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86 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA in imports from period 2008–30 without the project assuming a pessimistic 6% GDP growth and assume exports will further go up by 10% with the project since growth of exports to India had been very high in the past 5 years. Table 9.16 Pakistan’s Projected Exports to India with and without the Project (US $ million) Year Exports without Project Increased Exports Due to Project 2008 241.10 265.21 2010 292.66 321.93 2015 475.12 522.64 2020 771.33 848.47 2025 1252.22 1377.44 2030 2032.90 2236.19 Employment Benefits: Normal rail projects have a high labour component and wage bills are approximately 30% even for large 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. Time and Costs Savings: We make a similar assumption as in the case of the Petrapole-Benapole project and assume that a small section of the local population saves 2 hours a day due to reduced congestion and improved access to markets. There is also increased employment benefits in the area. We value this conservatively at $600,000. Total Benefits: A summation of national benefits from increased exports and local benefits from increased employment and access to goods yields total benefits Table 9.17 Total Benefits from the Project (US $) Year National Employment Time Net Benefits Net Exports Benefits Savings ($ million) 1 2,000,000 –8,000,000 5 2,000,000 –8,000,000 10 35,525,817 600,000 36,125,817 15 57,674,106 600,000 58,274,106 20 93,630,572 600,000 94,230,572 25 152,003,812 600,000 152,603,812 from the project. The trends in additional benefits with the project over time are summarised in Table 9.17. Benefits Costs Analysis The detailed result of a benefits costs analysis, should the government undertake such a project own its on, is conducted as the base scenario. We take a 27-year scenario with $73 million as project costs incurred over the five years at $10 million in the first year, $17 million in the second, $20 million in the third, $17 million in the fourth year, and $ 10 million 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 $1 million as maintenance costs in two phases. The main results from the exercise are summarised in Table 9.18. Table 9.18 Results from Benefit-Cost Simulations Economic Rate Net Present of Return (%) Value (NPV) ($) Base Calculation 32.12 187,176,733 Benefits lagged by 1 year 19.40 105,906,447 Benefits lagged by 2 years 18.08 81,793,884 Costs up by 10% 30.11 180,700,389 Benefits lagged by 1 year 18.23 94,788,398 Benefits lagged by 2 years 17.00 71,305,120 Benefits down by 10% 30.32 163,306,873 Benefits lagged by 1 year 18.23 85,377,524 Benefits lagged by 2 years 16.99 64,176,586 The base calculations have been computed with a conservative assumption that the project will lead to 10% increase in exports to India from projected levels and that the benefits will accrue only after the project is fully completed. The NPV at this base case is $187 million and the EIRR is 32.12%. Both the NPV and EIRR for different scenarios indicate that the project is economically viable and they are not overly sensitive to decreased benefits or increased costs. COLOMBO PORT EXPANSION 18 Indo-Sri Lanka trade significantly increased after the signing of the bilateral FTA between the two countries. The trade gap dropped by two-thirds within five years of signing the agreement. In 2002, Sri Lanka exported $167.7 million worth of goods to India, an increase of 18 This discussion in this section is entirely based on ADB’s project ‘Proposed Loan Colombo Port Expansion Project (Sri Lanka): The <strong>Report</strong> and Recommendation of the President’, 2007.
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 87 Fig 9.8 Indo-Sri Lanka Imports and Exports, 1980–2006 Dubai Karachi Mundra Mumbai JNP WEST AREA Cochin Delhi Chennai Colombo SOUTH AREA Fig 9.9 Location of Colombo Chittagong EAST AREA Rangoon ISC TO EUROPE MAIN FLOW OF TRADE FAR EAST TO ISC over 135% on the $70.8 million recorded in 2001. India, in turn, sent exports worth $831 million to Sri Lanka, up from $604 million the year before. 19 Ports are integral to trade for both countries as 90% of the total trade to and from India and Sri Lanka is carried by the sea route. Taneja et al. (2004) estimate that India has 12 major ports which handle 75% of its total port traffic. The Colombo port is also one of the major hub ports for India. A comparison between the Colombo and Mumbai’s Jawaharlal Nehru Port Trust port shows that in 1998 Colombo ranked 24, its ranking fell to 35 in 2005 while JNPT which held the rank of 64 in 1998 improved to 30 in 2005 in terms of container handling. 20 However, in terms of equipment handling Colombo offers better facilities than JNPT. For instance Colombo has 21 quay cranes while JNPT has only 16, and Colombo has 69 other cranes while JNPT has only 47. Even if JNPT develops as a hub port, Taneja’s survey shows that traffic from the southern part of India will continue to go through Colombo due to geographical proximity. The Colombo port handles 95% of Sri Lanka’s total international trade though majority of the traffic is for transshipment purposes. Since 1995, transshipment has accounted for around 70% of Colombo’s total container traffic and over 74% of this transshipment is traffic to and from the Indian sub-continent, comprising India, Pakistan, and Bangladesh (ADB 2007). As Colombo is located close to the world’s main shipping routes it has a locational advantage to develop as a hub port. The growth of Colombo port will allow it to increase its share of transshipment traffic from the South Asian region, primarily India. Table 9.19 Composition of Container Traffic, 1995–2003 000 TEU 1995 1996 1997 1998 1999 2000 2001 2002 2003 Transhipment 700 979 1,233 1,191 1,152 1,129 1,157 1,147 1,287 Domestic 329 350 416 479 512 552 531 546 589 Re-stows 20 26 38 43 40 50 37 71 83 Total 1,049 1,355 1,687 1,713 1,704 1,731 1,725 1,764 1,959 Growth % pa 29.2 24.5 1.5 –0.5 1.6 -0.3 2.3 11.1 Shares % Transhipment 67 72 73 70 68 65 67 65 66 Domestic 31 26 25 28 30 32 31 31 30 Re-stows 2 2 2 3 2 3 2 4 4 Total 100 100 100 100 100 100 100 100 100 Source: SLPA. 19 ‘Sri Lanka’s Indian trade doubles’, 2003, http://news.bbc.co.uk/1/hi/business/2848411.stm 20 http://aapa.files.cms-plus.com/Statistics/WORLD%20PORT%20RANKINGS%202005.xls
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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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