Report

82 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
Airlines, hotels, car rentals, companies, as well as
manufacturing, construction, etc., are establishments
that grow and contribute towards economic activity.
However, we do not compute this into benefits
calculation as this is already accounted for in the
expenses on personal and business tourists, both
domestic and foreign, on goods and services and would
cause double-counting. Tourism has expanded greatly
in the past two decades and is reportedly the world’s
largest industry and provider of jobs, although
measurement is extremely difficult and accurate
statistics are scarce (WTTC 2003). It is estimated that
international tourism generated about 10% of global
GDP in 1994, accounted for over 10% of all consumer
spending, created more than 12 million new jobs and
provided more than $650 billion in tax revenues to
governments. The magnitude of these figures explains
why tourism is, or should be, a priority concern of
governments worldwide. For the project, we consider
20% of project costs as wage bill which is a direct
benefit to people in the region.
Non-visitor Exports: Non-visitor exports are indirect
benefits from Tourism which include expenses on
consumer goods such as clothing, electronic items, and
petrol, which are exported for ultimate sale to visitors
and capital goods such as aircrafts and cruise ships
exported for use by the travel and tourism, providers.
The growth trends for this category are very high at
over 18%. We assume that this will grow at 15% over
the coming years without the project.
Table 9.11 Growth of Travel and Tourism in
Northeastern States (US $ million)
Year Personal Business Visitor Non-visitor
Travel Travel Exports Exports
2006E 280.71 36.71 52.68 33.14
2007E 302.69 38.64 59.88 39.77
2008E 330.24 41.29 66.36 47.54
2009E 365.08 44.67 72.72 56.82
2010E 404.71 48.44 79.68 67.92
2011E 448.69 52.52 87.36 81.18
2012E 497.48 56.95 95.76 97.02
2013E 551.55 61.77 105.00 114.10
2014E 611.51 67.02 115.08 134.13
2015E 677.97 72.74 126.12 157.83
Source: Computed based on WTTC 2005
Total Benefits: A summation of total direct and indirect
benefits will give us a figure for total tourism benefits.
We do not for our analysis consider benefits from
increased exports of goods already in the export market
such as tea and handicrafts or potential exports of agricommodities.
Past trends indicate a 10% growth per
annum for each category except for non-visitor exports
which have grown at over 18%. We now make a
conservative assumption that with the project, that
there is a further growth of 5% overall in the economy
of the region for each of the categories. We then take
the projected project benefits as the difference in
benefits from without the project and with the project.
Thus the trends in additional benefits from each of these
categories is presented in Table 9.12.
Table 9.12 Total benefits from the project (US $)
Year Increase in Increase in Increase in Increase in
Personal Business Visitor Non-visitor
Consumption Expenditure Exports Exports
1 13,256,700 1,717,926 2,256,000 1,375,782
5 18,254,040 2,233,260 3,636,000 2,841,150
10 30,575,340 3,351,078 5,754,000 6,706,680
15 47,850,584 5,133,713 8,901,434 13,802,703
20 67,545,004 7,246,655 12,565,100 24,141,013
25 103,926,362 11,149,878 19,332,964 48,556,200
Benefits Costs Analysis
The direct costs of the project are the costs of investing
in upgradation of the existing airport to international
standards to allow for a small number of international
flights, perhaps initially from the subregion and
southeast and east Asia. We perform the BCA as though
the government undertakes such a project on its own.
We take a 25 year scenario with $150 million as project
costs incurred over the five years at 10% in the first
year, 20% in the second, 30% in the third and fourth
year, and 10% in the last year. 20% of costs are the
wage bill, and the benefits are assumed to accrue only
after the end of the project. We take $1 million as
maintenance costs in two phases after 10 years. This is
over and above the regular costs for maintenance which
Table 9.13 Results from Benefit-Cost Simulations
Economic Rate Net Present
of Return (%) Value (NPV) ($)
Base Calculation 19.05 87,237,232
Benefits lagged by 1 year 17.35 82,091,574
Benefits lagged by 2 years 15.48 53,482,992
Costs up by 10% 17.99 78,721,352
Benefits lagged by 1 year 17.93 128,713,344
Benefits lagged by 2 years 14.55 41,642,351
Benefits down by 10% 17.88 69,955,064
Benefits lagged by 1 year 17.82 114,564,718
Benefits lagged by 2 years 14.44 36,200,825