r - part - usaid
r - part - usaid
r - part - usaid
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wells, as axe the da~gers of 8*disbenefitsu, the negative<br />
effects, The most obvious of these in Somalia is the<br />
possibility a£ overgrazing the pasture around the well site.<br />
All of these benefits and disbenefits prove difficult, if<br />
not impassible, to 6-?a?-xate in monetary terms. Project<br />
appraisal, in the sense nf determining the nprofitabiLity'r of<br />
the investment, i s not a meaningful exercise. Instead, this<br />
report presents an astimale of the economic cost per unit of<br />
water produced over the life of the investment. when data is<br />
available, this should be compared with the cost of providing<br />
water from other sources, such as uars, ballehs and burkeds, as<br />
an aid to policy-aakers in determining the most economic methads<br />
of providing water in Somalia.<br />
4.3.1, FixancfaL and Economic Appraisal<br />
The analysis of costs presented in this repczt reprssents<br />
those faced by a donor agency implementing a groundWaater project<br />
in Somzilia. Because the major <strong>part</strong> of these costs are for<br />
imported materials and equipment, the difference in cost faced<br />
by a private company will mainly concern import duties imposed<br />
by the Somali government. in this respect, the analysis<br />
approwihates to n true economic analysis. The cost of imported<br />
materials and e~iprnest represents the world price, except, as<br />
mentioned in Section 4.1.1.2, that the prices include freight<br />
costs to Somalia, but not insurance. A nuder of ather items,<br />
nct significant in terms of the total cost, night be interpreted<br />
differently far the purposes of financial, economic or<br />
socfo-economic analysis. These alternative, or **shadowgv, prices<br />
are disczssed in the fallowing sections.<br />
Labour costs<br />
As dfscussed at ~sction 1 . 6 , h e wage rates used in<br />
this report represent those which would realistically be needed<br />
to operate a qroundwater program in Somalia, The economic cost,<br />
or shadow price of labour, however, is arguably different. If<br />
the shadaw price of Labour is taken ta be the "opportunity<br />
costn, that is, the cost to an alternative sector of the economy<br />
deprived of that labour, then thr shadow price of unskilled<br />
labour is considerably lower than the market price in a cauntry<br />
where unemploynent, or underemployment, is high.<br />
Underemployment is represented by the fact that, f~r the<br />
~ogadishu area, salaried emplotpent accounts for only one<br />
quarter or one fifth of average household expenditure. A large,<br />
but unknown, portion of the rei~aindew undoubtedly derives from<br />
remittances from Somali nationals working overseas, mainly in<br />
Saudi Arabia. In the case of unskiifrd labour, the shadaw price<br />
could be said to be close to zero. For skilled labour, however,<br />
the opportunity cost might well be the cost to the economy sf