World Bank Documentdocuments.worldbank.org/curated/en/759481468914353853/pdf/4786... · document of the world bank fite copy for official use only i report no. 4786 the world bank

Document of

The World BankFItE CoPY

FOR OFFICIAL USE ONLY I

Report No. 4786

THE WORLD BANK

PROJECT PERFORMANCE AUDIT REPORT

THAILAND RUBBER REPLANTING PROJECT(LOAN 1243-TH)

November 18, 1983

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

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENTS

Currency Unit = Baht (B)$ 1.00 = B 23.00B 1.00 = $0.04

WEIGHTS AND MEASURES

Metric System

ACRONYMS

CDC - Commonwealth Development Corporation

DAE - Department of Agricultural Extension

DRC - Dry Rubber Content

GMO - Group Marketing Organization

ORRAF - Office of the Rubber Replanting Aid Fund

RRC - Rubber Research Center

UNDP - United Nations Development Programme

THAI FISCAL YEAR

October 1 - September 30

FOR OFFICIAL USE ONLY



TABLE OF CONTENTS

Page No.

Preface ...................................... iBasic Data Sheet ................................................... iiHighlights ............................ ............................. iii

PROJECT PERFORMANCE AUDIT MEMORANDUM

I. PROJECT SUMMARY ......................................... . 1

II. MAIN ISSUES .............................................. 3

A. General ............................................. 3B. Smallholder Practices ............................... 4C. Financing of Rubber Replanting and Related

Policies .......................................... 6

Table - Thailand Rubber Replanting Project - Disbursements ........ 11

Annex I - Comments by the Office of the Rubber Replanting Aid Fund 13Annex II - Comments by the UNDP Regional Representative .... ....... 15Annex III - Comments by the Commonwealth Development Corporation

Thailand Representative .............................. 19

PROJECT COMPLETION REPORT

I. Summary .................................................. 23II. Formulation .............................................. 24

III. Implementation ............................................ 26IV. Agricultural Impact ...... ........................ ........ 29V. Institutional Performance ..... ........................... 32

VI. Economic and Financial Evaluation ..... ................... 34VII. Changes In Repeater Project and Special Issues .. ......... 36VIII. Bank and Other Co-Lenders Performance .................. ... 38

IX. Conclusions ................. .... .......... ......... ... 39

Annexes 1-4

Map - IBRD 15401

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



PREFACE

This is a performance audit of the Rubber Replanting Project inThailand, for which Loan 1243-TH in the amount of US$50.0 million wasapproved in April 1976. The Loan was closed in December 1982, and finaldisbursement was made on January 7, 1983.

The audit report consists of an audit memorandum prepared by theOperations Evaluation Department (OED) and a project completion report (PCR)dated June 30, 1983. The PCR was prepared by the East Asia and PacificRegional Office, based on a report submitted by Thailand's Office of theRubber Replanting Aid Fund (ORRAF).

The audit memorandum is based on interviews with Bank staffassociated with the project, and a review of the PCR, the Staff AppraisalReport (No. 867-TH) dated March 30, 1976, the President's Report (No.P-1800-TH) dated April 8, 1976, the Loan Agreement of September 13, 1976,correspondence with the Borrower, and internal Bank memoranda on projectissues as contained in relevant Bank files.

Copies of the draft report were sent to the Borrower and thecofinanciers for comments on August 9, 1983. Comments received from ORRAF,UNDP and CDC are attached in Annexes I to III and have been taken intoaccount in the report or footnoted, as appropriate.

The audit finds the PCR comprehensive and accurate with respect tothe project's principal achievements and shortcomings and has no reason toquestion its conclusions. The audit memorandum focusses on farmers'practices after the immature period of rubber trees and on financingarrangements for rubber replantings because of the importance of these issuesin the long run and their relevance for tree crop development in general.

- ii -

PROJECT PERFORMANCE AUDIT BASIC DATA SHEET


KEY PROJECT DATA

Appraisal Actual or Actual as I ofEstimate Estimated Actual Appraisal Estimate

Project Costs (USS million) 148.0 205.0 138Loan Amount (USS million) 50.0 50.0 100Cofinancing:

Commonwealth Development Corporation LoanAmount (USS million) 6.8 6.8 100

UNDP Loan Amount (US$ million) 1.9 1.9 100Date Board Approval 12/75 04/20/76 -Date Effectiveness - 01/14/77Date Physical Components Completed 06/30/80 06/30/82 148/bProportion Physical target then Completed (%)/a 100 112Closing Date 06/30/81 12/31/82 129/bEconomic Rate of Return (X) 20 21 105Financial Performance - Satisfactory -

Institutional Performance - SatisfactoryAgronomic Performance - Satisfactory -

Number of Direct Beneficiaries (1982)/c 130,000 225,000 173

CUMULATIVE DISBURSEMENTSFY77 FY78 FY79 FY80 FY8I FY82 FY83

Appraisal Estimate (USS million) 9.1 20.8 34.8 50.0 - - -

Actual (US$ million) 0.2 3.2 9.6 25.9 36.7 48.1 50.0Actual as X of Estimate 2 15 28 52 73 96 100Date of final disbursement: 01/07/83

MISSION DATATotal

No. of Handays Specializations Performance Types ofDate Persons in Field/d Represented/e Rating/f Trend/g Problems/h

Identification/iPreparation/iAppraisal 01/75 3 60 A,E,F - -

Supervision 1 05/76 2 10 E,P - -

Supervision 2 11/76 4 40 A,A,E,F 1 2 MSupervision 3 06/77 3 30 A,E,F I 1 MSupervision 4 03/78 2 20 A,F 2 2 MSupervision 5 10/78 3 30 A,A,F 2 1 M,TSupervision 6 05/79 2 20 A,E 1 1 TSupervision 7 12/79 4 40 A,A,A,F 2 1 TSupervision 8 06/80 3 30 A,A,F I I TSupervision 9 12/80 3 30 A,F,F 1 1 TSupervision 10 10/81 1 5 F 2 1 0Supervision 11 05/82 2 10 A,E 2 2 F,OSupervision 12 12/82 1 5 F 2 2 F,OCompletion 03/83 2 20 A,F - -

OTHER PROJECT DATA

Borrower: Royal Thai GovernmentExecuting Agency: Office of the Rubber Replanting Aid Fund (ORRAF)Fiscal Year: October 1 - September 30

Name of Currency (Abbreviation) Baht (B)

Currency Exchange Rate:Appraisal Year Average: 1976 US$1.00 - B 20.28Intervening Years Average: 1977-81 US$1.00 - B 20.59Completion Year Average: 1982 US$1.00 - B 22.90

Follow-on Project:Name: Second Treecrops ProjectLoan Number: 2078-THLoan Amount (USs million): 142.0Date Board Approval: January 7, 1982

/a Expressed as a X of the target of 50,000 ha p.a.7i; Percentage calculated from Board approval date.

Actual project period covered five years instead of four envisioned at appraisal,therefore number of project beneficiaries is substantially greater.

/d Supervisions 2 to 8 were carried out by the resident staff of the Regional Mission forThailand and Indochina (RHTI). The average time spent on supervision in RMTI is assumedto be 2 manweeks/person.

/e A - Agriculturalist; E - Economist; F - Financial analyst.7 1 - Problem-free or minor problems; 2 - Moderate problems; 3 - Major problems.

1 - Improving; 2 - Stationary; and 3 - Deteriorating.F - Financial; N - Managerial; T - Technical; and 0 - Other.

7? The project was identified and prepared by the Royal Thai Government with assistance fromRMTI staff.

- iii -



HIGHLIGHTS

The project, which was the Bank's first attempt to assist thesmallholder rubber industry in Thailand, was intended to cover a time sliceof the Office of the Rubber Replanting Aid Fund's (ORRAF) program from 1976to 1980, during which time ORRAF's rubber replanting program was expected togrow from about 25,000 ha to 50,000 ha per year. The main componentsincluded rubber replantings, using improved materials and techniques, onabout 160,000 ha involving about 80,000 smallholders, and institutionbuilding within ORRAF. The main objective of the project was to improve andmaintain the income levels of smallholders through increased rubberproduction. As Thailand is expected to export over 90% of its rubberproduction, all the incremental production under the project is considered asbeing for export and would therefore result in increased foreign exchangeearnings.

Due to delays in loan effectiveness and slow disbursements, theactual project period extended from 1977 to 1982. The project has been suc-cessful in terms of achieving replanting targets and transferring improvedmaterials and technology to about 225,000 rubber replanters. The project'sestimated economic rate of return remains satisfactory at about 21% comparedto 20% at appraisal, and the financial rate of return to rubber smallholdersis attractive at 32%. The revised estimates of costs per hectare are in linewith the appraisal estimates. The institutional changes introduced duringthe project period have contributed to the success of ORRAF's program.

The following points may be of particular interest:

- major reasons for project success were concentration of responsi-bility for implementation largely with one organization, ORRAF, andthe project's focus on institution building within ORRAF (PCR,paras. 5.01, 9.02);

- need for extensive analysis of the implications of smallholderpractices and for continuous advice to smallholders after the im-mature period, and the need for interagency coordination betweenORRAF, RRC and the Department of Agricultural Extension (PPAM,paras. 14-17; PCR, paras. 7.03-7.04); and

- financing arrangements and cost recovery for rubber replantings andtree crop development in general (PPAM, paras. 18-26; PCR, paras.7.02, 9.03).

PROJECT PERFORMANCE AUDIT MEMORANDUM


I. PROJECT SUMMARY 1/

1. Rubber is an important export crop in Thailand, accounting forabout 17% of the value of agricultural exports in 1982; over 90% of the rub-ber produced is exported. In 1980, about 25% of the total rubber area con-sisted of old low-yielding stands, and about one-half was mature rubber witha large proportion of unselected seedling rubber. This situation is animprovement over the situation in, the mid-1970s when the Government requestedBank assistance for rubber replanting. That request led to the present proj-ect for which the Board approved a US$50.0 million loan (Loan 1243-TH) inApril 1976. The loan became effective on January 14, 1977 and was closedDecember 31, 1982, about 18 months later than expected. Cofinancing wasprovided by the Commonwealth Development Corporation (US$6.8 million) andUNDP (US$1.9 million).

2. The main objective of the project was to increase smallholderincomes by improving rubber yields through accelerated rubber replantings andexpanded use of high-yielding planting material and of modern methods ofcultivation. The project aimed at the production of high-quality plant-ing material for the replanting of about 160,000 ha during the period1976-79, yield stimulation of about 100,000 ha annually, maintenance of allimmature replantings, establishment of 400 Group Marketing Organizations(GMOs), and strengthening of the Office of the Rubber Replanting Aid Fund(ORRAF), which was the implementing agency. The estimated project cost wasUS$148.0 million.

3. Project implementation, after a slow start, was satisfactory, al-though loan effectiveness was delayed due to the need to amend restrictiveexternal borrowing legislation and to delays in furnishing legal opinions.Total project cost was US$205.0 million, or 38% above appraisal estimatesbecause of the slippage caused during start-up and the expanded scope of theproject resulting from the extended project period. Physical targets withrespect to replanting, organizational improvements and beneficiaries havebeen attained for the most part. It was expected at appraisal that the areareplanted annually would double from 25,000 ha to 50,000 ha. This target wasexceeded in 1982 when 56,000 ha were replanted. However, the rate ofincrease in annual replantings was much slower than expected so that duringthe original project period (1976-79) only 130,000 ha, or 81% of the totaltarget could be replanted. Over the extended period (1976-82) 275,000 ha, or89% of the implied target, was achieved. Actual replanting costs per hectareat slightly over US$1,700 (1983 constant dollars) were nearly identical toappraisal estimates. Rubber produced from project plantings is expected to

1/ Adapted from the PCR.

- 2 -

be marketed as air-dried sheets by private traders and GMOs. Of the 400 GMOsplanned under the project, 337 were actually established.

4. Procurement of fertilizers was delayed, initially for proceduralreasons and later because of a disagreement over formulations. 2 / Consultingservices engaged under the project totaled 18 months, and the consultants'performance was satisfactory.

5. Institutional performance under this project was good after initialstaffing problems in ORRAF. Organizational and management changes becamenecessary but were made in time, and staffing was strengthened to raise thetechnical capability of ORRAF to a very satisfactory level by the end of theextended project period.. The UNDP/FAO technical assistance componentfinanced a considerable amount of training activities. However, researchactivities of the Rubber Research Center (RRC) deteriorated because of inade-quate funding and staffing. 3 / Monitoring and evaluation activities wereinitiated with the establishment of the Planning and Monitoring Unit (PMU),but further improvements are required.

6. Special financial arrangements for the rubber sector have been inplace for a long time in Thailand. These include ORRAF grants 4 / toreplanters, paid in seven installments over six years, and cost recoverythrough a cess collected by ORRAF and an export tax on rubber. While totalcess and tax collections have tended to exceed the cost of payments toreplanters and a growing net surplus in public revenues is projected for thefuture, ORRAF has been facing financial difficulties since 1982. Thesedifficulties emerged with the falling cess revenues derived from falling rub-ber prices on the one hand, and the need to grant-finance an expandingreplanting program on the other. A solution is likely to involve changes inthe cess rate and supplementary financing from Government or externalsources.

