Project Analysis in Developing Countries: Cost Benefit Analysis for Development

✍ Scribed by Steve Curry, John Weiss

• Publisher: Palgrave Macmillan
• Year: 2023
• Tongue: English
• Leaves: 476
• Category: Library

✦ Synopsis

This updated new edition explores the techniques used to assess the economic impact of projects in developing countries. Blending an academic understanding of economics and development with an accessible style and practical advice, the costs and benefits of investment projects, an important mechanism for economic development, are assessed to ensure that resource allocation is as productive as possible. New material has been added, particularly on the environmental impact of projects, the role of the discount rate in decision-taking, the application of techniques to estimate willingness to pay for benefit estimation and the quantification of health impacts.

Although the basic techniques of project analysis were developed many decades ago, they remain highly relevant to address current concerns, such as population growth, urbanisation, pressure on physical infrastructure, inequality, and the climate crisis. This book aims to provide an accessible overview, drawn from extensive practical experience, of project analysis in developing countries. It will be relevant to students, researchers, and practitioners interested in development economics.

✦ Table of Contents

Preface to Third Edition
Contents
List of Figures
List of Tables
List of Boxes
Chapter 1: Introduction
Basic Ideas
The Project Planning Process
Changing Context for Project Analysis
Other Approaches
Outline of the Book
Chapter 2: Main Features of Projects, Resource Statements and Financial Statements
Project Viewpoints
Prices
Types of Projects
Conventions Used in Drawing Up Project Resource Statements
Investment Costs
Operating Costs
Working Capital
Benefits
Some Project Resource Flows
Resource Statements and Financial Statements
Use of Constant or Current Prices
Discounting
Discount Rate for Financial Analysis
Discount Rate for Economic Analysis
Conclusion
Further Reading
Bibliography
Chapter 3: Project Criteria
Project Criteria for Single Projects When Benefits Are Valued
Benefit-Cost Ratio (BCR)
Net Present Value (NPV)
Internal Rate of Return (IRR)
Equivalence of Project Criteria
Different Points of View: Returns to Total Capital and to the Project Owner
Project Alternatives
Choosing Between Project Alternatives When Benefits Are Valued
A Further Approach to Choosing Between Project Alternatives
Decisions on Timing
Choosing Between Project Alternatives When Benefits Are Not Valued: Least Cost Analysis
Choosing Between Project Alternatives When Benefits Cannot Be Valued: Cost Effectiveness Analysis
Project Criteria and a Shortage of Investment Funds
Conclusion
Further Reading
Bibliography
Chapter 4: Theory Behind Economic Analysis of Projects
Background to Economic Pricing
Project Effects: Incremental and Non-incremental
Unit of Account and Numeraire
Application of Conversion Factors
Conflicts Between Economic and Financial Criteria
Conclusion
Further Reading
Bibliography
Chapter 5: The Domestic Price System of Economic Analysis
Traded and Non-traded Goods
Valuation of Traded Goods
Border Parity Pricing
Valuation of Non-traded Goods
Treatment of Labour Cost
Economic Value of Land
The Shadow Exchange Rate
Test for Trade Efficiency—Domestic Resource Cost Ratio
Conclusion
Further Reading
Appendix 1: Applications of Economic Analysis with Irrigation Project Illustration
The Project
Economic Analysis
Appendix 2: Irrigation Project and Domestic Cost Ratio
Bibliography
Chapter 6: The World Price System of Economic Analysis
Rationale for World Price Numeraire
Equivalence of the Two Systems
Traded Goods in a World Price System
Non-traded Goods in a World Price System
Labour in a World Price System
Land in a World Price System
World Price Units and Willingness to Pay (WTP)
Irrigation Illustration Using World Price Numeraire
A More Detailed Analysis
Conclusion
Further Reading
Appendix 1: Semi-Input-Output (SIO) Analysis
Illustration of an SIO Application
Data Issues
Appendix 2: Semi-Input-Output System
Bibliography
Chapter 7: Estimating Willingness to Pay
Benefit Valuation in Non-traded Activities
Willingness to Pay (WTP)
Use of Surveys
Elicitation Approach
Benefit Transfer
Benefit Function Transfer
Conclusion
Further Reading
Appendix 1: Choice Experiment—Illustration from United Kingdom
Appendix 2: Benefit Function Transfer for Benefit Valuation for a Waste Water Treatment Project in China
Bibliography
Chapter 8: Choice of Discount Rate
Specifications of the Discount Rate
Social Time Preference Rate
Shadow Price of Investment
Where Pinv Is Not Required
The Weighted SOC Discount Rate
Equivalence of the Two Approaches
Choice of Discount Rate
STP Rate and Declining Discount Rates
Is There a Case for Using Different Discount Rates for Different Sectors?
Fixed Sector Budgets
Hard to Value Sectors
Different Types of Benefit
Conclusion
Further Reading
Bibliography
Chapter 9: Allowing for Uncertainty
Sensitivity Analysis
Scenario Analysis
Risk Analysis and Use of Probabilities
Reducing Risk
Further Reading
Appendix: Option Value and the Value of Waiting
Bibliography
Chapter 10: Benefit Valuation in Different Sectors
Transport
Non-Incremental Benefits
Incremental Benefits
External Effects
Education Projects
Health Projects
Practical Applications of Cost Effectiveness
Benefit Valuation in Health
Conclusion
Further Reading
Appendix 1: Productivity Benefits and Transport Projects
Appendix 2: Urban Transport Project
Appendix 3: Education Project
Appendix 4: Health Project
Bibliography
Chapter 11: Project Analysis and Environmental Effects
Introduction
Environmental Value
Methods of Estimating Environmental Values
Output- or Market-Based Approaches
Cost-Based Approaches
Revealed Preference
Stated Preference
Benefit Transfer
Meta-Analysis
Valuing Carbon and Other Emissions
Discounting and the Environment
Some Environmental Illustrations
Conclusion
Further Reading
Appendix 1: Depletion Premium
Appendix 2: Meta-Analysis Using Ecosystem Service Database (ESVD)
Bibliography
Chapter 12: Financial Analysis of Projects
Financial Sustainability
Financial Incentives
Charges and Cost Recovery
Price Changes
Conclusion
Further Reading
Bibliography
Chapter 13: Income Distribution Effects of Projects
Projects with Important Distributional Effects
Estimating Income Flows from Financial Statements
Power Example: Cost and Benefit Flows at Financial Prices
Estimating Income Flows from Resource Statements
Economic Prices and Income Flows
Foreign Participation in Projects
Poverty Impact
Trade-Offs in Poverty Analysis
Conclusion
Further Reading
Appendix 13.1: Water Project Example: Distribution and Tariff Setting
Benefit Conversion Factors
Tariff Adjustment
Appendix 13.2: Weighting System for Project Distribution Analysis
Revaluing Savings
Revaluing Consumption
Bibliography
Chapter 14: Conclusions
The Value System in Project Analysis
Empirical Estimation of Wider Effects
Future Application of Project Analysis
Conclusion
Bibliography
Index