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82 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA Airlines, hotels, car rentals, companies, as well as manufacturing, construction, etc., are establishments that grow and contribute towards economic activity. However, we do not compute this into benefits calculation as this is already accounted for in the expenses on personal and business tourists, both domestic and foreign, on goods and services and would cause double-counting. Tourism has expanded greatly in the past two decades and is reportedly the world’s largest industry and provider of jobs, although measurement is extremely difficult and accurate statistics are scarce (WTTC 2003). It is estimated that international tourism generated about 10% of global GDP in 1994, accounted for over 10% of all consumer spending, created more than 12 million new jobs and provided more than $650 billion in tax revenues to governments. The magnitude of these figures explains why tourism is, or should be, a priority concern of governments worldwide. For the project, we consider 20% of project costs as wage bill which is a direct benefit to people in the region. Non-visitor Exports: Non-visitor exports are indirect benefits from Tourism which include expenses on consumer goods such as clothing, electronic items, and petrol, which are exported for ultimate sale to visitors and capital goods such as aircrafts and cruise ships exported for use by the travel and tourism, providers. The growth trends for this category are very high at over 18%. We assume that this will grow at 15% over the coming years without the project. Table 9.11 Growth of Travel and Tourism in Northeastern States (US $ million) Year Personal Business Visitor Non-visitor Travel Travel Exports Exports 2006E 280.71 36.71 52.68 33.14 2007E 302.69 38.64 59.88 39.77 2008E 330.24 41.29 66.36 47.54 2009E 365.08 44.67 72.72 56.82 2010E 404.71 48.44 79.68 67.92 2011E 448.69 52.52 87.36 81.18 2012E 497.48 56.95 95.76 97.02 2013E 551.55 61.77 105.00 114.10 2014E 611.51 67.02 115.08 134.13 2015E 677.97 72.74 126.12 157.83 Source: Computed based on WTTC 2005 Total Benefits: A summation of total direct and indirect benefits will give us a figure for total tourism benefits. We do not for our analysis consider benefits from increased exports of goods already in the export market such as tea and handicrafts or potential exports of agricommodities. Past trends indicate a 10% growth per annum for each category except for non-visitor exports which have grown at over 18%. We now make a conservative assumption that with the project, that there is a further growth of 5% overall in the economy of the region for each of the categories. We then take the projected project benefits as the difference in benefits from without the project and with the project. Thus the trends in additional benefits from each of these categories is presented in Table 9.12. Table 9.12 Total benefits from the project (US $) Year Increase in Increase in Increase in Increase in Personal Business Visitor Non-visitor Consumption Expenditure Exports Exports 1 13,256,700 1,717,926 2,256,000 1,375,782 5 18,254,040 2,233,260 3,636,000 2,841,150 10 30,575,340 3,351,078 5,754,000 6,706,680 15 47,850,584 5,133,713 8,901,434 13,802,703 20 67,545,004 7,246,655 12,565,100 24,141,013 25 103,926,362 11,149,878 19,332,964 48,556,200 Benefits Costs Analysis The direct costs of the project are the costs of investing in upgradation of the existing airport to international standards to allow for a small number of international flights, perhaps initially from the subregion and southeast and east Asia. We perform the BCA as though the government undertakes such a project on its own. We take a 25 year scenario with $150 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, and the benefits are assumed to accrue only after the end of the project. We take $1 million as maintenance costs in two phases after 10 years. This is over and above the regular costs for maintenance which Table 9.13 Results from Benefit-Cost Simulations Economic Rate Net Present of Return (%) Value (NPV) ($) Base Calculation 19.05 87,237,232 Benefits lagged by 1 year 17.35 82,091,574 Benefits lagged by 2 years 15.48 53,482,992 Costs up by 10% 17.99 78,721,352 Benefits lagged by 1 year 17.93 128,713,344 Benefits lagged by 2 years 14.55 41,642,351 Benefits down by 10% 17.88 69,955,064 Benefits lagged by 1 year 17.82 114,564,718 Benefits lagged by 2 years 14.44 36,200,825
