Improving Transport Project Appraisals
In the Islamic Countries
39
For the consideration of environmental effects in particular, the use of EIAs for transport
projects has evolved during the last decades into an established practice in many parts of the
world. A comparative study (Al-Azri et al., 2014) on EIA systems in the Gulf Cooperation Council
States17, for instance, shows that several countries have achieved considerable progress in
developing legal and administrative frameworks for EIA systems.
Ad 3) Risk assessment
Project appraisal typically concludes with a risk assessment, aiming at including uncertainty on
future events into the analysis, thus increasing its accuracy and credibility. This can however be
done following different approaches (e.g. quantitatively and/or qualitatively). A qualitative risk
assessment is a discussion of the main source of risks, the identification of appropriate
mitigation measures and, in the best case, a risk management plan assigning responsibilities to
take action if some of the identified risks occur. A quantitative risk assessment usually requires
to identify the probability distribution of each variable included in the appraisal model (e.g.
value of time, level of demand, share of modal shift, etc.) and to run a Montecarlo simulation18
to obtain a probability distribution of the performance indicators (IRR and NPV): In this way
there is a quantitative assessment of the degree of risks which can then be addressed by an
appropriate risk management plan.
Examining risk assessment characteristics shall be part of an evaluation of transport project
appraisal practices, observing which risks are considered, how they are calculated or weighted,
and how mitigation measures are developed. The way forecasts are expressed (e.g. with a
baseline figure or with confidence intervals) can be revealing as well, and should be subject of
scrutiny. This analysis, if appropriately made, can be extremely informative and useful to
anticipate the possible source of risk as well as to frame, even with contractual obligations, the
respective duties and responsibilities of all the actors involved in the project implementation
and operation. It is a useful tool in the case of PPP schemes.
1.2.5 Demand analysis
For its relevance in project appraisal (transport sector being no exception), demand analysis has
been singled out as a separate aspect within the technical dimension of the assessment.
Table 1.7: Elements of the demand analysis aspect
Transport project appraisal involves traffic forecasting. Transport models, which are systematic
representations of the traffic demand, its drivers and effect, are generally used for traffic
17 Oman, UAE, Qatar, Saudi Arabia, Bahrain, Kuwait.
18 elying on repeate o obtain numerical results.
Aspect Elements included
Demand
analysis
1. Forecasting techniques: What kind of forecasting models
(deterministic/stochastic, static/dynamic, analytical/simulation) and
techniques are used?