Improving Transport Project Appraisals
In the Islamic Countries
33
Table 1.6: Methodologies in use for transport project appraisal
Methodology Output
Macroeconomic
simulation models
 Variation of gross domestic product (GDP) growth and other
macroeconomic variables (inflation rate, employment rate,
wages, etc.) and productive factors
 Variation of Human Development Index or other indicators
 Variation of Environmental Performance Index or other
environmental indicators.
Input/Output models  Variation of GDP growth and other macroeconomic variables
(inflation rate, employment rate, wages, etc.) and productive
factors. They are not suitable for capturing the technological
change
Cost Benefit Analysis  Indicators at micro level, with a relation to economic the
dimensions: net present value (NPV), internal rate of return (IRR)
 Willingness to pay for increased aesthetic value, hedonic price for
urban regeneration, social value of improved safety, etc.
 Monetary value of environmental externalities using revealed or
stated preferences
Cost-Effectiveness
Analysis
 Quantitative indicators on travel time savings
 Quantitative indicators on safety: n. of avoided deaths and injured,
Quality Adjusted Life Year (QALY)
Information Elicitation
Techniques
 Qualitative information on the project’s economic contribution
 Quality of Life Index and other qualitative information on the
project’s environmental contribution
 Environmental Impact Assessment (EIA) and other qualitative
information on the project’s environmental contribution.
Multi-Criteria Analysis  Qualitative impact score
Focus on CBA
Suggested methodologies can vary depending on the scale and typology of projects. Usually, for
major transport infrastructures, CBA is the most common recommendedmethodology, although
the way it is implemented can vary from one context to the other. Methodological guidelines
specific for transport are developed in many countries, for example in the UK, Spain, France,
Poland, the Netherlands, Denmark, Chile) and routinely updated15.
CBA is considered the most suitable technique for evaluating infrastructure investment because of
its long-term, holistic, micro-economic and welfare-based nature. In CBA one tries to express all
socio-economic advantages or disadvantages of an investment decision in a long-term
perspective by systematically comparing its costs and benefits (including the externalities) in
order to estimate the net welfare change attributable to it. The basic idea of CBA is that the socio-
15 See also Section2.2.3 on standards and guidelines.