Economic Assessment of Sanitation Interventions in Vietnam - WSP

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Economic Assessment of Sanitation Interventions in Vietnam | Study Aimstween overall efficiency questions (i.e. cost versus benefit),cost questions and benefits questions 2 .The major concern in economic evaluation is to understandeconomic and/or financial efficiency – in terms of return oninvestment and recurrent expenditure. Hence the focus ofeconomic evaluation is on what it costs to deliver an interventionand what the returns are. Different efficiency measuresallow the examination of this question from differentangles, such as the amount by which benefits exceed costs,annual equivalent returns, and the time taken to repay costsand start generating net benefits (see Box 1). Moreover, assanitation and hygiene improvement also fall within thehealth domain, economic arguments can be made for investmentto be made in sanitation and hygiene interventionsfrom the health budget (if the health return per unitcost invested is competitive compared with other uses of thesame health funds).As well as overall efficiency questions, it is useful from decision-making,planning and advocacy perspectives to betterunderstand the nature and timing of costs and benefits, andhow non-economic factors affect the implementation ofsanitation interventions and affect their eventual efficiency(see Boxes 2 and 3 below). Furthermore, this study attemptsto give greater emphasis to the impacts of improved sanitationthat cannot easily be quantified in monetary terms inthe overall cost-benefit assessment.BOX 1. RESEARCH QUESTIONS ON SANITATION EFFICIENCYi. Are benefits greater than the costs of sanitation interventions? By what proportion do benefits exceedcosts (benefit-cost ratio – BCR)?ii. What is the annual internal rate of return (IRR) of sanitation spending? How does the IRR compareto national or international standards for investments of public and private funds? How does the IRRcompare to other non-sanitation development interventions?iii. How long does it take for a household to recover its initial investment costs, at different levels of costsharing (payback period – PBP)?iv. What is the net gain of each sanitation intervention (net present value – NPV)?v. What is the cost of achieving standard health gains such as averted death, cases and disability-adjustedlife-years (DALY)?vi. How does economic performance vary across sanitation options, program approaches, and locations?What factors explain performance?BOX 2. RESEARCH QUESTIONS ON SANITATION COSTSi. What is the range of costs for each technology option in different field settings? What factors determinecost levels (e.g. quality, duration of hardware and software services)?ii. What proportion of costs are capital, program and recurrent costs, for different interventions? What arenecessary maintenance and repair interventions, and costs, to extend the life of hardware and increasesustainability?iii. What proportion of total (economic) cost is financial in nature? How are financial and economic costsfinanced in each field location?iv. How do costs of each sanitation option vary by wealth quintile? What is the average cost per sanitationoption as a percentage of annual household cash income, by income quintile?v. What are the incremental costs of moving from one sanitation improvement to another–i.e. up thesanitation ladder – for specified populations to meet sanitation targets?2‘Costs’ and ‘benefits’ refer simultaneously to financial and economic costs, unless otherwise specified.6Economic Assessment of Sanitation Interventions
Economic Assessment of Sanitation Interventions in Vietnam | Study AimsBOX 3. RESEARCH QUESTIONS ON SANITATION BENEFITSi. What local evidence exists for the links between sanitation and the following impacts: health impact,water quality, time use, welfare, tourism, and the business environment (including Foreign DirectInvestment)?ii. What are the size of financial and economic benefits related to health expenditure, health-relatedproductivity and premature mortality; household water uses; time savings; property value; and otherwelfare impacts?iii. What proportion of the benefits are pecuniary benefits (financial gains) and what proportion are nonpecuniarybenefits?iv. What proportion of each benefit accrues to households who invest in sanitation and what proportion isexternal to the investor?v. What is the actual or likely willingness to pay of households and other agencies for improved sanitation?What is up-front versus annual recurrent willingness to pay?vi. How do benefits accrue or vary over time?vii. How is improved sanitation – and the related costs and benefits – tangibly linked with poverty reduction?What is the potential impact on national income and economic growth?viii. What is the overall household and community demand (expressed and latent demand) for improvedsanitation?BOX 4. OTHER RESEARCH QUESTIONSi. How do program design and program implementation affect costs and benefits? In practice, (how) cansanitation programs be delivered more efficiently – i.e. reducing costs without reducing benefits?ii. How to leverage grants to incentivize investments in sanitation?iii. What factors determine program performance? What are the key factors of success and constraint,covering contextual, institutional, financial, social and technical aspects?iv. Which program approaches are best suited to which technical options?v. What is the cultural acceptability of different sanitation options and program approaches?vi. What other issues determine intervention choice and program design in relation to local constraints:energy use, water use, polluting substance discharge, and option robustness/durability/maintenancerequirements?vii. Based on research findings, what other key issues enter into sanitation option decisions?In addition, other research questions are crucial to the appropriateinterpretation and use of information on sanitationcosts and benefits. Most importantly, the full benefitsof a sanitation intervention may not be received due tofactors in the field that affect uptake of and compliancewith the intervention. These factors need to be better understoodto advise future program design. Moreover, theESI study touches on many financing issues, related towho is paying for the interventions and who is benefitingfrom them (and who, therefore, may be willing to pay).Given that scale-up cannot be achieved with full subsidizationof sanitation interventions by government or othersector partners, it will be vital to better understand howpublic money and subsidies can be used to leverage furtherinvestment from the private sector and from householdsthemselves (See Box 4).www.wsp.org7
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Page 17: ForewordTarget 10 of the Millennium
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VI.Costs of Improved Sanitationand
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ReferencesAcharya A, Paunio MK and
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ANNEX 1: PROGRAM APPROACH ANALYSIST
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ANNEX TABLESANNEX A. STUDY METHODST
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