Planning of National Transport Infrastructure
In the Islamic Countries
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Financial discount rate (FDR) equals the opportunity cost of capital of an alternative investment
with a comparable risk profile. It is used to attract both public and private financial commitment
to a specific investment opportunity.
Social discount rate (SDR) equals the opportunity cost of capital. The difference with FDR is that
SDR is valuated for society as a whole and from an inter-temporal perspective. In other words,
it reveals society’s orientation or valuation of present versus future costs and benefits.
For NTI planning, FDR is relevant when it comes to financial planning, while SDR is relevant
when it comes to socio-economic assessment (see sectio .
(Social) discount rates are formally set between 2% to 6% with outliers to 10%. The rate
depends on the country, the sector, the time horizon, the definition (risk premium), and they do
change over time. The recent (2008-2012) turmoil on the financial markets and the resulting
low interest rates have had their effect on the SDR’s, even on long-term rates. An overview of a
selection of examples:
 Australia: 7% real discount rate, plus a 4% and 10% sensitivity (Douglas, 2013);
 Denmark: 3%, 2,5% for 36-70 years, 2% for >70 years (Denmark, 1999 and Mouter,
2015), was 7% for 0-20 years, 6% for >20 years;
 European Bank for Reconstruction and Development: 10% (European Commission,
2014).
 France: 2,5% for <50 years, 1,5% for >50 years risk free discount rate, plus risk
premium 2,0% for <50 years, 3,0% for >50 years (France, 2013);
 Norway: 4%, 3% for 40-75 years, 2% for >75 years (Norway, 2012) and risk free
discount rate 2.5% for 0-40 years 2% for >40 years (Mouter, 2015);
 Spain: 6% for transport, 4% for water supply projects (European Commission, 2014);
 United Kingdom: 3,5% Ramsey formula based, 1% for long term (France, 2017), was
3,5% for 0-30 years, 3% for 31-75 years, 2.5% for >75 years Mouter, 2015);
 World Bank: 10% (European Commission, 2014).
Regarding the time horizon required or applied in a project appraisal, HEATCO (2006)
recommends the use of a 40-year appraisal period as a default evaluation period. A finite
evaluation period requires the residual effects to be indicated. Projects with a lifetime shorter
than 40 years should use their actual lifetime of the main asset. Several OECD countries apply a
standard time span that goes well beyond the recommended 40 years. The Netherlands applies
50 years for urban projects and 100 years or infinite for project appraisal related to green and
water related projects.
2.6. Content of National Transport Infrastructure Plan
NTI planning involves a high strategic level and often also touches the pragmatic project level.
The typical content of NTI plan is structured along the following line:
1. Identification of problem and needs;
2. Problem analysis including description of status quo;
3. Policy context and policy objectives;
4. Project formulation and appraisal;