Final Report - Asian Development Bank

TA 4721-PRC: Preparing the Shaanxi-Qinling Mountains Integrated Ecosystem Management Project
Final Report Appendix 13
A. Introduction
FINANCIAL AND ECONOMIC ASSESSMENT
1. This appendix contains a summary of the financial and economic analysis for the project
components and subprojects as well as the overall Project. A set of detailed analysis is contained in
Supplementary Appendix 15.
2. The Project has 3 components, and 8 subcomponents. Component One provides support for
the development of ex-situ commercial businesses and has three subcomponents that are
implemented by two implementing agencies. The NQBG will strengthen two commercial enterprises
being the QNBG and the Shaanxi Animal Rescue Center1. The Louguan Fudi Tourism Group will
implement an expansion of the geothermal hot spring development. For each enterprise project costs,
financial and economic costs and benefits have been assessed based on the visitation and associated
tourism receipts. Component Two supports two subcomponents: the first provides support for in-situ
residents to transition to new and more sustainable livelihood options. This subcomponent includes a
range of activities from the provision of social infrastructure, road and pathway improvement and
access, small and medium enterprise development support with additional support for the
development of community based homestay tourism, and the creation of rights to collective forest land
to be planted into analog forest systems. Project costs have been estimated and benefits estimated for
example enterprises related to essential oils, medicinal plants, and the homestays. No benefits have
been quantified for the reduced transport and travel times, improved water and energy supplies. The
second subcomponent for the in-situ program provides support for habitat re-establishment and
endangered species management for which project costs have been estimated and benefits assessed
in qualitative terms.
3. Component three has three subcomponents being (i) Project Management, (ii) institutional
strengthening, and (iii) the conservation replication and awareness program. The first two
subcomponents are treated as overheads while the third is a public good and global value set that is
assessed only in qualitative terms.
B. Assessment Parameters
4. The economic and financial analysis is in constant 2007 prices. An exchange rate of CNY 7.6
= USD 1 has been used throughout. The Project life is set to end in 2035. For the economic analysis
the discount rate is 12% and for the financial analysis a weighted average cost of capita of 5.6% is
used. The involvement of commercial funding for the Hot spring Development results in an assessed
WACC of 6.8% . Details of the WACC calculations are provided in Annex 1.
1. Financial Parameters
5. Project costs and financial analysis were provided by the IAs in the case of the QBG, SARC
and Hot Springs. Prices were modified including standardization of unit costs between IAs and
corrections to the SARC financial analysis to ensure consistency with PRC and ADB financial
guidelines. For investments linked to Component two and three costs and financial analysis were
prepared by the PPTA Team.
6. The financial analysis is based on cash items with non-cash items such as depreciation and
amortization of intangible assets separated from operating costs. Most of the financial analysis is
based on the net cash flow before the payment of corporate tax to remove the influence of differing
taxes based on the overall tax position of each enterprise.
7. Price and physical contingencies were calculated using the following table for different
expenditure categories in the case of physical contingencies see Table 1.
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