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 83 are expected to be met with revenues raised by the airport by ways of entry fees, parking charges, etc. The main results from the exercise are in Table 9.13. The base calculations are computed using conservative assumptions. The costs for upgradation have been taken as much higher than estimated for other similar projects in India and abroad. We have assumed the project benefits increase by 5% and that the benefits accrue only after the project is fully completed. The Net Present Value (NPV) at this base case is $87 million and the Economic Internal Rate of Return (EIRR) is 19%. Both the NPV and EIRR for different scenarios (Tables B10 and B11) indicate that the project is economically viable and they are not overly sensitive to decreased benefits or increased costs. RAILWAY IMPROVEMENT PROJECT FROM LAHORE TO WAGAH Trade relations between India and Pakistan have been governed by political considerations. Taneja (2007) has made a detailed analysis of Indo-Pakistani trade. Although still very low, the trade has grown significantly since 2001 when India’s export were US $144.01 million to 2006 when India’s exports are $ 689.23 million. The trade balance is in India’s favor and has grown six times in this period. Fig 9.6 Indo-Pakistan Imports and Exports, 1980–2006 Taneja (2007) summarises that trade between the countries takes place by all modes of transport – air, rail, sea, and road. The most feasible and cost-effective way of moving goods between the two countries is over land but land transport is extremely inadequate. The only operational road route is through the Wagah border. Although India permits export and import through several other points in Amritsar, Ferozepur, and Jodhpur districts (notified under Customs Act, Fig 9.7 Lahore-Amritsar Rail Corridor through Wagah-Attari 1994), Pakistan allows trade from India only through Wagah-Attari by rail and road. Goods from Kolkata are shipped to Karachi via Singapore. Only a limited number of items are allowed to be traded through the road route. Since 2005, Pakistan allows import of a few vegetables and livestock from India and allows the export only of cement to India by road. The road route between India and Pakistan has several bottlenecks which include single gate for goods and passengers; time restrictions; and number of tucks that could go across each day. Recent amendments of the road protocol allow Indian and Pakistani trucks to cross over to the border and unload, similar to the protocol between India and Bangladesh. The restrictions on movements of goods by rail are more severe. Pakistan does not allow the import of cotton by the rail route through Attari since as per Plant Quarantine Rules, 1967, Pakistan, cotton may be imported only through Karachi port. The numerous textile mills located around Lahore have to import cotton through Mumbai and Karachi. Similarly India has restriction on movements of certain goods – molasses and cotton yarn – via rail. The two countries also do not allow transit facilities to each other. Pakistan allows goods from Afghanistan to be transported to India over land but does not allow Indian goods to transit onward to Afghanistan. India also does not allow Pakistan transit facilities through its territory to Bangladesh and Nepal. The inland ports’ idea which received much thrust from Government of India’s Ministry of Commerce and Ministry of External Affairs, was objected to by the Ministry of Home Affairs on the ground of security concerns. However, the ICP notion to develop border trade is being pursued. 15 15 Times of India, 4 Dec. 2006, ‘New border points set to open up for trade’ by Indrani Bagchi.
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QUANTIFICATION OF BENEFITS FROM ECO
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QUANTIFICATION OF BENEFITS FROM ECO
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Preface Our consultations with seni
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viii CONTENTS 7. Revenue and Welfar
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Executive Summary OBJECTIVE This st
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EXECUTIVE SUMMARY xiii Table 1 EAMA
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EXECUTIVE SUMMARY xv India A full S
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EXECUTIVE SUMMARY xvii indicates th
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EXECUTIVE SUMMARY xix ments on basi
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Part I BENEFITS FROM TRADE, INVESTM
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4 QUANTIFICATION OF BENEFITS FROM E
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2 Literature Review and Rationale f
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15 Prospects for the Telecommunicat
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APPENDICES
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Appendix 8 Intra SAARC FDI Collabor
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Appendix 11 Table A11.1 On an Emplo
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Appendix 12 Original Commitments/In
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Appendix 14 Table A14.1 Telecommuni
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Appendix 15 REFERENCE PAPER Scope T
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Bibliography Abelson, P. (1996),
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BIBLIOGRAPHY 241 Cuba (2002), Negot
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BIBLIOGRAPHY 243 (2004), Impacts of
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BIBLIOGRAPHY 245 Silva, Patricia an
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BIBLIOGRAPHY 247 (1998), Tourism Se
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