G economics (tharath 20170121)_2nd workshop

WB # 1208945: A Feasibility Study and Capacity
Development for Strengthening Disaster Risk
Management and Rural Resilience in Cambodia
RESILIENCE OF RURAL INFRASTRUCTURE
2nd National Stakeholder Consultation
Regional Knowledge Sharing Workshop
Ministry of Rural Development
Phnom Penh, Cambodia
09 February 2017

Economics, Social, Natural Hazards, GIS
•Economic Study
•Social
•Natural Hazards GIS
CONTENTS

ECONOMICS
by: Sok Tharath CHREUNG
Infrastructure Economist
(MA. In Economics, Hiroshima University)

I. Introduction
Cost and Benefit Analysis (CBA) has been carried out by
taking into account the capital cost and road
maintenance costs, and the potential level of benefit
from disaster risk management (the so-call, the triple
dividend of resilience).
Economics

These items are considered over an evaluation period for
20 years (2017-2036, and the base year is 2016) with
costs and benefits discounted and expressed in present
value terms. Economic viability can be expressed with a
number of indicators incorporating the concept of
discounting and two of these have been calculated from
the annual cost and benefit streams; are:
 Net Present Value (NPV) = $ and
 Economic Internal Rate of Return (EIRR) = %
Economics, Introduction (Cont’)

II. Economic evaluation approach
The approach used WB’s approach “the triple dividend
of resilience” evaluation methodology for rural road
upgrading; that realising development goals through
the multiple benefits of disaster risk management.
“With Project” and “Without Project” cases are
compared.
However, from the road infrastructure sector point of
view there are only double dividend of resilience haven
been considered as in the followings:
Economics,

Economic evaluation approach (Con’t)
The quantified economic benefits, which would be
realised from the implementation of the project with
disaster risk management, are defined as savings in
 Avoided losses;
 Generation of Development Co-benefits;
nomic Potentials derived from the difference between
“With Project” and “Without Project”
Economics,

Economics, (Data request During 1st workshop)

Avoided
losses
Generation
of
Development
Co-benefits
Avoided annual
maintenance
costs (from
flooding)
Avoided/Reduced
road
reconstruction
from major
disasters
Reduced
Vehicle
Operating
Costs
Reduced
Travel Time Road Length (km)
Avg Annual Daily
Traffic (AADT)
Road Condition
(IRI)*
Avg Speed
(km/hr)*
Road closure
(days/yr)*
Avg wage ($/day)
Periodic
Maintenance Cost
($/km)
Road Reconstruction
Cost ($/km)
Road Rehab/Repair
Cost ($/km)
Frequency of major
floods
Improved
Health due to
less dust
Population
(within 2km-corridor)
Road
Upgrading
Cost ($/km)
Access to raw material cost
variations , as well as
availability of labor works
Periodic and
Routine
Maintenance
Costs ($/km)
BENEFITSCOSTS
*for with and without project
Vehicle Operating
Cost ($/veh-km)
Avoided income
loss (or extra
income gain)
from avoided
disasters
Two Additional cots
on (i) Mine/UXO
Clearance and (ii)
Land Acquisition &
Resettlement, if
necessary
Hospital Visit
(day/year)*
Design and
Construction
Supervision Cost
Conventional Transport Economics:
Traffic Study  RUC Saving (VOC & TTC)

Example of two periods during a year of with and
without project on the Vehicle Operating Cost
Days Per Year Days Per YearWith Direct Passability Without Direct Passability
Higher Transport Costs
Economics, Economic evaluation approach (Con’t)
Different economic cost & benefits of road
with and without maintenance (or project)
Pictures: Road Section from Oraing Ov to Damnak Pring, (11.5km); 25 July 2016
- Different Length
- Different Roughness
- Different Speeds
- Different Traffic