7. The project's impact is difficult to evaluate because of the seven-year immaturity period and the lack of reliable yield data for smallholders.The PCR uses data from 1961-1973 replants to suggest an average annual yieldof 1,350 kg/ha over a 20-year tapping period, or a total production of 27t/ha. This compares unfavorably with appraisal estimates of 1,480 kg/haannually over a 29-year tapping life, resulting in a total production of 43t/ha. Nevertheless, it is 18% higher than has been reported for replanted

2/ For details see the PCR, para. 3.04. ORRAF comments are in Annex I.Comments of the UNDP Regional Representative are in Annex II, point 1.

3/ A qualification of this statement by the UNDP Regional Representativecan be found in Annex II, point 2.

4/ In this context, the term "grant" is used throughout this report, al-though, strictly speaking, farmers receiving such payments had paid intheir contributions and were in effect pre-financing their own replant-ing.

-3-

plots with trees from 7-25 years old. 5 / It is also well above the averageyield and average lifetime yield of 960 kg/ha and 19.2 t/ha, respectively,given in a scenario based on alternative techniques set out in Annex 2, Table2 of the PCR. These large discrepancies between expectations in the apprais-al report and the two scenarios set out in the completion report are due tothe choice of techniques by smallholders and perhaps overly optimisticappraisal assumptions.6/

8. About 225,000 replanters benefitted directly from the project. Thefinancial rate of return on smallholder plantings has been reestimated at32%. The project's reestimated economic rate of return at 21% is nearlyidentical to appraisal expectations (20%). This favorable outcome is duepartly to improved price projections but also reflects output gains in theearly years on the revised yield curve relative to the yield curve used inthe appraisal (108%, 73%, 44% and 27% higher in the first, second, third, andfourth tapping year). At discount rates of 20-21%, these gains largely off-set the losses incurred from the seventh year of production through theremaining life of the tree. The PCR notes its reservations about theseyields during the early years of tapping. With the alternative scenario out-lined in the PCR, the 21% economic rate of return is reduced to 15%.

9. The Bank is supporting an expanded follow-on operation through theSecond Tree Crops Project (Loan 2078-TH) for which a loan of US$142.0 millionwas approved in 1982.

II. MAIN ISSUES

A. General

10. While the main objectives of this project-have been stated in theStaff Appraisal Report as increasing and maintaining the income levels of thelowest 50% income group through substantially increased rubber yields and en-suring that smallholdings are viable economic units, its primary operationalfocus was an accelerated replanting program for rubber. There is no questionthat ORRAF's replanting capacity was successfully expanded; any deviationsfrom the appraisal timetable as to the rate of expansion are of relativelylittle significance in the longer run. Whether the main objectives withrespect to smallholders' incomes will be achieved depends on appropriatemaintenance of the plantings, economic utilization of the trees duringmaturity, and the future level of rubber prices. Developments to date areencouraging but production from the new trees has not yet started. Infor-mation on incomes from trees that were planted prior to but maintained underthis project is scanty.

5/ Department of Agricultural Economics and ORRAF, Socio-Economic Survey ofRubber Farmers in Thailand, 1979.

6/ Comments by the UNDP Regional Representative on the differences betweenappraisal expectations and actual project achievements are in Annex II,point 3.

- 4 -

11. The key to successful implementation was the fact that the projectwas a time slice of an ongoing operation with strong Government support andthat externalities such as prices, costs and domestic politics had onlylittle adverse impact on project activities. ORRAF, strengthened under theproject, remained at the center of the successful operation, providing thephysical and financial prerequisites to participants.

12. Another noteworthy feature was the financing under the project ofORRAF's total program rather. than of specific incremental activities. Forexample, the Bank loan financed 60% of expenditures for all fertilizers andchemicals procured through ORRAF, 40% of the cost of all planting materials,and 21% of cash grant payments to rubber growers and of salaries of ORRAFfield staff. Internal distortions in the use of ORRAF resources, and pro-cedural and accounting complications were thus avoided, though not withoutloss of information on clearly distinguishable project input and outputeffects. It is thus difficult to determine the project's contribution toORRAF's expanded plantings, especially since a considerable expansion wouldlikely have taken place even without the project. But since the project'scontribution was almost entirely financial - organizational improvements con-ceivably could have been made solely with UNDP's and consultants' help - animpact at least commensurate with its financial share can be inferred; 24% ofORRAF's resources during 1977-81 represented funds provided under the projectby CDC and the Bank. This problem of incrementality becomes explicit in thePCR calculation of the economic rate of return which actually reflects theviability of replanting (versus not replanting) and not strictly returns toincremental project investments.

13. The generally encouraging performance of ORRAF notwithstanding,there were some aspects of concern that came into sharper focus as a resultof this and the follow-on project. One such aspect concerns farmers' prac-tices once the trees have matured which have not been improving as rapidly aswould be desirable. Another, more controversial, aspect has to do with thefinancing of the replanting effort. These are the main issues dealt with inthe following sections.

B. Smallholder Practices

14. The PCR indicates that the 29-year tapping life assumed at apprais-al is not consistent with the most recent estimates of an average tappinglife of only, 20 years. Declining average yields also have been reported. Itis not clear whether the appraisal assumptions were simply incorrect, orwhether farmer practices have changed over time in the direction of a shortertapping life. It is equally unclear whether a shorter replacement cycle iseconomically desirable or not. However, there are some instances ofshortening of the useful life of rubber trees to as few as ten years aftermaturing as a result of inappropriate tapping. The Rubber Research Center(RRC) of Thailand has issued recommendations on tapping practices aimed atmaximizing the lifetime production of trees over a relatively long period.In contrast, farmers' tendency continues to be to tap much more intensely inthe initial productive years. This practice leads to higher yields duringthe earlier years, lower, peak yields and a shorter life of the trees thanwith the recommended practices.

- 5-

15. The practice of using stimulants on a long-term basis is also notin common use in Thailand.7 / Stimulants have an output-increasing effectand allow savings in labor costs, but require an increase in the cost ofnon-labor inputs. The practice thus constitutes a shift towards a higher-input regime and as such becomes financially riskier and therefore lessacceptable to farmers generally. Another, less risky, practice also usedrarely is high level tapping with stimulation (HLTS) which is designed toincrease yields of trees several years before they are replanted. HLTS canbe a very profitable exploitation system, but is applicable only toward theend of the trees' useful life.

16. Within the customary project framework, the economic suitability offarmers' practices is implicitly analyzed at the time the overall justifi-cation for project investments is established. These evaluations, however,rely heavily on estimated internal rates of return which distracts from thereal importance of husbanding mature rubber trees. Most of the gains fromimproved practices involve increased inputs and lower tapping intensitiesthat prolong the life of trees and maintain yields in the future. Atinterest rates as high as the estimated internal rates, these gains areheavily discounted and the differences between techniques are minimal. Thus,it has been concluded in the PCR and at appraisal of the follow-on projectthat farmers' production practices have only marginal effects on the proj-ect's viability. However, these internal rates exceed appropriate discountrates and the methodology gives misleading results on the efficiency ofalternative techniques of production. It also tends to obscure effects onthe financial viability of the replanting effort, on aggregate output, onexport tax revenues going to the budget, and on the balance of payments. Theeffects of replacement time and planting of higher-yielding varieties at theend of the first cycle also are barely noticeable if conventional discountrates of 10-12% are used.8/ The choice of the discount rate becomes ofoverriding importance in this context. Using a much lower discount rate,perhaps in the 3-5% range, would make more sense from the point of view ofORRAF or Government, while a rate in excess of 12% would more likely reflectactual time preferences of individual farmers. Be that as it may, the fact

7/ The UNDP Regional Representative advises that the use of yield stim-ulants on young or middle-aged trees by small farmers is not applicablein Thailand (Annex II, point 4).

8/ For example, taking a 34-year time slice (replanting in year 28) basedon Annex 3, Table 3, the net present value (NPV - 10% discount rate) isB 1,423 per rai. With better practices resulting in a 5% increase innet benefits from year 11 onwards, the NPV increases to B 1,487 perrai. With intensive tapping resulting in an average annual increasein net benefits of 12% in years 8-14 and an average annual decrease of19% in years 16-20, followed by replanting, the NPV over a 34-yearperiod remains nearly unchanged at B 1,421 per rai. If in the lattercase replanting in year 21 takes place with an improved variety result-ing in a 20% increase in net benefits (year 28 onwards), the NPVincreases only slightly to B 1,451 per rai.

- 6 -

is that there is no agreement among experts as to what practices are optimaland whether presently recommended practices are consistent with currentGovernment policies.

17. There is no question that present yields obtained by smallholdersare below the genetic potential of the trees. It is not clear, however, whathas caused the continued use of low-yielding practices. Contributing factorsare likely to have included a lack of knowledge and the effects of Govern-ment's policies (i.e., reduced rubber prices and grant-aided replanting),though the relative importance of these is open to debate. But given theimportance of farmer practices after the immaturity period, the conclusion iswarranted that adequate attention has not been paid to this aspect in boththis and the follow-on project. ORRAF's responsibilities end six years afterreplanting, and an effort by the Bank to extend this period under thefollow-on project failed as an extension was not acceptable to the Borrower.The Department of Agricultural Extension (DAE), responsible for advisingsmallholders after ORRAF's involvement ceases, is ill-equipped for thistask.9/ In order to evolve a sound treecrops sector program, two essentialsteps need to be taken by Thailand's Government. First, as the implicationsof farmer practices are not sufficiently understood, extensive work isrequired to generate technically and financially sound recommendations.Second, institutional and incentive questions have to be resolved in order toachieve a high level of acceptance of these recommendations by smallholders.To this end, closer coordination among ORRAF, DAE and RRC will have to bearranged. Comments in this respect in the PCR (paras. 7.03-7.04) point inthe right direction, but opportunities for action have passed as far as thisproject is concerned, and no progress has been made so far under the follow-on project, which offers only an extremely weak basis for the Bank to takethe initiative. In similar situations in the future, the Bank should be moredetermined to identify and promote concrete steps for achieving long-termimprovements in husbandry practices.

C. Financing of Rubber Replanting and Related Policies

18. The issue of financing rubber replanting is to some extent inter-related with the issue of appropriate farmer practices raised above, and thereason for separating the two here is largely one of convenience rather thansubstance. Timely replanting is conditioned by incentives, and the existingsystem in Thailand of financing replanting is intended to provide strong in-centives. This system, in operation for over 20 years, is centered aroundthe existence of a fund into which farmers have to pay during the productiveyears of their trees and from which they receive assistance for replantingand during most of the following seven-year maturing period. The fund isadministered by ORRAF, and farmers' payments are collected through a cesslevied on rubber sales. Farmers' assistance is provided in kind, e.g.planting materials and fertilizers, and in cash in seven installments over asix-year period after replanting. In addition, Government is collecting anexport tax on rubber, part of which is transferred to ORR&F in the form of

9/ The views of the UNDP Regional Representative on DAE involvement andfarmers' adoption of improved practices are presented in Annex II, point5.

- 7 -

subventions as for some recent years the cess has been insufficient to coverthe cost of ORRAF' s operations. Annex 4 of the PCR provides a basisfor estimating the resulting flow of funds for 1983 as follows:

Rubber exports ('000 tons) 552Cess rate (B/kg) 1.13Export tax rate (B/kg) 2.20

ORRAF (B million)

Cess revenues 624Government subvention /a 1078

Total receipts 1,702

Grant costs 1,418Administrative costs 284

Total expenditures 1,702

Government

Export tax revenues 1,214Minus ORRAF subvention 1,078

Surplus 136

/a Based on the simplified assumption that all non-cess funds received byORRAF represent a Government subvention.

19. While for the period 1960-76 ORRAF's self-generated funds (cessplus interest) amounted to 93% of its total resources, that proportion haddeclined to 67% for the period 1977-81; Government subventions thus increasedfrom 7% to 33%. The latter increase was caused largely by the acceleratedreplanting program and was financed almost entirely with project funds. Formany years after commencement of this program in 1960 cess revenues exceededtotal ORRAF costs, and sizeable reserves were accumulated. Since 1975, how-ever, with the exception of 1977, ORRAF's costs have consistently exceededits cess plus interest revenues. With the present plans and assumptions onprices and costs (PCR, Annex 4) ORRAF's cess revenues are projected to be in-sufficient to cover its costs until the mid-199Os, implying that Governmentwould have to provide the resources for continued subventions. Export taxrevenues, expected to rise with the projected increasing rubber prices andexport volume, are estimated in the PCR to be more than ample to cover thecost of these subventions. However, there are some factors of uncertaintywhich cast doubt on the soundness of the present system. These include theextent of new plantings in the future, the length of the replanting cycle onexisting stands, and Government's ability and willingness to make adjustmentsin the cess and export tax levels. In addition, there are conceptual diffi-culties, such as accounting for interest charges on the cost of replanting,which could reverse what off-hand looks like a favorable picture.

20. A grant-financing scheme like this one encounters skeptical atti-tudes in some quarters as it represents a severe interference into the playof market forces with consequent possible distortions in the allocation ofresources and adverse effects on economic efficiency; however, these dis-tortions and effects have not been quantified in the Thailand rubbercontext. The PCR, reflecting Government opinion, concludes that Thailand'ssuccessful rubber replanting program is to a large extent due to the grantsystem of financial support (para. 9.03). It infers that while the systemhas disadvantages it is superior to available alternatives. The issue inthis context is whether a grant-based replanting program is indeed the bestapproach, currently and in the longer run.

