27, 1979 but

- 24 -

not yet signed; (b) substitute Section 3.02 (a) and (b) of the draft GuaranteeAgreement of the Mae Moh Lignite Project for Section 3.02 of the GuaranteeAgreement of the Khao Laem Hydroelectric Project and Section 3.03(a) of suchMae Moh draft Guarantee Agreement.for Section 3.05 of such Khao Laem GuaranteeAgreement; and (c) modify paragraph 4 of Schedule 1 to the unexecuted LoanAgreement of the Khao Laem Hydroelectric project to permit up to $12.0 millionin retroactive financing of eligible expenditures incurred after December 1,1979.

73. I am satisfied that the proposed loan would comply with theArticle of Agreement of the Bank.

PART VI - RECOMMENDATION

74. I recommend that the Executive Directors approve the proposedloan and proposed amendments to previous agreements.

Robert S. McNamaraPresident

By Ernest Stern

Attachments

May 1, 1980Washington, D.C.

- 25 - ANNEX I

TU.AO - SOCIAL INGICATo0S DAT SHEET Page 1 of 5

7RAILAW ~~~REFOUZCE GROUPS (ADJUSTED Ajj[RAGESLAND AREA (THOUSAND SQ. EM.) - HOST RSCENT ESTIMTE)

TOTAL 514.0 SAME SAIE NEXT UGHERAGRICULTURAL 179.6 MOST RECENT CGIORAIC INCOME INC0HE

1960 Lk 1970 A ISTT7 lb A XIRGION /c GROUP /d GROUP a

Gll PE CAPITA (US$) 100.0 210.0 490.0 528.9 467.5 1097.7

ENERGY CONSUMFTION PER CAPITA(KUIOGUMS OF COAL EQUIVALENT) 64.0 247.0 308.0 371.1 262.1 730.7

POPULATION AND VITAL STATISTICSPOPULATION, KID-EA (MILLIONS) 26.4 35.7 43.3URAN POPULATION (PERCENT OF TOTAL) 12.0 13.0 14.0 - 27.4 24.6 49.0

POPULATION FlOJETIOUSPOPULATION rI YTE 2000 (KILLIONS) 69.0STATIONART POPULATION (MILLIONS) 105.0TMR STATIOARY POPULATION IS ERACUD 2095

POPULATION DENSITYPU SQ. KK. 51.0 69.0 84.0 154.8 45.3 44.6P SQ. iX. AGRICULTUAL LAND 204.0 251.0 244.0 566.7 149.0 140.7

POPULATION AGZ STRU (PUCmET)0-14 YIS. 44.7 46.2 4U.0 41.3 45.2 41.3

15-64 SRS. 52.6 50.8 52.0 54.9 51.9 55.365 TRS. AND ABOVE 2.7 3.0 3.0 3.3 2.8 3.5

POPULATION GROWH RATE (PUCENT)TOTAL 2.8 3.0 2.8 Z.4 2.7 2.4U1A 5.1 3.6 3.5 4.3 4.3 4.5

CRUDE BIRTH RATE (PER TBUSAND) 46.0 42.0 32.0 30.2 39.4 31.1CRUDE DETH RATZ (PU THOUSAND) 17.0 12.0 8.0 8.3 11.7 9.2GROSS EPRODUCTION RATI .. 3.2 2.2 2.1 2.7 2.2FAMILY PLANING

ACCEPTORS. ANNUAL (THOUSANDS) .. 203. OA 527.0USERS (PUECENT or HARRIED lOt) .. 27.4 32.3 34.1 13.2 34.7

FOOD AND NUTRITIONInDEX or FOOD PRODUCTION

PER CAPITk (1969-71-100) 68.0 100.0 110.0 106.2 99.6 104.4

PER CAPITA SUPPLY OFCALORIES (PERCENT OF

REQUIRflHlTS) 96.0 103.0 107.0 104.1 94.7 105.0PROTEINS (GRAMS PER DAY) 43.5 52.2 50.0 57.4 54.3 64.4

Ot WHICH ANIMAL AND PULSI 8.4 .. 14.6 16.9 17.4 23.5

CHILD (AGES 1-4) MORTALITY RATR 15.0 9.0 6.0 4.8 11.4 8.6

HEALTHUFE EXPZCTANCY AT JILT! (YTARS) 51.0 57.0 61.0 61.1 54.7 60.2INfANT KORTALITY RATE (PZRTHOUSAND) .. 86.OLI 68.0 46.6 68.1 44.7

ACCESS TO SAE WATE7 (PQCENT OfPOPULATION)

TOTAL .. 17.0 22.0 21.9 34.4 60.8LRBAN .. .. 49.0 46.2 57.9 75.7RURAL .. .. 12.0 12.8 21.2 40.0

ACCESS TO ERTA DISPOSAL (PERCENTOf POPULATION)

TOTAL .. 17.0 40.0 28.4 40.8 46.0URBAN *- 65.0 58.0 65.0 71.3 46.0RURAL .. 8.0 36.0 14.7 27.7 22.5

POPULArION PER PRYSICIAN 7800.0 S420.0 8370.0 3790.5 6799.4 2262.4POPULATION PEU WUISING PERSON 4900.0 3340.0 1510.0 1107.4 1522.1 1195.4POPULATION PER ROSPITAL SED

TOTAL 1340.0/f 890.0 aoo.o 613.3 726.5 453.4LRBAN .. 280.0 240.0 203.6 272.7 253.1RURAL .. 1380.0 1290.0 1110.3 1404.4 2732.4

ADMISSIONS PER HOSPITAL BED .. 31.0 33.0 23.9 27.5 22.1

HOUSINGAVERAGE SIZE OP HOUSEHOLD

TOTAL 5.5/f 5.8 5.5 5.2 5.4 5.3URBAN 5.3Lf 5.9 5.5 .. 5.1 5.2RURAL 5.6/f 5.8 5.5 .. 5.5 5..

AVERAGE NUMER OF PERSONS PER ROOMTOTAL .. .. 2.4 .. .. 1.9L:RLAN .. .. 2.2 .. .. 1.6RURAL .. .. 2.4 .. .. 2.5

ACCESS O ELECTRICIrY (PERCENrOF DWELLINGS)

TOTAL .. .. 2S.6 .. 'A.l 50.0URSAN . 63.0:g .. * 45.1 71.7tURAL .. 13.0 .. .. 9.9 17.3

- 26 - ANNEX I

THUILAND - SOCIAL INDICATORS DATA SEET Page 2 of 5

THAILAND REFZJENCI GROUPS (ADJUSTED A)PAES- MOST RECENT ESTIMATE) -

SANE SAME NIEr HIGHERMOST RECZNT GZOGRAPHIC INCOME INCOME

1960 lb 1970 /b ESTIMATE lb REGION /c GROUP /d GROUP I.

EDUCATIONADJUmD CEROLLMENT RATIOs

ERnHAR: TOTAL 83.0 81.0 83.0 97.9 82.7 102.5MALZ 88.0 85.0 86.0 98.7 87.3 108.6FEMALE 79.0 77.0 79.0 97.4 75.8 97.1

SECON1DARY: TOTAL 12.0 18.0 26.O 42.2 21.4 33.5MALS 15.0 21.0 29.0 46.7 33.0 38.4FECU 9.0 15.0 22.0 40.9 15.5 30.7

VOCATIONAL EROL. (S Of SZCONDARY) 19.0 24.0 13.0 12.5 9.8 11.5

PUPIL-TEACEiR RATIOPRIMAr 36.0 35.0 30.0 32.5 34.1 35.8SECONDARY 20.0 16.0 21.0 25.8 23.4 22.9

ADULT LITERACY RATE (PERCENT) 68.0 79.0 82.0 84.1 54.0 64.0

CONSOIPTIONPASSENGER CARS PM THOUSAND

POPULATION 2.0 5.0 6.4 6.1 9.3 13.5RADIO RECEIVERS PU ThOUSAND

FOPULAT1ON 6.0 78.0 131.0 84.4 76.9 122.7TV RECEIES PER TROSAND

POpULATON1 2.3 7.0 17.0 22.4 13.5 38.3NEWSPAPER ("DAILY CNznALDiTEREST") CIRCULATION PERTHOUSAND POPUATION 11.0 24.0 .. 24.2 18.3 40.0CINEMA ANIUAL ATTENDAINC PU CAITA .. .. 1.7 3.6 2.5 3.7

