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Document of

The World Bank

FOR OFFICIAL USE ONLY

4 -t t - . -- , Report No. 3404b-TH

STAFF APPRAISAL REPORT

THAILAND

SECOND TREE CROPS PROJECT

November 30, 1981

Projects DepartmentEast Asia and Pacific Regional Office

r 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.

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CURRENCY EQUIVALENTS

$1 = B (Baht) 23

B 1 = $0.04B 1 million = $43,478

METRIC EQUIVALENTS

1 hectare (ha) = 2.47 acres1 meter (m) 3.28 feet

1 kilometer (km) = 0.62 mile1 kilogram (kg) = 2.2 pounds

ABBREVIATIONS

BAAC - Bank for Agriculture and Agricultural CooperativesCDC - Commonwealth Development Corporation, UKDAE - Department of Agricultural ExtensionDOA - Department of AgricultureERR - Economic Rate of Return

FAO/UNDP - Food and Agriculture Organization/ United Nations DevelopmentProgramme

GMO - Group Marketing OrganizationLDD - Land Development DepartmentMOAC - Ministry of Agriculture and CooperativesNPV - Net Present Value

OAE - Office of Agricultural EconomicsORRAF - Office of the Rubber Replanting Aid Fund BoardRRC - Rubber Research Center in DOA

THAI FISCAL YEAR

October 1 - September 30

FOR OFFICIAL USE ONLY

THAILAND


Table of Contents

Page No.

1. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . I

A. Project Background .1.. . . . . . . . . . . . . . . . . . IB. The Agricultural Sector ... . . . . . . . . . . . . . . 1C. Government Agricultural Policy . . . . . . . . . . . . . . 3

2. ORRAF AND THE TREE CROP SUBSECTOR . . . . . . . . . . . . . . 5

A. BackgrouLnd ......... ... ... ... ... .. . 5B. Institutional Arrangements ..... . . . . . . . . . . . 9

3. THE PROJECT ........ .. . ............. . . 13

A. Project Objectives . . . . . . . . . . . . . . . . . . . . 13B. Brief Description ... . . . . . . . . . . . . . . . . . 13C. Detailed Features .... . . . . . . . . . . . . . . . . 14D. Cost Estimates . . . . . . . . . . . . . . . . . . . . . . 18E. Financing . . . . . . . . . . . . . . . . . . . . . . . . . 20F. Procurement . . . . . . . . . . . . . . . . . . . . . . . . 20G. Disbursement . . . . . . . . . . . . . . . . . . . . . . . 22

4. PROJECT IMPLEMENTATION AND MANAGEMENT . . . . . . . . . . . . 23

A. Project Implementation . . . . . . . . . . . . . . . . . . 23B. Monitoring and Evaluation . . . . . . . . . . . . . . . . . 26C. Accounts and Audits . . . . . . . . . . . . . . . . . . . . 27

5. PRODUCTION, MARKETING, PRICES AND INCOMIES . . . . . . . . . . 28

A. Production . . . . . . . . . . . . . . . . . . . . . . . . 28B. Organization of Marketing . . . . . . . . . . . . . . . . 30C. Product Prices . . . . . . . . . . . . . . . . . . . . . . 30D. Farm Level Financial Impact . . . . . . . . . . . . . . . 31

This report is based on the findings of an appraisal mission that visitedThailand in September 1980, comprising Mr. T. Prins, Ms. M. Varkie (Bank),

Messrs. P. Harrison, O.S. Peries, Ng Siew Kee (consultants), E. Panton andC. Shearing (CDC). Ms. J. Mott and Ms. P. Brereton assisted in the prepara-tion of the report.

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.

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Page No.

6. BENEFITS AND JUSTIFICATION . . . . . . . . . . . . . . . . . 33

A. Benefits and Beneficiaries .. .33B. Rate of Return and Sensitivity Analysis . . . . . . . . . 37C. Additionality . . . . . . . . . . . . . . . . . . . . . . . 38D. Cost Recovery ... . . 39E. Impact on Women . . . . .. . . . . . . .39F. Environmental Impact . . . . . . . . . . . . . . . . . . . 40G. Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

7. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . 41

TABLES IN TEXT

2.1 Extent of Tree Crop Subsector . . . . . . . . . . . . . . . 63.1 Implementation Schedule of ORRAF, 1982-85 . . . . . . . . . 153.2 Project Cost Summary . . . . . . . . . . . . . . . . . . . . 193.3 Financing Plan . . . . . . . . . . . . . . . . . . . . . . . 215.1 Total Rubber Planting With and Without ORRAF . .285.2 Projected Thai Total Rubber Production With and

Without ORRAF .. 295.3 Financial and Economic Prices of Rubber . . . . . . . . . . 315.4 Per Hectare Financial Impact of Replanting Summary Data . . . 326.1 Projected Per Capita Income of Median ORRAF Rubber

Replanter With and Without Replanting . . . . . . . . . . . 356.2 Sensitivity Analyses - Rubber Replanting .. 38

ANNEXES

1. Rubber Cultivation and Production . . . . . . . . . . . . . . 432. The Office of Rubber Replanting Aid Fund Board .503. The Rubber Research Center . . . . . . . . . . . . . . . . . . 574. Cost Estimates and Disbursements . . . . . . . . . . . . . . . 615. Basis for Economic and Financial Analysis . . . . . . . . . . 726. Related Documents and Data Available in the Project File . . . 88

CHARTS

WB 22200 - Organization of ORRAF HeadquartersWB 22201 - Organization of ORRAF's Provincial OfficesWB 22218 - Organization of the Rubber Division and the Rubber Research

Center

MAP

IBRD 15401 - Rubber Growing Areas

1. BACKGROUND

A. Project Background

1.01 The Royal Thai Government has requested a second Bank loan toassist the Office of the Rubber Replanting Aid Fund Board (ORRAF) infinancing its accelerated rubber replanting program and in initiating aprogram of pubLic support of rubber new planting. ORRAF has proven to be aneffective and efficient organization, capable of implementing annual large-scale rubber replanting programs under the Bank-financed Rubber ReplantingProject (Loan 1243-TH). ORRAF will now also assume on a pilot basisresponsibility for the provision of technical support services during theestablishment and immature period to farmers undertaking rubber new planting.

1.02 The main objectives of the proposed project would be: (a) toincrease, or at least maintain, the income level of smallholders living onrelatively poor soils in rainfed areas by expanding rubber production;(b) to help improve the country's balance of payments by increasing rubberexports; and (c) to provide a basis for further development of the tree cropsubsector nationwide.

1.03 Project components include: (a) a four-year time slice of ORRAF'sentire program, including new rubber replanting starts, at a rate of about50,000 ha p.a. (totaling 200,000 ha), continuation and completion of replant-ings already started (212,000 ha), provision of technical support to a pilotscheme for rubber new planting, and the cost of ORRAF-s infrastructure andadministration; (b) expansion of rubber research and enhancement of theresearch capability in the Rubber Research Center (RRC); (c) establishmentof 60 ha of coconut seed gardens; (d) a land use survey of coconut-growingareas in six provinces; (e) a study of the potential for tree crop develop-ment nationwide; and (f) strengthening the institutional capabilities ofORRAF and the Office of Agricultural Economics (OAE) through technicalsupport and training. Total project cost over the four-year project periodis estimated at about $359 million of which $142 million would be providedas a Bank loan, and E 10 million as a loan from the CommonwealthDevelopment Corporation (CDC, UK).

1.04 The proposed project was prepared by ORRAF assisted by an FAO/UNDPtechnical assistance team and Bank preparation missions.

B. The Agricultural Sector

1.05 Out of Thailand-s population of 45 million, about 35 million live inrural areas and earn their livelihood primarily in agriculture. Despite rapidstructural change elsewhere in the Thai economy, the agricultural sector isdominant and will remain so for many years to come. At present it employs

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about 75% of the labor force, produces about 30% of Gross Domestic Product,and provides about 60% of total export earnings. The overall growth of thesector has been excellent, averaging about 5.0% p.a. in the period 1960-79.This has come largely from an expansion of the area under cultivation (about4% p.a. until the mid-1970s) along with a movement into higher valued crops.

1.06 The evidence now indicates that the availability of readily acces-sible new land for expanding agriculture has been nearly exhausted. This hasled to a further encroachment on forest reserves and on land only marginallysuitable for stable agriculture. It is estimated that the forest area hasbeen declining at a rate of 8.5% p.a. (a decrease from 50% of the total landarea in 1963 to 25% in 1977).

1.07 Land use has been intensified, primarily due to diversification intohigher valued crops. In irrigated parts of the central plain and in someother areas, intensification of land use is taking place principally throughthe use of higher yielding varieties of rice and maize, complemented (in thecase of rice) with higher usage of technical inputs such as fertilizer andpesticides. In rubber growing areas, similar changes leading to greater pro-ductivity are occurring. Some yields (kenaf, cassava, and for a time sugar-cane), however, have actually declined, presumably through planting on margi-nal lands. In part of the rainfed areas, a poor natural resource base is aserious constraint to increased agricultural production (excluding tree crops)and continued improvement in incomes.

1.08 One of the most striking features of the sector's development hasbeen the rapidity with which certain crops have grown in importance. The areaplanted to maize, cassava, and sugarcane is now just under 3 million haand has tripled in the last decade. This has been largely achieved through anexpansion of the rainfed cultivated area (and not at the expense oftraditional crops). In the 1979/80 season rice was planted on over 60% of thecultivated area, rubber on 10%, maize and cassava each about 8%, and sugarcane5%. Within this overall expansion a second characteristic can be perceived:areas planted with some of the newer crops have temporarily declined whileothers increased as a result of switches among crops. This reflects theresponsiveness of Thai farmers to the signals of market prices, and indicatesthe leading role of the private sector in maintaining the dynamism ofagriculture. A third source of variation is the weather, since the rainfallcan influence the output of the sector by as much as 20% in any given year.

1.09 Altogether, about 4.5 million farm families occupy about 24million ha. Ninety percent of the cultivated area is rainfed and only 10%irrigated. Farm sizes are necessarily small, but the size distribution isnot particularly skewed. Estimates made in 1974 by the OAE in the Ministryof Agriculture and Cooperatives (MOAC) give a modal farm size of 3.6 ha and amean size of about 5.5 ha. Almost 90% of farm families are self-employed, andthree quarters of the farms are worked by owner-occupiers rather than tenants.Despite the comparatively good distribution and utilization of land in

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Thailand, population pressure is leading to the cultivation of poorer lands.Off-farm incomes appear to have contributed greatly to the household incomesof small farmers and farmers on marginal lands, including those in therelatively poor Northeast.

1.10 The benefits of growth have been relatively well distributedthroughout the country. Since most agricultural production is by small-holders, most of the income growth in that sector has accrued to the ruralproducers themselves. The overall incidence of poverty has been reduced fromabout 57% in the early 1960s to about 31% by the mid-1970s, and from about 61%to 35% in the rural areas.

C. Government Agricultural Policy

Objectives

1.11 The main objectives of the Government's agricultural policy are:(a) to increase agricultural production as rapidly as possible; (b) toalleviate rural poverty and to redress inter-regional income disparities; (c)to expand agricultural exports rapidly so as to help the balance of payments;and (d) to better utilize the available land suitable for agriculture.These objectives are to be pursued subject to the constraint that forest andother natural resources are to be protected and the degradation of the naturalenvironment minimized.

Strategies

1.12 The Government's efforts to pursue the above objectives involvethe following major strategies: the creation of an environment in whichthe private sector will have the needed incentives and confidence to boostproduction and exports; the development of public sector infrastructureand services to facilitate the achievement of sector objectives; demarcationof 236 poverty districts in which line agencies are to focus their programs;and the establishment of the required legal and regulatory framework to giveindividual farmers title to their land and a clear demarcation of zonesreserved for forestry and conservation.

Bank Lending Strategy

1.13 The Bank fully supports the broad outline of the Government'sobjectives and strategies, and the proposed project is designed to meet theseobjectives by increasing the production of rubber. The Bank's agriculturallending program has two underlying aims: to improve the technical andinfrastructural bases for improving productivity, and to increase the Govern-ment's overall capacity for project planning, coordination and implementation.Where possible, projects are oriented toward meeting the needs of poor peopleand communities. The main activities supported by the Bank in agricultureare:

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(a) Irrigation. Since 1950, Bank assistance to Thailand's waterresource development has included financing for five multipurposedams and twelve irrigation projects for a total of $683 million.Of the irrigation projects, six were in the central Chao Phya Basin,two in the Northeast, one in the South and three in the Mae KlongBasin.

(b) Tree Crops. The replanting and new planting of tree crops (rubberand oil palm) is being expanded. This is improving agriculturalproduction and export earnings, as well as raising farmers incomes.The proposed project is the second phase of a long-term program tosupport the tree crop subsector.

(c) Research. Research programs are being supported which emphasize:the production of high-yielding and pest- and disease-resistantvarieties of the main crops; adaptive research aimed at improvingrainfed rice and other rainfed crop yields; and research intoalternative farming systems, including crop diversification,intercropping and rotational cropping, which should also benefitrainfed rice farmers.

(d) Land Development. Current land development activities are focusedon the conversion of shifting cultivation areas to a condition ofstable agriculture and introduction of appropriate soil and waterconservation works and practices.

(e) Extension. As the training and visit system of extension achievesnational coverage, every effort is being made to ensure that itreaches poor rural communities and that the service is supportedby the wider availability of agricultural inputs.

(f) Credit. Credit arrangements are being improved by strengtheningcredit institutions such as the Bank for Agriculture and Agricul-tural Cooperatives (BAAC) and the cooperatives and agenciessupervising the cooperative system. More funds are being madeavailable for medium- and long-term institutional lending, andcredit arrangements are being integrated with other supportservices.

(g) Rural Infrastructure. Rural infrastructure (including roads)and services are being strengthened through several Bank projects.

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1.14 Two Project Completion Reports have been prepared, one for theSirikit Dam (Ln. 514-TH) and one for the Chao Phya Irrigation ImprovementProject (Cr. 379-TH). These two projects were the subjects of a joint Proj-ect Performance Audit Report. The Sirikit Dam Project was very successful,made a major contribution to the rapid expansion of dry season cropping inthe Chao Phya Basin and was a timely addition to the country's powerproduction. The Chao Phya project was also successfuly completed and hasprovided valuable experience to the Government in the planning, design andimplementation of an intensive mode of on-farm development. It was found,during implementation of the Chao Phya project, that operation andmaintenance (O&M) of both the main and farm level systems required someimprovements and, under more recent projects, steps have been taken tostrengthen the O&M capablity of the Royal Irrigation Department (RID),mainly through provision for consulting services to assist RID to developO&M procedures in these project areas.

1.15 The Bank-supported program can help the Government achieve itsobjective of maintaining agricultural growth, although to improve produc-tivity, Government's agricultural commodity price policies must provide anadequate incentive for producers to adopt improved technology, which isheavily dependent on the use of fertilizers. As part of its preparation ofthe Fifth Economic and Social Development Plan, the Government has carriedout an agricultural pricing and marketing study which reviews, inter alia,the relationship between taxes on rice exports and the supply and price offertilizers with a view toward improving the incentive structure. Thelack of title for about 40% of agricultural holdings, which is anotherserious deterrent to private investment, is also the subject of Governmentreview.

2. ORRAF AND THE TREE CROP SUBSECTOR

A. Background

2.01 Tree crops, including rubber, coconut, coffee, cocoa, oil palm andfruit trees, now account for at least 15% of the planted area in Thailand.Table 2.1 shows the planted areas, value of production and value of exports ofthe major tree crops, and highlights the fact that rubber and coconutdominate the subsector. Both of these are smallholder crops and are grown onrelatively poor, rainfed soils. Consequently, they play an indispensable rolein alleviating poverty in the areas where they are grown.

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2.02 Rubber. As the table indicates, rubber is by far the single mostimportant tree crop, at present growing mainly in South and SoutheastThailand, but with potential for expansion into the relatively poor North-east. It is predominantly a smallholder crop and at present it contributes toabout 12% of the country's total foreign exchange earnings. Over the past twodecades, rubber production has been increasing at about 6% p.a., partly as aresult of a successful rubber investment fund administered through ORRAF, arubber replanting fund established in 1960. ORRAF administers rubberreplanting grants to smallholders from funds it receives through a generalcess levied on rubber exports. These grants are provided both in kind(high-yielding clonal plant material and required inputs such as fertilizersand agrochemicals) and in cash (after satisfactory completion of specifiedtasks) over about six years of the immaturity period of the rubber (paras.2.15-2.16). During the period 1960-80, about 340,000 ha (or 21% of thetotal rubber area) of old seedling rubber was replanted with high-yieldingclonal plant material under the auspices of ORRAF, but over 420,000 ha of thepresent rubber area is still planted with overaged and low-yielding treeswhich are due for replanting. Details of rubber cultivation are given inAnnex 1.

Table 2.1: EXTENT OF TREE CROP SUBSECTOR

Farm-gate Value ofPlanted area value of production exports(-000 ha) ($ million) ($ million)

Rubber 1,620 405 618Coconuts 440 70/b -Oil palm 12 0.1 -Cocoa 0.5 0.25 -Coffee 50 40Fruit trees 275/a 35/b 5/b

Subtotal - tree crops 2,397 550.35 623

Total - All agriculture(excluding forestry& fisheries) 16,000 5,500 2,800

Tree crops % contribution 15 10 22

/a Assuming about 4.5 million farmers, each with a 0.1 ha houselot of whichabout 50% would be planted with fruit trees (totalling 225,000 ha);another 50,000 ha of fruit trees are planted in groves and orchards bycommercial growers.

/b Mission estimate.

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2.03 ORRAF is also responsible for providing technical services tosmallholders during the immature period of the replanted rubber (about sixyears) after which the Department of Agricultural Extension (DAE) takes over.The private sector satisfactorily handles all the processing and marketingrequirements, while all rubber research is carried out by the Rubber Divisionin the Department of Agriculture (DOA) through its RRC. The RRC is currentlyin need of a greater number of qualified research officers.

2.04 Scope exists for increased rubber new plantings, and smallholdershave shown marked interest in this development. Government has already

begun to explore the possibilities for expanding rubber production into theEastern, Northeastern and Northern Regions and has decided to initiate apilot scheme for rubber new planting, with BAAC providing credit and ORRAFgiving technical support. The financial, technical and institutionalimplications of this development need to be further studied and the pilotscheme assessed.

Coconut

2.05 Coconut is the second most important tree crop in Thailand(440,000 ha). Extensive coconut plantings (mainly monoculture) are confinedto the South, where they account for about 180,000 ha; only about 10-20% ofthis area is estimated to be suitable for intercropping with coffee and cocoa.Elsewhere coconut is found on houselots and on bunds around rice fields. Inthe South, an estimated 90,000 ha are due for replanting and about 65,000 hamay be suitable for rehabilitation through the use of inputs and/or inter-cropping with coffee or cocoa. To establish the areas for replanting, rehabi-litation (monoculture or intercropped) and new planting, a land-use surveyon the basis of existing aerial photographs of the main coconut-growingareas in the South is required. At present the production and yields ofcoconut are low, mainly due to the use of unselected plant material andlack of adequate inputs and maintenance standards. About 885 million nutsp.a. are produced and are mainly sold as fresh nuts in the local markets.Only the small nuts are converted into copra for local oil milling, butbecause of the general shortage of nuts, Thailand has been importing anincreasing amount of edible oils. The present nut supply is substantiallyshort of demand, estimated at 850 million for the fresh nut market and 120million nuts for industrial processing, resulting in a shortfall of about85 million nuts p.a./l As this situation is expected to worsen, there isconsiderable scope for a major replanting or new planting program usinghybrid plant material and the required inputs. To permit such development

/1 One nut is equivalent to about 0.18 kg of copra.

the Government has decided to finance coconut planting on a pilot basisthrough a credit scheme administered by BAAC. However, institutionalresponsibility for technical support and coordination of services among thevarious agencies for a program of coconut development needs to be clarified.This would be studied under the proposed project, which also includes therequired land-use survey and staff training in coconut cultivation.

Oil Palm

2.06 Oil palm covers an area of about 12,000 ha in the South in threeland settlement schemes, of which 5,000 ha are due for replanting and 7,000 hacould be rehabilitated. In 1979, the private sector started an extensive oilpalm planting program, but particulars of the program are as yet unknown tothe Bank. It is projected that by 1985 domestic production of palm oilcould satisfy demand, so that any further major expansion of oil palmgrowing in Thailand would be destined for the export market. Under theBank's Agricultural Credit Project (Loan 1816-TH) the status of oil palmdevelopment in three land settlement schemes in the South developed by theCooperative Promotion Department will be reviewed, and a modestrehabilitation program initiated, with BAAC providing long-term credit forthe establishment of 350 ha of oil palm by about 220 settlers. Prospectsfor oil palm development in Thailand and the most suitable way of organizingthis development, should it prove economic, would also be addressed underthe review.

Coffee, Cocoa, Fruit Trees

2.07 Plantings of other tree crops such as coffee, cocoa and fruit treesare widely scattered. Some coffee and, to a lesser extent, cocoa are foundintercropped with coconut. The proposed training of staff in coconutcultivation (para. 2.05) would also cover coffee and cocoa as intercropsof coconut, and the land-use survey to be carried out for the main coconutgrowing provinces in the South would permit the areas suitable forintercropping with coffee or cocoa to be delineated. It is reasonable toexpect that BAAC would provide credit for such development as for rubber newplanting and coconut and that the agency providing technical support for themain crop, coconut, would also be responsible for providing technicalsupport for the intercrops.

2.08 Fruit trees are mainly grown on houselots and in orchards inselected areas. Despite the suitability of South Thailand for the cultivationof many tropical fruits, commercial development has failed to take place onany significant scale. Due to the large proportion of small-scale producersand the scattered location of fruit tree plantings, the scope for directGovernment involvement seems limited to extension services provided by the

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DAE and improved research and provision of selected plant material carried outby the DOA. BAAC should also investigate ways of providing long-term creditto smallholders for fruit tree cultivation.

B. Institutional Arrangements

2.09 Planning for the tree crop subsector is carried out by the Officeof Agricultural Economics (OAE) in the MOAC; however, except in the case ofrubber replanting, the institutional arrangements and coordination of serviceshave not proved adequate to stimulate the potential development of thesubsector.

