Report

86 QUANTIFICATION OF BENEFITS FROM ECONOMIC COOPERATION IN SOUTH ASIA
in imports from period 2008–30 without the project
assuming a pessimistic 6% GDP growth and assume
exports will further go up by 10% with the project
since growth of exports to India had been very high in
the past 5 years.
Table 9.16 Pakistan’s Projected Exports to India
with and without the Project (US $ million)
Year Exports without Project Increased Exports Due
to Project
2008 241.10 265.21
2010 292.66 321.93
2015 475.12 522.64
2020 771.33 848.47
2025 1252.22 1377.44
2030 2032.90 2236.19
Employment Benefits: Normal rail projects have a high
labour component and wage bills are approximately
30% even for large projects. Hence, we can make a
conservative assumption that 20% of projects costs is
the wage bill, which is a direct benefit for the people of
the region. Indirect employment benefits will come from
increased employment opportunities in the region due
to better connectivity and facilities. We assume that
employment benefits accrue only during the time of
project implementation.
Time and Costs Savings: We make a similar assumption
as in the case of the Petrapole-Benapole project and
assume that a small section of the local population saves
2 hours a day due to reduced congestion and improved
access to markets. There is also increased employment
benefits in the area. We value this conservatively at
$600,000.
Total Benefits: A summation of national benefits from
increased exports and local benefits from increased
employment and access to goods yields total benefits
Table 9.17 Total Benefits from the Project (US $)
Year National Employment Time Net Benefits
Net Exports Benefits Savings ($ million)
1 2,000,000 –8,000,000
5 2,000,000 –8,000,000
10 35,525,817 600,000 36,125,817
15 57,674,106 600,000 58,274,106
20 93,630,572 600,000 94,230,572
25 152,003,812 600,000 152,603,812
from the project. The trends in additional benefits with
the project over time are summarised in Table 9.17.
Benefits Costs Analysis
The detailed result of a benefits costs analysis, should
the government undertake such a project own its on, is
conducted as the base scenario. We take a 27-year
scenario with $73 million as project costs incurred over
the five years at $10 million in the first year, $17 million
in the second, $20 million in the third, $17 million in
the fourth year, and $ 10 million in the last year. 20%
of costs are the wage bill. Trade and time-savings
benefits are assumed to accrue only after the end of the
project. We take $1 million as maintenance costs in
two phases. The main results from the exercise are
summarised in Table 9.18.
Table 9.18 Results from Benefit-Cost Simulations
Economic Rate Net Present
of Return (%) Value (NPV) ($)
Base Calculation 32.12 187,176,733
Benefits lagged by 1 year 19.40 105,906,447
Benefits lagged by 2 years 18.08 81,793,884
Costs up by 10% 30.11 180,700,389
Benefits lagged by 1 year 18.23 94,788,398
Benefits lagged by 2 years 17.00 71,305,120
Benefits down by 10% 30.32 163,306,873
Benefits lagged by 1 year 18.23 85,377,524
Benefits lagged by 2 years 16.99 64,176,586
The base calculations have been computed with a
conservative assumption that the project will lead to
10% increase in exports to India from projected levels
and that the benefits will accrue only after the project
is fully completed. The NPV at this base case is $187
million and the EIRR is 32.12%. Both the NPV and
EIRR for different scenarios indicate that the project is
economically viable and they are not overly sensitive
to decreased benefits or increased costs.
COLOMBO PORT EXPANSION 18
Indo-Sri Lanka trade significantly increased after the
signing of the bilateral FTA between the two countries.
The trade gap dropped by two-thirds within five years
of signing the agreement. In 2002, Sri Lanka exported
$167.7 million worth of goods to India, an increase of
18
This discussion in this section is entirely based on ADB’s project ‘Proposed Loan Colombo Port Expansion Project (Sri
Lanka): The Report and Recommendation of the President’, 2007.