LABR FORCEtDTALLAUQ FORCE (THOUSADS) 12757.0 16163.0 18514.0

FEMALE (PERCENT) 48.3 47.3 46.9 36.7 29.2 25.0AGRICULTURZ (PERCENT) 83.7 79.9 77.0 54.6 62.7 43.5INDUSTRY (PERCENT) 4.4 6.0 8.0 16.3 11.9 21.5

PARTICIPATION RATE (PERCZNT)TOTAL 51.3 46.6 45.6 40.7 37.1 33.5'ALE 52.7 49.3 48.6 49.9 48.8 48.0FEMALE 49.8 43.9 42.6 31.0 20.4 16.8

ECONOMIC DEPENDNCY RATIO 1.0 1.1 1.1 1.1 1.4 1.4

INCOME DISTRIBUTIONPERCENT OF PRIVATE INCOMERECEIVED 8T

HIGHEST 5 PERCENT OF HOUSCEHOLDS 21.8/b 23.8/1 14./1 14.9 15.2 20.8HIGHEST 20 PERCENT OF HOUSCEDLDS 50.97i 49.77T 42.2L 46.8 48.2 52.1LOWEST 20 PERCENT OF HOUSEWOLDS 6.27w 6.17i 7.6/ 6.2 6.3 3.9LOWEST 40 PERCENT OF HOUSEHOLDS 14.97E 15.97? 19.1Lj. 16.8 16.3 12.6

POVERTY TARCET GROUPSESTIMATED ABSOLUTE POVERTY INCOMELEVEL (USS PER CAPITA)

URBAN .. .. 126.0 193.1 241.3 270.0RURAL .. .. 94.0 128.7 136.6 183.3

ESTIMATED RELATIVE POVERTY INCOMELEVEL (US$ PER CAPITA)

URBAN .. .. 115.0 136.8 179.7 282.5RURAL .. .. 108.0 96.8 103.7 248.9

ESTIMATED POPULATION BELOW ABSOLUTEPOVERTY INCOME LEVEL (PERCENT)

URBAN .. .. 15.0 32.0 24.8 20.5RURAL .. .. 34.0 52.5 37.5 35.3

Not availableNot applicable.

NOTES

/a The adjusted group averages for each indicator are population-weighted geoWmetric means, excluding the extremevalues of the indica or and the most populated country in each group. Coverage of countries among theindicators depends on availability of data and is not uniform.

/b Unless othervise noted, data for 1960 refer to any year between 1959 and 1961; for 1970, beween 1969and 1971; and for Mout Recent Estimate, between 1974 and 1977.

/c cast Asia & Pacific; Id Lower Middle Income (5281-550 per capita 1976); /e Intermediate KiddleIncome (S551-1135 per capits, 1976); if 1962; aI Percent of population in Bangkok metropolitanarea; /h 1962-63; /i 1968; /J Preliinary data for 1975/76. due to lack of data on nationalbasis, the methodology 'or aggregating the available regional data overstates incomes of low incomegroups and understates income of higher income groups. Thus, this data is not suitable for anyanalytical zomparisons; /k Government: /1 1964-1965.

'1osc Recent Estimate of HNP per capita is for 1978.

Augut, 1979

-27- w DwmnII OF NOff dIAMORS Page 3 of 5

Notes: Although the data .rc rs from soregnerelly judgd the et authoritative and reliable, it shoud se he eetsd. that they not he interen-tIf1i comparble iboense of ths lack of standardised definition .. d concepts used by dlffe.-t coutries in collecting the data. The data ar, nontheless,

usflto describe orders of emitude, Lod Ionte trends, asd ohamterise certain fier difference bete- coutrie..

Th g,et9jp- av--e for.eah indictor.r- pyepltien-sighted gennthic mean, excluding the extreme onios of ths indicator end the nost pepeatedcoetry II9Wiid(izYie to Ink of ats, group avrages of il indictors for CaPitni Aurplue Oil rporters end of indicators of Accens to dater and Encreta

Doeposal , Houning, IoIIe Distribuion sod Pevery for other coutey groups ar poPulatic-selighted ge-trio -en without eniemnof tic ectree -I.oes andtht noet popui.td .o-try. SInc-h coeas of ctrise aWE the Ipdicstor 14.gdso valblty of data end is not unifxe. cuIonnt he nuecised

inrelatiogavrse_o_oeinicto_o nohr.Ins acg .s a etml9yi usfla_axoitin f"eece viistncei the aue foiniAto tatieas the co~ntej sd reference scOut.

IAND ASEA (tho-so sqa.)k. cee to Norta .Disoa pecn fonuaie)-ttl uh n rural %WtflZ Ttota _ufae are o-prisig lend are sod Inland waters. NMembr ofpepl (totalt re,sdrri evdb ort ip la

agiulua -Iot re..ect estleate of agicultura area used tnq,raiiy percetages of their repective popsuatione. Encreta dispcaal eny includeor pormnet ly for crops, pastures nskht nod kitchen gardene or to the coIlntion and dispy..al, with or withot treatmet, of h. .... ertalie fallen, end wate-cter by cater-borne system o the use of put prince end -ouied

VIP cOP CAHfA di I - iii' per capita entimatre at current market prices, Pt tionpec~sipmoti- perslatioe divided by ned ber of practicing pbpsicmen-&iI1uIlthiAbyli covrinathod -i World Bnh Atlas (1976-7t basis) q.i(if?i.d fr- . .lVlehnol at iseverity leve.9i60, 1970,-ed 19T8 data. Pocultio !gVlrn Persm - Ptp.ation dicided by ou Io f prctiriog nale

Il!YC,UPINPRCPT - uncoo coneenption of oonvllenergysdfil n : graut uss pratical eus,ed ecistastnus.(i 7I'goit",petrleu natura gas nod bydro-, oucea end gro- Pecltion per' gddia te -I ixeta,ob., not 1..pt1bd rua_i.lto ttl,l onto

thernl e1sotricity) in kilogram Of coa quiralwnt per capita; 196n0ua) iie ythi epciv ne fhoptlbd aalbyi1970, ad 1976 data. poblic end prirAts general end specisiod hoftpital end rhbaiiiitnti. ctei

Pospitale -r wstabliehnts permnet staffed by at leact-one ptyioa.POUIATDIO AlI) VITAL STATISTICS Establishments proiddeg principaly eusto`dial car acntLinluded. uRa1

Total Population~ yeaV"llihon) - A. of Ju,ly 1; 1960, 1970, sad hoepitalo, hoe ,inclde bnalth ad medical osotere not permaently eta!fled19tl77 data,. by a physim. I (but by aedical assistent,nre mdeife, etc.) ehiob offer

Urbs. Pepulatio (pren ftotl - Patio of orbs. to totxl poelatiow; in-patient ocoadatio end proide a liatted range of nedival facilitiesdifferent definitions of orbs. area sey affect coparbility of data Adm;issinsper H,Iextal ted - Ttota number of admissions to or disohargen ro

eog tocuntries; 1960, 1970, end 195data hsiasdvdedby the numbr ofreu

PeMljc,i gj.pg.~- Current population projections are hued on HOUtSING19'75total populatio by age and se an their ortality sod fertility heerg Sioc of Houehold (prosprhu xd oa,obs..an -rerl -rxte. yrjo eprmters for Irotality rates copi of three A household cnit fagnpo 4-iiul h saelvn urtern nu

lees eoIng lif.e.wpeotacoy at birth itor-aig with coutry's their mate -. aI.. A boarder or lodger map or ma not he ibluocda in hper apitix iLcom iccel end fesaiw life eupsot-ny etabilising at ho...ehold foe otatixtical peposra.?77.5 yeavs. Thr parawtere for fvrtilty rate also hav three levels Average nbe of person pefrcoon-_tdotal. bmen sod rual-orage tujb-asooing deolicv In fertility aoordong toiom leve and pat ofprospc onI h. adrrlocplIe con-rtio-a dccLingo,sadl olacioc p-rforaoo. Eaoh vootry is then assigned one of these r..speoti-ely. Iu1.linge exclude on-peennoet tIruturen ted -cocpird p_rt~.

ems om-binations of motality and fertility treods for proJection Access. to ilotr'iit (ncet ofidelliega) - tota,1, urban, so coci Coo-purpse. .vetion- doelliag bbestiot nlvn quarters notprcetagoo

