This document summarizes the economic evaluation of proposed road improvement projects in Cambodia. Traffic studies were conducted in 2015 on 5 roads proposed for improvement projects, including traffic counts and origin-destination surveys. An economic analysis from 2017-2037 was conducted using the HDM-4 model to evaluate costs and benefits with and without the improvement projects. The results of the cost-benefit analysis showed economic internal rates of return ranging from 12.2-32.5% for individual road sections and 20.4% for all road sections combined, with an overall benefit-cost ratio of 1.58 and net present value of $45.55 million. A sensitivity analysis found the economic internal rate of return to be most sensitive to variations in traffic

1. Transport Economic
Evaluation
17 May 2016
by: Sok-Tharath CHREUNG, Transport Economist
TA 8784-CAM: Second Road Asset
Management Project
CAM: Proposed Second Road
Asset Management Project

2. 1. Introduction
2. Traffic Study
3. Economic Evaluation Methodology
4.Result of Cost Benefit Analysis
Contents

3. i. The general approach to the economic evaluation of the road improvements
being considered. Previous studies were consulted to assist in the calibration of
the HDM4 model and mid-2015 unit prices were collected. The approach
follows conventional economic appraisal methodology for road improvement
schemes. It takes into account the capital cost of the road maintenance costs,
the potential level of benefit per vehicle, and forecast volumes of traffic.
ii. Traffic study (Traffic Count (TC) and Origin-Destination (OD) Survey) were
conducted on 5 proposed project roads in April 2015. Moving observation
traffic counts were also done to determine appropriated areas of Traffic Count
and OD Survey. The classified traffic counts carried out by MPWT between June
2014 and January 2015 were also collected for 5 project roads, but none was
available for OD survey. Base on the traffic study, the estimation of future traffic
demand were calculated for target years 2035.
iii. Economic analysis covers 2017-2037 periods as the sections of the roads were
getting completed from 2017 onwards. A full 20 years analysis has been carried
out on the base price year 2015. All costs and benefits have been discounted at
12%. Economic price calculated by applying shadow price conversion factor for
all the traded good and services and domestic market prices net of the
domestic taxes and subsidies for non-traded goods.
1. Introduction

4. 2. Traffic Study
ST1: at KM2+500 after Bridge
- OD survey (12hrs)
-TC (24hrs)
ST2: at KM56
-TC (12hrs) ST3: at KM97
-TC (12hrs)
NR8 (AC):
Total Length 125km
Project Length 98km
NR76 (DBST):
Total Length 306km
Project Length 88km
ST4: at KM1 after Junction NR7
- OD survey (12hrs)
-TC (24hrs) ST5 at KM61
-TC (12hrs)
ST6 at KM42
-TC (12hrs)
NR78 (DBST, 121km & AC):
Total Length 191km
Project Length 153km
(Start Km 38: DBST 83km & AC 70km)
ST7: at KM75
- OD survey (12hrs)
-TC (24hrs)
ST8: at KM118
-TC (12hrs)
NR64 (DBST):
Total Length 112km
Project Length 92 km
(Start Km 20 from NR6)
ST10: at KM11
- OD survey (12hrs)
-TC (24hrs)
ST9 at KM 111
-TC (24hrs)
NR67 (DBST):
Total Length 135km
Project Length 135 km
ST11: at KM 1
- OD survey (12hrs)
-TC (24hrs)
ST12 at KM 122
-TC (12hrs)

5. Schedule of Traffic Survey

6. (1) VEHICLE
CATEGORIES
A. ESTIMATES OF
BASE YEAR TRAFFIC
(AADT: Annual Average
Daily Traffic)
i. 24 hour adjustment
factor (if the count is
less than 24 hours).
ii. Daily Traffic Variation
factor.
iii. Seasonal Variation
factor.
Traffic Count

7. TRAFFIC COUNT RESULT - AADT

8. O-D INTEVIEW SURVEY
((1) Survey Items
Trip Information of interviewee vehicle (Driver & Passenger) mainly focus on:
i. Origin and destination of the trip
ii. Number of passengers
iii. Trip purpose
iv. Contents and weight of freight
(2) Survey Method
The OD interview surveys were conducted to understand the passenger’s and
freight’s movement by road transportation with the questionnaires. The interviewee
vehicles were selected for each vehicle type (only Motorized Vehicles of 15 types as
in traffic count sheet) at the regular sampling rate which depends on the traffic
volume. The standard requirement of sampling rate shall be least 10% of traffic
volume of the same period at each location. The assistance of traffic police to select
the interviewee vehicle was arranged by the Consultant with coordination of
Provincial Department of Public Work and Transport.
(3) Survey Coverage
Survey points along the Project Road are shown in the above Maps. The number of
survey sites, their survey time and sampling rate are as follows:
12 hours: 5 sites, 1 day from 06:00 am to 18:00 pm on weekday (as shown in
Schedule above).