21. The two main advantages of the program in Thailand's smallholderenvironment have been (based on historical and cross-country comparisons) (a)more extensive and timely replanting, and (b) use of superior plantingmaterials and of better husbandry methods during the maturing period. Sincethe ORRAF fund operates on a pre-payment basis - farmers become eligible fora grant only after having made cess payments for years - cost recovery is notat issue as with, for example, a smallholder credit scheme. While the directcost of operating the fund has been somewhat higher than originally envisaged(about a third of the grant payments), there has been a satisfactory level ofoperational efficiency.

22. Possible disadvantages arise from the distortions to product pricesand costs of replanting inputs implicit in present policies. The replantinggrant removes a high proportion of the costs of replanting from the farmerwhile the export tax and cess significantly reduce farm gate prices andtherefore returns to additional rubber production. This can have a strongeffect in discouraging inputs into stand maintenance and in encouraging hightapping intensities and rapid exploitation of the trees. This may be a fac-tor in the choice of production techniques, disappointing yields, and lengthof replacement cycle alluded to previously. These adverse effects of a grantcan be aggravated when a portion is disbursed in cash rather than in kind.Since the new planter does not have access to the replanting grant but mustbear the burden of the export tax, present policies are likely to createstrong disincentives to new planting of rubber. Due to administrative andincentive reasons, present policies may have also limited diversification outof rubber into alternative crops - a process that has been very profitable inneighboring Malaysia, although it may not apply to the same extent inThailand.. Excluding a major cash crop like rubber from the rural credit mar-kets through the cess-grant mechanisms can be perceived as adverselyaffecting the development of such markets. Furthermore, being in the publicdomain, a grant system without adequate safeguards could become subject toabuse. While some of these negative effects might be acceptable costs ofovercoming inertia and effectively transferring the major technologicaladvantage of clonal rubber to smallholders, the appropriateness of such poli-cies in the longer run is questionable. Any future follow-on project willtherefore have to be designed in light of the changing rationale forreplanting assistance. - assuming the problems of lack of information aboutclonal techniques by the Thai farmer will have been largely resolved.

- 9 -

23. An immediate question that presents itself in the review of thegrant scheme is what the alternatives are and, furthermore, what the practi-cal and policy implications of these alternatives are likely to be. Creditfinancing, possibly subsidized, is one of the most prominent alternatives.Generally, smallholder credit offers a minimum of economic distortions buthas drawbacks with respect to accessibility by the most needy segment ofborrowers, the willingness of farmers to borrow for slow-maturing treecrops,and achieving a satisfactory loan recovery. Experience has shown that satis-factory recovery of loans is not achieved in countries where farmers are notfamiliar with the rights and obligations of agricultural credit and wherecollateral is nil or small.10/ The main policy implication for a small-holder rubber credit scheme would be the need to design a compatible systemof taxation and subsidization.l/

24. Discussions on these alternatives, generally and with respect tothe Thailand rubber case, have taken place in the Bank. The cardinal handi-cap in pursuing these discussions specifically applied to the present projectis lack of information. The number of rubber planters, planters' socio-economic situation, total rubber area in Thailand, and rubber yields andproduction are not known with a reasonable degree of accuracy; socio-economicstudies planned to be undertaken under this project have not been completedand thus not yielded the expected results. Furthermore, the present system'sachievements, such as the growth in annual replanted area and ORRAF'sbusiness performance, are easier to enumerate and evaluate than the dis-tortions it might be causing. The audit raises this issue not in the beliefthat a satisfactory answer is easily provided, but rather in order to furtherstimulate the debate of appropriate financing mechanisms for treecrops onhand of this well-managed grant scheme.

25. Two aspects are of crucial importance to the Bank. First, thereare questions to which clearer answers need to be sought than have beenavailable in the past. These questions concern the magnitude and accept-ability of efficiency losses resulting from the effects of the ORRAF grantscheme, the merits and efficacy of alternative support mechanisms, the needfor continued intervention after smallholders are firmly established in adesirable mode of production, and the relevance of the findings for non-rubber treecrops. Second, if the Bank is to be effective in dispensingpblicy advice to its Borrowers, this can be achieved only after an agreedposition has been arrived at internally. What must be avoided is that incon-sistent or contradictory signals are relayed. The audit discerns strong

10/ See OED, Ivory Coast - Oil Palm and Coconut Sector Study, (underpreparation).

11/ Comments by the UNDP Regional Representative on the grant system and thefeasibility of substituting a credit scheme in support of planting orreplanting tree crops are in Annex II, point 6.

- 10 -

differences of opinion among concerned Bank staff and has been unable toidentify an agreed official position.12/ The ORRAF scheme, with improveddata collection and monitoring in the future, offers a ready laboratory fromwhich valuable lessons could be learned. The fact that there are also newplantings - in addition to replantings - included in the follow-on projectand that these are financed through institutional credit may provide a use-ful, though limited, basis of comparison. The limitation arises as a creditprogram for new planters who still must bear the full burden of the indirectcost recovery on grants to replanters is far less favorable than a creditprogram with a corresponding reduction in export taxes.

26. The audit agrees with the PCR that the ORRAF grant scheme was a keyelement in attaining the immediate physical objectives of this project, butconsiders it premature to render conclusions on the policy premises on whichthe scheme is based or to offer or endorse recommendations on possible futuremodifications. The potential lessons to be drawn from this experience forthe Borrower, the Bank, and developers of treecrops in other countries arepromising enough, however, to urge that relevant aspects of the follow-onproject be kept under special review. The audit of that project, and a pos-sible future impact evaluation, should be able to draw on more evidence thanwas available at this time and shed more light on the issues raised as aresult of this project. Towards this end, the Bank should make every effortto cooperate with the Borrower in gathering relevant information, and fortifyits in-house deliberations with additional case studies in other countries,especially those where the introduction of grant systems is contemplated.

12/ OPS advises that some of the points under discussion are the role of thegrant mechanism in stabilizing farm prices, the effects of collectingboth the export tax and the cess, and the criteria for determining thelevel of the cess. The audit is also aware of discussions focussing onscenarios without any Government support for replanting, and on ap-proaches involving credit schemes adapted to the rubber replantingcycle.

TABLE



DISBURSEMENTS

Loan Agreement FinalCategory Schedule 1 (09/13/76) Disbursement /a

(US$ millions) (US$ millions)

1. Fertilizers and chemicals 31.00 33.41

2. Vehicles 0.30 0.77

3. Planting materials forrubber growers under PartA (1) of the project /b 2.20 2.93

4. Cash grant payments torubber growers (first twoinstallments) under PartA (1) of the project /b 8.50 10.15

5. Salaries of Fund (FED)field staff 1.50 2.56

6. Consultants' services 0.20 0.18

7. Unallocated 6.30 -Total 50.00 50.00

/a As of 01/07/83, the date of final disbursement from the Loan./b Includes all of FED's replanting activities from 1976 through mid-1980

plus the extended period thereafter through 1982.

- 13 - Annex IPage 1

* OFFICE OF THE RUBBER REPLANTING AID FUNDd' MINISTRY OF AGRICULTURE AND COOPERATIVES

Bangkoknoi - Talingchan Rd.No. 2003/5/ f13c Bangkok 7, THAILAND

October /9 , 3

Comments by the Office of the Rubber Replanting Aid Fund

ivr. Shiv S.KapurOperations Evaluation DepartmentWorld Bank1818 H. Street, N.W.Washington, D.C. 20433U.S.A.

Dear Sir,

Re: Project Completion Report (PCR) and Project Performance-Audit Report (PPAR) on Thailand Rubber Replanting Project(Loan 1243-THi)

Reference is made to your letter of August 9 and our telex dated October3, 1983, more details about correction and comments as follows

For correction;

1 PCR page 8, clause 4.02 - Marketing and Prices and PPAR page 2, clause 3,number of Groups of Marketing Organization (GMOs) were established at 337 groups,

2. PCR page 10, clause 5.02 - Implementation of Consultant's Recommendations,Ministry of Agriculture and Agricultural Cooperatives should be changed to Ministryof Agriculture and Cooperatives.

3. PCR page 11, Clause 5.U3 - Monitoring and Evaluationt quarterly andyearly progress report have been prepared by Loan Project Unit.

For comments

1. PCR page 4, clause 3.01 and page 7, clause 3.05 - Disbursements,incorrect to say that the absence of the Director for some months early in 1977and the changing in ORRAF's top management are the reasons of delay in projectstart up and extremely slow disbursement at the early years of the projectrespectively.

2. PPAR page 2, clause 4, incorrect to mention that the delay inprocurement of fertilizers at the begining of the project are partly due to ourunfamiliarity with the Bank's procurement procedures and Thailand's reluctancefor some time to accept ICB procedures, in our opinion, the reasons would be ;-

a) Different procedures between ICB and local competitive bidding,the ICB procedures require the time for preparation at least 8 months before thefirst delivery of goods while the local procedures need shorter, thus,

/for the first.......

- 14 - Annex Irage Z

for the first procurement of fertilizers, if we procured by ICs method,our fertilizer stock nad to be shortage. Finally, we decided to procurepartly fertilizers by local bidding method using our own fund.

b) The other reasons is due to disagreements between the Bankand ORRAF on fertilizer specifications in elimination magnesium from allthe fertilizer formulae and changing the amounts and specifications ofphosphate from a slow release to a soluble form.

We hope that the above-mentioned will be helpful and useful foryour staff.

With best regards,

Yours truly,

(Mrs. Cjharnfon Thitatarn)

Dcpuly i r

Loan Project UnitTel. 4249700

- 15 - Annex IIPage 1

UNITED NATIONS PROGRAMME DES NATIONS UNIESDEVELOPMENT PROGRAMME POUR LE DEVELOPPEMENT

Telephone OFFICE OF THE REGIONAL REPRESENTATIVE Cable Address:282*9161, 282-9171 "UNDEVPRO" BANGKOK282-9181, 282.9191 United Nations Building282-9365, 282-9381 Rajdamnern Avenue

Bangkok 2, ThailandG.P.O. Box 618

R. THA/79/016 Comments by the UNDP Regional RepresentativeLetter No. THA 1093

30 September 1983

Dear Mr. Kapur,

Subject: Project Performance Audit Report on ThailandRubber Replanting Project (Loan 1243-TH)

Your letter of 9 August, 1983 addressed to Mr. John L. Woods togetherwith the report, was forwarded to us for our comments. For your information,Mr. Woods is Director/Project Manager of the UNDP-supported inter-countryproject, Development Training and Communication Planning (RAS/81/111) whichassisted the UNDP-funded project on Bridging Assistance for Accelerated RubberReplanting in the field of development communication and training under a sub.contract arrangement.

We find the report comprehensive and analytical but would like to passon the following specific comments by Mr. Lim Poh Loh, FAO Chief TechnicalAdvisor, who played a central role in the operation and later, management ofthe two phases of the UNDP/FAO projects (THA/75/021 - Acceleration of RubberReplanting Project, 1976-80 and THA/79/016 - Bridging Assistance, 1980-82).

1. Fertilizer Procurement Delay: Ref. page 2 item 4

It is incorrect to say that the delay was due to ORRAF's unfamiliaritywith the Bank's procedures or Thailandts reluctance to accept the ICB procedures.The actual cause was the WB's disagreement with ORRAF's proposal to change thefertilizer formulations., As a result, ORRAF purchased 50,000 MT fertilizerslocally with its own resources.

/...2Mr. Shiv S. Kapur

DirectorOperations Evaluation DepartmentIBRD1818 H Street, N.W.Washington, D.C. 20433U.S.A.

Annex IlUNITED NATIONS DEVELOPMENT PROGRAMME - 16 - Page 2

2. Deterioration of Research Activities: Ref. page 3 item 5

The statement needs qualification. The demand for research supportfrom replantings and newplantings greatly accelerated during the period with nocorresponding increase in funds and staff and made it appear that there was adecline in research output. The RRC/DOA contributed considerably to the rubber

replanting programme to meet the training and technical requirements.

3. Yield Discrepancies: Ref. pages 3 and 4 in item 7 and pages7 and 8 in item 14

The differences between the expectations of the WB's appraisal reportand the project achievements are to be expected because of the manner in whichthe yield was estimated. PCR assumption of 1,350 kg/ha/year was over 20 tappingyears based on a daily tapping system using older rubber planting materialsplanted in 1960s and early 1970s whereas WB's assumption of 1,480 kg/ha/yearwas over 29 tapping years based on S/2 d/2 1007. tapping system using more modernplanting material. Hence, marked yield differences are shown between them.

These two yield assumptions cannot be strictly applied to the rubber

holdings replanted in the Phase I period (1977-1982). During this period, thetypes of rubber planting material have changed slightly and the actual tappingsystems adopted by the replanters were of mixed intensities - S/2 d/2 100%,S/3 d/l 133%, S/2 2d/3 133% and S/2 3d/4 150%. It should also be noted thatthe total actual tapping days in Thailand are generally lower than the tapping

systems adopted.

4. Yield Stimulation: Ref. page 8 item 15

Application of yield stimulant to young or middle-aged trees by smallfarmers to-obtain high yield and reduce labour cost is not applicable inThailand. Already, due to small-size farms, the farmers tend to tap theirtrees earlier and at higher intensities than desired. To introduce yield

stimulation with corresponding reduction of tapping frequencies will not beacceptable. The danger will be that the farmers will apply stimulant and

continue to tap the trees at high intensities. This practice will ruin thetrees and further shorten their economic life.