Sljq iPatio --Oatati-ery population there is .c growth total, urban, and rura dIling repectively..ineh. iiUftbci is Iqalt the dea,ti rate,an also the age

niructur,e reneios cons.tent. mix icoiscd onyatrfertility rates.. k TIONhwlie to the rp 1cn -olev of u-it net reproduction rts, h.. AjsedErlmetPto

each geeainoonnrplxe tsefesol Thesaionry ppyn- Priasry aehoul - total, male W fvne-irs total, sale and femle enroll-lation ci cc sa extonated cc tc taclc of theprojoted cha.trac intios esot of all ag.ee t the primrlel anpr..ag o repectice Prieop

of tic popolxtioc in the pear 2000, nod tic -tiv of dvoiiee Of frrtiiity nohool-age populations; normaly includes childre ngd '-il yarburatv te rePi: .eset leve. aijunted for different lengths of primacy eduatioc; -.r...trc'- otth

Ycce stationary popoatio It.I r-enoe - Tar prar ohm etatio...ry population ucoca duction enrollmet sy oc-ed 100 per-ec oo- con poplInsloe hd en voe. arblo or abov te fIDiaL. school age.

popointioc Density ieoon~~~~~~ ... dmcc shool -total. male and female - Computed ac ci o; cooirPer 00. Am. - gd-ycar popoitico pec nquar Ailoarter (100 heotares) of eduction reqirex at least for year of approved primary reot-to o

total re provides general vrtIo..al, ort techr trainin ios !.tcutioc f.. ' popoinper so. :s. grio-it-I land - Cnputed as ahoo for agriouItuc1 iand usua lly of 17 to 17 years of ag; correspond ecc coursec -c c-nr-iiy

only. -nluded.PcplatlcrrA.etrctur (percet) - Children (0-lb yvars), -orhing-age Voctional s.oellment (peroeni of ncecadsy) - Vocatio...I Icotitati-o -In'lde

(15-he rare end retie (i earo and over) no p-rrtagee of aid-year trohnica, industrial1, or other prgerse hiot operte icdvp-od-tly or npopultion 170, 1970,and19f77 dta departasta of asoondary Icetitution..

P.cuatit toet na?te (proeot) - total - A.-ua ercethratee of toni mid- Pucil-teohec ratio rcy en secondary - Total tt,ud-to corolid IIyerPopulti foe - 1950-tV, 19b0-70, an 907.phayad eo ay eeedvIdd by o-bro~ of t-ctrxi tic00

P..ultion Growth Palte yret -ubn- A-nal growth ratos Of urbaneodn-ecoppltosfor 1950-_o, 1907,td 1970-75. dl ieayrt (pecceIt) -Liteente adu1to (nile to Icl and erit- n

Crude Birth Pa. t Oer thuo ed) _ Anullv itxprtho-sac of id- apercetage of total adult ppulatho- agd 15 peac nod cryeiFpopulton;19 19197, 19 1977 dat.

Crude Death nte Ipee thouxad) _Anul deoh per tiocoand ci aid-year CONSO54PIOgpoultin;170,1970, Mo 97 aa Passenger Cars (pe th-eadpeuain P-IPneger caro o-pr ice ,t.,c -oro

Oroso Pprodooton at- A-era crneof daughtercacono xcibersetn lens the eIgh-esn;ecldaeilacex, ivacoe ted eliterit her tor-a reproduction p-rcd if fhe epircuprexe..t age- .eilv.opocific fert ittY rote-; o..oIly fio-yea -cecgre ending in i960, gadic Rsri--r (per thounen~dpclation) -All1 typen of -ro-cceIs -rdi-i9'70, and195. bcondcaots to genera puli IPer thou_ed ofP pop lato; noll ludvseiie-oed

Easily PLiacoi - .Acetoro. A-ou (thoucands) - AnnuaI number of croci v-r ceooutri-s sd Lc yenr h.c. ccgitca1l- of _adi" veootiacceptoce of bicth-otrt-1 decice under -. pice. of nations1 famly cffeot; dat for reoeet peace say Oct heoo-pabohlcsi-ovm.'to crplecicig pogran. ' aOlishcd Iiccen.ig.

PanlyPlacig Ocro(pecetIf exertd -cc) - P-eoetngc of marricd TO R-oe..e. (Per ttUna M opultiuc) - TV r-oi-rro for b-odi-nt t0 geoc-acocn of hild-hearing ag RI5-h yero) eh. doc bicth-control d-i-e public Pertosn ouain oldscld ione Te -oecic-ro -tto ali married ccec co can age group. end in yeart a ohe -giut-atio of TiV sets ens to effect.

FOOD All SIOTITIOiS Necnay- Ciroulationi wor thouso ortion I- lono tic uc-rgc circulationI.de. of F. t~~~~~~~~~~~ofdal goea interet o.oneper, d efie as riodical public-ti-c

ladn o food Podcio Of c Caia(17-1= )- oe.o. e opt devted prisuily t. recrding geeeral Iros. It in consticred to Ic "doilyancoa prducion o alld. food Ocaiditix Poutnexldsydtd if It= apsatie-et four times. .ee.i,

feed and tocc celendafpeso hxniu.Coemoditine. cove prieary gocdt cloes OculAttelduow per CapitanecI Per -.~ hr cc tie -ob-r of tiOc:to(cc tgaonc iotodofsooc)ouh rcrdiieendcntio oticto acd during tic year,icud i _gadio_o to dri c-icc IIcnxt xcd a-1

Ieg.cpff- nod tea ar vo-iuded). Agg-egate production of .- ch coutry unitaIe baced on anti coal .acrng Producc pcive eighte.pec capita _upoly of onrir (Perent of rcuxir-mets) - Comptved from LABOR FORCE

_ccrgy eoivlvt1 ht e foodoupvoaaiable Ic coutry per onpita oa ao oc tcsos cnmial ciepros nldn repv;Odsy. Avalhcoupiocopicdnotcpodcie-mprsbe ocsad uvpl d bt sociding huric tudeoto, vtc Dfi,,it,'courts, and cIncgco lo otuc. Pet cupplieneoidod animal feed, _wO, i aious coutries arc not coparable.ciusotilo lee ud it ~food prc-oitg, and loso-eie diotrobution. Require- .I Peavp.roea) P.-I.e ao force as Percentage of ti,tni labor furorcent. evr estl1atcd by PAl) baod cc phyoioigic needo o cm, cutregcet Ilbo forc Lc faring, fceutry, botleg andactivity end health -cciderlag o-ir-anrtaI tempe-atoc,bd- oiho fishing apretage Of total labor forceagendIce dietriioo;oo- "C .Pop1lt-, sod a11-ciog 10 perccnt fcc l,duetrovet) - lair r fo-rc InInig -ntrucic, oxofaturiog aol

na tIn.t houchldl loud, eaterIi r andgsa pervetag of tota laboc force._cc spto oupp f preteic ugrsa pcr dey) - Protjic cooteot of peDatcpto bt cret t otal, 'male nd fenale - incitiipatio or

capbt Rvt nupply of food per dsp. Oct suPPlY of food is doliOld n anticM un r compted tt Otale ae= ndfni lao oc cpr-aho. equire=wts for all -outcc-.-etabIished by USDA provide for a centagro of total, male and female popultio of Ia rerpetiv_y

eloinie allccnovv 6o hO ran of totnI protron per day sod 20 gras of loo,190,an 1975 datn. The..ar I- pcicpeiotnt:ervflectianima n pas rti,o h 10 lgres budh cnlpoec g-e etructre Of the population, sod long time trend. A fee -otimate

Tee tnodsrdo. aeicoec than those of 75 greE of total puteic and arc frenno.ihoa e...cI27 Erane of anna prici sn crg for tie corld, proposed by TAt ecnmi eenenrPtio - Patio of popuet-c under 15 and i5 and ove toIc tie Tird Borld food loc-ey. thLabrfoc inag group Of 15-hi years.

Per capita cotcio _upply from animal sod poLar - Proteic supply of foodC,der ived from animal nod pulve to g-n per day.ICOM DISRBUTIONICid(ae1-)MrtalityPte cc thcus_d) - A-ouI deaths per thouxano Prcentaae of Pr Ivte Inom both in -asi sd bled) - R-ci,-ed by rooheet

it ae goup1-hyvar, t oild 0 oLi thin: ag ru;fr -os dcc-l- 5 percent, ricEs Cperen,ooet 70 percent, an pooret ii PercentopiOg ocutriec data derived Prow life table.~ of householdu.

