PED guidebook main sxn rev6. FINAL.pdf - LGRC DILG 10

Strengthening Provincial/LocalPlanning and Expenditure ManagementProject Evaluationand Developmentii. Input good is tradeable1. In this case, the scarcity of foreign currency also needs to beconsidered in determining the true cost of the input. This is doneby imposing a foreign exchange premium (FEP) on the officialexchange rate. The value of the FEP is determined by the NEDA-PIS and may change from time to time. The most recent value is1.2.Example (p): Suppose the current exchange rate of P 54.75. With an FEP of1.2, this means that any imported input will cost 20% more when expressed indomestic currency. That is, a $ 100 worth of goods is equivalent to$ 100 x 54.75 x 1.2 = Php 6570.00in domestic currency. This is the value that will be used in subsequent economicanalysis.2. Moreover, the true cost will not include taxes and subsidies asthese are merely transfers from one economic agent to another.3. We need to further distinguish between importable and exportableinputsiii.Input good is importableEP = CIF _ price * ER * FEP + (handling _ cost less taxes) + (transport _ cost less taxes)where EP is the economic priceCIF_price is the CIF price of the good at the portER is the prevailing exchange rateFEP is the foreign exchange premium determined by NEDAHandling_cost is the cost of handling at the portTransport_cost is the cost of transporting the good from the port to the projectsiteiv. Input good is exportableEP = FOB _ price * ER * FEP + (handling _ cost less taxes) + (transport _ cost less taxes)where EP is the economic priceFOB_price is the FOB price of the good at the portER is the prevailing exchange rateFEP is the foreign exchange premium determined by NEDAHandling_cost is the cost of handling at the portTransport_cost is the cost of transporting the good from the port to the projectsitev. The good is partly tradeable, or, the good itself may be nontradeable butthe process of producing the good requires tradable goods.RGEdillon January 200643