HLTS is possible for the last phase of the life of the rubber trees

(3-5 years prior to replanting).

5. DOAE Involvement with Replanters after Release from ORRAF:Ref. page 10 item 17

This is a policy decision of the MOAC. As such, it has to be accepted.However, giving adequate equipment and staff to provide extension services to thefarmers will not be effective enough to ensure that the replanters will adopt the

required practices. The critical period is between the time of release from

/ .... 3

- 17 - Annex II

UNITED NATIONS DEVELOPMENT PROGRAMME Page 3

ORRAF and the opening of the newly mature trees for tapping (1-2 years).Material and cash incentives are necessary to hold the farmers to delay early

opening of under-sized trees, to apply fertilizers, to maintain the holdings to

good standards, to tap the trees correctly and at required frequencies and to

produce good rubber sheets and market them in group for better return. All these

activities will be hard to achieve by persuasion and the normal extension services.

6. Grant vs Credit for Rubber Replanting: Ref. page 14 items 22, 23

For over two decades, the grant system to encourage the rubber

replanting has been very successful. Cess collection on rubber exports from

all the rubber producers to support those who can and want to replant at the

rate of 3% of the total rubber area is perhaps the most efficient way especiallywhen the majority of the rubber holdings is small. Credit scheme to replant or

newplant a tree crop which takes 6-7 years to mature will be difficult.

We understand that ORRAF will be making additional comments on thereport for your review and to be reflected in the final report.

Yours sincerely,

, inston R. Prat eyRegional Representative

cc: Khun Narong Suchare, Director, ORRAF, Bangkok.Mr. Lim Poh Loh, CTA, THA/82/007, Bangkok.

Annex III-19 -

TELEPHONES: 2451690 TELEX: 84767 VELOP TH2451691 CAELES: VELOP BANaOPK

COMMONWEALTH DEVELOPMENT CORPORATION(U.K. STATUTORY CORPORATION)

(ulU>^qflh11mLJLL8RlslJflnn

d d.n. 2653 POSTAL ADDRESS: G.P.O.BOX 2653 LOCATION:g s BANGKOK 10500

'U 2 Olflll7tiiIlni 2ND FLOOR. SINKAHAKAN BUILDING

55 nIIorlumn (aen.niowxlr") 55 RACHADAPISEK ROAD (ASOKE.LAROPRAO,

M1 Z8s)JIfll' M 11 Uf HUAY KWANG

IVnI. 2451690-1 BANGKOK 10310

Comments by the Commonwealth Development CorporationThailand Representative

RUB 11 12th September 1983

Mr. Shiv S. KapurDirectorOperations Evaluation DepartmentThe World Bank1818 H Street N.W.Washington, D.C. 20433U.S.A.

Dear Mr. Kapur,

Re: Project Performance Audit Report onThailand Rubber Replanting Project

(Loan 1243-TH)

Thank you very much for your letter of 9th Augustenclosing a copy of the first draft of the above-mentioned report. I found it detailed and interesting,and I thank you for letting me have an opportunity tosee it.

Yours sincerely,

) \

T. FORDRepresentative, Thailand

TF/SM

- 21 -

THAILAND

RUBBER REPLANTING PROJECT

LOAN 1243-TH


June 30, 1983

Projects DepartmentEast Asia and Pacific Regional Office

- 23 -

I. SUMMARY

1.01 The Rubber Replanting Project, which was approved by the Board inApril 1976, was the Bank's first involvement in the treecrop subsector inThailand and the first Bank-assisted project to be implemented by the Officeof the Rubber Replanting Aid Fund (ORRAF). The objectives of the projectwere to improve and maintain the income levels of rubber smallholdersthrough increased rubber replanting, and to ensure the continuous economicviability of rubber smallholdings. To achieve these objectives, the projectaimed at gradually increasing ORRAF-assisted rubber replantings from a rateof 20,000 ha p.a. to 50,000 ha p.a., by providing high yielding plantingmaterial and technical advice to about 80,000 new replanters. In line withthe expansion of ORRAF's activities, the project also aimed at institutionbuilding. The project was originally intended to cover a time-slice ofORRAF's activities from 1976 to 1980, but due to delays in loan effective-ness and slow disbursements, the actual project period extended from 1977 to1982.

1.02 Both in terms of achieving the replanting targets and transferringtechnology, the project has been successful. ORRAF has raised the replantingrate from about 24,000 ha in 1976 to 56,000 ha in 1982. Over the last fouryears of the project the replanting rate averaged about 47,000 ha p.a. or94% of the target set at appraisal. During the project period it is esti-mated that about 225,000 rubber replanting households received ORRAF grantsand technical assistance. While it is too early to assess the impact of theproject and the attainment of its objectives, the latest estimates indicatethat the project remains economically and financially viable, with anoverall economic rate of return of about 21% compared to 20% estimated atappraisal, and a financial rate of return to the rubber smallholder of about32%. The total rubber production resulting from the 251,000 ha of land onwhich replanting was started during the project period is estimated to be inthe order of 7 million tons, peaking at about 420,000 tons per year in thelate 1990s. As Thailand is expected to export over 90% of its rubberproduction, all the incremental production under the project is consideredas being for export. The peak production from replantings started duringthe project period is expected to generate gross foreign exchange earningsin the order of $630 million.

1.03 The major problems faced during project implementation were:

(a) the one year delay in loan effectiveness due to legal issues inThailand, which set the project off on to a slow start;

(b) ineffective project management for about a year at the start ofthe project which caused initial delays in implementation,including the appointment of key staff;

(c) problems with international procurement of fertilizers due todisagreements over formulations and specifications; and

- 24 -

(d) the shortfall in cess revenues in 1982, caused by low worldrubber prices, which affected ORRAF's financial position.

Despite these problems, the project was implemented smoothly. The projectwas well formulated, simple and focused quite correctly on organizationaland training improvements in ORRAF. Important institutional changes wereintroduced during the project period, which contributed to ORRAF'ssuccessful operations. The Bank, other cofinanciers, and a managementconsulting firm had key roles to play in bringing about the improvements ininstitutional efficiency.

1.04 The overall success of the project is largely attributable toORRAF's management. Today, ORRAF implements a well-organized grant aidedprogram for rubber replanting and can respond quite effectively to thereplanting needs of smallholders both in terms of transferring technologyand providing capital. The replanting program in Thailand could well beemulated elsewhere in terms of approach, organizational structure andGovernment support.

II. FORMULATION

2.01 Background and Project Origin. Rubber is a major agriculturalexport of Thailand, accounting for about 17% of the total value of agricul-tural exports in 1982. Over 90% of the total rubber produced is exported.Thailand's total rubber area is estimated to be about 1.6 million ha andover 90% of the rubber is grown by smallholders in the South of Thailand,with holdings of 10 ha or less. It is estimated that about 420,000 ha ofthe rubber area consists of old low-yielding stands, and a further855,000 ha consists of mature rubber, of which about 50% is unselectedseedling rubber. All of the old low-yielding stands and the unselectedseedling rubber, including some mature clonal rubber, will need replantingwithin the next decade.

2.02 The Government assists smallholders growing rubber through theOffice of the Rubber Replanting Aid Fund (ORRAF), which was established in1960 to implement and supervise a grant program for smallholders involved inrubber replanting. Rubber planters are taxed indirectly through a replant-ing cess and export taxes. The cess funds, which are channelled throughORRAF to rubber replanters, are a prepayment for grants used for replantingsenile rubber. The rubber replanting grant consists of cash payments aswell as material components which are delivered to the farmer in kind. Ithas two purposes: providing sufficient materials (mainly high-yielding plantmaterial and fertilizers) to gain the benefits of improved rubber techno-logy; and contributing to the subsistence of farmers during the period ofmaturation (about the first seven years) by partial financing of labor costs.

2.03 Between 1960 and 1975, ORRAF oversaw the replanting of about160,000 ha of rubber and reached a replanting rate of 20,000 ha p.a. with

- 25 -

marked success. This rate of replanting, however, was considered insuffi-cient to permit replanting all the old rubber stands within the economiclife cycle of the trees. A level of 50,000 ha p.a. was considered moreappropriate in order to replant the backlog of old low-yielding stands by theearly 1980s and to keep pace with regular replanting requirements until theearly part of the next century. Such an increase in replanting wouldaccelerate the process of increasing the incomes of large numbers ofsmallholders. The Government, therefore, requested the Bank's assistance inthe expansion of ORRAF's ongoing program from replanting 20,000 to 50,000 hap.a. for the period 1976-80.

2.04 The main constraints to the expansion of the ORRAF program werefinancial and organizational. In order to cope with the expansion of ORRAF'sactivities additional staffing, training, and changes in the organizationalstructure and procedures, including data collection and analysis werenecessary. The Bank, therefore, focused on institution building duringappraisal, and most of the loan covenants pertained to improvements in ORRAF'sorganizational structure. The most important loan covenants in this respectincluded: (a) the appointment of a Deputy Director for Finance andAdministration; (b) the employment of management consultants; and (c) theestablishment and staffing of: (i) a Development Division, to assure allheadquarters advisory and support functions; (ii) an Internal Audit Unit toensure adequate financial controls; and (iii) a Planning and Monitoring Unit.

2.05 The preparation work for the project was carried out by the staff ofORRAF and the Rubber Research Center (RRC) who were assisted by a UNDPtechnical assistance team, and with the support of Bank staff in the RegionalMission, Bangkok. The Bank, together with the Commonwealth DevelopmentCorporation (CDC-UK), appraised the Rubber Replanting Project in January 1975.A Bank loan of $50 million (Loan 1243-TH) was approved in April 1976. The CDCcofinanced the project with a loan of $6.8 million equivalent and the UnitedNations Development Programme (UNDP) provided technical assistance amountingto about $1.9 million.

2.06 Project Objectives and Description. The main objective of theproject was to improve and maintain the income levels of smallholders throughincreased rubber production and in particular to raise substantially thenumber of rubber replantings undertaken annually with high yielding materialand modern methods of cultivation. The project was to benefit about 80,000new rubber replanters and about 70,000 existing replanters.

2.07 The project was intended to cover a time-slice of ORRAF's activi-ties from 1976 to 1980, the most significant of which were:

(a) replanting, using improved materials and techniques, of atotal of about 160,000 ha involving about 80,000 rubberreplanters;

(b) production of high-quality planting material to meet theneeds of the expanded replanting program;

(c) maintenance of immature replantings commenced prior to the project;

- 26 -

(d) yield stimulation of about 100,000 ha p.a.;

(e) training programs for ORRAF staff and rubber smallholders;

(f) establishment of 400 Group Marketing Organizations (GMOs)to help smallholders improve the quality of their rubbersheets;

(g) technical assistance by UNDP for project planning andimplementation;

(h) establishment of a monitoring system to evaluate the socio-economic impact of the program; and

(i) review and reorganization of ORRAF's structure and procedureswith the assistance of a team of management consultants.

The total project cost was estimated at $148.0 million, with a foreignexchange component of about 42%.

III. IMPLEMENTATION

3.01 The loan was signed September 13, 1976 and the project declaredeffective January 14, 1977, almost one full year behind appraisal expecta-tions. This resulted from problems faced by the Government in accommodatingthe Bank and CDC loans within the country's foreign borrowing limits set bythe Thai legislature. The signing of the loan agreement was delayed pendingthe enactment of new external borrowing legislation in the Thai Parliament.Loan effectiveness was further delayed to allow the Government additionaltime to resolve legal issues in respect of the Bank and CDC loans. Projectstart-up was also affected by ineffective top management during the earlyyears of the project. The responsiveness of ORRAF headquarters to the pro-blems of field staff, and its ability to effectively coordinate operationsand procure much needed replanting supplies deteriorated for some months in1977. Despite the slow start-up, by the end of the project period, theobjectives set out at appraisal in terms of organizational improvements,replanting targets and number of beneficiaries were attained. All of theBank loan covenants have been complied with.

3.02 Rubber Replanting Targets. The actual replanting rate each yearwas lower than that envisaged at appraisal, particularly during the earlieryears of the project, due to the one-year delay in project effectivenessand consequent loss of project momentum, security problems in South Thailand

- 27 -

caused by insurgency activities, and relatively high rubber prices up to1981, which caused farmers to postpone replanting due to the increasedprofitability of tapping. In 1982, the replanting rate exceeded the targetof 50,000 ha by 12%, due mainly to improvements in ORRAF½s processing ofapplications and surveying. The processing of replanting approvals wasshortened from 12 months to 3 months. Over the last four years of theproject the replanting rate averaged about 47,000 ha p.a. or 94% of thetarget set at appraisal. In addition to the replanting of new stands,during the project period ORRAF continued providing grants and technicalassistance for about 130,000 ha of replantings started prior to thecommencement of the project in 1977.