2.10 The institutions currently involved in the subsector provide avariety of services. Research and the production of foundation stock for all

tree crops are the resDonsibilitv of DOA. Nurseries to provide Dlantinamaterial to farmers are the responsibility of DOA, which may delegateauthority to provide this service to the agency responsible for assistingfarmers establish the crop. ORRAF, for example, handles nearly all thenurseries for rubber replanting. The provision of regular extension servicesduring the productive years of the trees is the responsibility of DAE. Creditis supplied either by BAAC or private banks. The provision of inputs iseither through normal commercial channels, or if economies in purchasing inbulk are appreciable, then the agency charged with responsibility forassisting farmers establish the crop can handle it. ORRAF performs thisfunction effectively in the case of rubber replanting. Marketing andprocessing are carried out effectively and efficiently by the private sectorin Thailand.

2.11 Except for rubber replanting, there are currently no lead agenciesresponsible for providing technical support to farmers for the establishmentof the various tree crops and during the immature period when the needs aregreatest. Recognizing this problem, Government intends to carry out a rubbernew planting pilot scheme (para. 2.04), with ORRAF's excellent cadre ofexperienced staff providing technical support to farmers during the establish-ment and immature phases of the crop. This will, of course, require closecollaboration with BAAC, which would provide the credit, and with the DOA andDAE.

2.12 A program to accelerate coconut development by smallholders is alsobeing developed in Thailand. Credit would be supplied by BAAC, but theinstitution responsible for providing technical support to farmers duringthe crop-s establishment and immature period has not been selected. ORRAFwould be the obvious candidate for the following reasons:

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(a) it is already officially responsible for giving technicaladvice on coconut cultivation to rubber growers replanting withcoconut, and under the proposed project, ORRAF's capacityto provide this assistance would be strengthened through stafftraining;

(b) it has an organizational infrastructure already in place to providea similar technical service to smallholders for rubber replanting;

(c) in the absence of an existing alternative institution, there wouldclearly be economies in expanding ORRAF to also provide similartechnical support to coconut producers; and

(d) institutional cooperation would be easier for BAAC if it had onlyto deal with ORRAF for both rubber new planting and coconuts.

Institutions

2.13 ORRAF. Since its establishment in 1960, ORRAF has evolved into oneof the most effective and efficient public sector institutions in Thailand.

Details of ORRAF-s organization and financial position are given in Annex 2.Its main activity has been providing and administering rubber replantinggrants and technical assistance for rubber replanters, financed from theRubber Replanting Aid Fund. ORRAF administers this Fund which receives itsmonies through a general cess levied on rubber exports supplemented, whennecessary, by Government subventions. Although the Government Act containingORRAF-s basic legal and organizational structure authorizes it to undertake"the implementation of rubber or perennial tree replantings," ORRAF-sinvolvement in the development of other tree crops has thus far been limited,largely due to lack of technical knowledge, the limited availability of highquality planting materials, and insufficient demand from smallholders, as thegrant allocation for other tree crops is much smaller than that for rubber.

2.14 To date, the basic objective of ORRAF has been to undertake rubberreplanting in order to replace overaged rubber trees throughout Thailand. Tothis end, it uses 90% of the proceeds of the cess levied on rubber exports tofinance the cost of rubber replanting in the form of grants to individualreplanters./l By law, ORRAF must strive to allocate annually about 70% of itsavailable funds to smallholders, which are legally defined as having holdingsof up to 8 ha each.

/1 According to Section 18 of the ORRAF Act, 5% must be allocated to theRRC, up to 5% can be used for ORRAF-s administrative expenses, and90% is returned to the farmers as grants for replanting.

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2.15 The rubber replanting grant has two purposes: providing sufficientmaterials (mainly high-yielding plant material and fertilizer) to gain thefull benefits of improved rubber technology.; and contributing to thesubsistence of farmers during the period of maturation (about the firstseven years) by partial financing of labor costs. Accordingly, the grantconsists of cash payments as well as material components which are deliveredto the farmer in kind. Both are released by ORRAF's provincial offices toreplanters in seven installments over a period of about six years, with eachinstallment conditional upon satisfactory completion of specified taskscertified by an ORRAF inspector. ORRAF's system of providing grants tosmallholders is well organized and efficient, and has adequate safeguardsagainst abuse.

2.16 The amount of the grant is determined by the ORRAF Board. In aneffort to keep up with rising costs, ORRAF has raised the grant from $470/hain 1962 to $580/ha (1965-66); $625/ha (1967-75); $875/ha (1976-79); $1,220/ha(1980) and $1,330/ha for 1981. These authorized amounts do not necessarilyrepresent the actual cost of the grant since material components of thegrant are fixed in terms of quantities of inputs rather than money. Thepresent procedure for a grant adjustment involves approval by (a) ORRAF'sBoard, (b) a special subcommittee consisting of representatives from variousgovernmental agencies, including the Ministry of Finance; (c) the MOAC andfinally (d) the Cabinet. This involves considerable time and duplication ofeffort since most of the representatives of the agencies involved in thisapproval process are already members of ORRAF's Board (para. 4.10).

2.17 Performance under the Rubber Replanting Project (Loan 1243-TI).During 1960-76, about 200,000 ha or 13% of the rubber area in South Thailandwas replanted. Under the Bank-financed Rubber Replanting Project ($50million, 1976), another 145,000 ha were replanted during 1977-80, resulting:in a total replanted area of about 345,000 ha (21% of the total rubber area).In 1981, an additional 65,600 ha will be replanted (Annex 1, Table 2).

2.18 About 116,000 new grants were initiated between 1977-80, with anaverage rubber replanted area of about 1.3 ha. In 1979, about 95% of thegrant payments went to farmers with a rubber replanting area of less than 8ha. About one third of these farmers are in the target group (defined ashaving per capita incomes less than one third of the national average), andabout 10% to 15% are currently in the absolute poverty group (defined ashaving annual per capita incomes less than $180 in 1981 terms).

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2.19 The replanting rate has been slightly slower than that envisionedduring appraisal, with about 90% of the target reached in 1979 and about 85%in 1980. This has resulted from a one-year delay in project effectivenessdue to legal problems in Thailand, security problems in South Thailand, andrelatively high rubber prices./l These factors and lower fertilizer prices,which have reduced the need for Bank funds, have caused Bank disbursementsto be slower than anticipated. Disbursements are, however, increasing andcould be completed by early 1982. At present, no problems are envisaged inmaintaining a 50,000 ha p.a. replanting rate for the future.

2.20 Apart from ORRAF, the main institutions involved in the subsectorinclude the following:

(a) The Horticulture Division of the DOA carries out research on fruitcrops, coconut, and oil palm, and provides seed gardens andnurseries for these crops. Assistance is being provided to theDivision under the Bank-s National Agricultural Research Project(Loan 1922-TH);

(b) The Rubber Division in DOA is the official regulatory body for therubber industry in Thailand. In addition, its 19 field stationsprovide areas of planted rubber for experimentation anddemonstration, besides producing budded stumps and budwood, whichare sold directly to farmers or passed on to ORRAF. Theorganization of the Rubber Division is given in Chart 22218;

(c) The RRC, established within the DOA in 1965, is responsible for:agronomic and economic research in production andprocessing;adaptation of research findings; and dissemination of informationamong producers and processors. The organization of the RRC isshown in Chart 22218, and details of its operations are presentedin Annex 3; and

(d) The DAE in MOAC provides extension services, advises farmerson agricultural techniques, and provides support services to themany Group Marketing Organizations (GMO) established throughoutthe country.

2.21 In addition, two coordinating agencies are involved with the rubbersubsector. As a result of the Rubber Replanting Project, a Technical Assis-tance Coordinating Committee was formed within the MOAC comprising represen-tatives of ORRAF, RRC, UNDP/FAO and DAE. The Committee meets bimonthly todiscuss technical matters requiring research and ways to channel researchfindings to farmers. It has proved to be particularly useful in conveyingtechnical information to ORRAF's Board and for requesting the Board'sapproval of procedural changes at the farm level. And, under the UNDP-financed Bridging Project, a Rubber Consultative Group has been established

/1 During periods of high rubber prices, the number of applications tendsto decline, as farmers wish to postpone replanting due to the increasedprofitability of tapping.

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to advise Government on (a) the technical and managerial requirements ofThailand-s rapidly expanding rubber industry, and (b) priorities for theresearch and training programs needed by ORRAF to meet the requirements ofits rubber replanting and new planting programs. The Group is comprised ofrepresentatives of the main agencies involved in the subsector.

3. THE PROJECT

A. Project Objectives

3.01 The proposed project would continue Bank support of the successfulRubber Replanting Project (Loan 1243-TH), although with some additionalfeatures to promote development of tree crops nationwide.

3.02 The main objectives of the proposed project would be:

(a) to increase, or at least maintain, the income level ofsmallholders living on relatively poor soils in rainfed areasby expanding rubber production;

(b) to improve the balance of payments by increasing rubber exports;and

(c) to provide a basis for further development of the tree cropsubsector nationwide.

B. Brief Description

3.03 The main components would be:

(a) ORRAF. The proposed project would cover a four-year time slice(April 1982-April 1986) of ORRAF's entire program, comprising:

(i) agricultural development in South and Southeast Thailandincluding:

a. Rubber Replanting

- new starts: continuation of an ongoing program at arate of 50,000 ha p.a. (200,000 ha over the projectperiod, involving about 166,000 smallholder plots);and

- continuation and completion of about 212,000 haof replantings started prior to April 1, 1982,involving about 151,400 smallholder plots.

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b. Rubber New Planting. Technical support in establishingthe crop and during the immature period to smallholdersparticipating in a rubber new planting pilot scheme to befinanced by BAAC. About 16,000 ha will be planted duringthe first year of the pilot scheme.

(ii) ORRAF's administration and management, covering civil works,equipment, vehicles, staffing and operating costs over theproject period; and

(iii) the consultant services of a Senior Agricultural Advisor toORRAF, and training for ORRAF staff in the cultivation ofcoconut and its intercrops (coffee and cocoa) in order tostrengthen ORRAF's capability to furnish technical supportfor these crops.

(b) DOA

(i) expansion of rubber research in Thailand and enhancement ofthe research capability in RRC;/l and

(ii) establishment of 60 ha of coconut seed gardens inthe South.

(c) LDD. A land-use survey including mapping of the coconut growingareas in six nrovinces in the South to assess the resource base forlong-range coconut development in these provinces, and consultantservices to prepare a proposal for a countrywide agriculturalland-use survey; and

(d) OAE. Strengthening OAE's agro-economic planning capability to serveand guide the tree crop subsector through (i) training of staffand (ii) a study of the potential for tree crop developmentnationwide, including the financial, technical and institutionalimplications thereof.

C. Detailed Features

ORRAF

3.04 Agricultural Development. ORRAF's development activities over theproject period would continue to focus on its ongoing rubber replantingprogram, comprising (a) the continuation of rubber replanting at a rate of50,000 ha p.a., totalling 200,000 ha during the project period, and (b)continued development and completion of about 212,000 ha replanted before

/1 Research for other tree crops has been appropriately covered in theBank's National Agricultural Research Project (Ln. 1922-TH).

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April 1, 1982. In addition, ORRAF's development activities would beexpanded to include provision of technical support to a pilot scheme forrubber new planting (para. 3.09).

3.05 Nurseries. ORRAF presently controls about 310 ha of rubber stocknurseries and intends to increase the nursery area to 555 ha by 1982. Thisis considered appropriate to the needs of ORRAF's replanting and new rubberplanting programs. In addition, about 210 ha of budwood nurseries have beendeveloped, which is considered sufficient for ORRAF's requirements over theproject period.

3.06 Implementation Schedule. Table 3.1 presents details of ORRAF'slmplementation schedule during the project period.

Table 3.1: IMPLEMENTATION SCHEDULE OF ORRAF, 1982-85

1982 1983 1984 1985

Rubber Replanting -------- ha x '000 -------

A. New rubber replantings 50.0 50.0 50.0 50.0B. Continuation and completion of ongoing

replantings 212.0 238.4 259.4 272.6

C. Number of rubber plots ----- plots x '000 ------

New Replantings (A) 41.5 41.5 41.5 41.5Ongoing Replantings (B) 151.4 170.2 185.3 194.7

3.07 Replanting Grants. ORRAF would continue to assist rubber growerswith the establishment and maintenance of rubber replanting through advice andtraining as well as through replanting grants in cash and in kind. The grantwould include a cash entitlement covering 70% of the estimated labor cost.Cash would comprise about 47% of the grant (land preparation 23% and mainten-ance operations 24%) and materials in kind about 53% of the grant (chemicals5%, fertilizers 42% and plant material 6%). Cash payments to smallholderswould depend on certification of ORRAF inspectors after satisfactorycompletion of specific tasks.

3.08 The cost of the ORRAF replanting grant payments (including ferti-lizers, chemicals, plant material, labor and residual payments, for thenew rubber replantings) and existing commitments, are detailed in Annex 4,Table 2. The indirect expenses of the ORRAF grant, mainly local fertilizertransport cost and miscellaneous expenses, are presented in Annex 4, Table 6.

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3.09 Rubber New Planting. It is proposed that ORRAF would providetechnical support, consisting of advice and training, to smallholdersparticipating in a pilot scheme for rubber new planting during theestablishment and immature period of the crop. The pilot scheme would belocated in Rayong and Chanthaburi Provinces in the east, and about 16,000 haof land would be planted during the first year of the scheme. The programwould be financed on a pilot basis by credit through BAAC. Establishmentand maintenance standards would be the same as under ORRAF-s replantingprogram. A committee has been established, with representatives from theconcerned agencies (BAAC, Cooperative Promotion Department, ForestryDepartment, Rubber Estate Organization, DOA and ORRAF) to oversee programimplementation. ORRAF would provide the necessary support using existingregional office field staff.

3.10 Administration. ORRAF-s administration and management costs overthe project period include staff salaries, labor wages, civil works (includingpurchase of land), vehicles, equipment, and operating costs. Details of thesecosts during the project period are given in Annex 4, Tables 3 and 4.During the project period ORRAF headquarters staff would increase from atotal of 359 at present to about 620 in 1985, and its field staff from 1,184to about 2,180. About 30 ORRAF vehicles, ranging from cars to trucks, wouldneed replacement and an additional 35 vehicles would need to be purchased.Low-interest loans are provided to field staff for the purchase ofmotorbikes. About 12 new ORRAF branch offices would be constructed duringthe project period.

3.11 Training and Technical Assistance. Apart from its ongoing rubberreplanting program, ORRAF is responsible for providing limited assistance torubber growers replanting with coconut. To date, however, it has had littleinvolvement with coconut growers. Under the project, the capability ofORRAF staff to provide technical support for coconut and its intercrops(coffee and cocoa) would be strengthened through local training courses, aswell as fellowships and study tours to neighboring countries to be offeredto qualifying staff. The project would also help finance the continuedservices of a Senior Agricultural Advisor to ORRAF, who is already in place.Details and cost estimates are presented in Annex 4, Table 5.

3.12 The training courses in coconut cultivation would be provided atDOA-s Sawii, Kanthuli and Nai-Chong research stations. The courses wouldlast from one to three months each. Selected ORRAF nursery managers wouldreceive three-month courses in hybrid coconut nursery layout, coconutgermination, polybag planting, appropriate weeding, watering, fertilizer, pestand disease control, culling and selection standards, and field transport.ORRAF field officers would receive two-month courses in correct felling andland preparation techniques, lining, holing, field planting, appropriateweeding, fertilizing, pest and disease control standards, and harvesting ofhybrid coconut. Finally, field officers would receive one-month introductorytraining in nursery and field establishment and upkeep standards, harvesting,and processing.

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Department of Agriculture (DOA)

3.13 Rubber Research Center. During the project period the researchcapability of RRC would be strengthened to cope with: (a) ORRAF's expandingrubber development program in Southeast Thailand where ecological conditionsare different from those in the South, (b) the urgent need to generate moreresearch data on the possibilities for expanding rubber cultivation in theNorth and Northeast, and (c) an increasing demand for appropriate recommenda-tions regarding choice of clones, type of plant material, density of planting,intercropping, husbandry practices, use of fertilizers during the immature andmature stage, pest and disease control, tapping systems and stimulationtechniques for young, mature and old rubber, processing and marketing.Government, with the help of the Rubber Consultative Group, is currentlyreviewing the staffing, organizational and financial requirements of thisstrengthening, and intends to seek UNDP financing for the program subsequentlyidentified. If UNDP financing cannot be obtained, the Government wouldfinance the program from its own resources. The present estimate of the costof this component should be considered as indicative only.

3.14 Hybrid Coconut Seed Gardens. Under the project, DOA wouldestablish about 60 ha of coconut seed gardens in the South. Hybrid seednut production would start in 1988 and would supplement the hybrid coconutseed supply from the Kanthuli seed garden. Dwarf coconuts would probably beacquired from Malaysia and possibly selected Talls would be raised in the seedgardens under DOA½s guidance and control. Details and cost estimates arepresented in Annex 4, Table 9.

Land Development Department (LDD)

3.15 Under the project, LDD would undertake a land-use survey of thecoconut-growing areas in Chumpon, Surat Thani, Nakon Si Thammarat, Pattani,Songkla and Phuket provinces in South Thailand. The Land ClassificationDivision in LDD would conduct this survey using recent aerial photographs(1:15,000). Vehicles and equipment would be provided to enable LDD tocomplete this task by FY84. On the basis of the color maps produced, moresophisticated planning could be developed regarding the required replantingrate and the possibility of rehabilitating suitable tall coconut standsthrough the use of inputs and/or intercropping. Details and cost estimatesare presented in Annex 4, Table 10.

3.16 While existing (largely pre-1975) aerial photography may be ade-quate for estimating the area currently under coconut in the six principalcoconut-growing provinces, the available photography is inadequate forproviding up-to-date data on agricultural land use for much of the country,largely due to its age. The absence of reliable current data on crops andother land use categories is a serious impediment to planning in most sectorsand at all scales. Accordingly, two man-months of consultant services areincluded in the project to assess the current situation in regard to aerial

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photography and land-use data and to prepare a proposal for rephotography ofthe country as a whole, on a scale adequate for detailed land-use analysis,and for full photo interpretation and map compilation services within afinite period, probably three years.

Office of Agricultural Economics (OAE)

3.17 The OAE is responsible for sector planning, including the formu-lation of agricultural policy options in the MOAC (para. 2.09). To betterequip OAE to plan for further development of the tree crop subsector, theproject would provide for a study of tree crop development nationwide,specifically covering the financial, technical and institutional implicationsof an expanded program for development of new rubber in the North andNortheast and of hybrid coconut and its intercrops (coffee and cocoa) in theSouth. The study would be carried out by consultants (about 9 man-months ofservices are contemplated) under the auspices of OAE, but overseen by ORRAFto ensure that the results of the study are readily applicable. The projectwould also include fellowships and study tours for OAE staff to studypolicy aspects of tree crop development, processing and marketing inneighboring countries. Details and cost estimates are presented in Annex 4,Table 5.

D. Cost Estimates

3.18 Total project cost is estimated at about $358.8 million (B 8.25 bil-lion) of which $143.5 million (40%) would be in foreign exchange, with taxesand duties representing about $11 million. Table 3.2 summarizes the costestimates; details are presented in Annex 4, Table 1. Expected priceincreases over the project period amount to about 26% of total base costs plusphysical contingencies, which reflect mid-1981 price estimates. The followingannual inflation rates have been assumed:

1981 1982 1983 1984 1985 1986

Local costs (%) 13.0 12.0 12.0 10.0 9.0 8.0Foreign costs (%) 9.0 8.5 7.5 7.5 7.5 6.0

Physical contingencies (averaging about 10% of base costs) have been appliedto all vehicles, equipment and civil works. No provision for physicalcontingencies has been made for: (a) agricultural development costs sincethese are based on actual costs of an ongoing program; or (b) for ORRAF'soperating costs and other costs of the DOA, LDD and OAE, since the projectcomprises a time slice of a large investment program where the major sources

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Table 3.2: PROJECT COST SUMMARY

Foreign % of

Local Foreign Total Local Foreign Total exchange base------- B million ------- ----- $ million % cost

ORRAFAgricultural Development

Fertilizers 294.0 1,911.0 2,205.0 12.8 83.1 95.9 87 34Chemicals 162.0 476.0 638.0 7.0 20.7 27.7 75 10Planting materials 179.0 138.0 317.0 7.8 6.0 13.8 44 5Labor 2,145.0 - 2,145.0 93.3 - 93.3 - 33Miscellaneous 42.0 22.0 64.0 1.8 1.0 2.8 35 1

Subtotal 2,822.0 2,547.0 5,369.0 122.7 110.8 233.5 47 82

Administration

Salaries & operatingcosts 831.3 109.3 940.6 36.1 4.8 40.9 12 14

Civil works 30.3 11.6 41.9 1.3 0.5 1.8 28 1Purchase of land 20.9 - 20.9 0.9 - 0.9 - -Vehicles and equipment 16.7 12.8 29.5 0.7 0.6 1.3 45 1Technical assistance &

training 2.1 6.1 8.2 0.1 0.3 0.4 75 -

Subtotal 901.3 139.8 1,041.1 39.1 6.2 45.3 14 16

Total ORRAF 3,723.3 2,686.8 6,410.1 161.8 117.0 278.8 42 98

DOARubber Research Center

Training & staffing 40.7 11.3 52.0 1.8 0.5 2.3 22 -Vehicles, equipment &

civil works 19.8 15.5 35.3 0.9 0.7 1.6 44 -

Subtotal 60.5 26.8 87.3 2.7 1.2 3.9 31 1

Coconut Seed GardenPlant materials, labor,

vehicles & equipment 4.1 3.8 7.9 0.2 0.2 0.4 48 -

Total DOA 64.6 30.6 95.2 2.9 1.4 4.3 33 1

LDDVehicles, equipment &

consultant services 2.1 2.0 4.1 0.1 0.1 0.2 50 -

OAETraining 0.8 2.5 3.3 - 0.1 0.1 75 -

Consultant services 0.2 2.1 2.3 - 0.1 0.1 90 -

Total OAE 1.0 4.6 5.6 - 0.2 0.2 83 -

Total Base Cost 3,791.0 2,724.0 6,515.0 164.8 118.7 283.5 42 100

Physical contingencies 7.1 3.9 11.0 0.3 0.2 0.5 38Price contingencies 1,153.8 572.0 1,725.8 50.2 24.6 74.8 33

TOTAL PROJECT COST 4,951.9 3,299.9 8,251.8 215.3 143.5 358.8 40

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of uncertainty and risk do not relate to the estimates of the physical andadministrative implementation requirements. The services of a SeniorAgricultural Advisor to ORRAF and the preparation of the tree crop devel-opment study and the national land-use survey proposal would require a total of52 man-months of consultant services at an estimated total cost of $365,500.The cost of foreign consultants is estimated at about $10,900/man-month(including international and local travel and subsistence) and that of localconsultants, at about $4,500/man-month.

