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

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Strengthening Provincial/LocalPlanning and Expenditure ManagementProject Evaluationand Development4.2.4 Some proportion of the good is tradeable.The same rules as in valuing “semi-tradeable” inputs apply. Refer to 4.1.3e.4.2.5 Labor outputs or increased labor productivityThe same rules as in valuing labor inputs apply. Refer to 4.1.3f.4.2.6 Commodity-specific Conversion Factor (CSCF)It is practical to compute for commodity-specific conversion factors for somegoods (whether inputs or outputs) that are frequently used. Commodity-specificconversion factor (CSCF) is simply the ratio between the economic price andfinancial price. Now, for the same good but pertaining to different project sites,the CSCFs will vary somewhat. Nonetheless, the previously computed CSCFsmay serve as a guide for evaluating future projects.For emphasis, recall the following differences between financial and economicprices in the case of tradeable goods.Table 8Variable Financial Price Economic PricePrice at portConverted usingprevailing exchange rateExchange rate ismultiplied by the ForeignExchange Premium(FEP)Tariffs, Taxes, subsidies Taken at full value Multiplied by a conversionfactor equal to 0Labor Taken at full value Multiplied by a conversionfactor, distinguishingbetween skilled andunskilled laborExample (t): Consider our communal irrigation project with financial cost of Php10 million. Note that the classification “foreign” pertains to the tradeablecomponent, while the classification “local” pertains to the nontradeablecomponent.The CSCF is computed as follows:In column A, we specify the prevailing price, I.e., the financial price. In column B,we indicate the conversion factor. Note that taxes are given a conversion factorof 0. This is because taxes are simply considered transfers from the taxpayer togovernment; there was no additional output that was produced. In column D, wespecify the proportion that is tradeable and this amount is multiplied by theRGEdillon January 200646
Strengthening Provincial/LocalPlanning and Expenditure ManagementProject Evaluationand Developmentforeign exchange premium, estimated to be 1.2. The CSCF, or the ratio betweenthe economic and financial price is estimated to be 1.03 in this case.ProjectCommunal IrrigationTotal Investment Cost Factors Financial Cost ECF Economic Costof whichMaterials 40 Php4,000,000.00Local 40 1,600,000.00 1 1,600,000.00Foreign 60 2,400,000.00 1.2 2,880,000.00Equipment 35 3,500,000.00Local 25 875,000.00 1 875,000.00Foreign 75 2,625,000.00 1.2 3,150,000.00Labor 25 2,500,000.00Skilled 30 750,000.00 1 750,000.00Unskilled 70 1,750,000.00 0.6 1,050,000.00TOTAL Php10,000,000.00 10,000,000.00 Php10,305,000.00Memo: ConversionFactor 1.03RGEdillon January 200647
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PED guidebook main sxn rev6. FINAL.pdf - LGRC DILG 10

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