ME AITM POVERT TAPGIT GOUOtPST lidetey a't Birth (yan - .AveRae nuber of year Of life Estimated Absolute PIvrt ioc-me leve (did perca'pita)l -buha sod rurl-

remainig atbrh 97,17,sd 1977. data. bsltpoeyinmeveL.i that inc leelbeo ohichasimlinfant Mortalt ane(e iu d) - A-c--I deaths of infants under oo otritiona.lly adequate iet P los ssetia non-food requiremets '5 nt

prar of age per thousnd live births. affordabl.Aceoto aeetr(eocto uaic - total oh n u l- Esin eaiePvrt nalvl(i e capita) -rbaned rurl

Number of prol P tta,I cic te ua)etiraoal ennes to oa rltv pover-ty on ee soetido avra er pe-cpitasaf oatec supply (iooludee treated surface water or entreated but personal incom of the -o-try. Urban leve in derived fro the -rura Ie-eluncotaminated eater such as that frum protected hrhles,springs, with edjoshm_nt fee higher cant of ljivig in orbs.aeaand sanitary cells) ax perc...tagen of their respective Populations in EPtAtedPUati.n Below AbsltPnet Ina ee orbs and

auris. ura- publi foutain Or stadpuet leratnd net fMIre then rua scn fpplton (urbaIa uraL) b arc.-_0 mtes from a h-u.. may be conidere.d as being withIn reasnable

soesof that boone. In rura arsas reasoable acces ..uid iMplytha.t the hussaIfe.o-mebers of the hou=hld An net have to apeS a tn ic so Solal Data Divisiondisproportlo..atc part of the day in fetching the fonilys. mater ned. lesmeAnalysis and ProJections Depetect

Augut 1979

-28- ANNEX I

Paee 4 of 5CCOIC rD!LWP1UT ITA 39!!?

ACt.41 ft0207t.4 Grm 00 Z 2961 *6...1965 1970 1907 2977 1978 / 1179 1I80 1985 2963-77 2977 -7 97 (1 - t.f 00P (21

A- N2

.- ln.1 Accolutn(rl1 I I.n S .r15 1933 prIe. 1

1 . I:rc. 4,0.7,. produr 9,84 3.8 io 123.0 15, 712.6 1 6,685. 8, 13.9 I9 391.2 20,692.9 29,218.7 7.7 7.8 7.1 7.0 11 .01 oian.l Ito. tirrn of irad. -64. 3 42 .9 -107.7 -978. 1 1,10 .9 1,238. 4 -1.473.0 -1.962.8 -2 2

3. G,r... do.lc 2, o 6 799.3 0,367.9 1,204.9 15 707.4 17,030.0 1,216.9 29.2 27,291.9 7.2 7.1 7.0 7.0 99.8... ort. 1.59.9 2,989.8 1 699.1 4,460.8 4,994. 1,082.8 3,440.4 7 507.8 8.6 6.7 6.7 6.8 23.3

3. 3 .

,portn - ci,,. -2.197.2 -2.274.0 -1,908.4 .4.106.9 -51.17.9 -5.077.4 3,512.1 -8,044.2 9.1 6.1 8.0 8.7 24.2t 2r-rtF -ndI,oed for TOT -_, 148.9 -2.127.3 -3,100.7 -3 ,29.8 4,048.9 -3. 839.0 - .039.1 -6.02l. 5 7. 1 4.1 8.0 8.8 21.01. 6...... .... g -. dIa.-d

f.0 TOT 220.0 671.9 398.4 932.1 447.9 -12243.8 -1 402.3 -21419.3 2.5h. Tot. con.o,pt2on , 302.3 8,007.0 112709.5 122170.1 23 ,02.6 24,223.6 15,090.4 20,721.2 7.3 7.2 6.5 6 1 74.32. Inv 1t*. 2,l 608.2 3,010.0 3,899.9 46269.2 4,. 1,247.2 S530.8 8,062.0 8.5 20.2 7.6 7.3 29.8n3. 22,ilonnl .ooln. 12,976.4 2,100.8 3,477.7 3,312.5 3,908.1 3,901.5 4,022.2 6,225.9 6.6 9.3 .8 9.6 22.2I I. Oo.7n. 1 .00208. .4J,,ond

Fr. TOT 2,497.2 2.351.7 1,495.5 3,1137.1 3967.4 1.9416I 4,122.3 6,172.7 6.9 8., ".9 I.3 22.2I. CDr a u s$rrefl US 4,052.9 6.543.1 16.28.43 28,156.9 21 2,8I.8 23 214.2 29,90.9 19,776.6 13.3 17.8 21.1 23.4

8 1. Sc or 0427.2(S0.,. of r21P)

1. 'A47 g,22o 0.191 0.136 0.301 0.281 0.271 0.26 0.2518 0.2292. 2nd_.r7 0.2M 0.227 0.269 0.288 0.299 I .304 0.309 0.3313. 077,27.. 0.401 0.427 0,430 0.431 0.430 0.432 0.632 0.437

. Prlce- 2975 . 100)

1. Fsp090 97270 28:I: 46.43 48.04 92.65 89.35 9W.55 212.61 125.04 171.40 1.6 22.7 7.2 1.22. 2.~or2 9727. 2.4.. 47.76 47. 23 010.71 224.12 123.05 147.66 1629.9 226.72 7 6 .7 . 01. t . ol 27. 2nd. 97.22 201.98 96.67 78.38 78,30 75.61 73.64 71.6O -1.9 1.1 2.2 0.24. C0DP WI72.o. (US20 59.22 63.39 103.66 204.92 116.07 130.00 141.00 204.32 5.2 6.9 7.3 6.0S. Mn..1 unerog. ea h.no 72 20.8 20.84 28.40 20.60 20.39

D. S.1.c-d 2.427.2.7. 1965-77 1977-79 2979-43 2985-90

2. tC04 3.56 :3.3 3.80 392 1.p-07 1 ... 2It7Y 2.09 087 0 95T 0.973. AvM ". -' ...ono2 1v, - . 0.24 0.22 0.22 0.244 S4720. 1 t .on 27 7.2. 0.28 0.12 0.23 0.28

5. 2.997907087 0.~~~~~~~~~~O'27 0.26 0.26 0.,266. -nv .-22t/ p 0 27 0.26 0.27 0.28

R. 2...,7n. 4P9/G8P 0.04 0.06 0.05 0.03

i41_ ed /b Lbr., fore. .. 9.. r ut.r 7lbr. 2647.2,2 1.0 F07c0 87 04d td.tl"t., 2. 1975 II . j Sm2.ill.. t 111 t of _-,T

I. 4472c422470 '.139 32.3 23. 340 42.2. 2n4,.270 4.412 38.4 2.4 7.9 3.120 336.73. 5.7,27.. 1.9 I 38.3 2.9 26.4 2.930 231.4

t-1 . ..... 14254 ,189 00.0 17.7 100.0 820 100.0

r. 6bl61 I2-c. 12 of 0DP) (C2nt-7l C -7 -.-.- t) .. 2 1970 2974 1975 19716 11L 1- 197?

1. Currt 235 23.8 24.3 23.6 . 24.0 24.62. *02 7ns 2mr2.3 22.1 23.5 22.0 22.2 I2.9 23.63. Curr_ _0.22.7 28.1 22.6 20.7 22.2 23.0 12.8 23.25. Ddat.1y -o1 .S. 2.9 2.2 3.7 2.3 0.4 2.2 25. Tt2.2Ipbll2 2.2-.2t. 7. 7 3.8 4.9 3.3 5.4 1,3

C. 9648 T 2C27 U0 il02 .. ) 61.0 112.0 629.6 72. 833.7 923.0 21,14o.tS .o t2020 IWport0In,l. ES) 9.3 8.0 28.4 20.0 21.2 29.7 29.2

Lb Al -1r.t _.rh plc...

Ls r 210020.