• Benefit Side: It takes into account the possible
benefits to the economy if we have better
disaster risk management, it means all savings
on:
i. Road reconstructions/rehabilitation.
ii. Vehicle operating cost (VOC)@Traffic Volume
iii. Travel time (travel time cost)@Traffic Volume
iv. Expenditure on hospital visits (due to less dust).
Economics, Economic evaluation approach (Con’t)

Economics:
III. Traffic Study
Traffic Survey: Due to limit of fund and time the only Moving Observer
Counts method were used to estimate the current traffic volume on
the project roads. The survey were carried out during the field surveys
in July, September, November and December 2016 recording the
levels of non-motorized and motorized traffic and categorised into
four main groups:
(I) Bicycle (BC), (Animal carts is rarely found in Cambodia rural road,
so it is excluded from the survey)
(II) Motorcycles including Motorcycles with a trailer or Tuk Tuk (MC),
(III)Light Vehicles (LV), and
(IV)Heavy Vehicles (including medium and heavy articulated truck).

• Method: In these surveys only traffic traveling in
the opposite direction to the survey vehicle is
recorded. If the survey vehicle is traveling at the
same speed as other vehicles the number of
vehicles encountered in a given time period
indicates the two-way traffic flow in that period
(If speeds are different the numbers recorded can
be adjusted to compensate for this). In the
surveys totals were recorded at approximately 5
km intervals along the roads.
Economics: Traffic Study (Con’t)

DERIVATION OF BASE TRAFFIC LEVELS
1. Estimates of Base Year Traffic: Annual Average Daily Traffic
(AADT)
• 24 hour adjustment factor (if the count is less than 24
hours).
• Daily Traffic Variation factor.
• Seasonal Variation factor.
2. AADT is converted to Passenger Car Unit (PCU)
Passenger Car Unit Equivalents:
Economics: Traffic Study (Con’t)
Categories BC MC LV HV
PCU Equivalents 0.3 0.40 1.25 2.50
Source: TA7199 for Preparing the Provincial/Rural Road Asset Management Project.

Economics: Traffic Data (AADT)
TOTAL
PCU
AADT % AADT % AADT % AADT % AADT %
1 KC1 ស្ពា នដ ើមដតៅ -ព្រែកតានង់ 23.40 72 6% 1,020 85% 96 8% 12 1% 1200 100% 580
2 KC2 ពាមររដ្ន ោះ-ព្រែកចង្ក្រា ន 18.90 162 9% 1,350 75% 270 15% 18 1% 1800 100% 971
3 KC3 រឹងរតាវ - ដតៅ 27.60 50 10% 400 80% 40 8% 10 2% 500 100% 250
4 KC4 រអាង-ដ ៀនជ្រៃ-ឥនទដនល 6.10 63 9% 560 80% 70 10% 7 1% 700 100% 348
5 KD1 ររពាាំងរកស្ពាំង-ផ្ល ូវ51 5.25 40 8% 400 80% 50 10% 10 2% 500 100% 260
6 KD2 ផ្ល ូវ51-វរៅឈូករកែាំ 5.90 10 3% 340 91% 25 7% 0 0% 375 100% 170
7 KD3 ជ្រៃលាស់-ទាំនរ់ធាំ 5.60 57 7% 650 80% 81 10% 24 3% 812 100% 438
8 KD4 ទួលស្ពម៉-ែណ្ណា រ៉ា យ 10.10 35 7% 425 85% 25 5% 15 3% 500 100% 249
9 KD5 ទួលលារ-ររពាាំងដតាន រ 8.93 424 20% 1590 74% 73 3% 58 3% 2145 100% 999
10 KD6 រលាាំងព្កន-រការ 10.95 36 9% 320 80% 40 10% 4 1% 400 100% 199
11 KD7 NR2-វរៅសរកាំ 5.40 27 9% 240 80% 30 10% 3 1% 300 100% 149
12 KRT1 រក រ-ដោលារ់ 5.00 144 18% 561.6 71% 86 11% 0 0% 792 100% 376
13 KRT2 អូរឬសសី-ថ្មកាាំង 9.10 29 10% 173 60% 86 30% 0 0% 288 100% 186
14 KRT3 សទ ឹងស្ពា យ-ខ្នងែស់ 7.00 19 5% 327 85% 39 10% 0 0% 385 100% 185
15 KRT4 សាំរូរ-អូរកក់ 25.00 103 13% 636 82% 35 4% 0 0% 774 100% 329
16 KRT5 ថ្មព្រ -ចង្ក្ងាង់ 11.00 36 4% 694 85% 58 7% 29 4% 816 100% 432
Total AADT
Kampong Cham
Kandal
Kratie
Road DescriptionProvince
ROAD
ID
No.
Motorcycles
(MC)
Bicycles
(BC)
Road
Length
(km)
Light
Vehilces
Medium &
Heavy