E. Financing

3.19 The Bank and CDC would assist Government in financing the proposedproject. The Bank loan of $142 million, plus a possible UNDP grant of about$1.5 million mainly for strengthening RRC, would cover the full foreignexchange requirements of the project. The Bank loan would be passed on toORRAF as a grant. A CDC loan for E 10 million (about $18.5 millionequivalent) would be applied toward local costs, bringing total externalfinancing to about 45% of project costs. The remaining local costs wouldbe covered by government budgetary allocations ($31.8 million) and ORRAF'sown sources (165 million). If UNDP funds are not obtained, GovernTmentwill finance the strengthening of RRC with its own funds. Details of pro-ject financing are presented in Table 3.3.

F. Procurement

3.20 Fertilizer and chemical contracts (about $152 million) would beprocured in bulk through international competitive bidding (ICB) in accordancewith Bank Group guidelines. A preference equal to 15% of the cif cost r thecustoms duty, whichever is lower, would be extended to local manufacturers inthe evaluation of bids. Contracts for urgently needed fertilizers andchemicals estimated to cost less than $500,000, up to an aggregate amount of$2.5 million, may be awarded on the basis of local competitive bidding (LCB)in accordance with procurement procedures acceptable to the Bank. Contractsfor civil works over $500,000 (totalling about $3.3 million) would be awardedon the basis of ICB in accordance with Bank Group guidelines. Contracts forcivil works costing less than $500,000 each would be awarded on the basis oflocal competitive bidding in accordance with procurement procedures acceptableto the Bank. The civil works contracts are expected to be small andscattered throughout the country, and are therefore expected to be ofinterest only to local contractors. The vehicles and equipment are ofnumerous types which would normally be purchased in small lots; these would beawarded on the basis of LCB in accordance with procurement proceduresacceptable to the Bank. Research equipment, coconut seed nuts, and othermiscellaneous items costing less than $15,000 each, up to an aggregate amount

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Table 3.3: PROJECT FINANCING PLAN($ million)

ORRAF Government Bank CDC TotalComponent Amt. % Amt. % Amt. % Amt. % Amt.

ORRAF

Agricultural DevelopmentFertilizers and chemicals 47.6 - 104.0 - 151.6Planting materials 6.5 - 8.0 2.8 17.3Labor 83.4 - 24.0 14.4 121.8Miscellaneous 3.5 - - - 3.5

Subtotal 141.0 48 - 136.0 46 17.2 6 294.2

AdministrationSalaries & operating costs 20.8 28.0 2.8 1.3 52.9Civil works and land 2.5 - 1.0 - 3.5Vehicles and equipment 0.7 - 1.0 - 1.7Technical assistance andtraining - - 0.5 - 0.5

Subtotal 24.0 41 28.0 48 5.3 9 1.3 2 58.6

Total ORRAF 165.0 47 28.0 8 141.3 40 18.5 5 352.8

DOA

Rubber Research CenterTraining, staffing, civilworks, vehicles &equipment - 5.10 100 - - 5.1

Coconut Seed GardenAgricultural development,vehicles & equipment - 0.15 37 0.25 63 - 0.4

Total DOA _ 5.25 95 0.25 5 - 5.5

LDDVehicles, equipment &

consultant services - 0.05 25 0.15 75 - 0.2

OAETraining & technical

assistance - - 0.30 100 - 0.3

Total Financing 165.0 46 33.30 /a9 142.0 40 18.5 5 358.8

/a Of which Government hopes to obtain UNDP grant of up to $1.5 million.

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of $1.5 million would be purchased by prudent shopping on the basis of atleast three price quotations. About 75% of plant material requirements wouldbe provided by ORRAF's own nurseries and by private nurseries at competitiveprices. For all contracts estimated to exceed $250,000 the Bank's priorapproval would be required before invitations to bid are issued and contractsare awarded.

G. Disbursement

3.21 The proposed Bank loan of $142 million would be disbursed toORRAF ($141.3 million), DOA ($0.25 million), LDD ($0.15 million), and OAE($0.30 million), as follows:

ORRAF

(a) 65% of total cost of fertilizers and chemicals;

(b) 40% of total cost of vehicles, equipment, planting material andcivil works;

(c) 100% of total cost of technical assistance and training;and

(d) 30% of total cost of first two installments of labor paymentsto rubber replanters and of salaries of ORRAF field staff.

DOA

(a) 65% of total cost of fertilizers, chemicals, vehicles, equipmentand civil works; and

(b) 40% of total cost of planting materials.

LDD

(a) 70% of total cost of equipment, vehicles and materials; and

(b) 100% of total cost of technical assistance and training.

OAE

(a) 100% of total cost of technical assistance and training.

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3.22 ORRAF. Disbursement of the Bank loan would be against fulldocumentation for fertilizers and chemicals, vehicles, equipment, civilworks, and technical assistance and training. Disbursements for plantingmaterial and labor payments would be directly linked to the progress ofimplementation, and disbursement requests would be prepared on the basis offield inspectors' reports, certificates of delivery of planting material andlabor payments. The first installment of the grant for labor payments isreleased to smallholders after the completion and inspection of landclearing and preparation; the second after the completion and inspection ofplanting. Bank disbursements for planting material, labor payments, andsalaries of ORRAF field staff would be made against statements of expendi-ture, and the documentation for such items would be retained by ORRAF andwould be available for inspection by the Bank during project supervision.The statements of expenditure would be certified by ORRAF's Deputy Directorfor Administration and Finance.

3.23 DOA/OAE/LDD. Bank disbursements for civil works, vehicles, equip-ment, and technical assistance and training would be made against fulldocumentation. Disbursements for planting material would be made againstcertified statements of expenditure, and the supporting documents would beretained by DOA and made available for inspection during the course of Banksupervision missions.

3.24 It is expected that disbursements would be completed byMarch 31, 1987. A disbursement schedule is shown in Annex 4, Table 11.The disbursement estimates were based on the actual rate of disbursementunder the Rubber Replanting Project (Loan 1243-TH), but adjusted forexpected improvements in ORRAF's procedures.

4. PROJECT IMPLEMENTATION AND MANAGEMENT

A. Project Implementation

4.01 Research. DOA would be responsible for all tree crop research.DOA's rubber research capability would be strengthened during the projectperiod by expanding the research capacity of RRC. Assurances were obtainedthat Government would review the staffing, organization and financing needsof the RRC and submit the findings of the review to the Bank by June 30,1982 for its comments, and implement such measures as it deemed appropriateafter consultation with the Bank.

4.02 Agricultural Inputs. DOA would also be responsible for theproduction of foundation stock. Its capability in this respect is adequatefor all tree crops except coconut, and the project would assist DOA in estab-lishing 60 ha of coconut seed gardens in South Thailand (para. 3.14).Nurseries to provide material to smallholders for rubber replanting aresupplied by ORRAF and the private sector, with some help from the RubberDivision of the DOA. This arrangement would be continued under the projectboth for rubber replanting and new planting. Initial technical support to

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rubber replanting and new planting would be handled by ORRAF, which would alsocontinue to provide technical advice to rubber growers replanting withcoconut. Other inputs for rubber replanting and new planting would besupplied by ORRAF.

4.03 Financing. Rubber replanting would continue to be financed by ORRAFthrough grants to farmers, while development of rubber new planting would befinanced by BAAC through long-term credits (15-20 years including 5-7.5years' grace) at 10% interest. The Farmers' Aid Fund contributed finance toBAAC which allows it to provide credit at less than its normal rate of 13%.Government has been advised of the Bank's reservations regarding the successof a credit scheme to individual smallholders for rubber new planting, butstill wishes to proceed on a pilot basis. Assurances have been obtained thatthe Government would periodically exchange views with the Bank on thesuitability of the terms and conditions applicable to the provision of fundsto smallholders for the development of tree crops other than the replanting ofrubber.

4.04 Extension services during the productive (mature) period of thecrops would be provided by the DAE. Only the rubber replanted in the pastwould come into production during the project period, and would require theseservices. Strengthening of DAE in the rubber-producing areas would be carriedout under the Bank's Second National Extension Project (Loan 1752-TH), whichshould result in one extension agent covering about 1,000 smallholderfamilies, or about 2,500 ha of rubber.

4.05 Training. DOA and ORRAF staff are well trained in rubber cultiva-tion and production, and existing training facilities are adequate for thenear future. Although ORRAF staff also have some advisory responsibilitiesfor coconut production, they lack adequate training in this regard. Under theproject DOA would be responsible for training ORRAF's field officers incorrect nursery and field planting techniques, upkeep standards, use of inputsand harvesting, as well as the processing and marketing of coconut(paras. 3.11-3.12). Assurances were obtained that Government would ensurethat DOA facilities at Sawii, Kanthuli and Nai-Chong would be made availablefor the training of ORRAF staff in the cultivation of coconut and its inter-crops.

4.06 Subsector Development. In preparation for further development ofthe subsector, OAE would engage consultants to undertake a study of tree cropdevelopment nationwide. Should the study recommend a substantial expansionof ORRAF's responsibilities in the subsector, assurances were obtained thatORRAF would exchange views with the Bank with respect to its organizationalstructure and the numbers, qualifications and experience of staff required tocarry out the duties assigned to it.

4.07 In addition, OAE staff would be appropriately trained in theeconomic aspects of tree crop development, processing and marketing in orderto (a) develop an agro-economic planning capability so as to advise

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responsible agencies (e.g. DOA, ORRAF) on the economic advantages of cropsunder area-specific conditions; (b) strengthen its staff to more efficientlyformulate policy options regarding tree crop development at the regional andthe national levels for consideration by MOAC; and (c) play a more prominentrole in coordinating the activities of the various departments and agenciesinvolved in the subsector such as ORRAF, DOA, DAE, BAAC, the Public WelfareDepartment and the Accelerated Rural Development Department in order tofacilitate the flow of information among these agencies and to ensure thatuniform implementation standards are maintained.

4.08 Land Use Surveys. The Land Classification Division in LDD would beresponsible for undertaking a land-use survey of coconut-growing areas in sixprovinces in the South and for preparing a proposal for a countrywideagricultural land use survey (paras. 3.15-3.16). The terms of reference ofthe consultants preparing the national land use survey would specify the timeby which the survey would be completed.

ORRAF

4.09 ORRAF would be primarily responsible for project implementation.Staff in the various divisions of ORRAF-s headquarters and in the provincialand field offices (Chart 22200) would be expanded in line with the expansionof ORRAF's development activities; no problems are envisaged in recruitingthe additional staff required. Assurances were obtained from ORRAF that: (a)it would, at all times, employ qualified staff in adequate numbers to carryout the duties assigned to it, and (b) before making any new appointment tothe position of D)irector or Deputy Director of the Fund, it would afford theBank a reasonable opportunity to exchange views on the qualifications andexperience of persons considered for such positions. It is expected that theconsultant services of the Senior Agricultural Advisor to ORRAF, who isalready in place, would be continued during the project. However, in theevent of the hiring of a new consultant assurances were obtained from ORRAFthat the consultant's qualifications, experience and terms and conditions ofemployment would be satisfactory to the Bank.

4.10 Adjustment of Grant Payments. An important reason for ORRAF'ssuccess has been its administration of the replanting grant payments. Whilethe level of the grant has consistently offered sufficient incentive toattract potential rubber replanters, the process of adjusting the grant levelis cumbersome by involving numerous governmental departments. Assurances wereobtained that Government would (a) allow ORRAF to adopt a policy whereby thelevel of the grant would be reviewed annually, and raised when necessary toreflect changes in input prices, wage rates and technical recommendations madeby RRC, and (b) simplify the procedures for approving adjustments in the grantlevel.

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4.11 Financial Arrangements. It is currently estimated that subsequentto the proposed project by the end of FY87, ORRAF would require about$290 million to maintain and complete the rubber replantings then under way.Assurances were obtained that after project completion Government wouldprovide ORRAF with the necessary funds to bring into production all rubberreplantings supported under the project. Government has considerable flexibi-lity in controlling ORRAF's financial position through its control over thelevel of the rubber replanting cess. In accordance with Government's policyof ensuring the long-term financial self-sufficiency of ORRAF, assurances wereobtained that Government would review with the Bank from time to time, thelevel of the rubber cess, its allocation and the incentives of smallholders toparticipate in rubber production; and would exchange views with the Bank priorto making any changes therein. Government is also able to affect the level offarmer participation in rubber replanting through its taxes on rubber which,together with the cess, affect farmers' incentives to replant. AlthoughGovernment has recently reduced the level of taxation of rubber in Thailand,the present level is still too high (para. 6.04). Assurances were thereforeobtained that Government would, from time to time, exchange views with theBank concerning the level of taxes and duties on rubber production, marketingand export.

B. Monitoring and Evaluation

4.12 The Planning and Monitoring Unit in ORRAF was created during theearly stages of the first Rubber Replanting Project. It is responsible formonitoring implementation of the rubber replanting program particularly withregard to the socio-economic impact of rubber replanting, smallholderincentives and participation, and consequent policy formulation. In 1979/80,the Unit and OAE collaborated on a socio-economic survey of grant-receivingrubber replanters. The sample size of the survey was about 1,300 farms.The information gathered in the survey has provided some useful insights intothe characteristics of the grant beneficiaries (para. 6.07). A regularresurvey is needed of a smaller sample size, based on repeated visits to thesame replanters with a view to more clearly defining their incomes andactivities. In addition, surveys of the participating smallholders in rubbernew planting and coconut areas should now be started under this program.Particular attention would be focused on the smaller farmers, especially thosein the absolute poverty group. Assurances were obtained from ORRAF that aneconomic and policy working group would be established in its Planning andMonitoring Unit, which would regularly update the socio-economic survey, andsubmit, by the end of each fiscal year, the findings of such group to the Bankfor its review and comment.

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C. Accounts and Audits

4.13 ORRAF's accounts are audited by the National Auditing Council at theend of every financial year on the basis of guidelines recommended by the Bankfor the first Rubber Replanting Project. Internal auditing is carried out bya special unit (consisting of ten staff members) which is responsible to theDirector. Consultants engaged during the first project made detailed recom-mendations for improving ORRAF's accounting and auditing procedures, and theirproposals are being implemented. The staff in the internal audit unit arecompetent, and when these recommendations have been effected, ORRAF's account-ing and auditing procedures can be considered satisfactory. Assurances wereobtained that ORRAF would: (a) maintain, in accordance with sound accountingpractices, records of its financial and operational activities; (b) have itsaccounts for each fiscal year audited by independent auditors acceptable tothe Bank, in accordance with appropriate auditing procedures consistentlyapplied; and (c) submit to the Bank within six months of the end of everyfiscal year during project implementation a certified copy of the auditor'sreport including a separate opinion by said auditors in respect ofdisbursements made on the basis of statements of expenditure.

4.14 Assurances were also obtained from Government that the DOA, LDD andOAE would: (a) maintain in accordance with sound accounting practices projectaccounts covering all project expenditures; (b) have project accounts foreach fiscal year audited by independent auditors acceptable to the Bank, inaccordance with appropriate auditing procedures consistently applied; and(c) submit to the Bank within six months of the end of every fiscal yearduring project implementation a certified copy of the auditor's reportincluding a separate opinion by said auditors in respect of disbursements madeon the basis of statements of expenditure.

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5. PRODUCTION, MAiRKETING, PRICES AND INCOMES

A. Production

5.01 Technical Specifications. Rubber replanting is well establishedin Thailand. Technical specifications for ORRAF's program were establishedunder the first Rubber Replanting Project, and would be continued underthe proposed project (see Annex 1).

5.02 Impact of ORRAF. With the ORRAF program continuing and beingsupported by the project, total rubber planting in Thailand would take placeat about 68,000 ha/year, while if ORRAF were to cease new commitments from theend of 1981, total plantings would be drastically reduced to an estimated20,000 ha annually in the long term (Table 5.1).

Table 5.1: TOTAL RUBBER PLANTING WITH AND WITHOUT ORRAF

19861982 1983 1984 1985 Onwards… --------- (000 ha p.a.) --------------

Plantings Started - withORRAF ContinuingORRAF replants 50.0 50.0 50.0 50.0 50.0Other replants 1.5 1.5 1.5 1.5 1.5Other new planting 14.5 15.5 15.5 16.0 16.0

Total - with ORRAF 66.0 66.5 67.0 67.5 67.5

Plantings Started - withoutORRAFReplanting 4.0 4.0 4.0 4.0 6.5New planting 13.5 13.5 13.5 13.5 13.5

Total - without ORRAF 17.5 17.5 17.5 17.5 20.0

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5.03 The main impact of ORRAF's activities under the project would befelt in the 1990s and beyond. Estimated incremental production resulting fromORRAF-supported rubber planting commenced under the project and then continuedat the 1985 level of activity is shown in Table 5.2. Production of rubber inThailand is projected to increase by about 5% p.a. durin.g the 1980s althoughthe increase would be slightly lower with the ORRAF program than without it.This is because of the production foregone as a result of felling low yieldingstands (for replanting). However, once production f,rom plantings started from1982 onwards becomes significant (in the early 1990s), the effect of continu-ing the replanting program would become positive, and both total and incremen-tal production would increase substantially. In the situation. without OR-RAF,however, production would continue to increase until the early 1.990s but then,as the proportion of senile trees became increasingly large, it would fall.By the turn of the century production would be nearly half a million tons peryear higher with ORRAF continuing than with no replantilg program.

Table 5.2: PROJECTED THAI TOTAL RUBBER PRODUCTIONWITH AND WITHOUT ORRAF

1981 1985 1990 1995 2000 2005…_____--_ (-000 tons p.a )

Rubber production with ORRAF 553 669 823 1,025 1,204 1,334Rubber production without ORRAF

1982 onwards 553 679 834 838 729 639Incremental production resultingfrom continuing and expandingORRAF - -10 -11 187 475 695

5.04 Project Production. Investment in rubber production during theproject period is of equivalent cost to a complete replanting of 155,000 ha ofrubber./l On the basis of this area, total rubber productior directly attri--butable to project investment would be about 3.2 million tons over a 30--yearperiod, peaking at about 250,000 tons annually in the late 1990se This wouldbe equivalent to 20-25% of projected Thai rubber exports and about 3-5% ofworld trade in 1995.

/1 See Annex 5, para. 4.

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B. Organization of Marketing

5.05 Incremental rubber production would be marketed along the presentlines with farmers selling air dried sheets to local traders or else formingGMOs and dealing directly with wholesalers and exporters. In either case,exporters would normally buy graded unsmoked sheets which they wouldsubsequently export. Local traders would continue to buy scrap rubber whichwould be used as an input to the block rubber manufacturing plants. In

parallel with the project, it is expected that a greater number of GMOswill be established. These have proved to be a cost effective way ofbulking smallholders' production, and studies have indicated that when rubberis sold through them prices are competitive and reflect a fair proportion ofthe f.o.b. price adjusted for taxes.

5.06 Thailand has had a decade of successful experience in handlingexpanding rubber exports and has a number of well organized and effectiveexporters. Consequently no problems are foreseen in dealing with theprojected increases over the next 10 to 15 years (which are likely to be at alower annual rate than in the 1970s). The main market for incremental rubberis likely to be Japan although Thailand also sells to other major markets suchas Singapore, New York and London.

5.07 Quality of Thai rubber exports is adequate, but not high, with thebulk of its ribbed smoked sheet (RSS) exports being grade 3. Withincreasing quantities of rubber being marketed through the GMOs where thequality is relatively high (for smallholder production) it is anticipatedthat the average quality will improve over the next decade.

C. Product Prices

5.08 Financial prices are estimated on the basis of Bank projectionsfor world rubber prices adjusted for international freight, the domesticcost of marketing and the present level of taxation of rubber. Details aregiven in Annex 5, Tables 2 and 3. The average farmgate rubber price isbased on the assumption that 80% of output would be unsmoked sheet of RSS 3quality and 20% would be scrap. Estimated financial and economic /1prices for rubber are summarized in Table 5.3.

/1 The difference between "economic" and "financial" prices is duemainly to direct taxation (see Annex 5, Table 3).

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Table 5.3: FINANCIAL AND ECONOMIC PRICES OF RUBBER(Constant 1981 $ per kg)

Financial Economic1982 1985 1990 1982 1985 1990

Farmgate PriceUnsmoked sheet - RSS 3 qualityon the basis of weight sold /a 1.01 1.03 1.13 1.30 1.33 1.47

Unsmoked sheet - RSS 3 qualityon the basis of DRC 1.11 1.13 1.24 1.43 1.46 1.62

Average (DRC basis)/b 1.03 1.04 1.14 1.31 1.34 1.49

F.o.b. price RSS 3 1.50 1.53 1.69 1.50 1.53 1.69

/a Per kg material assuming 91% dry rubber content (DRC).

/b Assuming 80% of production is RSS 3 quality and 20% is scrap rubber.

D. Farm Level Financial Impact

5.09 The financial impact at the farm level of replantina with an ORRAFgrant will depend upon (a) whether the farmer uses family or hired labor,and (b) the system of exploitation (daily or alternate daily tapping). Perhectare financial budgets for rubber replanting have been prepared /1 and aresummarized in Table 5.4. Models A, B, and C represent the most likelyreplanting situations with the project, i.e. with ORRAF grants, and Models Dand E show the effect of replanting without ORRAF grants. Each model comparesreplanting with the alternative of continuing to tap senile rubber for upto nine years and then abandoning it. Rubber replanters receiving ORRAFgrants can be categorized approximately as Model A 20%, Model B 50% and ModelC 30%. Of the farmers who would replant without ORRAF, about 75% would fallinto Model D and 25% into Model E. As demonstrated in Table 5.1, the totalnumber of hectares replanted "with" project would be substantially larger than"without project."