ANN!S S

- 29 - Page 5 oF 5

BAIANCF OF 7AY9FNTS, FXTrONHA AS LSTANC.F PFRT AND rC8FD3TW1N TH81F(Current US$ mIllins)

Actual _ Pro-ected1973 1974 1975 1976 1977 19781s 1979 1980 1985 1990

Su.-ry of btunce of OmnectoEtports (I-cl1dIng NFS) 2,084.7 3,025.4 2,796.5 3,490.6 4,029.3 4,930.7 6,300.0 7,660.0 12,835.0 24,967.7

Imports (-ocluding NFS) 2,258.3 3,353.2 3,487.3 3,911.9 5,093.8 5,919.2 8,140.0 9,460.0 13,904.5 24,650.4

Resource blance -173.6 -327.8 -609.8 -421.3 -1.064.4 -989.2 -1,840.0 1,800.0 -1,069.5 317.3

let fectuer seclc jocose -20.8 -0.7 5.4 -41.6 -72.5 -154.5 -210.0 -300.0 -925.0 -1,412.5

Net ioterest AYnco-to 7.0 36.0 69.0 26.1 -4.0 -69.4 -100.0 -210.0 -766.9 -1,170.7

Of which no publIc 0 6 LT 1I000 -25.1 -28.1 -34.5 -44.3 -64.5 -101.8 -133.1 -174.5 -407.1 -882.0

Direct inveorm- ot inooe.e -28.0 -37.0 -64.0 -66.1 -68.5 -72.8 -75.5 -80.0 -192.5 -290.0

W-oke-e re-ltt..cos (net) 0.0 0.0 0.0 0.0 0.0 0.0 22.9 24.5 34.4 48.2

Carret tru-sfeco (net) 145.5 241.0 80.1 22.8 39.3 40.4 60.0 80.0 100.0 110.0

laBor1e. 0 urcol occon- at -48.9 -87.5 -605.3 -440.0 -1,097.6 -1,103.4 -1,990.0 -2,020.0 -1,894.5 -985.1

Private direct inveatmeot 67.0 135.6 85.5 79.1 106.1 50.0 60.0 75.0 276.3 487.0

Grents 4 groat-like flavs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Feblic N 4 LT Io...Disb.r-.aenct 69.0 95.9 149.2 241.7 362.6 739.5 900.0 1,010.8 1,960.4 2,697.6

Anorticintio -28.9 -32.3 -38.7 -43.4 -87.8 -90.7 -164.1 -222.1 -620.1 -1,092.7

Net djsbure-monts 39.2 63.5 110.5 198.3 274.8 648.8 735.9 788.7 1,340.3 1,604.9

Other M 6 LT loa..Dl.sbhsam--t. 178.9 326.2 299.6 279.7 311.8 501.3 900.0 1,150.0 1,393.0 462.2

Aaortiration -223.1 -197.2 -235.1 -245.9 -264.2 -467.2 -520.0 -600.0 -850.6 -1,167.8

Net dishenbeoc-tr -44.2 129.3 64.5 33.8 47.6 34.1 380.0 550.0 542.4 -705.6

lee of IMF -esocrces 0.8 0.0 0.0 77.1 1.8 181.4 200.0 200.0 -30.0 0.0

Shurt-term capitoi transactiara 42.0 55.5 127.5 136.2 256.2 84.0 120.0 250.0 180.1 252.6

Capital tro.se.tl.n. NEI 57.9 96.3 77.2 -11.4 136.2 -371.9 0.0 0.0 0.0 0.0

Change in renerve- (- - ioceeo -113.0 -392.7 140.1 -73.0 275.0 476.9 494.1 176.3 -414.8 -654.5

Net foreign eachunge reaervee lb(end of period) 1,306.0 1,599.0 1,406.0 1,444.0 1,135.8 659.9 166.0 10.0 2,634.5 5,320.9

Groat end Loan Cunitnl .teOfficial groota 0.0 0.0 0.0 0.0 0.0 0.0

Total public M & LT looa. 87.1 436.5 223.4 372.3 633.0 1,220.0

I88D 15.0 142.0 95.0 158.0 137.8 256.0

IDA 25.0 7.0 0.0 0.0 0.0 33.1

Other foltiloterol 6.4 77.2 62.7 92.1 47.0 194.7

Governaents 24.0 200.5 47.7 22.2 106.4 312.0

Of which centrally pla..ed econoies 1I 0.0 0.0 0.0 0.0 0.0 0.0

Sappliera 0.0 0.0 0.0 0.0 0.0 0.0

fi-aclal institutioms 16.7 9.7 18.0 100.0 341.9 423.7

Other M 6 LT 1-ons (h.rt avollable) 178.9 415.9 392.5 360.2 348.9 531.8

Memmorsados Ite-mGrant element of total r-smitmente (X7 44.600 31,400 16.700 11.500 10.200 14.869

Aversge latore-t (X) 0.044 0.057 0.076 0.081 0.080 0.072

Average maturity (years) 29.100 23.800 23.300 18.500 14.000 12.832

Nedi- nd Loop-Tarc Debt (Diobur.ed ealy)Total debt outntondiog (DOD end of period) 903.9 1,160.7 1,345.6 1,606.8 1,931.9 2,691.0

nclading -ndinbhrsod 1,182.4 1,770.0 2,009.5 2,404.0 3,145.9 4,594.3

Pablic debt ser-ie -54.9 -60.4 -73.2 -87.7 -152.3 -202.9

Interest -25.1 -28.1 -34.5 -44.3 -64.5 -100.7

Other M 6 LT debt serni.e -253.8 -266.8 -314.5 -245.9 -338.3 -590.8

Total debt service -310.7 -327.2 -387.7 -333.6 -490.6 -796.7

Debt Burdon (X)Debt ervice ratio 14.9 10.8 13.9 9.6 12.2 16.1

Debt mervice r.tie di 16.2 12.0 16.2 11.5 13.9 17.6

Debt erniro/GDP 2.9 2.5 2.7 2.0 2.7 3.6

Public debt servoCe/Governe..t revena 4.3 2.5 3.5 3.7 4.4 6.3

Terl (t)

Intereet am tntal DOD/tot-l dibuebe--te 5.7 5.5 5.6 5.4 5.7 5.6

Total debt ..rvlns/Govmeeeoet r-eouom 12.4 11.8 11.9 10.7 12.0 19.6

Deme-denty ratios foer M 6 LT Dbt (X)Grome diSbcrreot.a(lporte (including NFS) 11.0 12.6 12.9 13.3 10.9 21.0

Net traasfer/lopurts (1n-lodiep, NFS) -2.8 2.8 1.8 4.8 2.0 10.2

Ret traosfec/groas disbor.ceeto -25.3 22.5 13.6 36.0 L8.4 48.7

mmaCareE (X)I0RR di net/gr tot aurseets 14.8 8.0 9.1 8.3 12.0 9.3

80mk Cro-p diobhr.eeaents/tn.. tntal disburseearst 14.8 8.3 9.7 9.5 13.6 9.91BR DOD/total DOI 24.2 20.8 20.0 18.6 17.9 20.2

Iamk 1en,p OD/tcotrl DOD 24.2 20.9 20.4 19.2 18.9 21.3

1SIID debt -ervle/tatul dcbt n-rni- 8.0 8.5 8.3 10.9 9.8 7.8

Iam G Crnu debt service/total scroe 8.8 8.5 8.3 10.9 9.8 7.8

lxtecral Debt (Disborsed omny) Ottaermdime 12/31178(Cerrert VSt ill.m.) Asnount X

1BRD 434.8 24.5Rook Cronp 459.3 25.8Othoc ualtilmtnel 257.5 14.5Governments 549.2 30.9

Of which ce.tenlly plenood ecoot-elcom / 0.0 0.0Sapplierm 9.0 0.5Pion.n.il ieon1 to-iono 502.1 28.2Bo-ds .0 0.0Total publli M & LT debt 1.777.1 100.0Other M & LT debt 913.9 51.4

Total public debt (lmdludlng undiebhrned) 3,680.4 207.1Tota1 M & LT debt (I-ludiog endl.b-rsed) 4,594.3 258.5

la Peelisimary.

lb Net foreign emeeta: 1S$ equlvaleet of Line 31. October, 1979

Ic Inlades 4HFA oo.utries., Peptpl- Repablir of Chi.., No-th Kor.a, North YIet e

Id In.l1ndig ent direct Investment income.