Table 1: RUBBER REPLANTING SCHEDULE

Replanted area (ha) Actual as % ofProject period Appraisal estimate Actual appraisal estimate

1976 25,000 23,560 941977 35,000 25,761 741978 50,000 36,339 731979 50,000 44,073 881980 50,000 41,952 841981 50,000 46,529 931982 50,000 56,000 112

3.03 Project Costs. The actual total costs of the project covering the6-year period 1977 to 1982 amounted to about US$205.0 million, compared tothe appraisal estimate of US$148.0 million for a 4-year period up to 1980.The cost overruns were financed by GOvernment budgetary sources and surpluscess funds. A comparison of the replanting cost, grant, and administrationcosts on a per hectare basis in constant dollar terms is shown in Table 2.

- 28 -

Table 2: PROJECT COSTS PER HECTARE /a(US$/ha)

Appraisal Actual as %estimate Actual of appraisal estimate

Rubber replanting costs /b 1,725 1,705 99ORRAF grant 1,442 1,302 90Administration costs 238 255 107Grant/replanting costs (%) 84 72Administration cost/grant (%) 16.5 19.6

/a Costs expressed in 1983 constant dollars. Appraisal estimates at1975 prices have been adjusted using GDP deflator.

/b Costs of establishing 1 ha of rubber up to tapping - includes interalia land clearing, fertilizing, plant materials.

The revised estimates of the costs per hectare are in line with theappraisal estimates, adjusted to 1983 prices. The actual cost of ORRAFgrants per hectare is slightly lower because the appraisal estimated 7 yearsof grant installments (an additional installment for fertilizer) whereas theactual grant was only for 6 years.

3.04 Procurement. Delays in the procurement of fertilizers wereencountered in the first 18 months of the project due to unfamiliarity on thepart of ORRAF staff with international competitive bidding (ICB) proceduresand the Government's insistence that local procurement regulations be fol-lowed. ORRAF was therefore forced to procure fertilizers following their ownprocedures without Bank reimbursement during the first year of the project.The problems with ICB procedures were common to several Bank projects inThailand under implementation in the mid-1970s. Once the Bank's ICB proce-dures were accepted, procurement proceeded satisfactorily. Later, towards theend of the second year,. fertilizer procurement was further delayed a fewmonths due to disagreements between the Bank and ORRAF on specifications. Inparticular, the ORRAF Board had proposed eliminating magnesium from all thefertilizer formulae and changing the amounts and specifications of phosphatefrom a slow release to a soluble form. These proposals were unacceptable tothe Bank, since empirical evidence was lacking to suggest that in the rubberreplanting areas the soil magnesium levels were adequate or that solublephosphate in the amounts proposed would be more effective than the existinglevels of rock phosphate. Magnesium was finally deleted from two of the fourcompound fertilizers used, and soluble phosphate included at higher levelsthan originally proposed, following a careful assessment of the evidence andthe conclusion of a short-term program of experimental work. In the future,the magnesium levels in the soil will need to be carefully monitored as thenew high yielding clones come into production.

- 29 -

3.05 Disbursements. Annex 1 shows the schedule of Bank disbursements.The Bank loan was expected to be fully disbursed by June 30, 1980, but theclosing date of the loan was extended to December 31, 1982 and the last drawdown of Bank funds took place in January 1983. The initial delay in disbur-sement resulted from the one year delay in loan effectiveness. During theearly years of the project, the rate of disbursement was extremely slow, duemainly to: (a) protracted changes in ORRAF's top management, as a result ofwhich major decisions with a bearing on project expenditures were delayed;and (b) the procurement problems outlined in para. 3.04 above.

3.06 Accounts and Audits. The audited accounts of ORRAF were receivedregularly, though usually late, due to the lengthy clearance procedures atthe National Audit Council. The last audited accounts received were forORRAF's FY81.

3.07 Performance of Consultants. A consulting firm was engaged for 18months to review and make appropriate recommendations to improve ORRAF'sorganization, operating procedures, accounting systems, data processing andstaffing. Much of the firm's recommendations have been implemented and areconsidered by both the Bank and ORRAF as having contributed to improvedefficiency in ORRAF's operations. The selection of the firm was appropriate,since it had extensive experience in Thailand with a wide variety of clientsboth in the public and private sectors. Most of the team was comprised ofThai nationals, which facilitated working relations.

IV. AGRICULTURAL IMPACT

4.01 Yields and Production. It is still too early to assess the levelof rubber production likely to be achieved by replantings undertaken duringthe project period, because the rubber trees are not yet in tapping./1Until recently, there has been no reliable data on rubber yields inThailand, and past appraisals have had to base yield projections on resultsfrom neighboring countries. The project appraisal assumed an alternatedaily system of tapping with yields peaking at 1,800 kg/ha and averaging1,480 kg/ha over a 29-year tapping period. The Rubber Research Institute ofThailand has now completed a survey of about 400 ORRAF replanters with treesfrom 1 to 12 years in tapping. The data from this survey, which is used forthe revised estimates of yields for the first ten years of tapping, indicatesthat the system of tapping used by smallholders is more intensive thanestimated at appraisal, resulting in higher yields during the early years,lower peak yields and a shorter life of the trees. The average peak yieldis estimated to be just under 1,700 kg/ha and ORRAF estimates that the tap-ping period is more likely to be 20 years. Based on these revised assump-tions, the production estimates per hectare would be about 27 tons over a20-year tapping life, compared to the appraisal estimate of 43 tons over a

/1 Tapping starts about 7 years after planting.

- 30 -

29-year tapping life. Total rubber production from the 251,000 ha ofreplanted rubber started during the project period is likely to be in theorder of 7 million tons, peaking at about 420,000 tons per year in the late1990s. Annex 2, Table 1 compares rubber yield estimates made at the time ofappraisal with revised estimates. The mission has reservations about theyields from the survey data for the early years of tapping as they appear tobe too high at an average of about 1,408 kg/ha for the first four years.They have nonetheless been used for the economic and financial analysis ofthe project as they are based on actual survey results rather than extrapo-lations of yield estimates from other countries. A more conservative yieldcurve as shown in Annex 2, Table 2 would reduce the economic rate of returnto about 15%.

4.02 Marketing and Prices. Rubber produced by project replanters islikely to be marketed along present lines with farmers selling air-driedsheets to local traders or else forming GMOs and dealing directly withwholesalers and exporters. Prior to the project, the main marketing con-straints for smallholders were the generally low quality of rubber sheetsproduced and the lack of adequate weighing equipment. This resulted inlower prices paid to smallholders, since village traders had to allow forrisks connected with uncertain quality and weight of rubber sheets. TheGMOs were formed to correct these problems, and they comprised small groupsof neighboring producers responsible for sheet-grading, weighing and market-ing. The project called for the establishment of 400 GMOs, but only 337were actually established during the project period. The GMOs have provedto be a cost-effective way of bulking smallholders' production, and studieshave indicated that when rubber is sold through them prices are competitiveand reflect a fair proportion of the f.o.b. price adjusted for taxes.

4.03 Average farmgate prices per kg of dry rubber content (DRC) havebeen projected as shown in Table 3. Although prices are currently belowthose predicted at appraisal, the present projections of prices for the1990s, when most of the project benefits will be realized, are about 25%higher in constant baht terms than forecast at appraisal.

Table 3: PROJECTED FINANCIAL AND ECONOMIC FARMGATE RUBBER PRICES(Baht/kg in 1983 constant terms)

Financial Prices Economic pricesAppraisal estimate Revised Appraisal estimate Revised

estimate estimate1975 1983 1983 1975 1983 1983

1983 9.0 18.4 14.9 11.5 23.5 18.11985 9.0 18.4 19.1 11.5 23.5 24.41990 9.0 18.4 22.3 11.5 23.5 29.31995 9.0 18.4 23.0 11.5 23.5 30.3

- 31 -

4.04 Technological Practices. During the project period, ORRAF effec-tively organized the supply of high yielding planting material to abouc175,UUU new replanters and about 5u,000 ongoing replanters scattered over 17provinces. OREAF expanded and decentralized the production and distributionof budded stumps and polybag budding to the provincial level. The projectcalled for the expansion in area of budwood nurseries and budded stumps/polybag budding nurseries from 117 ha to 166 ha and from 250 ha to 415 ha,respectively. During the project period the nursery areas established wereabout 36X over target for budwoods and about 6% under target for buddedstumps/polybag buddings. The OKKAF nurseries produced about 60 million buddedstumps/polybag buddings and 52 million green budsticks. The supply of buddedstumps increased significantly from 15 million in 1977 to 40 million by 1982.This remarkable achievement was made possible by the extensive buddingtraining program carried out by ORRAF. The number of smallholders trained inbudding increased from about 6UO in 1974 to about 2,500 p.a. from 1977onwards. Smallholders have adapted well to clonal plantings and theirplanting and maintenance standards are good. The RRC is making clonal recom-mendations based on the performance of clones in neighboring countries, astheir own clonal observation plots are still too young to provide recommen-dations based on Thai conditions. Tapping quality is generally satisfactory,but the system preferred by most farmers is daily tapping of a 1/3 spiral cutresulting in excessive bark consumption and reducing the economic life of thetree.

4.U5 During the project period, the following technological changeswere introduced:

(a) the plant density per ha was raised from 420 to 500 trees,resulting in an increase in the cost of plant material, initialapplications of rock phosphate in the planting hole, andfertilizer applications in the fourth to sixth years;

(b) seed at stake planting followed by budding in the field wascarried out by about 50% of the smallholders compared to 20% atthe start of the project; and

(c) magnesium was deleted from two of the four compound fertilizersOKRAF uses, based on the fertilizer experiments conducted bythe RRC.

During the appraisals of this project and the Second Tree Crops Project, theBank stressed the desirability of planting 600-650 trees per ha, especiallyon the smaller holdings. This was considered necessary to provide small-holders with sufficient trees per ha to: (i) ensure a quick closing of theleaf canopy to minimize weeding operations; and (ii) try to change theprevailing daily tapping system to alternate daily tapping. So far theseattempts have not been successful. The RRC has agreed that it will reviewthe existing world literature on higher density planting and will advise ORRAFaccordingly.

- 32 -

4.06 The project proposed an increase in the use of yield stimulant forhigh level tapping on old rubber trees during the final 3 years prior toreplanting. The promotion of this innovation did not progress as antici-pated because of the lack of ORRAF's involvement. ORRAF's activities arerestricted to advising replanters only during the immature period of rubberproduction. Some demonstration holdings for high-level tapping andstimulation were set up jointly by RRC and ORRAF during the early years ofthe project, but had to be discontinued as this was considered beyondORRAF's mandate. The European Economic Community (EEC) is expected to funda project aimed at intensifying high-level tapping and stimulation on oldrubber trees.

4.07 Environmental Impact. The project mainly replaced existing oldlow yielding rubber with new higher yielding clonal rubber, and on steepslopes terracing was used to reduce runoff and erosion. Intercropping wasconfined to the flat and slightly undulating land to minimize risk of soilerosion. The small amounts of agrochemicals used had no adverseenvironmental effects.

V. INSTITUTIONAL PERFORMANCE

5.01 ORRAF's Organization and Management. ORRAF's present managementand the general level of staff efficiency is highly satisfactory. Thepresent management team was in place by 1979, and since then project imple-mentation has been extremely smooth. The staff of ORRAF expanded from about754 in 1976 to about 1,934 at present, with about 77% located in ORRAF'sprovincial offices. In line with the expansion of ORRAF's activities duringthe project period, changes in the organizational structure and procedureswere carried out as proposed during appraisal and by the project financedmanagement consultants. Decentralization of functions to the provincialoffices took place and clearer lines of responsibility for provincial mattersthrough the Deputy Director of Operations were established. Detailed changeswere also introduced in ORRAF's internal procedures.

5.02 Implementation of Consultant's Recommendations. A post review ofthe implementation of the management consultants' recommendations wasundertaken in September 1979. The results of the review indicate that therehas been substantive compliance with or move to implement the recommendationsfor reorganization and administrative improvements, and personnel and staff-ing requirements, except the development of management information systemsand computerization. ORRAF's constraint in developing its managementinformation system has been the lack of adequate computer facilities and thedifficulties of access to the National Statistical Office's computer. TheMinistry of Agriculture and Cooperatives will soon have a computer centerand ORRAF will be required to use their services. This is expected to be asubstantial improvement from the past arrangement.

- 33 -

5.03 Monitoring and Evaluation. The Planning and Monitoring Unit (PMU)was established in May 1977, with the task of monitoring project implementa-tion, including the evaluation of the socio-economic impact of thereplanting program, smallholder incentives and participation under theprogram, and consequent policy formulation. The Bank placed high priorityon the establishment of the PMU and one of the main tasks of a "projectimplementation assistance mission," which visited the field prior to loansigning, was to initiate action on a socio-economic survey to be conductedby the PMU. The performance of the PMU has been gradually improving. Todate, the two main activities of the PMU have been the preparation of thequarterly and yearly progress reports, and the socio-economi.c survey, inconjunction with the Office of Agricultural Economics.

(a) Reporting. ORRAF has been regular in sending the quarterly andyearly progress reports to the Bank. The reports, prepared bythe Loan Project Unit, give details on the replanting progress,training undertaken, GMOs formed, supply of planting ma.erials,and the financial situation, but very little analysis is carriedout on observed trends. In the future it is expected that moreanalysis will be presented.

(b) Socio-economic Survey. The first survey conducted in. 1979 col-lected a vast amount of potentially useful information on ORRAFreplanters, but the data was collected without a clear idea of itsuse, and the analysis carried out was difficult to understand andnot always meaningful. With the assistance of the Bank and theUNDP/FAO team, it is expected that the updated survey to becarried out this year, will be a substantial improvement on thefirst version. An economic and policy working group has beenestablished within the PMU with the specific task of regularlyupdating the survey.