5.10 Replanters receiving ORRAF grants and using hired labor (Models Aand B) would suffer an average reduction in farm incomes of about $120/ha/yearfor the first eight years after replanting. However, once the rubber is inproduction, and the initial investments in tapping and processing equipmenthave been made, net additional income would average about $930/ha/year for

/1 Project file Working Paper C.6.

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Table 5.4: PER HECTARE FINANCIAL IMPACT OF REPLANTING - SUMMARY DATA

With ORRAF grant (6 yrs) Without ORRAF grantModel A B C D E

Tapping system /a D2 Dl Dl Dl Dl

Labor hired hired Family hired Familyunpaid unpaid

Years in tapping 26 20 20 19 19

Average yield (kg/ha/tapping year) 1,170 985 985 785 785

Average net cashflow, years 1-8($/ha p.a.) /b -120 -115 -285 -180 -400

Average net income,years 10-20($/ha p.a.) 930 805 1,315 600 1,060

Note: Each model is based on budded stump plantings and no implementationdelays have been assumed.

/a D2 = alternate daily tapping (150 tappings p.a.); DI = daily tapping(200 tappings p.a.).

/b Takes account of income foregone as a result of felling old trees whichwould have continued to be tapped if replanting had not occurred.

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alternate daily tappers and $805/ha/year for daily tappers from the years10-20. These estimates are based on real labor costs increasing by 3% p.a.between 1981 and 1995. Should wage rates remain at the real 1981 levels theincrease in income during years 10-20 would be $965/ha/year for daily tappingand $1065/ha/year for farmers tapping alternate days. Farmers using familylabor, with no alternative employment opportunities (Model C), would befinancially worse off during the first eight years by an average of$285/ha/year, but would devote an average of 60 man-days/ha/ year less torubber because the per hectare labor requirement for replanting rubber is lessthan for tapping senile rubber. However, once the replanted rubber comes intoproduction their income would increase sharply and from years 10-20 wouldaverage about $1,300/ha/year with an additional input requirement of about150 man-days/ha/year compared to not replanting. The impact of replanting onhousehold income is discussed in paras. 6.02-6.04.

5.11 After taking account of grant income, the financial returns tofarmers undertaking ORRAF replants are attractive, and it can be expected thatthere should be little problem of uptake of the ORRAF replanting program.However, the financial returns for replanting without ORRAF grants (Models Dand E) are moderate, with the financial rate of return (FRR) for replantingusing hired labor being about 12.8%. This and the relatively high per hareduction in income during years 1-8 support the thesis that the rate ofreplanting using farmers' own resources (and at lower input levels) would beconsiderably lower without ORRAF than with ORRAF continuing its program.

6. BENEFITS AND JUSTIFICATION

A. Benefits and Beneficiaries

6.01 The proposed project has many attractive features:

(a) benefits are widely distributed, with more than half accruing tathe "Target Group";/1

(b) investment cost per person directly benefitted is low, averagingabout $400;

/1 In the context of World Bank projects in Thailand the "Target Group" isdefined as including those families with a per capita income (PCI) ofless than one third of the national average.

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(c) implementation capacity has already been fully demonstrated andthe number of persons directly benefitted large - estimated atabout one million;

(d) the economic rate of return (ERR) is sound, at 15%;

(e) risks are low in that the ERR is robust and the organizationimplementing the project is proven to be effective; and

(f) because the project covers a time slice of a continuing program,it is replicable.

Besides substantially reducing poverty from the early 1990s among farmers onrelatively poor soils in the rainfed agricultural areas of southern Thailand,project benefits would also include (a) substantially increased rubber produc-tion giving rise to higher exports and public revenues (through taxes);(b) increased employment opportunities for low paid agricultural workers; and(c) the initiation of efforts to develop the tree crop subsector nationwide.

6.02 Impact on Poverty among Rubber Smallholders. As a result of contin-uing with ORRAF during FY82-85, replantings would be initiated on about166,000 plots. Since some farmers would have more than one ORRAF-supportedplot on which activities commenced during FY82-85, the total number offamilies benefitting would be less than the sum of the number of plots.However, because of the use of hired labor, it is estimated that in aggregateabout 200,000 different farm families or about 1.2 million people woulddirectly benefit from ORRAF-supported activities, initiated in FY82-85 underthis project.

6.03 The median ORRAF replanter uses some hired labor (typically asharetapper), has 5 ha of land and net income equivalent to about $300 percapita in 1981 dollar terms. For such a smallholder, the effect of a typical1.3 ha ORRAF-supported replant, compared to the most likely "without project"situation (i.e., continuing to tap senile rubber and subsequently abandoningit) would be to reduce family income by an average of $15 per capita for thefirst eight years after replanting, but to increase it by an average of$90 per capita during years 9-28.

6.04 Table 6.1 below compares projected average and "Target Group" cut-off Per Capita Incomes (PCIs) for Thailand with the PCI for the median ORRAFreplanter with and without the project. With the project the median ORRAFreplanter would be likely to benefit from an increase in real per capitaincome between 1981 and 1995 of 87%, compared with 30% in the most likelywithout project case. Both with and without project, the median farmer isprojected to be within the "Target" Group. In 1981 just over half of all

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project beneficiaries would fall within this group. By 1995, without theORRAF program the proportion falling within the "Target Group" would beexpected to increase to about two thirds, and even with the project, it islikely that there would be a slightly increasing proportion of "relativelypoor" rubber farmers. The export tax on rubber (excluding the cess) isstill high in view of the low income level of rubber smallholders.It is equivalent to a 22% rate of taxation at the farm level, despite thegovernment's recent export tax reduction and the improvement in farmgateprices as a result of the recent devaluation. Without the tax, the 1995 percapita income of the median ORRAF replanter would be raised to $725 with theproject and $440 without the project. This raises a serious politicalquestion regarding the level of taxation of rubber in Thailand, especially inlight of the possible expansion of rubber development into the poorer areas ofthe North and Northeast.

Table 6.1: PROJECTED PER CAPITA INCOME OF MEDIAN ORRAFRUBBER REPLANTER /a WITH AND WITHOUT REPLANTING

(Constant 1981 $per capita)

1981 1986 1991 1995

Natl1. Average per capita income /b 930 1185 1515 1840"Target Group" PCI 310 395 505 615Absolute Poverty /c 180 180 180 180

Median per capita income with project- rubber 105 70 155 240- other crops /d 45 50 55 60- off-farm /e 150 175 215 260

TOTAL 300 295 425 560

Median per capita income without project- rubber 105 100 80 70- other crops /d 45 50 55 60- off-farm /e 150 175 215 260

TOTAL 300 325 350 390

/a Based on replanting one tranche of rubber in 1982 and a second tranchein 1992 with ORRAF.

/b $930 in 1981 - projected growth in real terms 5% p.a.

/c $180 in 1981 assumed to remain constant.

/d Assumed to increase at 2% p.a. in real terms.

/e Assumed to increase in parallel with unskilled wages - 3% p.a. 1981-1988;5% p.a. 1988-95.

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6.05 The impact of the project on Thailand's rubber production would besubstantial (see paras. 5.02-5.04). By the turn of the century incrementalrubber production worth over $400 million annually would result from havingcontinued with ORRAF beyond 1981. Production directly attributable toinvestment under this project would be worth a total of about $5.0 billionover a 30-year period. As Thailand is expected to export over 90% of itsrubber production, all incremental production is considered as being forexport. Consequently, Government revenues stemming from taxes on exportedproduction directly attributable to project investment would total about$1.1 billion over 30 years and peak at $96 million per year ($63 millionexport tax, $23 million cess) at the current level of taxes and cesses,respectively.

6.06 The long-run employment impact of the 1982-85 ORRAF program would beto increase agricultural employment from 1991 to 2011 by an average of 80,000man-years p.a. in the rubber producing areas (Annex 5, Table 11). However,after increasing slightly in the first three years of the project (by about9,000 man-years per year) direct agricultural employment would be reducedduring 1985-1990 by an average of about 25,000 man-years per year. This isbecause at present price levels a large proportion of farmers (estimated atthe equivalent of 60%) would be likely to continue tapping senile trees in the"without project" situation for 8-10 years after trees would have been felledand replanted "with project." Typically, labor requirements for tapping matureor senile rubber are greater per year than the average labor requirementsduring the immature period of young rubber.

6.07 Analysis of farm survey data from smallholders participating in theORRAF replanting program indicates that: (a) on average income from paidemployment amounts to about half of net family income; and (b) many rubberfarmers employ hired labor for tapping. From this data and field observa-tions, it appears that labor is quite mobile and there are adequate employmentopportunities in the rural areas. Thus, no problems are foreseen in absorbinglabor released by the project in the medium term, or reactivating it in the1990s. In addition to affecting employment at the farm level, about 11,000man-years of ORRAF employee labor would be required to implement the project;about 100 personnel would be employed in the coconut seed gardens; and extrastaff positions would be created in RRC. Incremental jobs in the marketingand processing industries required to handle the rubber produced would peak atabout 4,000 in 1996. Overall, the equivalent of 1.2 million man-years ofemployment would result from project investments at an equivalent cost of$350 per man-year of employment created.

6.08 One of the important long-term benefits of the project would be itsimpact on the development of the tree crop subsector. The study of thefinancial, technical and institutional implications of tree crop developmentnationwide would focus on the development of new rubber in the country'spoorest areas, the North and Northeast, and of hybrid coconut and its inter-crops in the South. This development has the potential to significantlyinctease farmers incomes in those areas. A pilot scheme for rubber newplanting would also be tested under the project, while training of OAE staff

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in policy aspects of tree crop development, processing and marketing, and ofORRAF staff in coconut cultivation, would further prepare for the proposeddevelopment of the subsector. In addition to the project's overall impact onthe tree crop subsector, the proposed strengthening of RRC would specificallybenefit rubber development. It would allow RRC to carry out extensiveinvestigations on the suitability of rubber as a crop in the North andNortheast of Thailand as well as intensifying its research and training rolein the South. In the long run, the yield enhancing recommendations of the RRCwould benefit most of the half million rubber producing farm families inThailand, and could well lead to expansion of rubber in new areas such as therelatively poor Northeast.

B. Rate of Return and Sensitivity Analysis

6.09 The economic rate of return is estimated to be 15% for the rubber-replanting component, the cost of which is about $280 million, representingabout 98% of the total project cost.

6.10 The ERR is calculated on the basis of comparing, at economic prices,forecast agricultural production and its associated benefits and costsdirectly attributable to project investment and a "without project" situationunder which it is assumed that ORRAF would take on no new commitments afterthe end of 1981.

6.11 Forecasts of yield and input requirements are made on the basis ofpresent levels of technology. This is equivalent to the assumption that anychanges in cost/benefits due to nonproject factors would be the same in boththe with and without project cases. Economic prices are calculated on thebasis of financial prices adjusted for taxes and subsidies. In line withWorld Bank commodities division forecasts, the prices of fertilizer and

rubber are projected to increase over time. Furthermore in the light of -

the rapid growth of the southern Thai economy, economic labor costs (i.e.,shadow wages, net of productivity gains) are projected to increase at 3% p.a.in real terms from 1981-1995. Other project costs are assumed not to changein real terms over the 30-year period of project analysis. Details of thederivation of economic prices and cost and benefit streams are described inAnnex 5.

6.12 In order to test the stability of the ERR of the project a numberof sensitivity tests were carried out, the principal of which are summarizedin Table 6.2. These sensitivities are based on variations in costs/benefitsof the replanting part of the project, which accounts for about 98% of quanti-fiable cost and benefits. Thus they are a close proxy for sensitivity tests

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Table 6.2: SENSITIVITY ANALYSES - RUBBER REPLANTING

Case ERR (%)

1. Base case 15.32. Price of rubber down 20% 13.33. Gross benefits down 10%; all incremental costs up 10% 12.64. Labor costs increase at 5% per year for 30 years in real terms 12.45. All "with project" costs increase by 10% 13.96. Labor costs remain constant in real terms 16.47. No tapping/replanting without project 16.28. Replanting without project doubles 14.3

on the whole project. Overall the ERR is satisfactory, and the viability ofthe proposed project is relatively insensitive to changes in costs orbenefits. Switching values, calculated on the basis of an opportunity cost ofcapital (OCC) of 12%, indicate that gross benefits could fall by up to 17% andthe project would still have a positive Net Present Value (NPV). The range ofrubber prices at which the project would remain viable is wide, and a fall of29% would be required to bring the ERR below 12%. The switching values forindividual cost items at 12% OCC are 79% for labor, 101% for materials and415% for management. Because the project releases labor in the short run, butrequires extra labor in the long term, the effect of changing labor prices bya constant factor is minor. However, if the real cost of labor were toincrease over time, by a greater rate than the 3% projected, the ERR wouldfall. Within the likely range the effect would be relatively small; even witha real increase in labor costs of 5% per year for 30 years, the ERR would onlyfall to 12%. The per hectare rates of return and net present values ateconomic prices for the various components of the project are presented inAnnex 5.

C. Additionality

6.13 As the project comprises the whole ORRAF program for FY82-85 itis analyzed on that basis, i.e. "with ORRAF" compared to "without ORRAF."However, in that ORRAF is a semi-autonomous body, it is likely that evenwithout a Bank-financed project it would probably continue, albeitat a lower level of activity. The mission's best estimate is that withoutoutside support (i.e., World Bank or special Thai Government funds) but withno change in the cess rate or real level of grant, ORRAF could continue togrant aid new replantings during FY82-85 at about 30,000 ha/year. Againstthis background the additional impact of the project would be substantial.

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It would benefit an additional 700,000 people, and would lead to theproduction of $1.3 billion of additional rubber over a 30-year period, peakingat $150 million/year in 1999.

D. Cost Recovery

6.14 It is estimated that the ORRAF grant represents about 75% of thecost of replanting one hectare of rubber or about 50% of the farmer's incre-mental costs of replanting when income foregone is taken into account. Atforecast export prices, and assuming that present formulae for the cess andexport taxes continue to apply to the noninflated price of the product, thetotal ORRAF grant cost, without interest, would on average be recovered by thecess over the life of the replant. The cost recovery ratio would be about1.1 assuming an opportunity cost of capital of 12%, if both export taxes andcess are considered as "cost recovery." In sum, project costs would be morethan fully recovered by taxation specific to the rubber industry.

E. Impact on Women

6.15 Women play a major role in agriculture in Thailand and particularlyin the rubber industry. Women represent about 30% of the population which isactively engaged in rubber replanting activities in the South and Southeast.They assist mainly in rubber tapping, latex collection, maintenance andweeding operations, and a small percentage own and manage rubber holdings.Women are also employed in the rubber factories, where they represent themajority of the workforce. While no component in the project is designedspecifically to differentiate between beneficiaries by sex, the increase inrubber replanting activities and the resulting expansion in supportingservices and industries would create substantial employment opportunities forwomen in the long run.

6.16 In ORRAF, women who are well represented at all levels compriseabout 60% of the total staff employed at headquarters and about 20% in theprovincial offices. There is no distinction in salaries and wages between thesexes. It is expected that further employment opportunities would be madeavailable to women in ORRAF with the expansion in its organization and itsneed for additional staff during the project period.

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F. Environmental Impact

6.17 The project would mainly replace existing old rubber with newrubber, and less than 10% of the area to be replanted would need terracing toprevent runoff and erosion. The scattered nature of the plantings would limitthe impact of such runoff and of dissolved plant nutrients. Intercroppingwould be confined to the flat and slightly undulating land to minimize risk ofsoil erosion. No major rubber processing facilities are to be constructed;rubber processing would be mainly confined to the individual holdings.Fertilizers would be applied to the tree crops to avoid depletion of soilnutrients. The small amounts of agrochemicals used would have no adverseenvironmental effects.

G. Risk

6.18 The level of risk associated with this project is low. The presentoutlook for the world rubber market is favorable, and there is littlelikelihood of significant adverse price changes. The implementing agency,ORRAF, has already built its capacity and is effectively implementing alarge-scale rubber replanting program. ORRAF staff are well accepted by thefarmers and normally are able to carry out their work without hindrance.

6.19 The main project risk is not that the project would fail to show areasonable rate of return but that its rate of development could be retardedby extraneous factors. The most significant is the possibility thatinsurgency in South Thailand would become more widespread and ORRAF fieldofficers would not be able to carry out tasks effectively in an increasinglylarge area of the provinces in Which they work. This would result in a lowerlevel of inputs, and consequently yields would be lower. However, theprobability of the project being affected by insurgency on a regionwide basisis considered low, although it can be expected that there will continue to bescattered minor problems in the more remote areas. In sum, the main componentof this project which provides grants and technical support for replantingsmallholder rubber has a very high chance of success.

6.20 The impact of the tree crop development study to be carried outunder the project would depend on Government-s commitment to carry out therecommendations resulting therefrom. If implemented, the development of newrubber planting in the Northeast could constitute an important factor inalleviating poverty in the country's poorest Region by helping to increase

smallholders' incomes.

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7. AGREEMENTS REACHED AND RECOMMENDATION

7.01 Assurances were obtained from Government that:

(a) it would (i) review the staffing, organization and financingneeds of the RRC and submit the findings of the review to theBank by June 30, 1982 for its comments; and (ii) implementsuch measures as it deemed appropriate after consultation withthe Bank (para. 4.01);

(b) it would periodically exchange views with the Bank on thesuitability of the terms and conditions applicable to theprovision of funds to smallholders for the development oftree crops other than the replanting of rubber (para. 4.03);

(c) it would ensure that the DOA facilities at Sawii, Kanthuli andNai-Chong would be made available for the training of ORRAF staff inthe cultivation of coconut and its intercrops (para. 4.05);

(d) it would (i) allow ORRAF to adopt a policy whereby the level of thegrant would be reviewed annually, and raised when necessary toreflect changes in input prices, wage rates and technicalrecommendations made by RRC; and (ii) simplify the procedures forapproving adjustments in the grant level (para. 4.10);

(e) after project completion it would provide ORRAF with thenecessary funds to bring into production all rubber replantingssupported under the project (para. 4.11);

(f) it would periodically review with the Bank, the level of the rubbercess, its allocation and the incentives of smallholders toparticipate in rubber production, and would exchange views withthe Bank prior to making any changes therein. Government wouldalso, from time to time, exchange views with the Bank concerningthe level of taxes and duties on rubber production, marketing andexport (para. 4.11); and

(g) it would ensure that DOA, LDD and OAE would: (i) maintain in accord-ance with sound accounting practices project accounts covering allproject expenditures; (ii) have project accounts for each fiscalyear audited by independent auditors acceptable to the Bank, inaccordance with appropriate accounting procedures consistentlyapplied; (iii) submit to the Bank within six months of the end ofevery fiscal year during project implementation a certified copy ofthe auditor's report including a separate opinion by said auditor inrespect of disbursements made on the basis of statements ofexpenditure (para. 4.14).

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7.02 Assurances were obtained from ORRAF that:

(a) it would exchange views with the Bank with respect to itsorganizational structure and the numbers, qualifications andexperience of staff required to carry out its duties, shouldsuch duties be substantially expanded (para. 4.06);

(b) it would: (i) at all times, employ qualified staff in adequatenumbers to carry out the duties assigned to it; (ii) beforemaking any new appointment to the position of Director or DeputyDirector, afford the Bank a reasonable opportunity to exchangeviews on the qualifications and experience of persons consideredfor such positions; and (iii) continue to employ a SeniorAgricultural Advisor for the implementation of the Project, whosequalifications, experience and conditions of employment would besatisfactory to the Bank (para. 4.09);

(c) it would establish an economic and policy working group withinits Planning and Monitoring Unit, which would regularly update thesocio-economic survey, and submit, by the end of each fiscalyear, the findings of such group to the Bank for its review andcomment (para. 4.12); and

(d) it would: (i) maintain in accordance with sound accounting prac-tices, records of its financial and operational activities;(ii) have its accounts for each fiscal year audited by independentauditors acceptable to the Bank, in accordance with appropriateauditing procedures consistently applied; (iii) submit to the Bankwithin six months of the end of every fiscal year during projectimplementation a certified copy of the auditor's report includinga separate opinion by said auditors in respect of disbursementsmade on the basis of statements of expenditure (para. 4.13).

7.03 With the above assurances, the proposed project would be suitablefor a Bank loan of $142 million, with a 20-year maturity, including a graceperiod of 5 years. The Borrower would be the Kingdom of Thailand.

-43 ANNEX 1Page 1

THAILAND


Rubber Cultivation and Production

Rubber Production

1. Over 80% of Thailand's rubber is grown in peninsular Thailandwhere it is the principal crop. Rubber cultivation spread to the Southeastin the early 1970s; test plantings in the North and Northeast have onlyrecently been established, but preliminary indications are that growthexceeds expectations. Over the past decade, rubber exports grew at a rateof about 7% p.a. In 1979, rubber exports exceeded 500,000 tons at a valueof over $600 million (Table 1). Rubber together with rice, cassava andsugarcane form the most important foreign exchange earners in the agricul-tural sector. If the present favorable trend in prices continues, rubbercould well become the lead foreign exchange earning crop.

2. Over 90% of the rubber is grown by smallholders with holdings of8 ha or less. In the past, unselected seedlings with low yields potentialwere planted, inputs were hardly used and tapping was done daily. Processingwas carried out at the farm, and low grade rubber was produced fetchingrelatively low prices. However, with the introduction of the acceleratedrubber replanting program in 1960, modern technology was adopted. Highyielding clonal plant material, use of fertilizers during immaturity andcorrect husbandry practices have led to nearly a doubling in rubber exportsin the last decade. Improvements in processing and marketing through GroupMarketing Organizations (GMOs) have resulted in the production of betterquality sheets. The high proportion of scrap rubber exports has beendrastically reduced since 1974 due to processing into block rubber (Table 1).

3. Latest estimates place Thailand's total rubber area at about 1.6million ha (end-1980), distributed as follows:

Immature Mature Old/senile Total…------------------ ('000 ha) -- …---------------

Unselected seedlings 10 410 420 840Clonal rubber

ORRAF replantings 220 120 - 340New plantings 115 325 - 440

Total 345 855 420 1,620

- 44 - ANNEX 1Page 2

Areas replanted under ORRAF grant are shown in Table 2. It appears thatwith a replanting rate of 50,000 ha p.a. the old senile rubber stand (mainlyunselected seedlings) will be replanted by about 1995. Replantings after1995 would begin to include ORRAF's replantings that started in the early1960s and also rubber that was established by farmers using their ownresources.

