Improving Transport Project Appraisals
In the Islamic Countries
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Another topic is the list of effects that can reasonably be included in the assessment, as well as the
method for their assessment. Guidance documents may as well provide suggestions on the most
suitable methods to calculate the effects generated by the transport project. Ideally, the
appraisal should include all impacts of the investment. However, setting such a broad scope for
an appraisal will result in extensive and expensive data collection and analysis (TheWorld Bank,
2005). Given that the purposes of the appraisal are mainly to assess if a project is economically
beneficial and to aid the choice between alternatives, the scope of the appraisal is in practice
often narrowed by including a number of core effects.
A good practice is to define a shortlist of typical benefits that one may expect to have for
homogeneous groups of projects. At a minimum, for transport projects these should include
journey times, vehicle operating costs, safety, environmental effects, user charges and operator
revenues. In practice, a transport project must generally be justified by its direct benefits (Beria et
al, 2012). This conservativeness principle, which is shared by a number of guidance documents
(e.g. the World Bank, the UK, the EU), prevents overly optimistic outcomes on borderline issues.
However, this approach does not mean that second order effects (such as agglomeration
economies, distributive effects, wider economic impacts) are neglected. Second order effects can
clearly make a project preferable over another, but they cannot make feasible an otherwise
unfeasible investment. An overview of typical items included in an economic analysis of the
OECD countries is presented i
Figure 1.11: Typical items that are included in the economic analysis
Source: CSIL processing OECD survey data
0 2 4 6 8 10 12 14 16 18 20
Border prices for tradable goods
Shadow wages
Hedonic prices
Conversion factors to convert market into shadow
prices
Willingness to pay by users
Other emissions types that are considered in the
environmental impact assessment
Social discount rate
CO2 emissions
Cost savings
Time saving