Improving Transport Project Appraisals
In the Islamic Countries
65
Cohesion policy in the EU represents a significant example of harmonisation of methodologies
in a multi-level governance framework. EU legislation explicitly requires CBA in the 2014-2020
programming period as a basis for major projects co-financed by the European Structural and
Investment Funds. EU cohesion policy currently represents the widest international setting for
the use of CBA under a common set of information and funding mechanisms.
An example of mandatory content for major project appraisals is provided by the EU cohesion
policy legislation for 2014-2020. According to Article 101 of Regulation (EU) No 1303/2013, the
information necessary for the approval of a major project includes:
 Details concerning the body responsible for implementation of the major project, and its
capacity.
 A description of the investment and its location.
 The total cost and total eligible cost, taking account of the requirements set out in Article 61.
 Feasibility studies carried out, including options analysis, and the results.
 A CBA, including an economic and a financial analysis, and a risk assessment.
 An analysis of the environmental impact, taking into account climate change mitigation and
adaptation needs, and disaster resilience.
 An explanation as to how the major project is consistent with the relevant priority axes of
the Operational Programme (OP) or OPs concerned, and its expected contribution to
achieving the specific objectives of those priority axes and the expected contribution to socio-
economic development.
 The financing plan showing the total planned financial resources and the planned support
from the Funds, the EIB, and all other sources of financing, together with physical and
financial indicators for monitoring progress, taking account of the identified risks.
Regarding risk assessments, the EC practice in the past was to mandatorily require a
probabilistic risk analysis with Monte Carlo simulation. In the current period however this
requirement was relaxed, requesting a qualitative assessment as a minimum and a probabilistic
risk analysis only for more risky projects, for example in the Research, Development and
Innovation (RDI) sector.
2.3.5 Demand analysis
In WB’s Handbook, it is stated that the most important step in estimating the benefits of
transport projects is demand forecasting. Possible methods to estimate demand are suggested
in the Handbook. A distinction is made between normal, generated and diverted traffic. Traffic
that would have normally occurred in the absence of the project is called normal traffic, whereas
generated traffic refers to new traffic resulting from lower transport costs. Traffic that is drawn
away from existing facilities is referred to as diverted traffic. Possible methods to estimate
demand stemming from normal traffic are: extrapolating from past trend and assume that
growth will remain constant, or relate traffic growth to GDP growth. In case of diverted traffic,
analysts should be careful not to double count the benefits, as the diverted traffic does not
represent a net increase in total demand.