4. Smallholders Incomes. A recent survey (1980) of 1,300 ORRAF rubberreplanters, operating holdings of an average size of 7 ha, indicates thataverage gross family income was about $2,500 in 1979; $1,500 from farmincome and $1,000 from other sources, with farm expenses amounting to about$700. Net per capita income (family of 6-7 members) was $250-300 for 1979.About 75% of agricultural income was derived from rubber sales; 10% fromannual crops, and the remainder from perennial crops (7%) and livestock (8%).

5. Most ORRAF replanters (70%) have holdings varying from 2 to 10 hawith per capita incomes between $160 and $400, respectively. In 1979about 10% to 20% - mostly those with holdings of 2 ha or less - fell in the'absolute poverty' group with per capita incomes below $160. Rubberproducers who have not received ORRAF assistance typically have similarlevels of family incomes, but a recent survey indicates that the proportionof their agricultural income derived from rubber is about 46%, compared to75% for ORRAF participants.

6. Technical Specifications /1 - Nurseries. About 75% of clonal plantmaterial requirements is provided by ORRAF and private field nurseries /2 inthe form of bare root budded stumps, or polybag budded stumps, and 25% isplanted to seed at stake followed by field budding. Quality of plantmaterial is assured through RRC certification; RRC inspectors twice yearlyinspect all nurseries and remove plants not true to label.

7. Land Preparation. About 80% of land clearing is done by hand,occasionally resulting in labor shortages, delays in field operations and inincomplete planting programs. To accelerate land clearing operations,replanters individually or in groups either purchase chainsaws or contractfelling operations to chainsaw gangs at a cost of about $62.50/ha (B 200/rai).Terracing is needed over about 10% of the area. Rubber planting is done inthe rainy seasons of May-July or October/November each year.

/1 The standards given would be maintained for both the rubber replantingand new planting programs.

/2 Private nurseries are owned and operated by estates and smallholderswho produce plant material under contract arrangements with ORRAF.

- 45 ANNEX IPage 3

8. Planting. The Bank suggests that clones GTI, RRIM600, PR255 andPR261 be planted on the basis of their performance in Malaysia andIndonesia. RRIM600, PR255 and PR261 are potentially high yielding clonesunder optimal conditions, but are less tolerant to poorer soil conditions.GTI has done well in Indonesia, Malaysia and Thailand. Since it performsrelatively better than the other clones in hilly situations and when plantedat relative high density, it is proposed that GTI, PR255 and PR261 eachbe planted in about 30% of the area, with the proportion of RRIM600 kept to amaximum of 10%. The selected high-yielding clonal plant material would beplanted either as seed at stake followed by field budding, budded stumps orpolybag budded stumps, the latter being preferred for its vigorous growth andshorter immaturity period.

9. Planting would be done at a density of 500 trees/ha spaced at3.0 x 6.7 m or 3.5 x 5.7 m on flat and undulating land. The latter spacingwould ensure that the canopy would close in about 3-4 years, resulting in theshading out of weeds and a reduction in maintenance cost. At this density,approximately 420 trees would become tappable in 6 years for polybag buddedstumps, 6.5 years for budded stumps and 7 years for seed at stake plantings,when full inputs, especially fertilizers, are provided. Assuming a task ofabout 600 trees per tapping day and the adoption of alternate daily tapping,one labor unit could exploit about 3 ha of planted rubber, with someassistance from other family members.

10. Intercropping. About 80% of the smallholders intercrop theirrubber stands with annual or short-term perennial crops during the firstyear, but only about 20% continue intercropping during the second year, andalmost none thereafter. Intercropping is acceptable wherever the terrainand soil conditions are suitable as it provides the farmer with extra incomeduring the period of immaturity. At the end of one or two years in theintercropped areas, or from the outset in all other replanted areas, aleguminous cover crop is established by about 30% of the smallholders.Cover crop seeds are readily available.

11. Maintenance and Tapping. Maintenance is routine and consistsmainly of timely applications of fertilizer, weeding, and disease controlunder the guidance of ORRAF inspectors who ensure that planters andreplanters qualify for grant payments. The major disease, present mainly inthe western part of Southern Thailand, is Phytophthora botryosa leafdisease; in addition, Phytophthora spp cause black stripe panel disease.The most effective preventive measure is to plant the disease-tolerant cloneGTI (all other clones used in Thailand are more susceptible) and to crownbud clone RRIM600 with GT1 in the Phytophthora susceptible areas.Fertilizer is applied at the time of planting, i.e., 125 gm (63 kg/ha) rockphosphate placed in the planting hole. After planting, fertilizers areapplied at regular intervals reaching a peak in the fourth year at about 415kg/ha of a mixed fertilizer. Fertilizer application in the mature phase is


recommended, since without it the farmer is likely to compensate for reducedyield by more intensive tapping (i.e., daily rather than every other day asrecommended), thus shortening the tapping cycle to about 19 years, and thereplanting cycle to 26 years. It is expected, however, that only about 20%of the rubber replanters would continue fertilizer applications duringmaturity and adopt the less intensive tapping system. Yield projections forthe different tapping systems and levels of inputs are presented in Table 3.

12. Processing and Marketing. The main requirement in the production ofhigh quality sheet rubber is cleanliness during tapping, collection, andprocessing. The technique is straightforward and well understood by small-holders. Trees are tapped in the morning, and one tapper would be able totap, collect and process latex into wet sheet from an area of 1.5 ha during aworking day extending from about 6 a.m. to 12 noon. Most of the unsmokedsheet produced will continue to be marketed through existing marketingchannels uhich function efficiently. Many local GMOs have been establishedand are effective in improving the quality of rubber produced.

13. About 90% of the rubber in South Thailand is processed by thesmallholders into unsmoked sheet (wet sheet), since the present premium forblock rubber does not cover the additional investment and processing costsof conversion from unsmoked sheet into block rubber, except in the case ofscrap rubbers. The unsmoked sheet is sold to small village traders orthrough GMOs, to large dealers who process the rubber and export it asRibbed Smoked Sheet (RSS) grades 3 and 4. Several independent marketingstudies have shown that farmers obtain fair prices for their rubber producedat GMOs, representing 80-90% of f.o.b. prices net of taxes.

14. Yield Stimulation. In the 3 to 5 years preceding replanting, itwould be feasible to maximize returns from low-yielding rubber stands throughethrel stimulation combined, ultimately, with slaughter tapping. Sincesmallholders generally replant their rubber holdings in stages, theadditional income derived from stimulation and slaughter tapping wouldassist them to bridge the period of decreased income when only part of theholdings is productive. ORRAF is reviewing the possibility of establishingpre-replanting application procedures to assist smallholders in setting up aprogram of exploiting the old rubber trees prior to felling.

- 47 -

ANNEX 1Table 1

THAILAND


Rubber Exports by Type

RSS /a TTR /b Other /c Total /dYear mt x 000 % nit x 000 % mt x 000 % mt x 000 $ mil.

1970 229.6 82 0.3 - 49.2 18 279.2 111.41971 255.4 83 1.6 1 48.3 16 307.3 94.41972 269.7 83 1.8 1 53.0 16 324.4 94.31973 308.1 84 2.2 1 54.9 15 368.2 209.81974 306.8 84 7.0 2 51.3 14 365.2 218.31975 264.4 79 32.5 10 37.9 11 334.7 174.81976 286.2 77 48.7 13 38.1 10 372.9 263.71977 302.1 75 63.7 16 38.2 9 404.0 310.11978 338.2 77 69.8 16 33.7 8 441.8 397.31979 393.0 76 94.3 18 30.5 6 517.8 613.5

/a Ribbed Smoked Sheet grade 3 comprises about 65% of this type followed byRSS4 at about 23%.

/b Thai Tested Rubber grade 20 comprises about 90-95% of this type and thebalance is mainly made up by TTR 50. TTR production increased significantlysince 1975.

/c Including mainly brown crepe, air dried sheets and scrap rubber.

/d Rubber exports show a growth rate of 7.1% in volume and 6.7% in value (realterms) over the period 1970/79.

ANNEX 1- 48 - Table 2

THAILAND


Rubber Area Replanted, 1960-80

AverageReplant- Actual No. of size of

Approved Approvals/ ing replanted small- replantedApproval year area applications year area holders plots

(ha) (M) /a (ha)/b (ha)

1960-73 168,848 - 1960-74 163,954 97,000 1.71974 19,836 79 1975 18,932 15,300 1.21975 26,324 80 1976 23,254 17,050 1.41976 27,234 82 1977 25,664 17,900 1.41977 38,753 81 1978 36,301 28,900 1.31978 51,882 79 1979 44,477 36,400 1.21979 53,382 93 1980 38,697 33,100 1.21980 41,258 79 1981 65,600/c - -

/a Most of actual replantings take place a year after approvals.

/b Including type 3 replantings (fruit trees, etc.).

/c Includes area approved in 1979, 1980 and 1981.

THAILAND


Basis for Rubber Yield Projections (kg/ha)(Density: 500 trees/ha at planting)

S/2.d/2.10m/12.83X; S/2.d/1.20d/30.10m/12.111%; S/2.d/1.20d/30.1Om/12.111% /b Abandonedfull inputs; 6 years inputs; No inputs except minor during rubber (mainly)

150 tappings/tree/annum 200 tappings/tree/annum year 1-3- 200 tappings/tree/annum seedlings)

Planting Tapping No. trees Grams/tree/ Yield No. trees Grams/tree! Yield No. trees Grams/tree/ Yield Project Yield

year (1) year /a per ha tapping (kg/ha) per ha tapping (kg/ha) per ha tapping (kg/ha) year (kg/ha)

8 1 420 7.75 490 415 6.75 560 - - - 1 425

9 2 415 13.2 820 405 10.0 810 385 6.0 460 2 410

10 3 410 16.9 1,040 395 12.5 990 395 8.5 670 3 390

11 4 405 19.2 1,165 384 14.9 1,145 400 10.5 840 4 370

12 5 400 20.8 1,250 373 16.75 1,250 388 12.25 950 5 350

13 6 395 22.5 1,330 362 18.5 1,340 376 13.75 1,035 6 325

14 7 390 24.0 1,400 350 20.25 1,420 364 15.25 1,110 7 300

15 8 385 25.5 1,470 338 21.5 1,455 352 16.25 1,145 8 275

16 9 380 27.0 1,540 326 20.9 1,360 340 17.0 1,155 9 250

17 10 375 27.0 1,520 314 19.9 1,250 325 16.4 1,065

18 11 370 26.5 1,470 302 18.9 1,140 310 15.5 960

19 12 365 26.0 1,425 290 17.8 1,030 295 14.5 855

20 13 360 25.5 1,375 278 16.7 930 280 13.5 755

21 14 355 25.0 1,330 266 15.7 835 265 12.5 660

22 15 350 24.5 1,290 254 14.6 740 250 11.7 585

23 16 345 24.0 1,245 242 13.6 660 235 10.8 510

24 17 340 23.5 1,200 230 12.8 590 220 10.0 440

25 18 335 23.0 1,150 21F 20.0/c 870 205 9.5 390

26 19 330 22.0 1,090 206 18.0oT 740 190 20.n/c 760

27 20 325 21.0 1,025 1Q4 15. OT 580 175 17.0/c 595

28 21 320 20.0 96029 22 315 19.0 90030 23 310 18.0 840

31 24 305 25.1/c 1,15032 25 300 23.37 1,050

33 26 295 21.0/c 930

Total 30,455 19,695 14,940 3,095

Average p.a. (26 years) 1,170 (20 years) 985 (19 years) 785 (9 years) 345

/a Polybag budded stumps planted at the end of year 1 come into tapping early year 8; bare root budded stumps in mid-year 8 and seed at

stake planting early year 9.

/b Assuming an immaturity period of 7 years instead of the normal 6 years for polybag budded stumps.

7W High-level tapping combined with ethrel stimulation. a >

-50 ANNEX 2Page 1

THAILAND


The Office of the Rubber Replanting Aid Fund Board

Organization, Staffing and Training

1. The organizational structure of ORRAF is shown in Chart 22200.ORRAF is governed by a Board, whose Chairman is the Minister of the MOAC.The Board sets policy and approves structural and procedural changes aswell as annual programs and budgets. The Director of ORRAF (appointed bythe Chairman) is assisted by two Deputy Directors, one for finance andadministration and one for technical operations. Twelve provincial officesadminister grant payments, supervise replantings and provide extensionservices during the development phase. Under the Bank's Rubber ReplantingProject (Loan 1243-TH), ORRAF engaged the services of consultants in 1978to review and make recommendations on its organization and managementstructure, personnel and staffing requirements, management informationsystems and organization of operations. The resulting recommendations havelargely been followed, and ORRAF's present organizational structure issatisfactory for current operations.

2. About 76% of ORRAF's 1,543 staff members work in the provincialoffices. Staff remuneration compares favorably with Civil Service standards,and this, plus the flexibility provided by promotions and transfers, hashelped greatly in the recruitment and retension of high quality staff. Thesize and distribution of the staff are adequate to carry out ongoing programssuccessfully.

3. The training programs offered by ORRAF, both for its own staff andfor the rubber replanters are excellent. Regular technical training programsare offered to development and extension staff involved in field operations,while courses in management and administration are aimed at staff atheadquarters and in the provincial offices. Overseas scholarships and studyand observation tours have also been offered to qualified staff, with financ-ing from a UNDP Bridging Project. In addition, ORRAF courses providedthrough about 280 GMOs have trained about 6,500 smallholders in improvedprocessing techniques and bulk selling. With the exception of a recentlyinitiated coconut planting course for extension staff, all technical trainingcourses have been in rubber development.

Financial Position

4. ORRAF has three sources of funds: the rubber cess; interest incomeon deposits; and subventions from Government which include Bank and CDC loans.At the end of FY81, the total cash reserve available to ORRAF amounted toabout $26.1 million (B 600 million) (Table 1). The structure of the Fund is

- 51 -ANNEX 2Page 2

described in Table 2. Revenue from the replanting cess passes directly fromcustoms to ORRAF, which has been able to accumulate fairly largereserves because actual replantings and disbursement of grants have beenslower than estimated. Due to the rapid accumulation of cash balances overthe past six years, interest income has also been fairly substantial,amounting to about $3.7 million in FY81. This has been used mainly foradministrative expenses, and in FY81 covered about 30% of administrativecosts.

5. ORRAF's present financial position is satisfactory for currentoperations. The separation of administrative expenses from grant paymentsis sound financial practice, and no change is envisioned in the near future.Since the expansion of ORRAF's activities into rubber new planting, asproposed under the project, would be limited to technical and economicmatters, no changes are required in ORRAF's financial structure for thisproject, although a Government subvention to cover the costs of theadditional expenses incurred through the assumption of extraresponsibilities would be required.

6. The attached tables provide details of ORRAF's financial positionand staffing.

- 52 -ANNEX 2Table 1

THAILAND


ORRAF Cash Flow Summary, 1960-81(B million)

---------------------------- Actual -----------------------------Total Total Estimated

1960-74 1975 1976 1977 1978 1979 1960-79 1980 1981

SourcesCess (100%) 1,663 173 208 320 334 532 3,230 688 537lnterest 339 43 31 31 45 53 542 80 85Government subventions 99 29 52 178 147 32 537 - -Loans - World Bank - - - 34 59 169 262 313 ) 297

- CDC - - - 20 6 32 58 38)

Subtotal 2,101 245 291 583 591 818 4,629 1,119 919

UsesGrant payments

Cash and materials 1,105 232 288 299 401 480 2,805 658 837Indirect expenses

(through SubsidiaryFund) 49 9 15 5 (5) 6 79 (11) 12

Rubber Research Center /a 72 - 9 4 14 61 1,60 34 61Administration expenses

Fixed assets 23 - 5 5 - - 33 7)Contributions to staffwelfare and pension fund 12 3 6 4 4 4 33 8

Personnel expenses 158 38 46 51 55 87 435 115Office expenses 64 6 5 7 11 11 104 17 ) 245Miscellaneous expenses - - - - - - - -

Fixed assets and net currentassets - Increase/(Decrease) 30 27 49 (46) 81 130 271 216

Subtotal 1,513 315 423 329 561 779 3,920 1,044 1,155

Funds Available to ORRAFYearly 588 (70) (132) 254 30 39 - 75 (236)Cumulative 588 518 386 640 670 709 709 784 548

Staff Welfare and Pension Fund /bYearly 10 3 6 4 4 4 - 8 13Cumulative 10 13 19 23 27 31 31 39 52

Total Cash in Hand and at Bank perORRAF balance sheet (cumulative) 598 531 405 663 697 740 740 823 600

/a Actual payments made by ORRAF. The 5% cess allocation in a given year is not entirely disbursed in that year.

/b Of the B 12 million transferred to the Pension Fund, B 2 million was paid out during 1960-74, leaving abalance of B 10 million.

- 53 - AMEX112

THAILAND

SECOBD TREE CROPS PROJECT

Structure of ORRAFEs Funds 1960-81(R million)~

Total EstimatedFinancial years 1960-74 1975 1976 1977 1978 1979 1980 1981

Unallocated Fund (Interest)Annual interest earned 339 43 31 31 45 53 80 85Transfers to:

Replanting Aid fund 50 10 11 - - - - -SuboIdi.ry Aid fund 76 6 26 -Land & Boilding Fund 57 17 1 1Ad=inistrotion Fond 109 - 1 37 12 31 72 189Welfare 4 Pension Fond 1 - - - - - - -

293 33 39 38 12 31 72 189

Anousl Bulanre 46 15 (8) (7) 33 22 8 (104)

C-olstive 3slanco 46 56 48 41 74 96 104 -

Roplanting Aid FundCeos (90% allocation) 1,497 156 188 288 302 479 620 483Trannf-rs from

Unallocated Fund 50 - - - - - - -Subsidiary Fund - 25 26 - - 64 11 12Adniuintration Fund - - 11 - - 35 - -

Lorns - World Bonk/C.m.on..alth-evelopnont CorForation - - - 54 59 189 336 281

Cnvornoent Sob-entions - - - 120 25 - - -

Subtotal 1.547 181 225 462 386 767 967 776

Crants - Cosh and Materialo 1,105 232 288 299 401 486 658 837

Annual nalanco 442 (51) (63) 163 (15) 261 309 (61)

Cuoolativ- B6alon 442 391 328 491 476 757 1,066 1,005

Rubber R .earuh Conter (RRC)Cess (5% tilonation) 03 8 10 16 16 27 34 27Paid by ORRAF to RRC 72 - 9 4 14 61 34 27

Aonual Balance 11 8 1 12 2 (34) - -

Cunola.ti- Beal..o 11 19 20 32 34 - - -

Saboidiary Aid Fund (7ndirour inponon)Trunsforn fron Unollocsted Fund 76 10 26 - - - -Tranoforn fr.. Ad=iotstrotion Fund 23Cov.rn.ont Subventiona - 7 - 25 21 - -

Subtotal 99 17 26 25 21 - -

Trannforn to Replanting Aid Fund - 25 26 - - 64 1i 12Annool Eopenditur-s/(Rooipts) 49 9 15 5 (5) - (11) (12)

Subtotal 49 34 41 5 (5) 64

Anoual 6laonue :0 (17) (15) 20 26 (64) -

Cu=olative Bslonce 50 33 I 38 64 -

Land 4 Buildings FundTrannEorn from Unallonated Fond 57 6 1 1 - -Tranniern to Adninintration Fund 6 2 34 13 1 9

Annual Balance 51 4 (33) (12) (1) (9) -

Cunulati-o balnue 51 55 22 10 9 -

Fixod Asoots & Net Currents Assets

Annual (Innreno.)/De-.r.ne (30) (27) (49) 46 (81) (130) (216) (58)

Cumulative Balance (30) (57) (106) (60) (141) (271) (487) (545)

Adninistration FundCeon (5% allncation) 83 9 10 16 16 43 34 27Tranofrs fEro Unallocrated Fund 109 17 1 37 12 31 72 189Trannfers fEro Land A Bldg Fund 6 2 34 13 1 9 - -Loano - World Bank - - - - 6 12 13 16

no-eronont Sobvention 99 22 52 33 101 15 - -

Subtotal 297 50 97 99 136 110 121 232

Tr-onfers to:Replantill Aid Fund - - - - - 35 -SobaidLary Aid Fund 23 - - - - - -Welfre 6 Pensino Fund 11 3 6 4 4 4 8 13

Subtotal 263 47 91 95 132 71 113 219

Enpcnses - Pers.onel 151 38 46 51 5 87 115 1Office 64 6 S 7 11 11 17 ) 232Asets 23 - 5 5 - - 7)Miscellan.o.. - - - - - - - 3

Subtotal 245 44 56 63 66 98 139 232

Annual balanue 18 3 35 32 66 (27) (26) (13)

Cunolative Balance 10 21 56 88 154 127 101 88

Fund Balances Av-ilable to ORRAF 589 518 386 640 670 709 784 548

Staff Welfare and Pension FundCtntributinon fra= ORRAF 11 3 6 4 4 4 8 13Transfer fIron Uallocatod Fund 1 … … … … … …-I

12 3 6 4 4 4 8 13Fay=eots 2 - - - - - - -

Annual Balance 10 3 4 4 4 8 13

C-oultivo Balance 10 13 19 23 27 31 39 52

TOTAL FUNDS ON RAND AND AT BANKAnR ORRAF 00042 BALANCE BOuT a598 531 405 663 697 740 823 6

-54 ANNEX 2Table 3

THAILAND


ORRAF's Projected Cash Flow During Project Period (1982-85) /a(B million)

FY82 FY83 FY84 FY85

SourcesCess (100%) 1,012 1,173 1,311 1,461Interest lb 45 27 27 36Government subventions /c 276 690 1,012 1,196

Total 1,333 1,890 2,350 2,693

UsesGrant paymentsCash and materials /d }Indirect expenses 1 1,265 1,541 1,840 2,116

Rubber research center 51 59 66 73Salaries and operating costs 244 281 322 370Fixed assets 30 30 38 21Technical assistance and training 2 2 2 4

Total 1,592 1,913 2,268 2,584

Funds Available to ORRAFYearly (259) (23) 82 109Cumulative 289 266 348 457

Staff Welfare and Pension FundYearly 24 28 31 37Cumulative 76 104 135 172

Total Cash in Hand and at Bankper ORRAF Balance Sheet 365 370 483 629(Cumulative)

/a In current terms.7T Assumed to be at the rate of about 7.5% of cash in banks and in hand.7 Includes Government's own contributions and the Bank/CDC loans, plus B 193

million disbursed from the first project (Loan 1243-TH) in FY82./d Includes procurement of fertilizer, assuming stocks at end-FY85 are the same

as that at the beginning of FY82.

