Report

78 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
improvement in Bangladesh’s trade balance. The
increase in trade is the difference in the trade balance
in with- and without project scenarios.
Access to Education, Markets, and Infrastructure:
Several quantifiable benefits emerge for the local
population with better connectivity. These will not be
large as compared to the figures of improved trade but
they can be compared to the resettlement costs to see
long-term local benefits emerging from the project. The
corridor under consideration is in proximity to SH1,
and has features similar to this and SH10. 11 The categories
of affected persons include project affected
households and communities, both vulnerable and nonvulnerable;
small business enterprises (SBE), such as
tea shops, temporary markets, or mechanics; and informal
dwellers or squatters, who are illegal or unauthorised
occupants. While there will be costs of relocating
these persons and structures, there are increased opportunities
for them as well. In order to compute incremental
benefits from better access to education, markets
and infrastructure facilities, we compute a valuation
for time savings in Table 9.7. Assuming each person
saves 2 hours a day and can be gainfully employed in
this time, we attach a monetary valuation to the times
savings for 2000 households. This is valued at the
current wage rate at Rs 10 per hour.
Table 9.7 Estimated Time Savings from the Project
Unit
Current time savings per household per day 120 minutes
Total time savings per household annum 92 days
Number of beneficiary households in 2000
the area
Wage rate at Rs 10 per hour, savings per Rs 7,300
household
Benefits from Time Saved Rs 14,600,000
Benefits from Time Saved $339,535
Employment Benefits
Normal road projects have a high labour component
and wage bills are approximately 30% even for large
national highway projects. Hence, we can make a
conservative assumption that 20% of projects costs is
the wage bill, which is a direct benefit for the people of
the region. Indirect employment benefits will come from
increased employment opportunities in the region due
to better connectivity and facilities. We assume that
employment benefits accrue only during the time of
project implementation.
Total Benefits: A summation of national benefits from
increased trade and local benefits from increased
employment and education and market opportunities
yields total benefits from the project. The trends of
additional benefits with the project over time are in
Table 9.8.
Table 9.8 Total Benefits from the Project (US $)
Year National Net Employment Time Net Benefits
Exports Benefits Savings
1 2,500,000 –10,000,000
5 2,500,000 –10,000,000
10 78,918,155 339,535 79,257,690
15 164,112,799 339,535 164,452,334
20 341,265,215 339,535 341,604,750
25 709,619,187 339,535 709,958,722
Benefits Costs Analysis
The detailed result of a benefits costs analysis, should
the government undertake such a project on its on, is
conducted as the base scenario. We take a 27 year
scenario with $125 million as project costs incurred
over the five years at 10% in the first year, 20% in the
second, 30% in the third and fourth year, and 10% in
the last year. 20% of costs are the wage bill. Trade and
time-savings benefits are assumed to accrue only after
the end of the project. We take $1 million as
maintenance costs in two phases. The main results from
the exercise are summarised in Table 9.9.
Table 9.9 Results from Benefit-Cost Simulations
Economic Rate Net Present
of Return (%) Value (NPV) ($)
Base Calculation 37.73 638,788,238
Benefits lagged by 1 year 24.36 441,535,923
Benefits lagged by 2 years 22.70 350,285,175
Costs up by 10% 35.78 629,890,479
Benefits lagged by 1 year 23.23 424,693,737
Benefits lagged by 2 years 21.66 334,294,177
Benefits down by 10% 35.99 567,933,080
Benefits lagged by 1 year 23.22 382,254,281
Benefits lagged by 2 years 21.64 300,794,717
The base calculations have been computed with the
conservative assumption that the project will lead to
11
ADB (2001b) estimates 1834 persons are affected along SH1 and SH10 in West Bengal (including bypass) as, categorised
according to ownership of structures. Retail service shops along the roads are 35% while food kiosks are 29%. Over 60% of
the small businesses are owner-operated.