TOTAL
PCU
AADT % AADT % AADT % AADT % AADT %
Total AADT
Road DescriptionProvince
ROAD
ID
No.
Motorcycles
(MC)
Bicycles
(BC)
Road
Length
(km)
Light
Vehilces
Medium &
Heavy
17 SR1 ស្ពា យដចក- ដរ ើល 17.00 167 19% 604 68% 58 7% 62 7% 891 100% 519
18 SR2 ទួលរដមៀរ- វ៉ា រ ិន 8.00 224 25% 412 46% 262 29% 0 0% 898 100% 559
19 SR3 ែដែល - សូ ភី 12.00 24 8% 240 80% 30 10% 6 2% 300 100% 156
20 SR4 ខ្ចា យ- សសរសៅ មភ 11.00 38 6% 518 77% 115 17% 0 0% 671 100% 362
21 SR5 ស្ពា នដតាន រ-ែរងដរកាម 14.00 201 21% 518 55% 216 23% 0 0% 935 100% 538
22 SR6 រាស្ពទ- ដវៀន 8.00 74 17% 262 58% 112 25% 0 0% 448 100% 266
23 SR7 ូនដែង- ូនព្អម 13.00 74 22% 150 45% 112 33% 0 0% 336 100% 222
24 SR8 Siem Reap (in Town) ភូមិររាំង- រឹង ូនា៉ 1.60 38 18% 116 55% 58 27% 0 0% 212 100% 130
25 ST1 ផ្ល ូវជារិដលខ្៩-អូរព្ររល 8.00 24 3% 667 82% 94 12% 30 4% 815 100% 467
26 ST2 កាាំងដមម៉ យ-ព្រសរកស្ពាំង 25.00 18 5% 306 85% 36 10% 0 0% 360 100% 173
27 ST3 អូរព្ររល-កាាំងចាម 26.90 24 10% 211 88% 5 2% 0 0% 240 100% 98
28 ST5 ផ្ល ូវជារិដលខ្៧-ដកាោះសាំពាយ 11.00 13 7% 162 90% 5 3% 0 0% 180 100% 75
29 TBK1 ផ្ារអូរាំងឪ- ាំណ្ណក់រែីង 11.50 299 11% 2246 82% 112 4% 74 3% 2731 100% 1,314
30 TBK2 ទួល រ-ទួលឃ្ល ាំង 4.50 120 8% 1200 80% 150 10% 30 2% 1500 100% 779
31 TBK3 រក ុងសួ ង-ដនន 10.00 275 17% 1186 72% 187 11% 0 0% 1648 100% 791
32 TBK4 ដពាធិរស ុក-ដកាងកាង 3.50 750 71% 263 25% 37 4% 0 0% 1050 100% 377
33 TBK5 ពាមៃីលាាំង- កាំររទី១ 5.00 180 12% 1050 70% 225 15% 45 3% 1500 100% 868
34 TBK6 រែោះអងគ-តាដែញ 14.40 108 3% 2983 88% 211 6% 86 3% 3388 100% 1,704
389.63 3,959 13% 22,780 75% 3,128 10% 523 2% 30,390 100% 15,518
AVG 11.46 116 13% 670 75% 92 10% 15 2% 894 100% 456
Siem Reap
Stung Treng
Tbong Khmum
Economics: Traffic Data (AADT)

