Economic Analysis Of Projects Research Articles

Estimating Shadow Wage Rates for Economic Project Appraisal

One of the central concerns in cost benefit analysis is the adjustment of distortions in markets to provide a better guide to a more effective allocation of scarce resources. The objectives of this paper are to develop a model for the estimation of the shadow wage rate (SWR) for groups of occupations and to estimate the SWRs for the major groups of occupations in Australia. The main findings of the analysis indicate that estimated SWRs for major groups of occupations are different from the corresponding market wage rates, and that estimated SWRs of the groups are different. The results of the study demonstrate the importance of estimation of the SWR as a part of the appraisal process of investment projects. The ratio analysis indicates the significance of the difference between SWR and market wage rate, which is recommended to be adjusted is economic analysis of projects.

Determining the Best Alternatives Between Buy or Lease Option of Hydraulic Pumping Unit (HPU) by Evaluating Cost Performance and Project Evaluation

The year 2020 was one of the darkest times for world oil and gas companies, because world oil prices had touched their lowest point in the last 15 years. In 2022, it is started to show a change. The recovery of the world economy and coupled with the Russian oil embargo is predicted to make world oil prices will be at a high position for at least the next 5 years. And this is a good momentum and opportunity for all the world's oil companies.Unfortunately, PT Pertamina EP JTB Field was having problems with not achieving its oil production target. It was found that one of the problems is HPU rental artificial lift showing a decreasing performance in recent years. Because the HPU lease contract will expire in July 2023. Two alternatives are proposed to improve the production performance. There is conduct another lease contract with tightened specification and the other is to buy SRP.The results of the buy vs lease analysis found that the HPU rental price was 7.96% more expensive when compared to the purchase of SRP. The fair value was IDR 3,099.394. If the company exercise the SRP buy option, it will result in an NPV of IDR 108,791,789,979 and an IRR of 217%. Based on the results of the risk analysis, the probability of failure of this purchase project was quite low. The probability of NPV < IDR 5 billion is only 0.93%, while the highest probability in the range of IDR 60-160 billion. Keywords: Buy vs Lease Analysis, Project Economic Analysis, Risk Analysis DOI: 10.7176/EJBM/14-16-06 Publication date: August 31 st 2022

Procedure for economic analysis of projects for selective collection of used PET bottles

Procedure for economic analysis of projects for selective collection of used PET bottles

Procedure for economic analysis of projects for selective collection of used PET bottles

Procedure for economic analysis of projects for selective collection of used PET bottles

Assessing the Flexibility of Renewable Energy Multinational Corporations

Currently, international business and society are on the eve of large-scale changes. The study aims to develop a methodological approach to assess the energy flexibility of multinational corporations in the context of the structural transformation management of renewable energy production. The methodology of this study is based on a comprehensive approach, which includes the methodology of the United States Agency for International Development (USAID), diagnostics of the level of development and energy flexibility of multinational corporations, regression analysis and scenario modeling. In particular, scenario analysis of renewable energy development in countries of the Commonwealth of Independent States (CIS) and economic analysis of projects for the development of corporate renewable energy industry were carried out. The results showed that the Russian renewable energy business is flexible enough for changes; however, at the same time, changes are needed in the national legislation, the basics of work, the national energy market; the conditions should be formed for the development of this business, a green tariff on a market basis should be formed, etc. The scientific contribution of this study is the proposed indicator in the form of the Multinational Corporation Energy Flexibility Index. It provides an opportunity to diagnose the agility of multinational corporations’ development, taking into account changes in their production structure. The developments obtained in the course of the work can be applied for studies related to assessing the flexibility of national energy systems, as well as in the practice of managing multinational corporations operating in the field of renewable energy.

Mechanisms for Adapting the Methods of Technical and Economic Analysis of Projects on the Digitalization of Drilling Business Processes

Mechanisms for Adapting the Methods of Technical and Economic Analysis of Projects on the Digitalization of Drilling Business Processes

Some unresolved questions in practical project appraisal: indirect taxes and the numeraire

Aid projects are still assessed by a methodology for project economic analysis developed largely in the 1970’s. Many such projects are in infrastructure sectors producing goods that are internationally non-traded and whose benefits are valued on the basis of approximate estimates of consumer willingness to pay. An omission in one influential strand of this literature was the distinction between analyses with and without the inclusion of indirect taxes. This has led to the potential overestimation of benefits from such projects in applied development work. This note explains this complication, discusses how it can be resolved and some of its practical consequences.