9. Zone Codes of OD
The OD zoning
system used 208
traffic zones of
which 194 zones are
for districts and 24
zones are for
provinces within
Cambodia; and 14
zones are for cross
border points to
neighboring
countries (These
Zone Codes are
adopted by JICA).

10. O-D Survey Result
The sampling rate of OD Interview Survey conducted on NR8, NR76, NR78, NR64 and NR67
were achieved more than 10% in total; however the sampling numbers of motorcycle of
NR8, and NR 76 were less than 10%, but other stations were more than 10%. Light vehicles
and trucks were more than 10% considering 12h traffic volume of traffic count of each
station. Table below illustrates the summary of sample rates of 5 locations. The detail
cleaned data of the 5 stations are used for traffic demand forecast.

11. 3. Economic Evaluation Methodology

12. Procedure of Evaluation
1
Traffic Survey
Computed AADT
Traffic Demand Forecast
Road Improvement to
DBST
(With Project)
Without Improvement
(Without Project)
Estimation of
Financial Costs
RUC (VOC & TTC)
Without Project With Project
Calculation of Benefit Calculation of Economic Cost
Conversion to
Economic Cost
Economic Evaluation
(EIRR, NPV, B/C)
Application of HDM-4

13. HDM 4
• The Highway Development and Management Tool (HDM-4) has
been used to analyze the upgrading works. This model was
developed by the International Study of Highway Development and
Management (ISOHDM), funded by the World Bank, Asian
Development Bank, and other sponsors. The objective was to
produce a standard model to be used throughout the world to
prepare road investment programs and to analyze road network
strategies. The latest version available for general use is version
2.08, and this has been used in this Study.
• The HDM-4 model simulates road condition for each road section,
year-by-year, using three sets of sub-models:
a. Road Deterioration - which predicts pavement deterioration
and surface roughness;
b. Works Effects - which simulate the effects of road works on
pavement condition and determines the corresponding
costs;
c. Road User Effects - which determine costs of vehicle
operation and travel time.

14. 4. Result of Cost and Benefit Analysis
Code
Length
(km)
Economic Indicators
NPV
($ Mill.)
B/C
Ratio
EIRR
(%)
NR8 98 29.88 2.81 32.5
NR76 88 3.57 1.28 16.4
NR78-1 83 0.11 1.00 12.2
NR78-2 70 8.78 1.80 23.6
NR64 92 0.04 1.00 12.1
NR67 135 3.17 1.21 15.4

15. Cost Benefit Analysis for all Project Roads
All Road Sections Indicators
EIRR (Economic Rate of Return)
(%)
20.4
B/C Ratio 1.58
Net Present Value (US $ million) 45.55

16. SENSITIVITY ANALYSIS
• In this study, the conducts of risk and sensitivity analyses are
followed from the ADB's Guidelines for Economic Analysis of
Projects (1997). 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

17. RESULT OF SENSITIVITY ANALYSIS
The Results of Sensitivity Analysis are shown in the following table:
Scenario EIRR (%)
NPV
(US$ million)
Switching
Value (%)
Sensitivity
Indicator
Base Case 20.4 45.55 - -
Costs +20% 17.1 30.86 62.01 1.61
VOC -20% 17.1 25.47 -45.36 -2.20
Traffic Growth Rate -20% 17.5 27.75 -51.17 -1.95
Base traffic - 20% 10.2 -7.76 - -
No time benefits 16.5 22.23 - -
Costs +20% & VOC-20% 13.9 10.78 - -
Conclusion: As the results of sensitivity analysis, the EIRR is most
sensitive to variation in traffic. In case base traffic reduce 20%, the
EIRR will be less than the margin of 12%.

18. THANK YOU FOR YOUR PAY
ATTENTION!