TheImprovement ofTropical and Subtropical Rangelands

THE EOONOMIO OONTEXT 63
and returns will have on people participating directly in the project,
including families or community groups that make direct use of the
project and the primary uaers. Financial analy_ also must consider
administration, management, and taxes of the project and costs to
the government and donon for thOle activities.
In financial analy_, market prices, if available, are used to
reflect the value of production. Project returns may also include a
very significant contribution in the form of food or fuel consumed
directly in the household. Ifsubsidies are paid by the government in
ueociation with the development ofa project, then that also becomes
part of the income to the direct beneficiaries from the standpoint
of financial analysis. Financial analysis also considen revenue to
the government (taxes) for project administration, which have been
considered in the coste of the primary beneficiaries (usen).
The "economic" upects of project analy_ and evaluation, in
contrast to financial aspects, considen the project from the standpoint
of the affected society and economy u a whole. Financial and
economic analy_ differ in three significant ways:
1. Taxes that are treated 88 costs to primary project participants
in financial analy_ are viewed by government and society 88
revenues, not costs.
2. In economic analysis, market prices may be adjusted and
become "shadow" or "accounting" prices or "social costs/benefits"
to reflect more accurately the economic values to society.
3. In economic analysis, interest on capital and repayment of
borrowed capital are not treated 88 project costs. Although interest
is a cost to the project, it is a return to society and the economy
as a whole, if actually earned, and hence becomes a "wuh" item in
economic analysis and accounting for the project. Similarly, the repayment
ofborrowed capital, although a requirement for the project,
neither increases nor decreases net national product.
ComparIICIIl Without and With a Project
The pUrpOle of project analysis is to identify and estimate benefits
and costs that will arise "without" the project and compare them
with benefits and costs "with" the proposed project. The difference
between them is the incremental or marginal net benefit arising from
the project.
The results of the without-with comparisons may be the same 88
comparing a particular project situation "before" and "after." Often,