Special issue on forest investments profitability

In this special issue, a sample of the papers presented and discussions held are provided. The selected articles are partly presented in the context of the cost–benefit analysis of forests investments. Public budgeting process nowadays requires in most countries a thorough economic analysis of the annual projects and programmes. Forestry institutions are no exception. However, in the public arena and international organisations, the records of appropriate cost–benefit of forestry projects are scant. A recent review of the use of cost-benefit analysis (CBA) by the Independent Evaluation Group of the World Bank which spread the use of CBA to justify development projects, shows that the economic analysis of projects has been diminishing compared to their uses in the 70s. For natural resources, and forestry in particular, the presence of recognised positive externalities seems to have diminished the reason to undertake this analysis. In the context of budgeting constraints encountered by many countries following the 2008 financial crisis, the need for a proper analysis of natural resources investments has been made more acute.

Should the building of water reservoirs for irrigation be subsidized? An approach based on microeconomics

In numerous river basins, the implementation of the Water Framework Directive challenges the administrative authorization delivered for agricultural withdrawals. In such a context, farmers demand public subsidies for building water reservoirs filled in winter for summer use (substitution reservoirs) in order to compensate the water quota reduction and prevent drop in income. We here present a financial and economic assessment method for such projects and highlight how it is possible to support the decision in assessing profitability thresholds. This method combines classical project economic analysis and microeconomic modelling. It is implemented in the Boutonne River basin, where an 84% agricultural water quota reduction is planned. Our calculation shows that this quota reduction could lead to a drop of 3.2 M€ in agricultural income at the basin scale and creation of a 15.5 Mm3 water reservoir could offset the 19.6 Mm3 quota reduction. However, this creation of a water reservoir for irrigation is not feasible without state aid. Economical and financial criteria alone do not make it possible to decide on creating the reservoir, but they are usable for determining the impacts of public subsidize rates.

Decision support systems for environmental flows: Lessons from Southern Africa

The decision by a number of countries to re‐engage with large dams creates an obligation to ensure that the attendant environmental and social consequences are dealt with adequately. In this regard, the key challenges for the future are the assessment and management of downstream environmental and social impacts. The paper examines these issues in the context of southern Africa, particularly the Lesotho Highlands Water Project. It examines the ways in which Environmental Flows can affect the environment and the livelihoods of riparians, the need to make trade‐offs between different uses of the water, and the difficulties of making trade‐offs if the values of stakeholders regarding water use are not supported by a legal framework. The paper highlights the need to undertake environmental flow work early in the project cycle as part of the Environmental Impact Assessment, and the need to integrate environmental flow factors into the project's economic analysis. It explores the financial trade‐offs that are implicit in environmental flow work, the need for a multi‐disciplinary team to carry out the work, and the need for a transparent decision framework. Finally, the importance of establishing a decision support system for use during the operational phases of the project is highlighted.

Economic analysis of World Bank education projects and project outcomes

This paper tests the hypothesis that World Bank education projects have a higher likelihood of being successful if at the time of appraisal, they underwent good quality economic analysis. Analysis shows a strong relationship between the quality of cost–benefit analysis and cost–effectiveness analysis and the quality of project outcomes. Economic analysis of projects is a tool for weeding out potentially poor investments and selecting potentially worthwhile ones. Good practice education projects require good economic analysis—analysis of demand, of the counterfactual private sector supply, of the project’s fiscal impact, of lending’s fungibility—and strong sector work before project design.

Sustainomics, Sustainable Development and Climate Change

This paper examines key issues in the nexus of sustainable development and climate change. It describes sustainomics as ‘a transdisciplinary, integrative, balanced, heuristic and practical meta-framework for making development more sustainable’. The paper seeks to integrate these concepts through two broad approaches involving optimality and durability, and applies these ideas to climate change analysis. Operationally, it plays this bridging role by helping to map the results of environmental and social impact assessments (EIA and SIA) onto the framework of conventional economic analysis of projects. In addition the approach may help to formulate effective sustainable development policies, by linking and articulating these activities explicitly trough the Action Impact Matrix framework.