-30 -ANIEX IIPage 1 of 12

THE STATUS OF BANK GROUP OPERATIONS IN THAILAND /a

A. STATEKENT OF BANK LOANS AND 1DA CREDITS(As of February 29, 1980)

Loan or Amount ($ million)Credit Less CancellationsNumber Year Borrower Purpose Bank IDA Undisbursed

Twenty-four loans and one credit fully disbursed 388.90 5.50 -822 1972 Kingdom of Thailand Education 15.40 - 2.78864 1972 Telephone Organization of Thailand Telecom 37.00 - 0.77870 1972 Kingdom of Thailand Highways 28.60 - -369 1973 Kingdom of Thailand Education - 19.50 2.59461 1974 Kingdom of Thailand Irrigation - 7.00 0.95977 1974 Electricity Generating Authority

of Thailand Power 75.00 - 8.34992 1974 Industrial Finance Corporation

Thailand Industry 11.70 - 0.201021 1974 Hetropolitan Water Works Authority Water 55.00 - 0.111149 1975 Kingdom of Thailand Irrigation 95.00 - 67.581198 1976 Kingdom of Thailand Rural Dev. 21.00(TW) - 8.841199 1976 Kingdom of Thailand Livestock 5.00(TW) - 3.051243 1976 Kingdom of Thailand Rubber 50.00 - 31.581253 1976 Telephone Organization of Thailand Telecom 26.00 - 4.291271 1976 Kingdom of Thailand Education 31.00 - 20.251327 1976 Industrial Finance Corporation of

Thailand Industry 25.00 - 7.421393 1977 Kingdom of Thailand Agriculture 28.00 - 20.751468 1977 Kingdom of Thailand Irrigation 55.00 - 37.671485 1977 Electricity Generating Authority

of Thailand Power 50.00 - 26.041492 1977 Industrial Estates Authority of

Thailand Industry 4.80 - 3.12767 1978 Kingdom of Thailand Population - 33.10/b 33.011519 1978 Kingdom of Thailand Transport. 110.00 - 64.321527 1978 Provincial Electricity Authority Rural Elect. 25.00 - 22.611556 1978 Kingdom of Thailand Housing 8.60 - 7.64S-10 1978 Natural Gas Organization of

Thailand Natural Gas 4.90 - 0.211620 1978 Telephone Organization of Thailand Telecom 90.00 - 90.001630 1978 Kingdom of Thailand Irrigation 17.50 - 17.181638 1979 Kingdom of Thailand Urban 16.00 - 14.001662 1979 State Railway of Thailand Railways 16.70 - 16.701690 1979 Electricity Generating Authority

of Thailand Power 80.00 - 80.00

31 - ANNEX IIPage 2 of 12

Loan or Amount ($ million)Credit Less CancellationsNumber Year Borrower Purpose Bank IDA Undisbursed

913 1979 Kingdom of Thailand Education - 35.00 35.0929 1979 Kingdom of Thailand Agriculture - 25.00 25.01752 1979 Kingdom of Thailand Ag. Extension 40.00 - 40.01773 1980 Petroleum Authority of Natural Gas

Thailand Pipeline 107.00/d 107.01787 1980 Kingdom of Thailand Irrigation 80.00 80.0

Total 1,598.10 125.10 879.0of which has been repaid 214.70 0.09

Total now outstanding 1.383.40 125.01

Amount sold /c 68.62of which has been repaid 43.21 25.41

Total now held by Bank and IDA 1.357.99 125.01

Total undisbursed 782.45 96.55

/a This summary includes Bank Group loans/credits signed as of February 29, 1980.

/b Of which $3.1 million is Norway grant participation.

/c Of which $43.3 million sold to the Bank of Thailand.

/d Includes refinancing of Loan S-10-TH ($4.9 million).

32 -ANNEX IIPage 3 of 12

B. STATEMENT OF IFC INVESTMENTS(As of February 29, 1980)

Amounts ($ million)Year Company Type of Business Loan Equity Total

1959 Concrete Products and Cement and ConstructionAggregate Co., Ltd. Materials 0.30 - 0.30

1964/ Industrial Development - 0.38 0.381970 Finance Corporation Finance Company

of Thailand (IFCT)

1969/ Siam Cement Group Cement and1975/ Construction1978/1979 Materials 28.33 4.24 32.57

1977 Mutual Fund Company Money and CapitalLimited Market - 0.29 0.29

1977 United Sugar Terminal Food and FoodLimited Processing 2.50 0.20 2.70

1978 Siam Commercial Bank Small and MediumScale Industries 2.00 - 2.00

1979 Bangkok Glass IndustryCompany, Limited Glass Containers 4.85 0.25 5.10

1979 Siam City Cement Cement and Construc-Company, Limited tion Materials 36.00 4.00 40.00

1979 Thai Orient LeasingCo. Ltd. Capital Market - 0.15 0.15

Total gross commitments 73.98 9.51 83.49

Less cancellations, terminations,repayments and sales 48.86 2.56 51.42

Net held by the Corporation 25.12 6.95 32.07

Total undisbursed 34.00 - 34.00

~ 33 - ANNEX IIPage 4 of 12

C. STATUS OF PROJECTS IN EXECUTION /1(As of February 29, 1980)

Loan No. 822 Second Education Project (Kasetsart University); $15.4Million Loan of May 24, 1972; Effective Date: 22,1972; Original Closing Date: June 30, 1978; CurrentClosing Date: July 31, 1980

Although the technical assistance and educational aspects ofthe project are largely on schedule, civil works are about three yearsbehind schedule with consequent delays in furniture and equipment procure-ment. The delays in civil works result from delays in contracting archi-tectural consultants, completing tender documents, and awarding contracts.These delays also reflected ineffective management which has begun to improveafter the recent formation of a commission of senior officials to coordinateproject implementation. Consequently, civil works are expected to becompleted by June 1980 and equipment procurement, by September 1980. Thespecialist services program under the project is nearly completed. Out of26 experts, 21 have completed their assignment and the remainder have beenrecruited. Recommendations of experts for improvement of teaching, researchand extension activities are considered worthwhile and have been implementedby the university staff. All the fellowships have been awarded; nearly allrecipients have completed their training. Total project cost will exceedappraisal estimates by about 35%.

Credit No. 369 Third Education Project; $19.5 Million Credit of April 11,1973: Effective Date: August 8, 1973; Original ClosingDate: June 30, 1978; Current Closing Date: September 30,1980

All project components are virtually completed except the TeacherTraining Colleges (TTC) component which is about three years behind schedule.Good progress is generally being made in the pedagogical development ofproject components except at Songkla University where the attraction ofteaching at Bangkok universities is resulting in high staff turnover.

/1 These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular to report any prob-lems which are being encountered, and the action being taken to remedythem. They should be read in this sense, and with the understandingthat they do not purport to present a balanced evaluation of strengthsand weaknesses in project implementation.

- 34 -ANNEX IIPage 5 of 12

Loan No. 1271 Fourth Education Project; $31 Million Loan of September 13,1976; Effective Date: February 9. 1977; Closing Date:June 30. 1982

Progress in project implementation follows approximately theappraisal estimate. There have been no significant delays in civil worksor procurement of furniture and equipment. Nearly all fellowships have beenawarded. Staff training programs are on schedule but need to be improved, asdoes supervision by the Ministry of Education of its nonformal educationprograms.

Credit No. 913 Fifth Education Project; $35 Million Credit of June 28. 1979;Effective Date: October 12, 1979; Closing Date: June 30,1985

Good progress is being made in project implementation: (i) theCentral Procurement Unit has been established; (ii) sites for all first phaseinstitutions have been acquired, and expected to be completed by mid-1981;(iii) Phase I sketch plans and lists for most furniture and equipment havebeen prepared; and (iv) technical assistance contractors have been identifiedand partly contracted.

Loan No. 864 First Telecommunications Project; $37 Million Loan of December5. 1972; Effective Date: March 1. 1973; Original Closing Date:December 31, 1977; Current Closing Date: June 30, 1980

The project is lagging a few months behind the revised time scheduleestablished in 1975 due to delays in procurement. The Bank loan is fullycommitted and as of February 29, 1980, $0.8 million remains to be disbursed.Nearly all of the local telephone network expansion has been completed. Aftera year's delay in procurement under a bilateral loan, the installation of thelong distance transmission equipment is now progressing satisfactorily. The

Loan No. 1253 Second Telecommunications Project; $26 Million Loan of June 11,1976: Effective Date: August 25. 1976; Closing Date:December 31. 1980

The project is progressing satisfactorily. Procurement action onall Bank-financed items is complete. The Bank loan is fully committed and$21.7 (83%) had been disbursed as of February 29, 1980. Local telephonenetwork expansion is a few months behind schedule. After a year's delay inprocurement under a bilateral loan, the installation of long distancetransmission equipment is progressing satisfactorily. The project is nowexpected to be fully disbursed by September 1981, having been completed by theend of December 1980, 11 months behind schedule.

- 35 -ANNEX IIPage 6 of 12

Loan No. 1620 Third Telecommunications Project; $90 Million Loan ofOctober 4. 1978; Effective Date: January 3, 1979;Closing Date: September 30, 1983

Due to review of management decision on standardization of switch-ing equipment and cables, action on procurement has been delayed by about 9-12months. Waiting lists have been introduced in all telephone areas andprocedures for giving new connections revised. Progress on implementation ofother project components is satisfactory.