-55- ANNEX 2Table 4

THAILAND


Present and Proposed Number of ORRAF Staff

1980 (Present)Actual Budgeted 1982 1983 1984 1985

HeadquartersCentral Office

Director 1 1 1 1 1 1Deputy Director 2 2 2 2 2 2Assistant to Director 1 1 1 1 1 1Replanting Inspector 1 1 1 1 1 1

Subtotal 5 5 5 5 5 5

Replanting DivisionCentral Section 6 6 8 8 8 8Grant Application Receiving Section 13 18 26 26 26 26Replanting Consideration Section 19 19 22 22 20 18Verification & Assessment Section 16 28 48 55 60 66Replanting Material Section 19 23 30 32 34 38

Subtotal 73 94 134 143 148 156

Office of the Secretary 9 10 10 10 10 10Office of the Internal Auditor 10 10 14 14 14 14Planning & Monitoring Unit 13 16 27 27 27 27Computer Center 27 48 71 71 71 71

Development Division 50 66 90 90 90 90Administrative Division 69 80 100 100 100 100Finance Division 103 106 126 134 140 144

Total 359 435 577 594 605 6617

Provincial OfficesProvincial Heads 12 12 12 12 12 12Replanting Officers (Grades 4,5,6) 80 85 120 134 161 172Replanting Officers (Grades 1,2,3) 720 817 1,161 1,275 1,320 1,365Finance/Admin. Officers (Grades 4,5,6) 24 26 38 38 38 38Finance/Admin. Officers (Grades 1,2,3) 132 208 300 300 300 300Supply Officers (Grades 4,3) 12 12 12 12 12 12Supply Officers (Grades 1,2) 24 26 40 47 54 61Clerks/Others 180 190 195 210 220 220

Total 1,184 1,376 1,878 2,028 2,117 2,180

GRAND TOTAL 1,543 1,811 2,455 2,622 2,722 2,792

- 56ANNEX 2Table 5

THAILAND


Schedule of Grant Payments for Replanting (Type 1)

Ins tall- Baht/rai /aYear ment Items Cash Kind Total

1 1st Felling, clearing and weeding 605Land preparation 110Application of stumpkiller 45Terracing 61Stumpkiller (liter) 195 (9)Preplanting fertilizer (kg) 25 (10)Cover crop seed (kg) 30 (1.5)Cover crop fertilizer

Phosphate (kg) 4 (1.5)Compound (kg) 40 (8)

Subtotal 760 294 1,054

2nd Planting rubber 130Planting and maintaining cover crop 60Weeding/fertilizing 225Fencing 80Rubber plants 200Supplies of rubber plants 40Cover crop fertilizer (kg) 100 (40)Rubber fertilizer (kg) 140 (28)

Subtotal 495 480 975

2 3rd Cover crop maintenance 30Weeding/fertilizing 225Cover crop fertilizer 37 (15)Rubber fertilizer (kg) 240 (48)


3 4th Cover crop maintenance 30Weeding/fertilizing 115Cover crop fertilizer 38 (15)Rubber fertilizer (kg) 240 (48)


4 5th Cover crop maintenance 30Weeding/fertilizing 115Cover crop fertilizer 38 (15)Rubber fertilizer (kg) 260 (52)


5 6th Weeding/fertilizing 115Rubber fertilizer (kg) 320 (64)


6 7th Weeding/fertilizing 60Rubber fertilizer (kg) 320 (64)

Subtotal 60 320 380

Total 1,975 2,267 4,242

/a At ORRAF 1981 standard price.

-57- ANNEX 3Page 1

THAILAND


The Rubber Research Center (RRC)

1. The Rubber Research Center (RRC) was established in 1965 in Hat Yaias a branch of the DOA-s Rubber Division. RRC is responsible for conductingresearch on all aspects of rubber cultivation, production and processing,and dissemination of information among producers and processors. It is thenational regulatory body for the Thai Tested Rubber (TTR) scheme and itcarries out specification testing for block rubber, while supervising thetesting laboratories of private manufactures of TTR rubber. The RRCfinances are provided by (a) 5% of the annual proceeds of the rubber cess;and (b) budget allocations of the Rubber Division. The budget for 1978 and1979 was in the order of $1.5 million per annum, about 30% being spent onsalaries and the balance on utilities and research.

2. The RRC's Director, with a Deputy Director, heads two departments:one for administration and one for technical development. The lattercomprises the following five divisions: Agronomy, Soil Science, Technology,Economics and Development. The Development Division has three sections:Field Services and Nurseries, Training, and Technical Services andDemonstration. The organization is presented in Chart 22218.

3. Each Division has only a limited number of Research Officers (RO).Some of these ROs have been trained in scientific disciplines such as soilscience, plant pathology and agricultural economics. Extension services tothe smallholders are to be provided by ORRAF up to and including the firstyear of tapping from FY82 onwards and the MOAC's Department of AgriculturalExtension (DAE) thereafter. The RRC provides only liaison in developmentwork and a limited amount of field development services to smallholders.The RRC also:

(a) provides training courses and refresher courses for officers of theDAE and ORRAF;

(b) provides training courses in bud grafting and tapping for small-holders uho have completed replanting; and

(c) supervises the supply of planting material, by regular inspectionand licensing of official and commercial nurseries, that providebudwood or budded stumps to rubber growers.

4. In summary the RRC mainly directs its research work to solving thefollowing problems:

-58 - ANNEX 3Page 2

(a) reducing the immature period of the rubber tree, as the longnonproductive period is a disincentive to investment in the crop;

(b) increasing crop yields, by breeding high-yielding clones, bybetter nutrition and disease control, improved tapping andstimulation techniques and innovations in crop husbandry practices;

(c) improvements in the economics of production, transport, processing,marketing and export of natural rubber (NR); and

(d) exploitation of the inherent unique qualities of NR and itsmanipulation to obtain special types of NR with desirablequalities, e.g., resistance to oxidation and oil.

5. Priorities. Research should be geared to the special requirementsof smallholders, who produce more than 90% of Thailand's rubber. Thetechniques developed should be simple and effective. Although theenvironmental and ecological conditions in Southern Thailand and in theNorthern parts of peninsular Malaysia are similar, it is important to carryout independent research and test the majority of Malaysian research findingsunder local conditions, before adopting them. Therefore, research at the RRCshould be concentrated on (a) breeding and selection, (b) field plantingtechniques, (c) exploitation and stimulation, (d) nutrition and(e) processing, as discussed below.

6. Breeding and Selection. Studies on breeding were discontinued in1971, and since then, Indonesian and Malaysian clones have been recommendedfor planting, without comprehensively testing them in Thailand. This policyincludes an element of risk as imported clones, although inherently highyielding, may have undesirable characteristics such as susceptibility towind damage and diseases, under the conditions prevalent in Thailand, whichcould make them unsuitable for local conditions. Therefore, a high prioritymust be given to testing of imported clones and to breeding and selection.The extension of rubber new planting into new areas in the Southeast andpossibly in the Northeast, with environmental conditions which substantiallydiffer from those in South Thailand, will entail the breeding of new clones,adapted to those conditions.

7. Field Planting. The agronomic and economic aspects of landpreparation and field planting operations need further careful study,because of their impact on the environment and on the period of immaturity.The use of polybag budded stumps, at various stages of growth, should befurther studied, with special reference to the economics of production. Theuse of high stumped buddings appears to be limited as this material does nottravel well, quite apart from the economics of their production anddistribution to smallholders, scattered over various areas of Thailand.

- 59 - ANNEX 3page 3

8. Crown Budding. Studies on the subject can be scaled down consid-erably. The idea of crown budding itself appears to be a negative one,discounting the possibilities of breeding clones resistant to leaf diseases.It is encouraging to note that Brazil and Sri Lanka have recently madesigificant headway in breeding high-yielding clones such as RRIC 121 and 131,tolerant to South American Leaf Blight (SALB), a more virulant disease thanPhytophthora leaf disease.

9. Intercropping. The following studies are proposed:

(a) effects of intercropping on growth and yield of rubber indifferent soils and environmental conditions;

(b) fertilizer requirements of intercrops in various locations;

(c) management and labor requirements for intercrops in combinationwith rubber;

(d) pests and diseases of the intercrop, and any interaction of thesewith rubber, the main crop;

(e) the ecological balance between intercrops and rubber, e.g.,humidity effects and the action on predators and weeds;

(f) effect of row spacing on rubber and the intercrop;

(g) moisture relationships in the soil, with special reference todry periods;

(h) weeds and weed control, succession of weeds; and

(i) transport, marketing and economics of production of intercrops.

10. Exploitation and Stimulation. Research in this area should aim atadjusting tapping cut lengths (from S/4 to S/1), frequency of tapping (fromd/l to d/6), up- and downward tapping and stimulation methods (above andbelow cut, and on the groove), so as to enable a smallholder family to tapits own holding without hired labor and obtain optimal income from rubbercultivation. Further research should also be undertaken on new systems oftapping such as puncture tapping, for more economic exploitation, especiallyduring periods of labor shortage.

11. Nutrition. Fertilizer recommendations are presently based largelyon the Malaysian experience. As in the case of breeding, this practice isnot advisable to be continued and RRC should step up its research onnutrition and the economics involved, in order to give smallholdersappropriate advice based on local research findings. The RRC haswell-equipped analytical laboratories and some trained staff; it shouldexpand its studies on plant nutrition and aim at providing smallholders with

- 60- ANNEX 3Page 4

fertilizer recommendations based on soil and foliar analyses. RRC has startedsoil mapping in relation to fertilizer recommendations in the importantrubber growing areas; this program should be intensified and given priority.

12. Processing. The present market trends appear to favor the produc-tion of Ribbed Smoked Sheet (RSS) over that of block rubbers as the invest-ment costs for the latter are high, but the premia for them are insufficientlyattractive; the prices often being only comparable to or below those for RSSI.Thailand sells a greater part of its rubber to Japan, and the Japanesemarket is quite willing to buy the rubber in the form of RSS. Therefore,studies on the production of high quality sheet by smallholders must begiven priority and only the lower grades of rubber and scrap should beprocessed into block rubber.

13. New Types of NR. The Rubber Technology Department of the RRCis well equipped at present with a range of new equipment provided by theJapanese International Cooperation Agency (JICA). The RRC is now givingpriority to studies on the production of modified rubbers for specific uses.

14. Economics. There are several aspects of exploitation, use ofstimulants, fertilizers, fungicides and herbicides, transport of latex,processing, transport of dry rubber, marketing and shipment, that must bestudied, in order to ensure that the Thai rubber industry reaps the fullbenefits from this crop. A start has been made on some of these problems,but a great deal more requires to be done. Therefore, studies on thoseproblems should be started as soon as possible.

15. Strengthening RRC. Considering the volume of research work that isbeing done and has to be undertaken, it is necessary to increase the staffand facilities of the RRC considerably. The training and development of alocal research capability would be the key feature of the research componentof the proposed project. The present training provided to research staff isconsidered weak, and several research officers require additional scientifictraining at post-graduate level in critical areas to design and carry outappropriate experimentation more effectively. Therefore, priority must begiven to postgraduate training in the agronomy, soils science and technologydisciplines to strengthen RRCs research capability.

16. RRC Funding. The essence of research is to formulate ideas andrecommendations based on experimental findings and therefore it is deemednecessary having RRC conduct its experiments independently, with adequatefunds, so that it can express independent views without owing any specialallegiance to any particular Department. Therefore, careful considerationshould be given, whether the present system of providing 5% of the cessproceeds with additional Government subventions to RRC is the most optimalmethod of funding research. It is strongly recommended that rubber researchbe funded by a special research cess on rubber exports, as done in Malaysiaand Sri Lanka.

17. Indicative cost estimates for the rubber research component aredetailed in Annex 4, Tables 7 and 8.

THAILAND


Tatal Project Costs in Current Terms (by Tnput)($ million)

Foreign1982 1983 1984 1985 Total exchange

Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total (Z)

A. ORRAF

Agricultural Development

Fertilizer 2.8 18.0 20.8 3.7 22.8 26.5 4.7 27.7 32.4 5.6 32.3 37.9 16.8 100.8 117.6 86Chemicals 1.9 5.3 7.2 2.1 6.0 8.1 2.4 6.5 8.9 2.7 7.1 9.8 9.1 24.9 34.0 73Planting materials 1.9 1.4 3.3 2.3 1.7 4.0 2.7 2.0 4.7 3.2 2.1 5.3 10.1 7.2 17.3 42Labor/Residual cash grant

payments 23.3 - 23.3 27.9 - 27.9 32.9 - 32.9 37.7 - 37.7 121.8 - 121.8 -Indirect expenses of grant 0.4 0.2 0.6 0.5 0.3 0.8 0.7 0.3 1.0 0.8 0.3 1.1 2.4 1.1 3.5 31

Subtotal 30.3 24.9 55.2 36.5 30.8 67.3 43.4 36.5 79.9 50.0 41.8 91.8 160.2 134.0 294.2 46

Administration/Management

Salaries & operating cost 9.4 1.2 10.6 10.9 1.3 12.2 12.5 1.5 14.0 14.3 1.8 16.1 47.1 5.8 52.9 11Civil works 0.4 0.1 0.5 0.4 0.2 0.6 0.4 0.2 0.6 0.5 0.2 0.7 1.7 0.7 2.4 29Purchase of land 0.3 - 0.3 0.2 - 0.2 0.6 - 0.6 - - - 1.1 - 1.1 -Vehicles and equipment 0.3 0.2 0.5 0.3 0.2 0.5 0.2 0.2 0.4 0.1 0.1 0.2 1.0 0.7 1.7 41Tech. assis. & training - 0.1 0.1 - 0.1 0.1 0.1 0.1 0.2 - 0.1 0.1 0.1 0.4 0.5 75

Subtotal 10.4 1.6 12.0 11.8 1.8 13.6 13.8 2.0 15.8 14.9 2.2 17.1 51.0 7.6 58.6 13

Total ORRAF 40.7 26.5 67.2 48.3 32.6 80.9 57.2 38.5 95.7 64.9 44.0 108.9 211.2 141.6 352.8 40

B. DOA - RRCTraining _ 0.1 0.1 - 0.2 0.2 - 0.2 0.2 - 0.2 0.2 - 0.7 0. 85Staffing 0.2 - 0.2 0.4 - 0.4 0.7 - 0.7 1.1 - 1.1 2.4 - 2.4 -Civil works 0.1 - 0.1 0.2 0.1 0.3 0.2 0.1 0.3 0.2 0.1 0.3 0.7 0.2 0.9 22Vehicles and equipment 0.1 0.1 0.2 0.2 0.1 0.3 0.1 0.1 0.2 0.2 0.2 0.4 0.6 0-5 1.1 45

Subtotal 0.4 0.2 0.6 0.8 0.4 1.2 1.0 0.4 1.4 1.5 0.5 2.0 3.7 1.4 5.1 28

Coconut Seed CardenAgricultural development/

vehicles and equipment - - - 0.1 0.1 0.2 - 0.1 0.1 - - - 0.1 0.2 0.3 65Labor - - - 0.1 - 0.1 - - - - 0.1 - 0.1 -

Subtotal _ - _ 0-2 0.1 0-3 - 0.1 0.1 _ - - 0.2 0.2 0.4 50

Total DOA 0.4 0.2 0.6 1.0 0.5 1.5 1.0 0.5 1.5 1.5 0.5 2.0 3.9 1.6 5.5 29

C. LDD - Vehicles, equipmentand con- - 0.1 0.1 0.1 _ 0.1 - - - - - - 0.1 0.1 0.2 40sultant services

D. OAE - Training - - - - - 0.1 0.1 0.2 0.1 0.1 0.2 75- Studies - 0.1 0.1 - - - - - - - - - - 0.1 0.1 -

Subtotal - 0.1 0.1 _ - - - - - 0.1 0.1 0.2 0.1 0.2 0.3 100

GRAND TOTAL 41.1 26.9 68.0 49.4 33.1 82.5 58.2 39.0 97.2 66.5 44.6 lll.1 215.3 143.5 358.8 40

Note: Discrepancies due to rounding.

ANNEX 4

-62 - Table 2

THAILAND


Cost of ORRAF Grants for Rubber Replanting /a

FY82 FY83 FY84 FY85 Total--------------- (B million) ---------------

New ReplantingsFertilizer 32 104 202 316 654Chemicals 62 111 139 149 461Planting materials 25 57 78 86 246Labor 195 297 371 415 1,278

Subtotal 314 569 790 966 2,639

Existing CommitmentsFertilizer 415 420 389 327 1,551Chemicals 90 48 23 16 177Planting materials 46 21 4 - 71Labor 248 170 111 77 606Residual cash payments 47 57 72 85 261

Subtotal 846 716 599 505 2,666

Total GrantsFertilizer 447 524 591 643 2,205Chemicals 152 159 162 165 638Planting materials 71 78 82 86 317Labor 443 467 482 492 1,884Residual cash payments 47 57 72 85 261

Total 1,160 1,285 1,389 1,471 5,305

/a In 1981 constant terms. In calculating the cost of ORRAF grants,assumptions have been made as to the delays which would beincurred in aggregate disbursements. Details are in the projectfile.

Note: Discrepancies due to rounding.


THAILAND


ORRAF's Administration Costs (1982-85) /a

1982 1983 1984 1985 Total--------- (B million) -----------------

Salaries - ORRAF staff 90.867 93.213 95.482 97.681 377.243Permanent wages - labor 8.051 8.653 9.299 9.995 35.998Temporary wages 4.088 4.393 4.722 5.075 18.278Compensation /b 22.930 23.710 24.355 25.311 96.306Utilities/supplies /c 14.879 15.997 16.246 18.480 65.602Transport /d 48.097 51.701 55.550 59.715 215.063Miscellaneous costs /e 32.550 32.879 33.194 33.470 132.093

Total 221.462 230.546 238.848 249.727 940.583

/a Costs are expressed in 1981 constant terms.

/b Includes allowances for house rent, education fees, overtime, medi-cal assistance, etc.

/c Water, electricity, telephones, office supplies, gas, etc.

/d Includes transportation costs, insurance of vehicles,traveling per diems, etc.

/e Includes training, pension reserves, etc.

ANNEX 4Table 4

THAILAND


Cost of ORRAF's Fixed Assets (1982-85) /a

1982 1983 1984 1985 Total…--------- (B million) ------------

VehiclesPickup trucks 1.695 0.452 0.339 0.339 2.825Cars with audiovisualequipment 1.236 0.927 0.506 0.365 3.034

Trucks 3.622 4.404 - - 8.02612-seater microbuses - 0.277 2.216 0.277 2.770Cars 0.208 0.208 0.416 - 0.832

Subtotal 6.761 6.268 3.477 0.981 17.487

Land 6.767 3.782 10.366 - 20.915

Construction /b 10.905 10.064 10.346 10.636 41.951

Other fixed assets /c 3.237 2.916 2.916 2.916 11.985

Total 27.670 23.030 27.105 14.533 92.338

/a Expressed in 1981 constant terms.

/b Expected to construct 3 branches of the Provincial Officeseach year.

/c Includes purchases of microfilm, training center equipment,agricultural equipment, etc. Fixed assets are expected tostay constant in 1981 terms with the exception of 1982 whenadditional microfilm is expected to be purchased.

THAILAND


Cost of Technical Assistance, Training and Studies of ORRAF and OAE

1982 1983 1984 1985 TotalMan- Man- Man- Man- Man-months $'000 months $'000 months $'000 months $'000 months $'000

A. ORRAF

Technical AssistanceSenior Advisor 8 46.0 12 69.0 12 69.0 8 51.75 41 235.75

Training OverseasFellowships /a 12 24.0 12 24.0 12 24.0 12 24.0 48 96.0

Study tours lb 10 20.0 10 20.0 10 20.0 10 20.0 40 80.0

Total Costs 90.0 113.0 113.0 95.75 411.75

n. OAE

Training OverseasFellowship /c 10 20.0 10 20.0 10 20.0 10 20.0 40 80.0Study tours /c 8 16.0 8 16.0 8 16.0 8 16.0 32 64.0

StudiesConsultant services 9 98.0 - - - - - - 9 98.0

Total Costs 134.0 36.0 36.0 36.0 242.0

/a 12 ORRAF staff p.a. for 1 month. Travel allowance for Southeast Asia $700; stipend $1,300. H

Mainly fellowships for management and training.

/b 10 ORRAF officers p.a. for 1 month. Study tours on nursery development and establishment oftree crops other than rubber.

/c 10 officers p.a. for 1 month on fellowships and 8 officers p.a. for 1 month on study tours.


THAILAND


Indirect Expenses of ORRAF Grant /a

Items FY82 FY83 FY84 FY85 Total-------- (B million) --------

Fertilizersubsidy /b 10 11 12 13 46

Miscellaneousexpenses /c 4 4 5 5 18

Total 14 15 17 18 64

/a In 1981 constant terms.

/b Subsidy to farmers for transport costs offertilizer from the stockist to the farmat the rate of B 100/ton.

/c Includes expenses for special diseases -chemicals, sprayers, etc. Assumed to be0.3% of total grant payments.