5.04 Training Program and Research. ORRAF's training programs wereexpanded in line with the requirements for its accelerated replantingprogram during the project period. The UNDP/FAO technical assistance underthe project financed a considerable amount of training activities. Trainingcourses were provided for ORRAF staff as well as rubber smallholders inareas such as field maintenance, tapping, latex processing and improvedmethods of rubber replanting. ORRAF staff were also trained in management,planning, auditing and communications. During the period 1977-81 about1,800 ORRAF staff and 70,500 rubber smallholders benefitted from the varioustraining courses offered. During the past year training activities in ORRAFwere curtailed due to budgetary constraints. Over the project period therehas been a slow deterioration in the research activities of the RRC. Thereis an urgent need for RRC to attract more qualified people and to strengthenits research and training. Additional funding might be required by RRC,since its source of funding was also seriously affected by the fall in cessrevenues last year.

- 34 -

VI. ECONOMIC AND FINANCIAL EVALUATION

6.01 Benefits and Beneficiaries. At aDpraisal, it was estimated thatabout 80,000 rubber replanters, commencing replanting during the period1976-80, would benefit from the project. The number of holdings on whichreplantings were initiated during the actual project period 1977-82 were asfollows:

Table 4: NUMBER OF IIOLDINGS STARTING REPLANTING DURING PROJECT

Year No. of replanting plots started

1977 19,4521978 29,5921979 36,4911980 34,9121981 38,1611982 46,200

Total 204,808

The number of actual replanters would be smaller than the total numberof plots, since some replanters have more than one plot. Up-to-date dataon the number of actual replanters is not available for this period.However, for the period 1976-80, data collected by ORRAF indicate that on125,000 new plots there were about 114,000 replanters (91%). Extrapolatingfrom this data, about 85% of the plots initiated during the project period1977-82 would be replanted by about 175,000 replanters. In addition, about50,000 replanters who started replanting prior to project effectivenesswould continue to receive ORRAF grants during the project period. ORRAFsupported activities under the period would therefore benefit about 225,000replanters or about 1.35 million people (assuming six members per replantinghousehold). The number of beneficiaries is substantially greater than theestimates at appraisal because: (a) the actual project period covered sixyears rather than the appraisal estimate of four; and (b) the averagereplanting plot was about 1.2 ha and not 2 ha as estimated at appraisal.The appraisal of the Second Tree Crops Project discussed in some detail theincome profile of an ORRAF replanter. In summary, the median ORRAFreplanter uses some hired labor (typically a sharetapper), has 5 ha of landand net income equivalent to about $350 per capita in 1983 dollar terms.

- 35- -

About 50% of the income is derived from off-farm activities, about 35% fromrubber production, and 15% from other crops./l

b.UZ Farm Level Financial Impact. Thie financial rate of return (FRR)to the smallholder participating in the ORRAF replanting program remainsattractive at 32%. The Fkx has been calculated on the basis that, with-out the project, there would be no viable alternative crops, but senilerubber would continue to be tapped until it was unprofitable. At appraisalthe FKR was estimated to be about 41%, without taking into account netincome foregone. On this basis the revised FRR would be 42%. The revisedestimates of the cost of replanting are fairly close to appraisal estimates,although the contribution from the replanters' own resources has been greaterthan originally estimated. During the project period, the ORRAF grant moreor less kept pace with inflation; it was revised twice. Annex 3, Table 1compares the key assumptions made at appraisal with the revised assumptionsfor the financial and economic evaluation. Annex 3, Table 2 shows theprojections for the rubber price, export tax and cess rate, and Annex 3,'Table 3 shows the financial rate of return.

b.U3 Economic Rate of Return (ERR). The ERR of the project isestimated to be about Z1X compared to 20% estimated at appraisal. Therate of return is slightly above that estimated at appraisal because higherrubber price estimates and lower input use in the mature stage more thanoffset lower projected long-run yields. The ERR has been calculated on thebasis of the costs and benefits of a unit of replanted rubber. ORRAF'sadministrative costs, estimated to be about 20% of the grants, have beenadded to the cost of the grants. All costs and benefits have been convertedto border prices. The ERR is based on a "without project" scenario of oldrubber being tapped for three years and tnen being abandoned. The likelyalternative to replanting rubber in most of southern Thailand is to abandonthe area once tapping becomes unprofitable. however, an alternative"without project" scenario, assuming that old rubber is felled after threeyears and replaced with annual crops yielding 400 baht/rai ($110/ha) net isalso considered. The effect of such an alternative is minor, reducing theERR by about half a percentage point. The follow-on to this project, i.e.the Second Tree Crops Project has estimated an ERR of about 15%. The mainreasons for the higher revised estimate for the first project are: (a)recent yield survey results have allowed higher yields to be projected,particularly in the first five tapping years (para. 4.01); and (b) reallabor costs have been assumed to remain constant, whereas they were assumedto increase by 3. p.a. at the Second Tree Crops Project appraisal. Annex 3,Table 4 shows the economic rate of return on a unit of replanted rubber, andAnnex 3, Table 5 shows the sensitivity analysis on the ERR.

/1 For a more detailed analysis of the OkRAF replanters' income refer tothe Appraisal Report of the Second Tree Crops Project, Report No.34U4b-Tk1, November 1981.

- 36 -

VII. CHANGES IN REPEATER PROJECT AND SPECIAL ISSUES

Changes in Repeater Projects

7.01 The Second Tree Crops Project (Loan 2078-TH) was appraised inAugust 1980 and approved by the Board in January 1982. The projectcontinues Bank support of ORRAF's program, although with some additionalfeatures to promote the development of tree crops nationwide. These include,inter alia: (a) training of ORRAF and the Office of Agricultural Economics'staff in the development of tree crops other than rubber, particularly thecultivation of coconut and its intercrops; and (b) a study of the financial,technical and institutional implications of tree crop development, focusingon the development of new rubber in Thailand's poorest regions, the Northand the Northeast, and of hybrid coconut and its intercrops in the South.The improved organizational features of ORRAF that xere introduced under thefirst project are sought to be sustained and strengthened under the secondproject.

Special Issues

7.02 Funding of ORRAF. During the project period ORRAF's financialposition was satisfactory, but by FY82 ORRAF had substantially drawn downits excess reserves and is now faced with serious financial deficits, duelargely to reduced cess revenues resulting from the unexpected fall in worldrubber prices. In the short-term, world rubber prices are expected to belower than anticipated at appraisal of the Second Tree Crops Project. Duringthe past year the Government did not accommodate ORRAF's additional fundingneeds due to budgetary constraints, and the Bank and CDC had to increasedisbursement percentages under the second loan to assist ORRAF. In order tomaintain a program of 50,000 ha p.a., ORRAF will continue to need additionalresources over the remaining years of the Second Tree Crops Project. Theseresource needs will have to be financed either by raising the cess, bysupplementary Government financing, or additional external financing. Thepresent cess rate is considered appropriate to support ORRAF's program overthe long-term when the backlog of old rubber trees has been replanted andproduction has reached higher levels. By about 1995 it is expected that thecess income derived from the current rate would enable ORRAF to be self-sufficient (see Annex 4). However, the high volatility of this income, dueto its dependence on the level of world rubber prices, would result inconstant fluctuations in ORRAF's funding. In order to stabilize ORRAF'sincome to cover its fairly constant costs, a flat rate for the cess, whichis close to the long-term projected rate for 1995, should be considered. Inthe short-term, it is imperative that the replanting program not bejeopardized due to lack of funds, since it would have serious repercussionswithin the next decade on Thailand's foreign exchange earnings and thewelfare of rubber smallholders. The Government should seriously re-examinethe cess levels for the short-term with a view to changing the formula, byeither temporarily increasing the cess rate or by introducing a flat ratethat would be appropriate in the long-term, with corresponding reductions inthe export tax. Alternatively, additional budgetary funds would have to be

- 37 -

allocated to ORRAF or external financing would have to be sought. Thepresent clause in the ORRAF Act governing the allocation of cess revenuesshould also be re-examined. At present only 5% of the cess revenues can beused to cover administrative costs. This 5% allocation should be raised toa more appropriate level of about 15-20%.

7.03 Restriction of ORRAF's Activities to the Replanting Period. Atpresent, ORRAF's assistance to rubber smallholders is restricted to thefirst six years of replanting. The Second Tree Crops Project appraisalmission proposed extending ORRAF's involvement, in the form of grants andtechnical advice, from 6 to 8 years to cover the last year of immaturity andthe first year of tapping. This was expected to discourage prematureopening of the rubber trees, accustom smallholders to the use of fertilizerduring maturity, and train smallholders in the correct methods of tapping.The proposal to extend the grant period was rejected by the Government atnegotiations due to the substantial fiscal implications such a decisionwould entail. The responsibility for technical advice now rests with theDepartment of Agricultural Extension (DAE) after the sixth year ofreplanting. The DAE is unable to provide the highly specialized technicaladvice or the extensive and intensive coverage required during the last yearof immaturity and the first year of tapping. Government's hesitation toincrease the grant payments to cover the extra two years may beunderstandable given present budgetary constraints, but ORRAF should beauthorized to continue providing technical advice to smallholders for atleast an additional two years. After the eighth year, the DAE and ORRAFshould work together for a few years before the entire responsibility ispassed over to DAE. It is crucial that farmers are: (a) properly trainedin tapping techniques, involving length and angle of the cut, height ofopening, depth and intensity of tapping, and bark consumption; and (b)advised of appropriate fertilizer usage and correct processing methods. TheDAE staff are not adequately experienced in these fields, while the ORRAFstaff are already in place, are highly qualified and have well establishedworking relationships with the smallholders. The additional cost to ORRAFof providing advice for a few more years would be marginal.

7.04 Shortened Life Cycle of Trees. There is increasing evidence thatthe smallholders are tapping more intensively than originally expected andare therefore shortening the economic life of the rubber trees. Theincidence of "second-round replanting" appears to be relatively small atpresent (an investigation of five provinces indicated that less than1% of the ORRAF grants were for replants on land which had previously beenreplanted with clonal material), but the problem could become worse in thefuture. The impact of a shorter tree life on the economic rate of returnwould be marginal although, depending on the discount rate, it would have aproportionally greater effect on the net present value (NPV). Reducing thetapping period from 20 to 15 years for example, would only reduce the ERRslightly from 21.1% to 20.6%, but it reduces the NPV at a 12% discount ratefrom $2,705 per ha to $2,405 per ha, a reduction of 11%. The impact on thelevel of replanting and production in the long run would be more severe,implying that a higher replanting rate than 50,000 ha p.a. would be required

- 38 -

from the late 1990s, and typically a lower proportion of trees would be inproduction at any one time. ORRAF could avert this problem to a certainextent by imposing and widely publicizing restrictions on its replantingregulations, which would prohibit subsequent replanting grants for anyrubber plot which had not already gone through say a 20-year tapping cycle.Exceptions to this restriction should include early replanting due toemergency situations caused by natural disasters such as wind damage, fireand floods. Discussions are now under way between the Bank and ORRAFregarding this issue, and the incidence of "second-round replanting" isbeing carefully monitored by ORRAF.

VIII. BANK AND OTHER CO-LENDERS PERFORMANCE

8.01 The Bank's major contribution to the project was in providingfinancing for ORRAF's accelerated rubber replanting program and inaddressing ORRAF's organizational constraints. Few technical improvementsor innovations can be attributed to Bank involvement either at the appraisalor implementation stage. The transfer of rubber technology from Malaysialargely took place prior to the Bank's involvement in the rubber sector inThailand with the assistance of the UNDP technical assistance program. Theproject was' technically well prepared by ORRAF and RRC, but the Bank and CDCintroduced important organizational changes at appraisal. During the earlyyears of project implementation, supervision was carried out regularly bythe Bank's Regional Mission for Thailand and Indochina (RMTI). Since thisproject was the Bank's first involvement with ORRAF, intensive supervisionwas required during the early years. The Bank was able to assist moreeffectively in project start-up and to influence the appointments of the keycompetent staff that exist in ORRAF today because the staff supervising theproject were located in Bangkok. CDC and the Bank staff of RMT1 jointlysupervised the project until about mid-1980 and then the responsibility forproject supervision was transferred to headquarters. By this time there wasless need for constant supervision as the key staff of ORRAF were in placeand project implementation was proceeding satisfactorily. The Bank carriedout 12 supervisions during some six years of implementation period. Theworking relationship between Bank staff and ORRAF was good throughout.

8.02 UNDP/FAO technical assistance was provided to the project in twophases, 1976-79 and 1980-82. This financed expatriate staff assistance,fellowships, training, overseas study tours, and equipment. The first phaseof assistance was to both ORRAF and the RRC and the team of FAO experts waslocated at the RRC. The second phase concentrated mainly on strengtheningORRAF and RRC management, improving training capabilities, and increasingthe production of planting materials. The UNDP/FAO assistance was consideredby ORRAF and RRC as extremely valuable, and resulted in the general improve-ment of training and rubber nursery operations.

