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90 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA Table 9.22 Total Benefits from the Project (US $) Year Avoidance of Additional Net benefits Feeder Costs Revenue from Transshipment 1 – – 79,000,000 5 104,338,000 22,843,000 108,478,000 10 153,306,000 47,188,000 93,126,000 15 225,257,000 74,240,000 123,032,000 20 342,876,000 114,975,000 322,570,000 25 455,655,000 74,342,000 396,827,000 Source: ADB, 2007 • Loss of revenues to Sri Lankan terminals from transshipment; and • Loss of dues paid to SLPA by container vessels. Lower freight costs are expected to result in annual savings of $82 million by 2015, and faster delivery times will create annual savings of $49 million by 2015. In addition transshipment traffic is expected to generate direct net annual income to terminal operators amounting to $77 million by 2015. The benefits of the Project are the avoidance of these costs to the economy. The values assigned to the benefits are compared with the total investment cost of $1.3 billion for the Project to 2034. Benefits Costs Analysis The economic evaluation compares the economic benefits and costs of the project from the viewpoint of the national economy. The economic analysis was based on the scenario that the three terminals are sequentially developed to meet the forecasted demands by taking into account that SLPA provides the basic infrastructure to accommodate the terminals. Table 9.23 Results from Benefit-Cost Simulations Economic Rate Net Present of Return (%) Value (US$) Base calculation 17.76 436,655,000 Capital costs up by 10% 16.3 Total costs up by 10% 15.95 346,757,000 Traffic forecasts down 16.0 by 10% Avoidance of feeder 16.19 331,393 costs down by 10% Decrease in revenue 17.36 408,354,000 benefits by 10% Total benefits down 15.76 303,091,000 The economic internal rate of return is estimated at 17.8%. These assumptions do not include the value to be placed on fast, direct shipping services by investors considering alternative countries as locations for setting up new manufacturing or distribution centers. It also does not include loss of international investors, who will include frequent, direct shipping services on their checklist of preconditions for locating in a country. Thus the economic analysis is conservative. Sensitivity and risk analyses indicate that the economic internal rate of return is robust under most conditions. The financial analysis of income and expenditure also gives a robust result of 11.5% for the base case. CONCLUSION It has been demonstrated that the trade and transport facilitation projects under consideration are high benefit projects for the countries undertaking them. Should the government choose to finance the projects on their own from year 1 to year 5, with benefits accruing only after project completion, both projects yield very high benefits with high economic internal rates of return, even in the worst case scenarios. However, the importance of a supportive overall policy framework for the promotion of transport, trade, and tourism cannot be undermined. It is essential for the governments to develop a meaningful strategy. As SAFTA is established, additional steps to support the framework such as facilitating customs procedures at borders points and improved infrastructure are essential in order to reap the benefits form reduced tariffs. The large amount of informal trade in the SAARC region is attributable to the cumbersome procedures at the border and improvements in infrastructure will formalise these figures. But, investments in transportation systems alone are not sufficient and there is a need for policy reform, accompanied by improved procedural and operational efficiency. For the road and rail project considered at the Indo-Bangladesh and the Indo-Pakistan border respectively, positioning appropriate trained customs department personnel and provision of adequate law and order is necessary. Thus, besides physical infrastructure gaps, regulatory and procedural problems need to be looked into, which includes harmonisation of technical standards, customs, documentation and procedures which have so far impeded timely delivery of goods and services. Therefore, a sustained effort to develop and entire package of policies for trade facilitation is required to realise the full trade potential and the effective exploitation of comparative advantage and competitiveness among countries. Similarly, a long term master
QUANTIFICATION OF BENEFITS FROM TRANSPORT AND TRADE FACILITATION IN SOUTH ASIA 91 plan needs to be developed in consultation with all the state governments and private sector to ensure sustainable tourism development or unplanned construction and overcrowding will considerably reduce the tourism appeal in the region. An independent development agency may be created to draw up an integrated plan using area planners and landscape architects to create infrastructure including roads, power, water and sewage systems, and railway stations. This exercise has been preliminarily worked out as a BCA to show that the four identified projects are high yield projects for the countries that undertake them. The projects would also benefit other countries of the region. They can be expanded to subregional projects such that there is political commitment and endorsement from all countries, and coordination of custom reforms and activities to bring better consistency in the legal and regulatory frameworks can be designed for better regional cooperation. An integrated effort will serve national and regional interests at the same time. The total benefits will exhibit manifold increase with marginal increases in costs. Adoption of similar win-win projects will induce confidence in the regional cooperation agenda for all involved countries.
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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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4 Effective Additional Market Acces
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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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