Loan No. 1519 Sixth Highway (Provincial Roads) Project: $110 MillionLoan of March 23. 1978; Effective Date: June 22, 1978;Closing Date: December 31, 1982

Progress is generally satisfactory. Procurement of maintenanceequipment is under way, and most contracts have been awarded. Constructionof project roads is well under way, with most contracts on schedule.

Loan No. 1662 Fifth Railway Project; $16.7 Million Loan of April 23, 1979;Effective Date: August 22, 1979; Closing Date: June 30, 1982

The loan was declared effective on August 22, 1979 and progresson project implementaton is satisfactory.

Credit No. 461 Northeast Irrigation Improvement Project: $7 Million Creditof February 19, 1974; Effective Date: October 7, 1974;Original Closing Date: June 30. 1979; Current Closing Date:June 30, 1980

The project will be completed two years behind schedule as a resultof initial delays in appointing consultants and in procuring earthmovingequipment. Work on rehabilitation of main canal systems has been completedand the pace of construction of tertiary canals has improved considerably.The current estimate of project cost is $30.3 million, compared with $12.5million at appraisal. This increase is due to inflation being higher thanforeseen at appraisal, the decision to provide new tertiary canals over anarea of 34,700 ha rather than the 21,500 ha assumed at appraisal, and theadoption of higher standards for tertiary development than envisioned atappraisal. The higher costs are compensated by increases in projectedcommodity prices and the economic rate of return is now estimated at 24%compared to 22% at appraisal. Progress on the rainfed rice component has beenaffected by management difficulty in integrating the work of severaldisciplinary groups.

ANNEX II

-36- Page 7 of 12

Loan ,c-. 1630 Se-oad Northeast Thailand Irrigation Improvement Project:$17.5 Million of December 4, 1978; Effective Date: May 9,1979; Closing Date: September 30, 1985

Consultant contract was signed in March 1979. Design by contractis delayed but "force account" work began in early 1980. Procurement of,vehiclas and equipment is delayed due to difficulties in reconciling thedrainage used in existing bidding documents with recently introducedgovernment regulations on procurement.

Loan No. 1149 Phitsanulok Irrigation Project; $95 Million Loan of July 25,1975; Effective Date: October 31, 1975; Closing Date:June 30, 1983

Major civil works are behind schedule, but project completion isstill expected by mid-1984. Construction work on the diversion dam isprogressing will and RID expects to award a third canal contract intime to commence construction during the next dry season. About 4,500 ha ofon-farm development was completed in 1979. Thus, total area provided withon-farm development is now 9,000 ha or 10% of the project area. All studiesfinanced under the project are proceeding satisfactorily.

Loan No. 1468 Second Chao Phya Irrigation Improvement Project; $55 MillionLoan of September 23, 1977; Effective Date: December 23, 1977;Closing Date: June 30, 1983

Equipment procurement is progressing satisfactorily. Rehabilitationand on-farm development works on about 15,500 ha were completed in the 1979construction season bringing the total area developed to 22,000 ha, whichis in accordance with the appraisal estimate. A project monitoring system isbeing set up and the Chao Phya Project area is now served by the NationalAgricultural Extension Project.

Loan No. 1787 Eleventh Irrigation Project; $80 Million Loan ofFebruary 17, 1980; Effective Date: April 2, 1980;Closing Date: June 30, 1986

This loan is not yet effective.

Loan No. 1198T Northeast Thailand Rural Development Project; $21 MillionLoan of February 27, 1976; Effective Date: June 29, 1976;Closing Date: June 30, 1981

After a delay of one year in appointing consultants, satisfactoryprogress is being made on the engineering of village roads. The first con-tract for construction of 114 km has been completed and work has begun ontwo contracts for a total of some 250 km. Procurement problems havedelayed the water supply components, but most of the drilling equipment hasnow been delivered, drilling crews have been recruited and are being trained.The rural electrification component has been completed, and progress onagricultural extension and land settlements is satisfactory. After a slowstart-up, the Upland Crop Improvement Component is progressing satisfactorily.

ANNEX II~ 37 - Page 8 of 12

The program management, with the assistance of a recently appointed programadvisor, has undertaken a critical review of past work and is gradually intro-ducing an innovative program of research to help solve the problems of upland-crop farmers in the Northeast'.

Credit No. 929 Northern Agricultural Development Project: $25 MillionCredit of June 28, 1979; Effective Date: October 12, 1979;Closing Date: December 31, 1985

This development credit became effective on October 12, 1979.Preparation for the first year of project implementation have been satis-factory, particularly in view of the fact that the implementing agencieshave no prior experience with Bank-supported projects.

Loan No. 1199T Livestock Development Project; $5.0 Million Loan of February27, 1976; Effective Date: May 25, 1976; Closing Date: June30, 1981

Project implementation is proceeding satisfactorily but disburse-ments remain about eighteen months behind appraisal estimates. The appraisaltarget of 50,000 ha seems to have been reached in FY1979. The seed productionand pasture development programs are progressing well and the loaned-bull andartificial insemination program, hitherto hindered by the delay in importationof cattle, are improving.

Loan No. 1243 Rubber Replanting Project; $50 Million Loan of September 13,1976; Effective Date: January 14, 1977; Closing date: June30, 1981

The project is one year behind schedule due to procurement diffi-culties and initial delay in loan signing as well as in agreeing on theformula of fertilizers to be procured through ICB. Implementation isimproving, however. Staff constraints have delayed completion of thesocio-economic survey of rubber smallholders.

Loan No. 1393 National Agricultural Extension Project; $28 Million Loanof May 17, 1977; Effective Date: September 1, 1977;Closing Date: December 31, 1982

Staffing is almost complete in 20 of the possible 25 provinces.The quality of training, particularly that for subject matter specialists,can be further improved. Efforts to rectify shortcomings in the quality ofleadership and technical support are being made in the weaker provinces.Excellent extension results have already been achieved, in particular throughthe extensive use of small pumps for dry-season cropping by small farmergroups, in rubber quality improvement and in improvements in home gardens.The civil works program is about two years behind schedule because of high

ANNEX II-38 - Page 9 of 12

inflation and, until recently, the low unit cost of ceilings for civil worksset by the Budget Bureau. It is expected that contracts for all remainingcivil works will be awarded before October 1980. Procurement of vehicles,equipment and materials is on schedule. Disbursements are lagging through thedelays in the civil works program. Consultants continue to provide DAE withexcellent assistance.

Loan No. 1752 Second National Agricultural Extension Project; $40 MillionLoan of September 18, 1979; Effective Date: December 18, 1979Closing Date: December 31, 1985

This loan became effective on December 18, 1979, and implementationprogress to date is satisfactory.

Loan No. 977 Srinagarind (Ban Chao Nen) Hydroelectric Project: $75 MillionLoan of April 15, 1974: Effective Date: June 14, 1974:Closing Date: December 31, 1980

Civil works under the project are nearly completed. Theinstallation of the turbine generating units is expected to be completed onschedule. Project costs are likely to be about 30% higher than appraisalestimates, due mainly to additional grouting work required beneath the mainembankment. The progress on resettlement has been satisfactory, and all ofthe families affected have now been resettled.

Loan No. 1485 Pattani Hydroelectric Project: $50 Million Loan ofSeptember 23, 1977: Effective Date: December 20, 1977;Closing Date: December 31, 1982

The construction of the main civil works is proceeding satis-factorily. Implementation is about one month behind schedule. The initialdelay was caused by slow mobilization of the contractor and poorer-than-expected rock conditions at the downstream ends of the diversion tunnels.Orders for all major equipment (financed by the Kuwait Fund) have beenplaced. Construction for the resettlement component is progressing accordingto schedule. Disbursements are generally in line with appraisal estimates.

Loan No. 1527 The Accelerated Rural Electrification Project: $25 MillionLoan of March 9, 1978: Effective Date: June 7, 1978;Closing Date: June 30, 1983.

The project is in the early stages of implementation. There wasan initial delay of about four months in the preparation of bid documentsbut procurement is now under way and should present no further problems.

Field construction crews have been working on pole setting and conductorstringing since the middle of 1978, utilizing materials available in stock.

39 ANNEX IIPage 10 of 12

S-10 Natural Gas Development Engineering Project, $4.9 Million Loanof July 28, 1978; Effective Date: September 25, 1978; ClosingDate: June 30, 1980.