- 39 -

IX. CONCLUSIONS

11.(l The rubber replanting program in Thailand appears to be moresucce,ssful than similar programs for tree crops in other countries. As muchas half of the world's area devoted to smallholder rubber production appearsto be in need of replanting or rehabilitation. Among major rubberprolucers, only in Thailand is the rate of replanting close to the rateappropriate to maintain the planted areas. It is estimated that actualrubber replantings in organized programs in Malaysia, Indonesia and Thailandtotal no more than about 85,000 ha p.a., with Thailand accounting for about50,000 ha p.a. The attractiveness of Thailand's replanting program is thatit addresses the Government's twin objectives of growth and incomedistribution and includes the following features:

(a) wide distribution of benefits;

(b) low investment costs per person directly benefited;

(c) a sound economic rate of return;

(d) full cost recovery and increased public revenues and foreignexchange earnings; and

(e) an effective public sector institution implementing the project.

Q.02 The replanting program in Thailand could well be emulatedelsewhere in terms of approach, organizational structure and governmentsupport. The main lessons to be learned for other similar projectsworldwide are that it is important to have:

(a) adequate financial incentives to replant and to adopt improvedtechnologies;

(b) an effective organization responsible for disseminating technicalknowledge (during the immature and mature periods) and providingimproved planting materials and other inputs;

(c) good arrangements for the collection and marketing of rubber;

(d) adequate measures to meet farmers' subsistence needs during thephase when the rubber plants are immature; and

(d) a single organization largely responsible for implementing thenational program.

A fundamental difficulty that has been experienced in some Bank-supportedrubber projects is the reluctance of smallholders to use the full range ofinputs available, especially during the period when the rubber is

- 40 -

immature./l In Thailand, the use of the full range of inputs is more orless ensured during the immature period by ORRAF's grant system, which hasadequate safeguards against abuse. The grant payments (cash and materialinputs) are released by ORRAF's provincial offices to replanters in seveninstallments over a period of about six years, with each installmentconditional upon satisfactory completion of specified tasks certified by anORRAF inspector.

9.03 The success of the replanting program in Thailand is largelyattributable to the effectiveness of the implementing agency, ORRAF, and thegrant system of financial support. A grant system with indirect cost recov-ery through the rubber cess and export tax could conceivably create somedistortions, such as the adoption of low-input technology and high tappingintensity resulting in shorter replanting cycles, and the disincentives todevelop other treecrops and new rubber which are financed under creditschemes. In Thailand, these distortions are relatively minor. There islittle evidence of low-input technology during the immature period of rubber,but there are indications of high-intensity tapping (para. 7.04). The dis-incentives to grow other tree crops are minor, because they are only sub-stitutable for rubber over a relatively narrow range of climate, soils, andproduction/processing systems, and in Southern Thailand the economicallyviable alternatives to rubber production under similar agroclimaticconditions are minimal.

9.04 Alternative financing systems, such as credit with direct costrecovery where farmers incur repayment obligations but do not have to paya cess or export tax, are sometimes suggested. In Thailand, however, it isunlikely that such a scheme would be equally effective for smallholderrubber production because of the risks involved. On the supply side, thefinancial institutions would be reluctant to lend small amounts of creditannually, with lengthy grace periods, to large numbers of smallholdersscattered ovei a wide area. Repayments could only begin after the treesbegin to produce in the eighth year and the collection of repayments wouldbe difficult because of the smallholders' isolated locations and theopportunity to sell the rubber through numerous local traders. The highoverhead costs per participant in supervising and collecting the credit andthe risks of non-repayment would dissuade the financial institutions fromlending in the volume required. Access to credit would almost certainly berestricted to relatively wealthy clients and as a result might well changethe structure of the rubber industry from predominantly smallholderoperations to large estate type undertakings. On the demand side, manysmallholders, particularly the poorer ones, would be unwilling or ineligibleto borrow, as evidenced by the present low demand for credit for coconut andnew rubber development in Thailand.

/1 World Bank Sector Policy Paper, "Natural Rubber," 1982.

ANNEX 1- 41-

THAILAND

RUBBER REPLANTING PROJECT (LOAN 1243-TH)


Schedule of Disbursements

Accumulated disbursementsIBRD in US$ million Actual disbursements

fiscal year Appraisal Actual as a % of appraisal& semester estimate disbursements estimates

19771st (Jul-Dec 1976) 3.82nd (Jan-Jun 1977) 9.1 0.2 2

19781st 14.0 1.6 112nd 20.8 3.2 15

19791st 26.2 7.4 282nd 34.8 9.6 28

19801st 40.5 17.9 442nd 50.0 25.9 52

19811st 32.1 642nd 36.7 73

1n82lst 41.7 832nd 48.1 96

1983ist 49.9 1002nd 50.0

ANNEX 2- 42 - Table 1

THAILAU.7D



Comparison of Yield Projections - Appraisal and Survey Data

Appraisal Revised /aYear of Tapping estimate estimatereplant year (kg/ha) (kg/ha)

8 1 500 1,0409 2 810 1,40010 3 1,060 1,53011 4 1,310 1,66012 5 1,500 1,67013 6 1,600 1,67014 7 1,700 1,670

15-16 8-9 1,67017 10 1,58018 11 1,47019 12 1,38020 13 1,28021 14 1,19022 15 1,800 1,11023 16 1,03024 17 96025 18 1,45026 19 1,12027 20 82028-30 21-23 1,65031-36 24-29 1,000

Note: Year one is the year of planting.

/a Tapping year 1-10 based on yield from a survey of 399 ORRAFreplants (1961-1973) undertaken by Rubber Research Institute ofThailand. Survey results have been adjusted downwards by 7% toconvert from weight of sheet sold to dry rubber content (DRC).In that the clonal material used by project replants from 1977to 1982 is likely on average to have higher yield potentialthan that used from 1961 to 1973, these estimates may be on theconservative side. The yields for tapping years 11-20 aremission estimates based on normal decline rates from the peakestablished in tapping years 5-9.

ANssY ?

Table 2- 43 -Tae

THAILAND



Alternative Projections of Rubber Yields

S/2.d/2 S/2.d/2 S/3.d/l S/2.d/1Year of Full inputs 6 years inputs 6 years inputs 6 years inputs

Planting Tapping 10% smallholders 25% smallholders 40% smallholders 25% smallholders-------------------------------- Rg/ha -------------------------------

8 1 490 450 520 5609 2 820 630 765 850

10 3 1,040 820 900 1,10511 4 1,165 925 1,025 1,27012 5 1,250 1,025 1,145 1,40013 6 1,330 1,115 1,210 1,45014 7 1,400 1,180 1,225 1,29515 8 1,470 1,235 1,150 1,15016 9 1,540 1,290 1,070 1,01017 10 1,520 1,210 1,000 88018 11 1,470 1,130 930 75519 12 1,425 1,050 870 61020 13 1,375 980 810 1,10021 14 1,330 905 760 83022 15 1,290 840 710 57523 16 1,245 770 1,350 -24 17 1,200 705 1,02025 18 1,150 645 72026 19 1,090 605 - -27 20 1,025 565 - -28 21 960 530 - -29 22 900 495 - -30 23 840 445 - -31 24 1,150 1,04032 25 1,050 88533 26 930 740 _

Total 30,455 22,210 17,180 14,840Average 1,170 855 955 990

Notes: S/2.d/2 - alternate daily tapping with half spiral cutsS/2.d/1 - daily tapping with half spiral cutsS/2.d/1 - daily tapping with one-third spiral cuts

ANNEX 3Table 1

- 44 -

THAILAND



Assumptions for Financial and Economic Analysis

Appraisal Actual orestimate revised estimate

Rates of Return (ROR)Financial ROR /a 41% 42%Economic ROR 20% 21%

Annual Cash Flow at Peak Yields (baht/rai) 4,970 4,600

Project Costs /b /GrantRubber replanting costs (baht/rai) /c 6,349 6,274Labor cost (baht/day) 41 56ORRAF grant (baht/rai) 5,308 4,495

Agricultural PracticesTapping system S/2.d/2 Mainly S/2.d/l

and S/3.d/lLife of trees (years in tapping) 29 20Fertilizer use (mature period) (kg/rai) 56 (total area) 64 (25% of area)

Prices at Full Development /bRubber (baht/kg) 18.4 19.1-23.0Fertilizer (baht/kg) 6.2 6.3

/a Financial return to the smallholder, without taking into account netincome foregone.

/b Costs and prices are expressed in 1983 constant baht.

/c 1 ha = 6.25 rai.

45 -ANNEX 3Table 2

THAILAND



Rubber Prices, Export Tax and Cess Rate Projections

1983 1984 1985 1990 1995

US$/KgWB /a - NY price RSS I (1981 constant 1.05 1.19 1.34 1.56 1.61

US$)WB-NY prices RSS I converted to 1983

constant US$ /b 1.12 1.27 1.43 1.67 1.72RSS 3 /c price 1.08 1.23 1.38 1.61 1.66Ocean freight difference /d 0.16 0.16 0.16 0.16 0.16Estimated price RSS 3 f.o.b. Thailand

(1983 constant US$) 0.92 1.07 1.22 1.45 1.50

1983 Constant Baht/KgConvert RSS 3 f.o.b. Thailand price to

1981 constant Baht (23:1) 21.2 24.6 28.1 33.4 34.5Likely gazetted price /e 16.3 18.6 20.9 24.5 25.2Cess rate /f 1.13 1.36 1.59 1.95 2.02Export tax rate La 2.20 3.12 4.04 5.48 5.76

/a World Bank Commodities Division forecast price for RSS I spot New York.7Th Commodities division price forecasts in 1981 constant $ times infla-

tion factor of 1.07./c Estimated at a discount of 3-1/2% below RSS I price.7- Difference between Spot/New York and f.o.b. Thailand, includes freight,

insurance, unloading and transport to New York warehouse - based on1981 estimate.

/e Based on official formula of: GP (Baht/kg)=0.667 x Thai f.o.b. price+ 3.21, with a downward adjustment of Baht 1 per kg in line with pastexperience.

/f Based on the formula: Cess (in Baht) - 0.5 + 0.1 (GP - 10).Eh Based on the formula: Export tax (B/kg) = 0.4 (GP - 10.80).

THAILAND

RUDDER REPLANTING PROJECT

PROJECT COHPLETION REPORT

FINANCIML COSTS AND BENEFITS AYERAGE RUkBIER PLANTE '79

BAHT PER RAI

1 2 3 4 5 6 7 8 9 10 11 12 13-16 17

RUDBER AVERAGE - - - - - - - 3278 4570 5165 5790 5959 6146 5814ORRAF GRANT 1834 634 507 482 519 519 - - - - - - - -

TOTAL BENEFITS 1834 634 507 482 519 519 - 3278 4570 5165 5790 5959 6146 5814________________-- ---- --------- - - ----- -------.

FERTILIZER 271 314 330 265 351 372 100 103 103 103 103 103 103 . 103ROCK PHOSPHATE 153 44 41 38 - - - - - - - - - -PLANTING MATERIAL 238 - - - - - - - - - - - - -STUMP KILLER 134 - - - - - - - - - - - - -COVER CROP SEED. 22 - - - - - - - - - - - - -CHEMICALS - 50 50 50 50 50 50 25 25 25 25 25 25 25TAPPING EOUIPMENT - - - - - - - 850 120 120 120 120 120 120STIMULANT - - - - - - - - - - - - - -

LABOR 1595 436 204 258 179 143 125 869 1317 1317 1317 1317 1317 1317

COSTS AVERAGE 2414 844 625 611 581 565 275 1847 1565 1565 1565 1565 1565 1565

NET BENEFIT AVERAGE -580 -210 -118 -129 -62 -46 -275 1431 3005 3600 4225 4394 4581 4249

NET BENEFIT MOP 705 386 - - - - - - - - - - - -

INCREHENTAL BENEFIT -1285 -596 -118 -129 -62 -46 -275 1431 3005 3600 4225 4394 4581 4249=======_===== C=== ===========_====== _=_============_======== ====== Q=== __==_ _====

18 19 20 21 22 23 24 25 26 27 28-34

RUBBER AVERAGE 5410 5078 4710 4379 4085 3790 3533 5336 4122 3018 -ORRAF GRANT - - - - - - - - - - _

TOTAL BENEFITS 5410 5070 4710 4379 4085 3790 3533 5336 4122 3018 -

FERTILIZER 103 103 103 103 103 103 103 - - - -ROCK PHOSPHATE - - - - - - - - - - -PLANTING MATERIAL - - - - - -STUMP KILLERCOVER CROP SED - - - - - - - - - - -CHEMICALS 25 25 .12 12 12 12 12 12 - - -TAPPING EQUIPMENT 600 120 120 120 120 120 120 120 120 120 -STIMULANT - - - - - - - 128 128 128 -LABOR 1317 1317 1317 1317 1317 1317 1317 1317 1317 1317 -