• Cost Side: It takes into account the capital cost and
road maintenance costs
 Capital Cost: Cost for road upgrading (including repair of
embankment, sub-base, base course, protection work, drainage
system, structure works (bridges & culverts), sealing with DBST
or/and concrete, and ancillary works (for traffic safety). There are
additional costs of (i) Design and Supervision, (ii) Mine/UXO
clearance, and (iii) land acquisition and resettlement; will be included
if it’s necessary. It also include maintenance cost over project period.
The financial cost is computed in term of US$ per Kilometer ($/km)
and converted to economic cost as in below table:
*The overall economic costs uses for the evaluation are assumed 90% (Standard
Conversion Factor) of financial cost to allow for taxes included in the financial
costs and shadow pricing for all the traded good and services and domestic
market prices net of the domestic taxes and subsidies for non-traded goods.
Economics,

Road ID Province
Road
Amount
(USD)
Cost of Upgrading
(USD/km)
Financial Economic
Length
(km)
Width
(m)
KC1 - KC4
Kampong
Cham
76.00 6 14,624,000 197,500 177,750
KD1 - KD7 Kandal 52.13 6 7,682,700 150,000 135,000
KRT1 - KRT5 Kratie 57.10 6 8,864,000 158,000 142,200
SR1 - SR8 Siem Reap 84.60 6 11,880,000 145,000 130,500
ST1 - ST4 Stung Treng 70.90 6 13,092,000 192,500 173,250
TBK1 - TBK6 Tbong Khmum 48.90 6 8,180,000 175,000 157,500
TOTAL 389.63 6 64,322,700
Weighted-Average 172,499 155,249
Estimation of Construction Cost for Road Upgrading

COST SIDE
With Project
Road Upgrading Cost: 172,499 $/km
Periodic Maintenance Cost: 12,000 $/km every 5 years
Routine Maintenance Cost 1,000 $/km
Design cost: 1,000 $/km
Mine/UXO clearances 4,100 $/km
Land acquisition & resettlement
compensation 20,000 $/km
Without Project
Road Reconstruction Cost: 71,790 $/km
Road Rehabilitation/Repair Cost: 1,200 $/km
Periodic Maintenance Cost: 12,000 $/km every 4 years
Routine Maintenance Cost 1,000 $/km every year

IV. Economic Evaluation Methodology

Procedure of Evaluation
Traffic Survey
Computed AADT
Traffic Demand Forecast
Road Upgrading to
DBST
(With Project)
Without Improvement
(Without Project)
Estimation of
Financial Costs
RUC (VOC & TTC) &
Other Saving from DRM
Without Project With Project
Calculation of Net Benefit Calculation of Net Cost
Conversion to
Economic Cost
Economic Evaluation
(EIRR, NPV)
Application of Economic Model

All Road Sections Indicators
EIRR (Economic Internal Rate of Return) (%) 34.2
Net Present Value (US $ million) 101.47
Economics: Result of Economic Evaluation
Economic analysis covers from 2017-2036 periods as the sections of the
roads were getting completed from 2019 onwards. A full 20 years analysis
has been carried out on the base price year 2016. All costs and benefits
have been discounted at 10% (WB’s Discount Rate for rural road project).
But ADB normally applied to 12% of discount rate.