Forget the weights, who gets the benefits? How to bring a poverty focus to the economic analysis of projects

Forget the weights, who gets the benefits? How to bring a poverty focus to the economic analysis of projects

Renewable energy in third world development assistance Learning from experience

The record of renewables in energy assistance over the past 15 years has been poor. The reasons include technical weaknesses, high costs and falling oil prices. The future role of renewables in development assistance remains open to debate. They should only be used when they represent the optimum technical and economic solution. Ensuring that this is the case will require considerably greater rigour in the technical and economic analysis of projects than in the past.

Parameters for the economic analysis of projects: the needs of very large countries

The estimation of shadow prices in very large developing countries has not yet been properly adressed. An approach is suggested to satisfy the particular needs of such countries in economic appraisal. The needs of the individual analyst are considered as well as the opportunities that might be provided by the existence of a national organisation professionally committed to shadow pricing work.

Oil in the 1990s

The record of renewables in energy assistance over the past 15 years has been poor. The reasons include technical weaknesses, high costs and falling oil prices. The future role of renewables in development assistance remains open to debate. They should only be used when they represent the optimum technical and economic solution. Ensuring that this is the case will require considerably greater rigour in the technical and economic analysis of projects than in the past.

Estimation and interpretation problems in theex posteconomic analysis of projects

Although international development agencies are showing increasing interest in quantifying the developmental impact of their projects, such studies frequently confront methodological difficulties. The paper focuses on the range of estimation and interpretation problems that arise in formulating ex post economic analyses and comparing outcomes with expectations in economic terms. Following a review of contextual and methodological issues, four major problem areas are explored: the selection and indexing of appropriate sets of ‘real’ market prices: the calculation and application of shadow prices; the adoption of suitable decision criteria for the assessment of success and failure; and the identification and quantification of benefits and costs. The dicussion emphasizes the desirability of applying systematic, consistent and complementary approaches in the ex ante and ex post analysis of projects and highlights some of the inadequacies of conventional procedures. The paper concludes with some observations on the opportunities that exist for improving the methodology of ex post evaluation and isolating the necessary conditions for successful developmental investment.

Social Rates of Return in Pakistan's Large-scale Manufacturing Sector

The paper attempts to estimate social rates of return in Pakistan's large-scale manufacturing sector. As cut-off rates, they can help in the selection of public and private sector projects and can also be used as' estimates of the Accounting Rate of Interest (ARI) which can then be used as test discount rates in the economic analysis of projects. In the context of Pakistan, our study makes an important contribution in that whereas the discount rates hitherto used in the country for an economic appraisal of projects have all been determined arbitrarily,1 we, in this study provide first ever rates that have been arrived at empirically. For example, the discount rate used in both private and public sector investment projects for a considerable period of time was arbitrarily fixed at 12 percent. The reason given for choosing this estimate was that it was based on the rate used by lending institutions on the loans they advanced to various development-oriented agencies. The Fifth Five Year Plan (1978-83) raised this rate to 20 percent for the industrial projects which were to be undertaken in the public sector because it required this sector to generate more funds [9]. Also, during this period, it had been decided that a cut-off rate of 15 percent would be applicable to private-sector industrial projects because the private sector investors complained that if the higher figure of 20 percent was used as a discount rate, then the Bruno Ratio, which measures the domestic cost of saving one unit of foreign exchange and also serves as a criterion of profitability, would decrease to such an extent that the project would become unprofitable.

1A Voice Storage System: New Custom Calling Services

In creating new customer services, systems engineers traditionally conduct market needs analysis, engineering feasibility studies, and project economic analysis. Finally, they prepare development requirements. In addition, systems engineering designs the service from the customer's point of view. This article describes new custom calling services as the customer sees them and highlights some interesting features of the services.

Shadow Pricing and Macroeconomic Analysis: Some Illustrations from Pakistan

Shadow prices are being used increasingly in the economic analysis of projects. The purpose of this paper, however, is to argue that shadow prices are equally relevant for certain types of analysis at the macro-economic level. In theory, macroeconomic issues can be properly analyzed, if at all, only in general equilibrium frame• work. Quantification then requires the solution of an appropriate model. But, estimable general equilibrium models can seldom include many variables, and the level of aggregation must remain high. They are general only in the very partial sense of simultaneous solution of a limited set of aggregated endogenous variables. On the other hand, some of the issues addressed by shadow pricing involve quite disaggregated variables, and, of course, project analysis itself often requires very detailed estimations.