COSTS AVERAGE 2045 1565 1552 1552 1552 1552 1552 1577 1565 1565 -

NET BENEFIT AVERA6E 3365 3513 3158 2827 2533 2238 1981 3759 2556 1452 -

NEt BENEFIT LOP - - - - - - - _- - - _--

INCRENENTAL BENEFIT 3365 3513 3158 2827 2533 2238 1981 3759 2556 1452 -

STREANNAME INERNT L RATES OF RETURN FOR NET STREAMS

N.A9ERAGE 42.080N.IOP NO RATE OF R£TURN EXISTSN.lNC 31.735

PRESENT VALIES OF STREAMS

DISeOUNT co -rRATE 3.AVERAGE B.GRANT 8.TOT C.CF C.RP C.BS C.SK C.CS C.CH C.TE m X

12.00 17175.4 3367.5 20543.0 1659.4 225.9 212.9 119.6 19.6 25?.3 762.7 o w u

DISCOUNTRATE C.ST C.LR C.AVERAGE N.AVERARE N.WOP N.INC

12.00 20.3 6581.6 9861.3 10681.7 936.7 9745.e

THAILAND

RUBBER REPLANTING PROJECT

PROJECT COFPLETION REPORT

ECONOMIC COSTS AND BENEFITS AVERAGE RUBBER PLANTED '79

BAHT PER RAI

1 2 3 4 5 6 7 8 9 10 11 12 13 14

RUBBER AVERAGE - - - - - - - 4210 5891 6683 7516 7829 7882 7936

FERTILIZER 271 314 330 265 351 372 100 103 103 103 103 103 103 103ROCK PHOSPHATE 153 44 41 38 - - - - - - - - -PLANTING MATERIAL 215 - - - - - - - - - - - -STUMP KILLER 121 - - - - - - - - - - - - -COVER CROP SEED 20 - - - - - - - - - - - - -CHEMICALS - 45 45 45 45 45 45 23 23 23 23 23 23 23TAFPING EOUIPNENT - - - - - - - 765 108 108 108 108 108 108STIIiULANT - - - - -_ _ _ _ _ _ _ _ _LA4OR 1595 436 204 258 179 143 125 869 1317 1317 1317 1317 1317 1317

COSTS AVERAGE 2375 839 620 606 576 560 270 1760 1551 1551 1551 1551 1551 1551

ORRAF IGINT COST 366 130 94 81 96 96 - - - - - - - -

TOTAL COSTS 2741 969 714 687 672 656 270 1760 1551 1551 1551 1551 1551 1551

NET.BENEFIT AVERAGE -2741 -969 -714 -687 -672 -656 -270 2450 4340 5132 5965 6278 6331 6385

NET BENEFIT UOP 1281 968 147 - - - - - - - - - - -

INCREMENTAL BENEFIT -4022 -1937 -862 -687 -672 -656 -270 2450 4340 5132 5965 6278 6331 6385

==I=

0

- - - - -- - - - - - -- -----̂ -----------------o ------------ -- - - - - --- --- --- - -- --

15 16 17 18 19 20 21 22 23 24 25 26 27 28-34_ _ _ _ _ _ _ _ ~~ ~ ~ ~~~~ - --__ _ _ _ _ _ _ _ _ _ __ _ __ _ ---- --- -_ _ _ -- -- __ -- - - - - -__-- - - - - - - - -

RUBBER AVERAGE 7989 8043 7660 7127 6690 6205 5769 5381 4993 4654 7030 5430 3975 -

FERTILIZER 103 103 103 103 103 103 103 103 103 103 - - - -ROCK PHOSPHATE - - - - - - - - - - - - - -PLANTING KATERIAL - - - - - _ _ _ _ _STUMP KILLER - - - - - - - - -

COVER CROP SEED - - - - - - - - - - - - - -CHEMICALS 23 23 23 23 23 11 11 11 11 11 11 - - -TAPPING EQUIPMENT 108 108 108 540 108 108 108 108 108 108 108 108 108 -STIMULANT - - - - - - - - - - 115 115 115 -LABOR 1317 1317 1317 1317 1317 1317 1317 1317 1317 1317 1317 1317 1317 -

COSTS AVERAGE 1551 1551 1551 1983 1551 1539 1539 1539 1539 1539 1551 1540 1540 -

ORRAF MGMNT COST - - - - - - - - - - - - - -

TOTAL COSTS 1551 1551 1551 1983 1551 1539 1539 1539 1539 1539 1551 1540 1540 -

NET BENEFIT AVERAGE 6438 6492 6109 5144 5139 4666 4230 3842 3454 3115 5478 3890 2435 -

NET BENEFIT MOP - - - - - - - - - - - - - --_ - -- - __ -- - ------ --- __ -_ _-- ------- -- ---- ------- ------- -- --- ------- ------- ------- v

INCREMENTAL BENEFIT 6438 6492 6109 5144 5139 4666 4230 3842 3454 3115 5478 3890 2435 -

STREANNAME INTERNAL RATES OF RETURN FOR NET STREAMS

N.AVERASE 25.363N.UOP NO RATE OF RETURN EXISTSN.INC 21.091

PRESENT VALUES OF STREAMS

DISCOUNTRATE D.AVERA6E C.CF C.RP C.BS C.SK C.CS C.CH C.TE C.ST C,LR F

- - - ~~~~~~~~ - --------- - - ---- 0- -

12.00 22349.9 1659.4 225.9 191.5 108.0 17.9 234.9 686.4 18.2 6581.6 r ,0

DISCOUNTRATE C.AVERAGE C.ADMIN C.TOT N.AVERAGE N.WOP N.INC

12,00 9723,8 651.6 10375.4 11974.5 2020.8 9953.7

- 5n -

TNAILAt7D ANNEX 3Table 5

RUBBER REPLANTING PROJECT (LOAN 1243-TR)


Sensitivity Analysis on Econonic Rate of Return

SENSITIVITY ANALYSIS SENSITIVITY TESTS

NPV AS A IPRESENT OF PRESENT INTERNAL

INPUT STREAMlS FOR BASE CASE VALUE hT OCC CWS7 AT DCC RATE OF== ======== ......... .--= TEST CASES TEST CASE VARIATIONS OF 12.02 OF 12.0% RETURN

PERIODS B.AVERAGE C.AVERAGE C.ADMIN CAOP ---- -- -

I 0.0 2375.4 365-8 1281.22 0.0 83S.0 130.2 968.4 BASE CASE 9953.7 80.296U 21.09123 0.0 620.1 94,1 147.44 0.0 605.9 80.9 0.0 TEST CASE I B-AVERAGE LAS I YEAR 7559.0 60.9781 18,54225 0.0 575.6 96.0 0.06 0,0 560.2 96.0 0.0 TEST CASE 2 B.AVERAeE DOlN 251 4366.2 35.222S 16.76027 0.0 270.1 0.0 0.08 4209.9 1760.0 0.0 0.0 TEST CASE 3 C.IIOP UP m 7953.0 55.2411 18.25919 5891.2 1551.0 0.0 0.010 6683.0 1551.0 0.0 0.011 7516.5 1551.0 0.0 0.012 7829.0 1551.0 0.0 0.013 7882.4 1551.0 0.0 0.014 793.8 1551.0 0.0 0.0 SENSITIVITY ANALYSIS FOR PRESENT VALUES15 7989.3 1551.0 0.0 0.0I1 8042.7 1551.0 0.0 0.017 7659.8 1551.0 0.0 0.018 7126.6 1983-0 0.0 0.0 APPRAISAL UALUES19 6690.2 1551,0 0.0 0.0 - ---20 6205.4 IS39.0 0.0 0.021 5769.1 1539.0 0.0 0.0 DISCOUNT22 5361.3 1539-0 0.0 0.0 RATE B.AVERASE C.AVERAGE C.ADMIN C.HOP

243 4 9 8 8:8 :8 10.00 285.9s. 11486.9 679.6 2075.825 7029.6 1551.1 0.0 0.0 12.00 22349.9 9723.6 651.i 2020.826 5425.8 1540.1 0.0 0.0 15.00 15529.2 7833.6 61;36 1943.227 3975.4 1540.1 0.0 0.026-34 0.0 0.0 0.0 0.0 SNITCHING VALUES

DISCOUNTA6GREGATED STREAMS FOR BASE CASE RATE B.AVERAGE C.AVERAGE C.ADMIN C.WIP:=:::::cc='i=s --sc:c - -:3:__ __ __ _____ _ _

10.00 14242.3 26140.5 15333.3 16729.4TOTAL TOTAL MET 12.00 12396.3 19677.5 106iO.3 11974.5INCREMENIAL INCREMENAL INCREMENTAL 15.00 10390.5 12972.4 5752.4 7082.0

PERIODS BENEFITS COSIS BENEFITS

PERCENTAGE CHAi5EI 0.0 4022.4 -4022.4

2 ~~~~~0.0 1937.5 -1937.5861.6 DISCOUNT

43 o°§8 62*76 ~~~~~ ~ ~ ~~~-686l.7 RATE B.AVERAGE C.AVERAGE C.AMIN C.wOPS O.0 671.5 -671.5 -- ---------- _-__6 R: b62 -656.2 10-00 -50-7 127,6 2156.2 705.S7 0: 0 71 -270sl 12-00 -44.5 102,A 1527,5 492.610 611 R9 N 85.oo -33.1 65,6 837.4 2645410 6683.0 1551-0 5132,0

h2 Rid85el29 451:1 }50 6278.0SUIMARY ECONOHIC CHARACTERISTICS13 7882.4 1551.0 6331.414 7935,8 1551.0 6384.815 7989.3 1551.0 6438.3 DISCOUNT PRESENT PRESENT MET fRESENT NPV At I OF INTERNAL RATE16 8042.7 1551 0 6491.7 RATE BENEFITS COSTS UALUES PRESENT COSTS OF RETURN17 7659.9 1551 .0 6108.8 -- -- --- ---- -------18 7126.6 1983.0 5143.619 6690.2 1551.0 5139.2 10.0 28895-9 14242.3 14653.7 *10^.92 21.091220 6205.4 1539.0 4666.4 12.0 22349.9 12396.3 995S.7 80.37 21.091121 5769.1 1539.0 4230.1 15.0 15529.2 10390.5 5138.8 49.52 21.091222 5381.3 1539.0 3842.3 P 1023 4993.4 1539.0 3454.424 4654.1 1539.0 3115.125 7029.6 151.1 5478.526 5429.8 1540-1 3889.627 3575-4 540.1 2435.2U-34 0, 0.h 0.0

ANNtX 4- 51 -

THAILAND



Cost Recoversy

1983 1985 1990 1995 2000

Rubber exports ('000 tons) /a 552 602 741 922 1,083Cess rate (B/kg) /b 1.13 1.59 1.95 2.02 2.02Export tax rate (7Bkg) /b 2.20 4.04 5.48 5.76 5.76

RevenuesCess revenues /b ($ million) 624 957 1,445 1,862 2,188Export tax revenues /b ( ) 1,214 2,432 4,061 5,311 6,238

Total Revenues 1,838 3,389 5,506 7,173 8,426

CostsGrant costs 1,418 1,483 1,500 1,500 1,500ORRAF admin. costs 284 297 300 300 300

Total Costs 1,702 1,780 1,800 1,800 1,800

Total revenues/Total costs(%) 108 191 305 399 468Cess revenues/Total costs(%) 37 54 80 103 122Tax revenues/Total costs(%) 71 137 225 296 346

/a World Bank Commodities Division projections for Thailand's rubber exportsare slightly higher than shown here.

/b Expressed in 1983 constant baht.

I RE° 1ioD L., ? 2 40 _ C> 'C CHINA

/- ~~~~~~~~~~~~BURMA ~'~4L

-210 r"'20- TOO

~~~~~ J ~~~~~~~~~~~THAILAND- '~~~~~~~~~~ ~~~~~~' ) S~~~~~~~~~~DE.OCRATC ?

, doma< R KAMPUCHEG A

LAO PEOPLE'S DEM. REP

00*7818 La,dS.R,00.0tO 7.770hi- S

;t~~k/ PE06

l8~~~~~ (I / ~ ~ ~ ~ ~ ~ ~ ~ ~ NODNESIA ,* ~~~~~~~~~~~~~~~SINIGAPORE

~~, IMOR KampER sNnh

r t y tfi; ~r ph- J

-\IR\. j\ RR70TESR> ' -o ho ETwPO N XS tS

_140 t ,7 '\-~ -\ X _,y 1 44

Sri R.h. * )-'~\, l, , . _ ( % tPhwaburV 0 1

Andes-non d0

% t \ z \ DEMOCRATIC KAMPUCHEA

J" < t - ! < (\~~~~~~~.: I

'~~~~~~~~~~ 'I I. f o

C l .,. . -

A~~~~~~~~~~~~~~~~~~

10. 1 /. l

. f lt _ I ~~~~~~~~~THAILAND >

I -- s: -' $ RUBBER GROWING AREAS

80 \ : C- * ORRAF PROVINCIALOFFICES

*oLT * 4 t /; ORRAF HEADDUARTERS SO

4 1, --- 4 1 , . * EXISTING RUBBER OBSERVATION PLANTING

I ' 1 .^@ >,jl ,aV.' .* PROPOSED RUBBER OBSERVATION PLANTING

. NURSERY PLUS TEST PLANTING

- ~~~~~~~~~~~~~~~~~~ROADSRAILWAYS

* AIRPORTS

PORTS

CHANGWATBOUN.ARIES

Msl, ; ~' \; ) 5: i g--= REGIONAL BOUNDARIESISILOMEIf. " INTERNATIONALBOUN~OARE

P_ _ _ -; I' '0- :, /X30~~~~~~~~~~ so-- tIoo% M A'1L A Y S I A -_

1_. A2 1 106 O

Documents

World Bank Documentdocuments.worldbank.org/curated/en/759481468914353853/pdf/4786... · document of the world bank fite copy for official use only i report no. 4786 the world bank