THAILAND


RRC: Staffing and Training Requirements and Costs /a

Unitcost FY82 FY83 FY84 FY85 Totalp.a. No. Amount No. Amount No. Amount No. Amount amount

(B'000) (B-000) (B-000) (B'000) (B'000) (B'000)

StaffingSenior research officer 100 5 500 7 700 9 900 11 1,100 3,200

Research officer 74 11 814 26 1,924 38 2,812 53 3,922 9,472

Sr. technical assistant 57 16 912 31 1,767 51 2,907 66 3,762 9,348

Technical assistant 44 17 748 35 1,540 55 2,420 75 3,300 8,008

Laboratory assistant 30 16 480 36 1,080 56 1,680 76 2,280 5,520

Administrative assistant 30 - - 20 600 40 1,200 60 1,800 3,600

Total 65 3,454 155 7,611 249 11,919 341 16,164 39,148

Postgraduate Training /bAgronomy division 300 4 600 4 1,200 4 1,200 4 1,200 4,200

Soils science division 300 5 750 5 1,500 5 1,500 5 1,500 5,250

Technology division 300 4 600 3 900 3 900 3 900 3,300

Total 13 1,950 12 3,600 12 3,600 12 3,600 12,750


/b Postgraduate training covers 3-1/2 years starting in second half of FY82; therefore, costs for

FY82 are half the annual amount. |X

om

- 68 -

ANNEX 4

Table 8

THAILAND


RRC: Cost of Civil Works, Equipment and Vehicles /a(B -000)

Items FY82 FY83 FY84 FY85 Total

Buildings /b 3,006 3,962 4,266 4,407 15,641

Equipment 3,113 3,455 3,030 3,743 13,341

Vehicles 1,569 1,569 1,569 1,569 6,276

Total 7,688 8,986 8,865 9,719 35,258


/b Based on a unit space per additional officer.Includes operating costs. See Project File fordetails.

-69 ANNEX 4Table 9

THAILAND


60 ha Dwarf Coconut Seed Garden: Establishment and Operating Cost(B 000)

FY83 FY84 FY85 Total

LaborLand clearing and preparation contract 600.0 300.0 - 900.0Labor 414.5 114.2 107.2 635.9Foremen 24.3 6.6 6.3 37.2Watchmen (2 @ B 13,500 p.a.) 13.5 27.0 27.0 67.5Tractor drivers (5 @ B 22,500 p.a.) 67.0 90.0 112.5 270.0

Subtotal 1,119.8 537.8 253.0 1,910.6

MaterialsPlant material 886.1 105.4 - 991.5Fertilizers 340.9 303.5 407.9 1,052.3Chemicals 30.0 30.0 30.0 90.0Water pumps and watering equipment

(5 @ B 20,000) 60.0 40.0 - 100.0Pump operation @ B 11,000 p.a. 33.0 55.0 55.0 143.0

Tractor trailer (5 @ B 500,000) 1,500.0 500.0 500.0 2,500.0Tractor operation @ B 80,000 p.a. 240.0 320.0 400.0 960.0Fencing (2 x 800 m + 2 x 750 m @ B 10/m) 31.0 3.1 3.1 37.2Tools 60.0 6.0 6.0 72.0Miscellaneous 20.0 2.0 2.0 24.0Watchman hut (2 @ B 5,000) 5.0 5.0 - 10.0Office/storage sheds (2 @ B 20,000) 20.0 20.0 - 40.0

Subtotal 3,226.0 1,390.0 1,404.0 6,020.0

Total Seed Garden Program Cost 4,345.8 1,927.8 1,657.0 7,930.6

Note: Expressed in 1981 constant terms. For details, see C.4 of Project File.

THAILAND


Land-Use Surveys: Requirements and Costs

UnitNumber cost FY82 FY83 FY84 FY85 Total

required B000 No. B-000 No. B'000 No. B000 No. B000 B'000

Land Development Department (LDD)

A. Land-Use SurveyCoconut Growing ProvincesVehicles 3 250 3 750 750Vehicle operating cost: 730,000 km/vehicle p.a. @B 10/km; 6 months in FY82 3 300 3 450 3 900 1,350 0

Equipment 6 25 6 150 150Color map prints 1,000 1,000

Operational cost 120 240 360

Subtotal 1,470 2,140 _ - 3,610

B. Preparation for a National

Land-Use SurveyConsultants: two

consultants for one 2 man- 250 500 - - - 500

month each months

Total 1,895 2,020 - - 3915

_ _ I

0l,lt

- 71 - ANNEX 4Table 11

THAILAND


Disbursement Schedule($ Million)

IBRD fiscal year Disbursement Cumulativeand semester in semester Disbursement

FY822nd (Jan.-June 1982) 1.3 1.3

FY83ist 5.9 7.22nd 9.6 16.8

FY841st 14.1 30.92nd 16.4 47.3

FY85l1st 16.9 64.22nd 19.5 83.7

FY861st 20.3 104.02nd 20.2 124.2

FY871st 10.0 134.22nd 7.8 142.0

- 72 -ANNEX 5Page I

THAILAND


Bases for Economic and Financial Analysis

Definition of the Project for Purposes of the Economic Analysis

1. For the purposes of economic analysis the "with project" situationis considered to include (a) the completion of the ORRAF replantings presentlyin the immature stage, including those initiated under the Rubber ReplantingProject (Loan 1243-TH); and (b) new ORRAF programs including the replanting ofan additional 200,000 ha started during the project.

2. In the base case "without project" situation, it is assumed thatORRAF would adequately fulfill its present obligations by completing theplanting on all areas started prior to the project period, but that it wouldnot undertake any new replanting. In that the proposed project is defined asbeing to support ORRAF's new program 1982-85 it is most appropriately analyzedby considering the returns to the entire new program even though a reduced newprogram may have been possible without the support of a specific project.

3. Under these circumstances, i.e., no new ORRAF replanting "withoutproject", it is expected that some of the 200,000 ha of old rubber which wouldnot be replanted by ORRAF without the project would be replanted, albeit at alower rate, using farmers' own resources, and that some would be abandoned.Based on an analysis of historical replanting rates prior to the initiation ofORRAF, consideration of Thai rubber farmers' access to alternative capitalsources, and the financial rates of return from replanting without any gratnt,it is estimated that "without project" replanting would take place at a rateof 2,500 ha per year for an 8-year period. That is, a total of 20,000 ha, or10% of the area, would be replanted using farmers own resources "withoutproject." Of the other 180,000 ha of land which would not be replanted"without project," some would continue to be tapped regularly, some wouldoccasionally be tapped and some would be abandoned. The aggregate "withoutproject" activity on this land is considered as being the equivalent of 60% ofthe area being fully tapped for a further 9 years with yields declining from425 kg to 250 kg/ha DRC. Details of land use, with and without project aregiven in Table 1.


4. As the proposed project covers a 4-year time slice of areplanting program, yet the total time that an individual rubber plot isunder replanting is about 6 years, it is not possible to define specificplots or areas of rubber Which are fully replanted using project funds. Inorder to estimate the effect of the project investment in replantingtherefore, a "fully replanted equivalent area" equal to the areas which arepartially covered by the project has been calculated by dividing the basecost of "New Starts ($114.7 million)" plus "Continuation and Completion ofOngoing Programs, ($115.9 million)" by the average base cost of replanting onehectare of rubber ($1,453). Using this methodology, the project would havean effect equivalent to completely replanting about 155,000 ha of rubber.

Derivation of Economic Prices

5. Project output prices for rubber are based on the Bank's commodityprice projections for 1980-85 and 1990 expressed in mid-1981 constantdollars, adjusted for international freight, local marketing costs, andquality differentials. Details of rubber price calculations are given inTables 2 and 3. Fertilizer prices are also based on the Bank's commodityprice projections for 1980-85 and 1990. They have been calculated on thebasis that "straights" are imported and manufactured into compound fertili-zers in Thailand. Details of economic fertilizer price calculations aregiven in Tables 4 and 5. Other prices are based on present financial levelsinflated to mid-1981 constant currency values using inflation factors shownin Table 6. The prices of some components of the cost of individual itemsare modified by conversion factors to adjust for local taxation. Specificconversion factors used in these calculations are detailed in the Project File.

6. In peninsular Thailand there is a relatively free market in laborand adequate employment opportunities. Although the economic output valuesof some farm products, specifically rubber and rice, are above their finan-cial prices, it is felt that labor is reasonably mobile between differenttypes of agriculture and other industries. Consequently in the base casefor project evaluation the financial wage rate is taken to be the economicwage rate in 1981. However, in view of the rapid growth of the economy (pastand projected) real wages are expected to increase over time, at 3% p.a.during 1981-88 and 5% p.a. during 1989-95. Project labor requirements havebeen estimated at present levels of technology, thus the economic cost oflabor would be expected to increase over time. In the base case an annualincrease of 3% during 1981-95 is used. This would imply productivity gainsof about 2% p.a. during 1989-95.

Analysis Undertaken

7. The economic analysis of the project has been done both byexamining, on a per hectare basis, the economic effect of the differentproject subcomponents and also by making a detailed analysis includingsensitivity tests on the entire ORRAF new program, 1982-85.

- 74 - ANNEX 5

Pag-e 3

Per Hectare Economic Analysis of Project Components

8. Per hectare rates of return and Net Present Values at economicprices have been estimated for the various components of the project asfollows:

Per haERR NPV

% ~~~$

With Project Results

Rubber - Replanting D2 Tapping/l 18.6 1,950Rubber - Replanting DI Tapping7T 18.7 1,085

Without Project Results

Senile rubber (9 year tapping) infinity 700Rubber replanting - own resources/1 18.8 1,090

/1 ERRs and NPVs assuming no opportunity cost of land.

9. The per hectare incremental rates of return and NPVs of thereplanting components, assuming fully tapped senile rubber if the replantswere not undertaken are:

INCREMENTAL RESULTS FROM REPLANTING ASSUMING THAT OLD STANDS WOULDCONTINUE TO BE FULLY EXPLOITED IF NO REPLANTING TOOK PLACE

ERR NPV% ($/ha)

With Project

Replanted Rubber D2 15.6 1,260Replanted Rubber Dl 13.8 512

Without Project

Replanted Rubber '1 13.9 390

-75- ANNEX 5Page 4

The weighted average rate of return ("with project" less "without project")of these project components is the ERR for the project. It is estimated at15%.

Cost and Benefits Streams for Rubber Replanting

10. The sensitivity of the project to changes in various economicparameters is assessed on the basis of analysis of the rubber replantingcomponent. Benefits in this analysis are considered as the total value ofincremental rubber production of the ORRAF FY82-85 new program, i.e., theincremental quantities/i produced multiplied by the economic prices.Economic costs include the incremental costs of rubber development/2 (newreplanting) and the incremental operating costs of ORRAF attributable to thisdevelopment. As ORRAF is a large organization and has been able to plan itsexpansion well in advance of project implementation, it is assumed that ORRAFmarginal costs per dollar of grant distributed to the incremental area underthe project is equal to its average operating costs per dollar of grant paid,i.e. ORRAF costs of administering the grant are equal to about 20% of thegrant itself.

11. Aggregated economic benefits and cost streams are listed inTable 8, The sensitivity analysis based on variations of these main benefitand cost streams is presented in Table 9 and switching values underdifferent opportunity costs of capital assumptions are shown in Table 10.

12. The impact of the program on employment in the agricultural sectoris presented in Table 11 and details of the fiscal impact are presented inTable 12.

Institutional Support

13. The project costs attributable to strengthening the RRC, OAE andLDD which amount in total to about 1% of the project cost have been excludedfrom the economic analysis. Had these items been included as part of theproject costs, then the estimated benefits from them would have to have beenconsidered as project benefits. By excluding them both as costs and benefitsit is implicity assumed that the benefits from research and institutionbuilding are equal to costs when discounted at the project economic rate ofreturn (ERR).

/1 See Table 7, based on Tables 20-30 in Working Paper C.3.

/2 Detailed calculations are presented in Working Paper C.3 in the projectfile.


THAILAND


Land Use on the 200,000 ha Which Would be Newly Replanted "With Project"('000 ha)

1982 1983 1984 1985 1986 1987 1988 1989 Total

Area of Replants Started"With Project"

New Replants - ORRAFType 1 (budded stumps) 35.0 32.5 30.0 25.0 - - - - 122.5Type 2 (seed at stake) 12.5 12.5 12.5 12.5 - - - - 50.0Type 4 (polybags) 2.5 5.0 7.5 12.5 - - - - 27.5

Total - "With Project" 50.0 50.0 50.0 50.0 - - - - 200.0

"Without Project"New replants - farmers' own

resources 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 20.0

Cumulative Land Use in 1995-Project Area (year-end) 1981 1982 1983 1984 1985 1986 1987 1988 1989 2009

"With Project"Old rubber 200.0 150.0 100.0 50.0 - - - - - -Immature rubber - ORRAF - 50.0 100.0 150.0 198.5 197.0 195.5 194.0 187.0 -Mature replanted rubber - - - - - - - - 7.0 194.0Failed rubber /a - - - - 1.5 3.0 4.5 6.0 6.0 6.0

Total - "With Project" 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0

"Without Project"Old rubber 200.0 150.0 100.0 50.0 - - - - -Immature rubber -farmers' own resources - 2.5 5.0 7.5 10.0 12.4 14.8 17.2 19.6 -

Mature replanted rubber - - - - - - - - - 19.4Failed rubber /a - - - - - 0.1 0.2 0.3 0.4 0.6Senile rubber - 47.5 95.0 142.5 190.0 187.5 185.0 182.5 180.0 0.0Abandoned rubber /b - - - - - - - - - 180.0

Total - "Without Project" 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0 200.0

/a 3% of replanted area assumed to fail after Year 3.

lb Rubber scheduled for ORRAF replanting with project 1982-85 would be expected to be abandoned by1995 "without project," unless it were replanted using farmers' own resources.

-77- ANNEX 5Table 2

THAILAND


Rubber Prices, Export Tax and Cess Rate Projections

1980 1981 1982 1983 1984 1985 1990

$/Kg

WB /a - NY price RSS I(1977 constant $) 1.00 0.98 1.03 1.04 1.04 1.05 1.15

NY prices RSS I converted to1981 constant $ /b 1.66 1.63 1.71 1.72 1.73 1.74 1.91

RSS 3 /c price 1.60 1.57 1.65 1.66 1.67 1.68 1.84

Ocean freight difference /d 0.15 0.15 0.15 0.15 0.15 0.15 0.15

Estimated price RSS 3 f.o.b.Thailand (1981 constant $) 1.45 1.42 1.50 1.51 1.52 1.53 1.69

1981 Constant Baht/Kg

Convert RSS 3 f.o.b. Thailandprice to 1981 constantBaht (23:1) 33.4 32.7 34.5 34.7 35.0 35.2 38.9

Likely gazetted price /e 23.2 22.7 23.9 24.0 24.2 24.4 26.8

Cess rate /f 1.82 1.77 1.89 1.90 1.92 1.94 2.18

Export tax rate /g 6.96 4.76 5.24 5.28 5.36 5.44 6.40

/a World Bank Commodities Division forecast price for RSS I spot New York.7T Commodities division price forecasts in 1977 constant $ times inflation

factor of 1.66./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./e Based on official formula of: GP (Baht/kg)= 0.667 x Thai f.o.b. price

+ 1.88, with a downward adjustment of Baht 1 per kg in line with pastexperience.

/f Based on formula - Cess (in Baht) = 0.5 + 0.1 (GP - 10).g Based on the formula: Export tax (B/kg) = 0.4 (Gazetted price - 5.80) for

1980; 0.4 (gazetted price - 10.80) for 1981.

THAILAND


Rubber Price Structure

Financial prices Economic prices

1982 1985 1990 Conversion 1982 1985 1990

(1981 constant Baht/kg) factor /a (1981 constant Baht/kg)

Estimated RSS 3 f-o.b. Thailand price /b 34.50 35.19 38.87 1.0 34.50 35.19 38.87

Gazetted price /b (23.90) (24.35) (26.81)

Export tax /c 5.24 5.44 6.40 0.0 - - -

Cess /b 1.89 1.94 2.18 0.0 - - -

Loading 0.15 0.15 0.15 1.0 0.15 0.15 0.15

Packing 0.15 0.15 0.15 1.0 0.15 0.15 0.15

Smoking 0.20 0.20 0.20 1.0 0.20 0.20 0.20

Transport 0.20 0.20 0.20 0.8 0.16 0.16 0.16

Storage, overheads & dealers margins /e 0.80 0.80 0.80 0.9 0.72 0.72 0.72

Price at GMOllocal centerRSS 3 - DRC basis 25.87 26.31 28.79 33.12 33.81 37.49 s

Price per kg material soldRSS 3 - 91% DM 23.54 23.94 26.20 30.14 30.77 34.12

Local transport 0.25 0.25 0.25 0.8 0.20 0.20 0.20

GMO fee 0.03 0.03 0.03 0.9 0.03 0.03 0.03

Farmgate Value RSS 3 Equiv. Material 23.25 23.66 25.92 29.91 30.54 33.89

Average value - DRC at farmgate

(assuming 20% scrap and 80%sheet, averaging RSS 3) /d 23.52 23.92 26.20 30.23 30.86 34.26

/a Factor by which financial prices are multiplied to give economic prices.

7i See Table 2 for details.

7W Export tax is (GP - 10.80) x 0.4.Id Scrap sells at 60% price of RSS 3 on DRC basis ex-farm. X

le Includes both local dealer, and exporter who in many cases are part of the some organization. X X

- 79 -

ANNEX 5Table 4

THAILAND


Estimates of Project Fertilizer Prices - Financial

1. World Prices of Straights'

International Price Estimates Adjustment Total adjustment(1981 constant $/ton) (1981 constant $/ton) from world price

to free at factory1981 1982 1983 1984 1985 1990 Freight Bags Unloading excluding tax

Urea /a 229 234 254 274 294 309 +32 -20 +3 +15TSP /a 216 219 229 239 249 252 +40 - +3 +43KCL Ia 110 110 110 110 110 125 +35 - +3 +38Kieserite /b 150 150 150 150 150 150 --------- No adjustment applicable ---------

Cost Per Unit of Nutrient (USc/kg)(1981 constant currency terms)

1981 1982 1983 1984 1985 1990

N - (Urea is 46%) 53.0 54.1 58.5 62.8 67.2 70.4P205 - (TSP is 46%) 56.3 57.0 59.1 61.3 63.5 64.1K2 0 - (KCL is 60%) 24.7 24.7 24.7 24.7 24.7 27.2Mg0 - (Kieserite is 26%) 57.7 57.7 57.7 57.7 57.7 57.7

2. Calculation of Price of Average Compound Fertilizer Used

Ingredients Cost for Average Compound (1981 constant $/ton)(13.3:14.9:6.0:1.6) 178 181 190 199 208 215

Ingredients cost converted to (1981 constant Baht/ton)Baht: (23:1) 4,094 4,163 4,370 4,577 4,784 4,945

Local manufacturing costs includ-ing bags (150), sales tax &import duty (250) 1,200 1,200 1,200 1,200 1,200 1,200

Ex-factory price 5,294 5,363 5,570 5,777 5,984 6,145Delivery to Hat Yai/Rayong 480 480 480 480 480 480Local handling including:

storage (30), local transport(300), stockist fee (100), &insurance (30) 460 460 460 460 460 460

Projected financial price atlocal stockist 6,234 6,303 6,510 6,717 6,924 7,085

3. Calculation of Rock Phosphate Price (1981 constant Baht/ton)

Ex-factory price (Baht) /c 1,700 1,730 1,800 1,880 1,960 1,990Delivery to Hat Yai/Rayong 480 480 480 480 480 480Local handling (as above) 460 460 460 460 460 460

Projected financial price atlocal stockist 2,640 2,670 2,740 2,820 2,900 2,930

/a World Bank Commodities Division forecasts in 1977 constant $ adjusted to 1981 constant dollarby an inflation factor of 1.66.

/b Mission estimate based on recent contract prices.7W 1981 price based on ICB agreement for mid-1981 supply to ORRAF. Price increases 1982-90 based on

assumption that price of bagged rock phosphate increases at the same rate as the world price for TSP.

-80 - ANNEX 5Table 5

THAILAND


Fertilizer Price - Economic(1981 Constant Baht/kg)

1982 1985 1990

CompoundIngredients cost /a 4,163 4,784 4,945Local manufacturing /b 855 855 855Delivery to Hat Yai/Rayong /c 384 384 384Local storage /a 30 30 30Local transport /c 240 240 240Stockist fee /a 100 100 100Insurance /a 30 30 30

Economic Price at Stockist 5,802 6,423 6,584

Delivery to farm /d 100 100 100

Economic Price at Farm 5,902 6,523 6,684

Rock PhosphateEx-factory price /e 1,557 1,764 1,791Delivery and local handling (as above) 784 784 784

Economic Price at Stockist 2,341 2,548 2,575

Delivery to farm /d 100 100 100

Economic Price at Farm 2,441 2,648 2,675

/a Same as financial price - see Table 4.

/b Estimated cost, net of sales and import tax, B 950 times a specific conver-sion factor for manufacturing estimated at 0.9.

/c Financial cost (see Table 4) times a specific conversion factor fortransport of 0.8.

/d Economic cost assumed to equal the transportation subsidy of Baht 100/ton.

/e Local mining and manufacturing, standard conversion factor taken as 0.9times financial price to give economic price.


THAILAND


Inflation Factors Used in Financial and Economic Analysis

1. International Price Index(Used by World Bank Commodities Division for internationally tradedcommodity price projections)

Index % Increase

1977 100.018.3

1978 118.314.5

1979 135.512.5

1980 152.49.0

1981 166.1 /a

2. Likely Cost Increases in Thailand

(a) Calendar Years (yearly increase)

1981 1982 1983 1984 1985_________________ (%)… ---------------

Local costs 13 12 12 10 9Foreign costs 9 8.5 7.5 7.5 7.5

(b) Project Years [Increase from base cost (mid-1981) to project year(October-September)]

Year 1 Year 2 Year 3 Year 4(1981/2) (1982/3) (1983/4) (1984/5)… _____________ (%) - …

Local costs /b 9.5 22.6 36.7 50.1Foreign costs /b 6.7 15.4 24.2 33.5

/a Factor applied to price estimates expressed in 1977 constant $ to convertthem to 1981 constant $.

/b Percentages applied to base cost in appropriate year to give pricecontingencies factor.