All the project preparation activities and preliminary engineeringhave been completed. In July 1979, the Borrower, the National Gas Organiza-tion of Thailand, was taken over by the Petroleum Authority of Thailand whois the Borrower for a loan of $107 million for the Second Gas Pipelineproject.

Loan No. 1690 Bank Pakong Thermal Power Project; $80 Million Loan ofAugust 9, 1979; Effective Date: May 20. 1980:Closing Date: June 30, 1984

This loan is not yet effective.

Loan No. 1773 Second Natural Gas Pipeline Project; $107 Million Loan ofFebruary 15, 1980; Effective Date:Closing Date: December 31, 1983

This loan is not yet effective. The loan amount includes $4.9 millionunder Loan S-10.

Loan No. 1021 Bangkok Water Supply Project; $55 Million Loan of June 28,1974; Effective Date: December 2, 1974: Original ClosingDate: June 30, 1979; Current Closing Date: June 30, 1980

Physical work on the project is proceeding satisfactorily. Thequality of construction and the performance of consultants on supervisionof construction of the IBRD portion of the project is good. Because of theinitial delays in contract awards, the project is expected to be completedby the end of 1980. Due to inadequate tariffs, which were last revised in M4ay1972, MWWA's financial performance continues to be poor. The Governmentapproved MWWA's proposals for raising the water tariffs in line with increasedoperating costs were recently approved by Cabinet; parliamentary oppositionhas put these tariff increases in abeyance.

l

Loan No. 1556 Bangkok Sites and Services Project; $8.6 Million Loan ofJune 15, 1978; Effective Date: September 22, 1978;Closing Date: December 31, 1981

Progress is generally good with only minor delays in implement-ation. Current cost estimates for civil works are below appraisal esti-mates. In order to minimize resistance to beneficiary charges, costrecovery in improved slums is expected to be introduced as physical worksare completed.

40- ANNEX IIPage 11 of 12

Loan No. 1638 Bangkok Traffic Management Project: $16 Million Loan ofJanuary 25, 1979; Effective Date: April 25, 1979; ClosingDate: September 30, 1982

Implementation of the project is generally ahead of schedule.Signal equipment has been installed, some two years earlier than expected, asa result of the consulting and procurement work done under contracts for whichthe Bank provided retroactive financing.

Loan No. 1492 The Minburi (Lat Krabang) Industrial Estate Project: $4.75Million Loan of December 5, 1977; Effective Date: March 24,1978; Closing Date: December 31, 1981

Project implementation continues to be good. On-site infrastructurehas been progressing. Bunding, drainage, and three of the four deep wellshave been completed. Substantial progress is being achieved in road construc-tion, sewerage, and water distribution. Land sales have been very encouragingwith nearly all of available plots either firmly committed or being nego-tiated, and are well ahead of appraisal estimates. These sales have beenachieved at an average sales price of B 300,000 per rai, as compared toprojected sales price of B 250,000 per rai in the appraisal. In order toaccommodate substantial demand for the Export Processing Zone, IEAT hasenlarged this area to 30 ha. The estate's full development is expected bymid-1980.

Loan No. 992 Second Industrial Finance Corporation of Thailand (IFCT)Project; $12.0 Million Loan of June 4, 1974; EffectiveDate: September 4, 1974: Original Closing Date: September 30,1978; Current Closing Date: December 31, 1980

Since June 1974 when the loan was made, IFCT's financial conditioncontinued to be good. The loan is fully committed and nearly disbursed.

Loan No. 1327 Third IFCT Project; $25 Million Loan of December 8, 1976;Effective Date: March 14, 1977; Closing Date: December

3,1980

The loan commitment rate was initially slower than expectedbecause of sharply depressed investment climate in 1976. This has muchimproved. The IFCT's capital structure and liquidity position haveimproved, however, with successful share capital increases. Satisfactoryprogress has been made on the institutionbuilding aspects of the project.

-41 - ANNEX IIPage 12 of 12

Credit No. 767 Population Project; $33.1 Million Credit of February 27, 1978;

Effective Date: June 30, 1978; Closing Date: December 31,1981

In accordance with the Credit Agreement the Government has(a) established and staffed the Project Coordinating Committee, which hasmet frequently; (b) established and staffed the Project Administration andFinancing Unit (PAFU); (c) appointed a project director, deputy director andtwo assistant project directors and a health planner/economist; and (d)initiated most of the key project activities at the national level and inthe 20 Accelerated Family Planning and Health Provinces. Due to initialstaffing problems, key project activities were held up initially and majorelements of the project are about six months behind schedule. The Ministryof Public Health is, however, taking appropriate action to strengthenproject management, improve coordination and remove impediments toimplementation.

- 42 - ANNEX III

Page 1 of 3

THAILAND

MAE MOH LIGNITE PROJECT

Supplementary Project Data Sheet

Section I - Timetable of Key Events:

(a) Time taken by the country toprepare the project - About 2 years

(b) Agency which prepared the project - EGAT/Consultants

(c) First presentation to the Bank - April 1978First mission to consider the project - May 1978

(d) Date of departure of the AppraisalMission - April 1979

(e) Completion of Negotiations - March 20, 1980

(f) Planned Date of Effectiveness - August 31, 1980(Tentative)

Section II - Special Bank Implementation Actions:

None.

Section III - Special Conditions

(a) Conditions of Effectiveness of the proposed loan are that:

(i) all conditions precedent to the effectiveness of the ADBLoan Agreement have been satisfied (para. 44);

(ii) the contract between EGAT and the consultants has beensigned (para. 58); and

(iii) the acquisition of the resettlement site has beenconfirmed (para. 65).

(b) EGAT has agreed:

(i) to earn a rate of return of 2%, for FY81 and 8%, in FY82 andthereafter, and carry out a plan of action to eliminatefuel oil subsidies and to adjust tariff rates to therequired levels (para. 37);

- 43 - ANNEX III

Page 2 of 3

(ii) that lignite from the mine expansion financed with the

Bank loan will be used only for EGAT's power generation(para. 44);

(iii) to establish not later than April 1, 1981 a mine managementsystem based on mine accounting centers, and placingfinancial management responsibility within the Mining

Department (paras. 52 and 53);

(iv) to prepare and furnish to the Bank a training program for its

staff in mind accounting and commence the implementationof such program not later than October 1, 1980 (para. 53);

(v) to carry out a study to determine the long-term forecast pricefor lignite to be used for adjusting the lignite price andpreparing master mining plans (para. 54);

(vi) commencing in 1982, to consult with the Bank, not later thanApril 1, of each year, on the adjustments to be carriedout during the next fiscal year in the price of lignite,to be based on the recommendations emanating from the studyas well as, inter alia the size of the lignite reserves,prevailing prices of substitute fuels and possibledevelopments in the use of lignite (para. 55);

(vii) to use a minimum price of lignite, produced and transferredto the power plants, which shall be established on theprinciple that it will be based on the cost of productionplus a margin which is at least adequate to cover debtservice, fixed asset replacements and explorationrequirements for each mine accounting center (para. 55);

(viii) to prepare annually nation-wide exploration plans and reviewwith the Bank (para. 57);

(ix) to complete the initial master mining plan by September 30,1981 followed by land reclamation activities. The miningplan will be updated by March 31, 1982 taking into account therecommendations of the lignite pricing study (para. 57);

(x) to furnish to the Bank for review the air pollution study, toto financed by ADB under the Unit 4 power project (para. 64);

(xi) to prepare water quality contingency plans (para. 65);

(xii) to furnish the Bank with the assessment by EGAT's consultantson the geotechnical aspects of the slope stability ofthe open pit mine at Mae Moh (para. 66);

ANNEX III- 44 -

page 3 of 3

(c) The Government has agreed:

(i) that the electricity sector will earn rates of return ofnot less than 2% for FY 1981 and 8% for FY 1982 andthereafter, and to this end take or cause to be takenmeasures in accordance with a plan of action to adjustelectricity tariffs and to eliminate fuel oil subsidies(para. 37);

(ii) that the above rates of return for the sector and EGAT willsupercede the relevant provisions in the Guarantee andLoan Agreements of (a) the Accelerated Rural Electrifica-tion Project (Loan 1527-TH); and (b) the Bang Pakong ThermalPower Project (Loan 1690-TH) (para. 38).

(d) Modifications to the Loan and Guarantee Agreements for Khao LaemHydroelectric Project are that:

(i) rate of return provisions are conformed to the proposedMae Moh Lignite Project (para. 38); and

(ii) Retroactive financing of up to $12 million would bepermitted (para. 38).

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