Economics: SENSITIVITY ANALYSIS
• Quantitative risk analysis provides a means of estimating the
probability that the project NPV will fall below zero, or that the
project EIRR will fall below the opportunity cost of capital.
• The EIRR was analyzed with respect to changes in the benefit
and cost streams. The tests applied were carried out as the
following manners:
a. Construction costs increased by 20%
b. Vehicle operating costs (VOC) reduced by 20%
c. Construction costs increased by 20% and VOC reduced by 20%
d. Base year traffic reduced by 20%
e. Traffic growth rates reduced by 20%
f. Value of time benefits excluded
g. Benefit from Traffic only (VOC & Time saving), no disaster happen.
h. Costs +70% & Benefit -50%, worst case
i. Costs +100% & Benefit -40%, worst case

Economics: SENSITIVITY ANALYSIS
Sensitivity Analysis Results
Scenario EIRR (%)
NPV Switching Value
(SV, %)
Sensitivity
Indicator (SI)(US$ million)
Base Case 34.21% 101.47 - -
Costs +20% 29.76% 94.01 -340.05 -0.29
VOC -20% 21.33% 39.13 32.55 3.07
Base traffic - 20% 30.47% 81.54 101.84 0.98
Traffic Growth Rate -20% 33.47% 95.60 345.72 0.29
No time benefits 28.65% 72.36 225.69 0.44
No generate traffic 34.21% 101.47 - -
Costs +20% & VOC-20% 18.04% 31.66 29.07 3.44
Benefit from Traffic only (VOC & Time
saving), no disaster happen
24.54% 52.14 - -
Costs +70% & Benefit -50% 9.67% -1.18 - -
Costs +100% & Benefit -40% 9.96% 0.32 - -

 As the results of sensitivity analysis, even if the worst case which cost is
increased by 20% and VOC is decreased by 20%, the overall project EIRR is
18.04%. This is greater than 10% the discount rate of World Bank for rural
road improvement and greater than 12% of Royal Government of
Cambodia. The test of no case of disaster happen is also calculated (only
savings are from traffic and travel time, it means economic gain from
better transportation), the overall EIRR is still remain 24.54%.
 Therefore, the implementation of the project is economically feasible from
view point of national and regional economy.
 The EIRR will fall below 10% in the cases of:
1. Costs will be increased by 70% (+70%) and Benefit will be reduced by 50% (-
50%), and
2. Cost will be increased by 2 times (+100%), and Benefit will be reduced by
40% (-40%).
Recommendation: As show in the graph below VOC saving generates from
traffic volume is the main economic benefit, so traffic count at least 1 site
per road is required for the Detail Design, and revise of CBA should be
done for baseline of Benefit Monitoring Evaluation (BME). And where the
roads are formed as a transport networks OD survey is recommended.
Economics: Conclusion

SENSITIVITY ANALYSIS: EIRR
BENEFITS 0% -10% -20% -30% -40% -50%
COST 34.2% 1.0 0.9 0.8 0.7 0.6 0.5
0% 1.0 34.2% 31.4% 28.5% 25.4% 22.1% 18.5%
10% 1.1 31.7% 29.1% 26.3% 23.3% 20.2% 16.8%
20% 1.2 29.5% 27.0% 24.3% 21.5% 18.5% 15.3%
30% 1.3 27.6% 25.2% 22.6% 20.0% 17.1% 13.9%
40% 1.4 25.9% 23.6% 21.1% 18.5% 15.7% 12.7%
50% 1.5 24.3% 22.1% 19.8% 17.3% 14.6% 11.6%
60% 1.6 23.0% 20.8% 18.5% 16.1% 13.5% 10.6%
70% 1.7 21.7% 19.6% 17.4% 15.1% 12.5% 9.67%
80% 1.8 20.6% 18.5% 16.4% 14.1% 11.6% 8.82%
90% 1.9 19.5% 17.5% 15.4% 13.2% 10.7% 8.03%
100% 2.0 18.5% 16.6% 14.6% 12.4% 9.96% 7.29%

0
5
10
15
20
25
30
35
40
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036
$million
Economic Benefits
Reduced Vehicle Operating Costs Reduced Travel Time (cost)
Improved Health due to less dust Avoided Losses

THANK YOU
Angkor Wat Temple viewed from across the moat
Top viewed from Temple???

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