THAILAND


IIPACT OF ORRAF REPLANTING PROGRAN 1982-85 ON THAI RUBBER PRODUCTION

THOUSAND TONS

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

IRRAF REPL 0,0 0.0 0.0 0.0 040 0.0 00 0 3.8 19,8 51.5 96.1 144.5 186.2 217.3 240.1 256*9

EPL OWN RESRCS W0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.4 1.4 3.1 5.1 7,5 10.0 12.7 15,4;ENILE RUBDER WOP 20.2 39.7 58.2 75.8 71,3 66.5 61.5 56.3 51.8 37.1 23.6 11.3 0.0 0.0 0.0 0.0

FOTAL NON ORRAF WOP 20.2 39.7 58.2 75.8 71.3 66.5 61.5 56.3 52.2 38.6 26.7 16.4 7.5 10.0 12.7 15.4

CT INC RUBBER -20.2 -39.7 -58.2 -75.8 -71.3 -66.5 -61.5 -52.4 -32.3 12.9 69.4 128.1 178.8 207.3 227.4 241.4

----------- -------------------------------- -------------------------- --- -----

YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTALS

IRRAF REPL 267.0 269.0 262.6 249.4 232.6 214.7 197,3 180.7 167.2 159.8 156.4 150.5 133.1 104.7 3961.2… ___ ------- _ _ ____ - - ---- _ ____ ------- ------- ------- ------- ------- ______

REPL OLN RESRCS WOP 17.8 19.2 19.9 19.9 19,4 18.4 17.1 15.6 13.9 12.7 11.9 10.9 9.4 7.8 269,6SENILE RUBBER 1OP 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 573.1

…__ _____ __ _ __ ___ _ __ __ _____ _ - --- ------- ------- ------- __ - -rOTAL NON ORRAF WOP 17.8 19.2 19.9 19,9 19.4 18.4 17.1 15.6 13.9 12.7 11.9 10.9 9.4 7.8 842.6 H

ET INC RUBBER 249.2 249.7 242.7 229.5 213.2 196.3 180.1 165.1 153.3 147.1 144.5 139.6 123.7 96.9 3118.6 s @… = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = _ = _ = = =

ANNEX 5- 83 - TABLE 8

THAILANDSECOND TREE CROPS PROJECT

SENSITIVITY ANALYSIS

INPUT STREMAS FOR BASE CASE (millions of dollars)

PERIODS B.NBK B.SENWOPAV B.RRWOP C.SENKATAV C.RORHATS C.HATSORRAF C.SENLABAV3 C.RORLAB3 C.LARORRAF3 C.ANAGMT

I -.13045E-13 -15.8 0.0 -0-9 -0.2 4.3 -9.0 -0.9 16.9 2.82 -.13140E-13 -31.3 0.0 -1.9 -0.4 10.3 -18.6 -1.4 26.5 5.03 -.13230E-13 -46.2 0.0 -2.8 -0.6 16.6 -28.5 -1.7 34.0 6.94 -.13325E-13 -60.6 0.0 -3.7 -0.7 22.5 -38.7 -1.9 39.2 8.45 -.13620E-13 -58.3 0.0 -3.7 -0.8 23.8 -38.7 -2.0 24.6 7.06 -.13910E-13 -55.5 0.0 -3.6 -0.8 23.8 -38.3 -2.1 17.9 6.37 -.14205E-13 -52.4 0.0 -3.6 -0.8 21.8 -37.5 -2.2 12.6 5.78 5.5 -48.9 0.0 -3.5 -0.8 20.7 -36.6 -2.3 12.1 5.09 29.4 -45.9 -0.6 -3.5 -0.9 22.0 -35.7 -1.7 20.6 3.610 76.1 -33.0 -2.1 -2.6 -0.9 23.9 -26.8 -1.9 37.7 1.911 142.2 -21.0 -4.6 -1.8 -0.9 26.0 -17.8 -2.8 60.1 0.712 213.8 -10.0 -7.6 -0.9 -0.9 26.1 -8.9 -3.7 80.5 0.013 275.5 0.0 -11.0 0.0 -0.9 23.4 0.0 -4.8 93.1 0.014 321.5 0.0 -14.8 0.0 -1.0 20.1 0.0 -6.1 98.4 0.015 355.2 0.0 -18.8 0.0 -1.1 18.5 0.0 -7.1 98.4 0.016 380.1 0.0 -22.8 0.0 -1.1 18.0 0.0 -8.2 98.4 0.017 395.0 0.0 -26.3 0.0 -1.0 17.5 0.0 -8.9 98.4 0.018 398.0 0.0 -28.5 0.0 -0.8 18.0 0.0 -9.1 98.3 0.019 388.5 0.0 -29.4 0.0 -0.8 19.9 0.0 -9.1 98.4 0.020 369.0 0.0 -29.4 0.0 -0.9 21.5 0.0 -9.1 98.4 0.021 344.1 0.0 -28.7 0.0 -1.0 22.1 0.0 -9.1 98.4 0.022 317.6 0.0 -27.3 0.0 -0.9 21.1 0.0 -9.1 98.4 0.023 291.8 0.0 -25.4 0.0 -0.9 19.0 0.0 -9.1 98.5 0.024 267.4 0.0 -23.1 0.0 -0.9 17.1 0.0 -9.2 98.6 0.025 247.4 0.0 -20.6 0.0 -0.9 16.3 0.0 -9.2 98.7 0.026 236.4 0.0 -18.8 0.0 -1.0 16.5 0.0 -9.1 98-7 0.027 231.4 0.0 -17.6 0.0 -0.9 17.4 0.0 -9.2 98.7 0.028 222.6 0.0 -16.1 0.0 -0.9 18.4 0.0 -9.2 95.7 0.029 197.0 0.0 -13.9 0.0 -0.9 17.7 0.0 -8.8 84.8 0.030 154.9 0.0 -11.5 0.0 -0.8 15.0 0.0 -7.9 66.9 0.0

ABOREGATED STREAMS FOR BASE CASE

TOTAL TOTAL NETINCREMENTAL INCREMENTAL INCREMENTAL

PERIODS BENEFITS COSTS BENEFITS

1 -15.8 13.0 -28.82 -31.3 19.6 -50.83 -46.2 24.0 -70.24 -60.6 25.1 -85.65 -58.3 10.3 -68.56 -55.5 3.2 -58.77 -52.4 -4.0 -48.38 -43.4 -5.5 -37.99 -17.2 4T4 -21,6 Notes: B.NBK Benefits - New Replants10 41.0 31.2 9.8 B.SENWOPAV Benefits - Senile Rubber Without Project11 116.7 63.5 53.2 B.RRWOP Benefits - Replanted Rubber Without12 196.2 92.2 104.0 Project13 264.5 110.7 153.8 C.SENMATAV Costs - Materials Senile Rubber14 306.7 111.4 195.3 C.RORMATS Costs - Materials Replanted Rubber15 336.5 108.7 227.8 Without Project16 357.2 107.0 250.2 C.MATSORRAF Costs - Materials Total With Project17 368.7 106.0 262.7 C.SENLABAV3 Costs - Labor Senile Rubber18 369.5 106.4 263.1 C.RORLAB3 Costs - Labor Replanted Rubber Without19 359.1 108.4 250.7 Project20 339.6 109.8 229.8 C.LABORRAF3 Costs - Labor Total with Project21 315.4 110.4 205.0 C.MANAGMT Costs - Management and Administration22 290.4 109.4 181.023 266.5 107.4 159.124 244.3 105.7 138.625 226.8 104.8 122.026 217.6 105.0 112.627 213.8 106.0 107.828 206.5 104.0 102.629 183.1 92.9 90.130 143.4 73.2 70.2

- 84 - ANNEX 5

TABLE 9


SENSITIVITY TESTS

NPV AS A IPRESENT OF PRESENT INTERNALVALUE AT DCC COSTS AT OCC RATE OF

TEST CASES TEST CASE VARIATIONS OF 12.0% OF 12.02 RETURN

BASE CASE 127.0 40.0721 15,266%

TEST CASE I C.NATSORR UP 10% 112.2 33.831% 14.856%

TEST CASE 2 C.dATSORR UP 1OXC.LABORRA IP 10I 76.5 20.835% 13.948X

TEST CASE 3 B.NBK UP 20%B.SENWOPA UP 202B.RRWOP UP 20% 215.8 68.087% 16.551%

TEST CASE 4 B.NBK DOWN 20%B.SENWOPA DOWN 20%B.RRWOP DOWN 20% 38.2 12.058% 13.270%

TEST CASE 5 B.RRWOP UP 150%C.RORIATS UP 150XC.RORLAB3 UP 150% 109.3 40.638% 15.058%

TEST CASE 6 B.SENWOPA DOWN 99%3.RRW0P DOWN 99XC.RORNATS DOWN 99%C.RORLAB3 DOWN 99XC.SENLABA DOWN 99%C.SENNATA DOWN 991 202.6 38.015% 17.604%

TEST CASE 7 B.SENWPA UP 67%C.SENLABA UP 67XC.SENNATA UP 67% 83.7 43.580% 13.997%

TEST CASE 8 B.NBK UP 20% 274.7 86.679X 18.184X

TEST CASE 9 B.NBK DOWN 20% -20.7 -6.534X 11.362%

TEST CASE 10 8.NBK LAG I YEAR 43.2 13.647% 13.070%

TEST CASE 11 C.KANAGMT UP 100% 96.4 27.737% 14.350%

TEST CASE 12 C.SENLABA UP 33XC.LABORRA UP 33%C.RORLAB3 UP 33% 73.9 19.989% 14.074Z

TEST CASE 13 C.LABORRA UP 10%C.NATSORR UP 10%B.NBK DOWN 10% 2.7 0.732% 12.075%

Notes: C.MATSORR Costs - Material Total With ProjectC.LABORRA Costs - Labor Total With ProjectB.NBK Benefits - New ReplantsB.SENWOPA Benefits - Senile Rubber without ProjectB.RRWOP Benefits - Replanted Rubber without ProjectC.RORMATS Costs - Materials Replanted Rubber Without ProjectC.RORLAB3 Costs - Labor Replanted Rubber Without ProjectB.RRWOP Benefits - Replanted Rubber Without ProjectC.SENLABA Costs - Labor Senile RubberC.SENMATA Costs - Materials Senile RubberC.MANAGMT Costs - Management and AdministrationC.RORLAB Costs - Labor Replanted Rubber Without Project

-85 - ANNEX 5TABLE 10


SENSITIVITY ANALYSIS FOR PRESENT VALUES

APPRAISAL VALUES

DISCOUNTRATE B.NBK B.SENUOPAV B.RRWOP C.SENHATAV C.RORHATS C.HATSORRAF C.SENLABAV3 C.RORLAB3 C.LABORRAF3 C.4ANAGMT

B,OO 1386.1 -305.5 -86.2 -20.2 -8.6 212.46 -209.0 -44.6 581.1 36.310.00 1005.0 -276,2 -61.0 -18.2 -7.0 175,7 -188.0 -33.8 449.9 33.312.00 738.5 -250.8 -43.8 -16.4 -5.8 147.8 -169.8 -26.2 356.8 30,6

SWITCHING VALUES

DISCOUNTRATE B.NBK B.SENWOPAV B.RRWOP C.SENNATAV C,RORNATS C,MATSORRAF C.SENLABAV3 C.RORLAB3 C.LABORRAF3 C.HANAGHT

8.00 939.3 -752,3 -533.1 426.7 438.2 659.5 237.9 402.2 1028.0 483.110.00 749,2 -532.0 -316.8 237.6 248.8 431.5 67.8 222.0 705.7 289.112.00 611.5 -377.8 -170.8 110.6 121.2 274.8 -42.8 100.8 483.7 157.6

PERCENTAGE CHANGE

DISCOUNTRATE B.NBK B,SENWOPAV B.RRUOP C.SENMATAV C.RORHATS C.HATSORRAF C.SENLABAV3 C.RORLAB3 C,LABORRAF3 CdIANAGNT

8.00 -32.2 146.3 518,1 -2213,7 -5179.4 210.2 -213.8 -1001.5 76.9 1232,310i00 -25.5 92.6 419.0 -1408.6 -3652.9 145.6 -136.1 -757.6 56.9 769.212.00 -17.2 50.6 290.0 -773.9 -2189.9 85.9 -74.8 -485.0 35.6 415.0

SULIARY ECONOMIC CHARACTERISTICS

DISCOUNT PRESENT PRESENT NET PRESENT NPV AS I OF INTERNAL RATERATE BENEFITS COSTS VALUES PRESENT COSTS OF RETURN

8.0 994.4 547.6 446.8 81.6% 15.266%10.0 667.7 411.9 255.8 62.1Z 15.266%12.0 443.9 316.9 127.0 40.1Z 15.266X

Notes: B.NBK Benefits - New ReplantsB.SENWOPAV Benefits - Senile Rubber Without ProjectB.RRWOP Benefits - Replanted Rubber Without ProjectC.SENMATAV Costs - Materials Senile RubberC.RORMATS Costs - Materials Replanted Rubber Without ProjectC.MATSORRAF Costs - Materials Total With ProjectC.SENLABAV3 Costs - Labor Senile RubberC.RORLAB3 Costs - Labor Replanted Rubber Without ProjectC.LABORRAF3 Costs - Labor Total With ProjectC.MANAGMT Costs - Management and Administration

Table 11

- 86 -

THAILAND


EhPLOYMENT IHPACT OF ORRAF REPLANTING 1982-1985

THOUSAND MAN YEARS

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

EXTRA EMFLOYMENT

ORRAF PROG 1982-1985 27.9 42.6 53.0 59.3 36.2 25.5 17.5 15.9 25.8 45.0 68.4 87.3 96.1 96.8 96.8 96.8

EMPLOYMENT FOREGONE

REPLNTS OWN RESOURCES 1.4 2.2 2.6 2.8 2.9 3.0 3.1 3.1 2.1 2.3 3.1 4.0 5.0 6.0 7,0 8.1SENILE RUBBER 14.9 29.9 44.5 58.6 56.8 54.5 51.9 48.2 44.8 32.0 20.3 9.6 0.0 0.0 0.0 0.0

NET INCREMNTL EHPLHT 11.5 10.5 6.0 -2.1 -23.6 -32.0 -37.5 -35.4 -21.1 10.7 45.0 73.6 91.1 90.8 89.8 88.7======= ======= ======= ======= ======= ======= =Z====== ===== _ ==:===== ======= ,=_=== _==== == ====== ======= ======= =======

YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTALS

EXTRA EMPLOYMENT

ORRAF PROG 1982-1985 96.7 96.7 96.7 96.8 96.8 96.7 96.8 97.0 97.0 97.0 97.1 94.1 83.4 65.8 2199.7

EMPLOYMENT FOREGONE

REPLNTS OWN RESOURCES 8.8 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 9.0 8.6 7.7 183.0SENILE RUBBER 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 466.1

NET INCREMNTL EMPLMT 88.0 87.7 87.8 87.8 87.8 87.8 87.9 88.0 88.0 88.0 88.1 85.1 74.8 58.0 1550.6

ANNEX 5Table 12

- 87 -

THAILAND


IMPACT OF ORRAF 1982-1985 REPLANTINGS ON GOVERNMENT COSTS AND REVENUES

MILLIONS OF DOLLARS (1981 CONSTANT TERMS)

YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997

INCREMENTAL EXPORT TAX -4.1 -8.1 -12.0 -15.9 -15.5 -15.1 -14.4 -12.8 -8.1 3.2 17.5 32.3 45.1 52.2 57.3 60.8INCREMENTAL CESS -1.6 -3.2 -4.7 -6.2 -6.0 -5.7 -5.4 -4.7 -3.0 1.2 6.4 11.8 16.4 19.1 20.9 22.2

INCREMENTAL GOVT INCOME -5.7 -11.3 -16.8 -22.1 -21.5 -20.7 -19.8 -17.5 -11.1 4.4 23.9 44.1 61.5 71.3 78.2 83.1

INCREMENTAL ORRAF GRANTS 15.1 27.0 37.4 45.4 37.5 34.2 30.8 26.8 19.4 10.5 3.5 0.0 0.0 0.0 0.0 0.0INCREMENTAL ORRAF OVERHE 2.9 5.3 7.3 8.9 7.3 6.7 6.0 5.2 3.8 2.0 0.7 0.0 0.0 0.0 0.0 0.0INCREMENTAL RESEARCH ALL -0.1 -0.2 -0.2 -0.3 -0.3 -0.3 -0.3 -0.2 -0.1 0.1 0.3 0.6 0.8 1.0 1.0 1.1

INCREHENTAL GOVT COSTS 18.0 32.1 44.4 53.9 44.6 40.6 36.5 31.7 23.0 12.6 4.5 0.6 0.8 1.0 1.0 1.1

NET INCREMENTAL GOVT FLO -23.6 -43.4 -61.2 -76.0 -66.1 -61.3 -56.3 -49.2 -34.1 -8.1 19.3 43.5 60.7 70.4 77.2 81.9

YEAR 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 TOTALS

INCREMENTAL EXPORT TAX 62.8 62.9 61.2 57.8 53.7 49.5 45.4 41.6 38.6 37.1 36.4 35.2 31.2 24.4 800.2INCREMENTAL CESS 22.9 23.0 22.3 21.1 19.6 18.1 16.6 15.2 14.1 13.5 13.3 12.8 11.4 8.9 290.5

INCREHENTAL GOVT INCOME 85.7 85.9 83.5 79.0 73.3 67.5 62.0 56.8 52.7 50.6 49.7 48.0 42.6 33.3 1090.7

INCREMENTAL ORRAF GRANTS 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 287.5INCREMENTAL ORRAF OVERHE 0-0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 56.1INCREMENTAL RESEARCH ALL 1.1 1.1 1.1 1.1 1.0 0.9 0.8 0.8 0.7 0.7 0.7 0.6 0.6 0.4 14.5

INCREMENTAL GOVT COSTS 1.1 1.1 1.1 1.1 1.0 0.9 0.8 0.8 0.7 0.7 0.7 0.6 0.6 0.4 358.1

NET INCREMENTAL GOVT FLO 84.6 84.8 82.4 77.9 72.4 66.6 61.1 56.0 52.0 49.9 49.0 47.4 42.0 32.9 732.6…… … ………= =…== =…== = = = == = == = = = == = = == = = == = = =_ = = = ==-=== = = == = = = …= = =

88 - ANNEX 6Page 1

THAILAND


Related Documents and Data Available in the Project File

A. General Reports and Studies Relating on the Agricultural Sector

A.1. "Technical Changes in Natural Rubber", Draft Paper, EconomicAnalysis and Projections Department/IBRD, June 1980.

A.2. IBRD "Thailand Agricultural Development Strategy Review,"Draft Report, November 1980.

A.3. Thailand Rubber Statistics, Rubber Division of DOA, Vol. 9 (1980),No. 1.

A-4. "Coconut Improvement in Southern Thailand," UNDP No:THA/79/017/A/01/A12.

A.5. "Trends and Potentials of Natural Rubber Production in Thailand,"Rubber Division of DOA.

B. General Reports and Studies Relating to the Project

B.1. The 1980 Socio-Economic Survey of ORRAF Grant Receiving RubberReplanters in Thailand, May 1980.

B.2. Appraisal of Smallholder Coconut Development Project, Dr. Ng SiewKee, Agromac Sdn. Bhd., October 1980.

B.3. (a) Proposals for a Second Series of Loans to Support theAccelerated Rubber Replanting Programme in Thailand, ProjectPreparation Report by FAO/UNDP and ORRAF, March 1980.

(b) Second Final Edition, August 1980.

B.4. Thailand Smallholder Coconut Development Project, FAO/CPPreparation Report, August 1980.

B.5. SGV Reports on ORRAF's Management and Organization.

(a) Personnel Systems and Procedures, November 1978.

(b) Accounting Systems and Procedures Manual, Part I and II,December 1978.

(c) Replanting Application Processing Procedures Manual, December1978.

- 89 -ANNEX 6Page 2

(d) Job Descriptions Manual, December 1978.

(e) Final Report on ORRAF Management Organization and OperationsStudy, January 1979.

(f) Report on Post Review of Implementation on ORRAF Management andOperations, September 1979.

B.6. Final Research Report on Survey of Rubber Growing Areas in ThailandUsing Satellites' Imagery Techniques, Part I, Rubber Research Center,Hat Yai, May 1980.

B.7. "Bridging Assistance for Accelerated Rubber Replanting," UNDP,March 1980.

C. Table of Contents of the Project File

C.1. A - Rubber Division of MOACB - Rubber Research CenterC - Extension ServicesD - Rubber Consultative GroupE - Tables

C.2. - Rubber TaxationC.3. - Costs and ProductionC.4. - Coconut DevelopmentC.5. - ORRAFC.6. - Per Hectare Financial Farm ModelsC.7. - Project CostsC.8. - Economic Analysis of the Project

- 90 -

THAI LANDSECOND TREE CROPS PROJECT

Organization Chart of ORRAF Headquarters

Board of Directors

rector

Technical Executive~ ~ ~~~~~~~~~Serearal IneraDeputy Director uty rector

|Paning and |to< i; 1 | ;;; 4

2 Monitoring ut | rP_ ctor Office | | Audit UfA t

Applantion Develo ocn ac Ahin nPrsonnDivision Division Ofic

Consierlantiong Traning Acc ounting | enie Dat Prpo,n

Rec tion Section Section Section cessing Unit

_ Verification |Replanting

men Secvn | tinSction| Section Seto

ran ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~iaca Inventory and R

Accounting Management

Sectioo a

Wo rid Bank -22200

-91 -


Organization Chart of ORRAF's Provincial Offices

ProvincialHead

Assistant AssistantProvincial Head Provincial Head

for Operations for Finance andfor Operations ~~~~~~~~~~~~~~~~~Administration

r~~

Head Head Head Head Head Head Head Hade Head Head ProjectFel Inspection Deeomn edReplanting Replanting Administration Ceashe Administration Replanting Croset

ur~ ~ ~ ~ ~Dvelopmt entic Project Materials Accounts Accounts Csier and Personnel Application ACcountin

Unit Unit Unit Unit Unit Uitni Unit Unit

HeadSub-office

r'g

uervsor Supervisor Supervisor Supervisor Clerk Clerk Clerk Clerk Clerk Clerk

Deve I I I I I II___-Administrative Duty and ResponsibilityField Development Project *Senior Inspection Supervisor

Surveyor Inspector Service

World Bank - 22201

- 92 -


Organization of the Rubber Division and the Rubber Research Center (RRC)

MOAC

Director

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r Rubber | /~~~~~~~~Ru

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| dinistration |Field Services | |DeputV Director|

t~ ~~~~~~an ttsi' Branch Branch Teehnica Administration|

| Cash and - |_ |

B tresnch- Techlg || Soil Science ||Dvloet|| Agronomy onomic | Field Stations|

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