Public Finance and
Management
Microeconomics of the Budget
M. Baher El-Hifnawi
East Asia and the Pacific
World Bank
May 1, 2006
Public Expenditure Analysis
• Rationale for Government Intervention
• Instruments/Mechanisms for intervention
• A Framework for the Appraisal of
Development Expenditures
When should governments
intervene?
• Market failures (public goods, externalities)
• Redistribution
How should governments
intervene?
• Subsidy
• Regulation
• Public provision
Mechanisms for intervention
• Regulation
• Grant/Subsidy
• Direct provision
Framework for Appraisal of
Development Expenditures
• Sector analysis
• Cost benefit analysis
• Cost effectiveness
Framework for Appraisal of
Development Expenditures
• Cost Benefit Analysis
– Economic analysis: is the project worthwhile?
– Financial analysis: what are the fiscal
impacts? Is the project financially
sustainable?
– Stakeholder analysis: Who gains? Who
loses? Any contributions to poverty reduction?
– Basic needs analysis: any additional benefits
attributed to addressing a basic need?
– Risk analysis: how robust are the results?
Project Parameters
Project Parameters
(Tables 1a, 1b, and 1c)
Price Levels and Exchange Rate
(Table 2)
Financial Analysis
Unit Cost of Production
(End of Table 5)
Production and Sales
(Table 3a, 3b, 4 and 5)
Working Capital
(Table 6)
(Cost of Good Sold)
Loan Schedule
(Table 7)
Investment and
Depreciation
Schedule
(Table 9 and 10)
(Depreciation
Expense)
(Interest Expense)
Income Tax Statement
(Table 11)
(Taxes)
Total Investment Cash Flow (Nominal)
(Table 12)
(Loan)
Equity Holder’s Cash Flow (Nominal)
(Table 14)
Total Investment Cash Flow (Real)
(Table 13)
Equity Holder’s Cash Flow (Real)
(Table 15)
Economic Analysis
Step One:
National Economic Parameters:
a. Economic Opportunity Cost of Capital
b. Foreign Exchange Premium
(Table 16 for FEP)
Step Two:
+
Economic Conversion Factors for:
a. Project Output(s)
b. Project Inputs, including
• Investments
• Operating Expenses
• Labor
c. Working Capital
d. Taxes, Tariffs, Subsidies, and Loans
(Table 17a,17b, 17c, 17d and , 17e)
(Applied to Real Financial Cash Flow Statement)
Statement of Economic Costs and Benefits
(Table 18)
Stakeholder Analysis
A. Economic Real Net Resource Flow
(Table 18 of MPR Case)
-
(Minus)
B. Financial Real Net Resource Flow
(Table 13 of MPR Case)
(Yields)
C. Net Resource
Flow of
Externalities
D. Present
Value
E. Allocation of
Externalities
(Table 19 of MPR Case)
(Table 20 of MPR Case)
(Table 20 of MPR Case)
Stakeholder Analysis (Continued)
F. Summary of Stakeholders’ Net Benefits (Costs)
(End of Table 21 of MPR Case)
G. Reconciliation of Economic and Financial Analyses:
(Top of Table 21 of MPR Case)
Economic NPV = Financial NPV + PV Externalities
H. Basic Needs Analysis
Risk Analysis
A. Sensitivity Analysis
(Table 22 of MPR Case)
B. Risk Variables
(Table 23 and 24 of MPR Case)
C. Results
(Table 25 and 26 of MPR Case)
(Figure 1, 2, and 3)
Economic Analysis:
Three Basic Postulates for
Applied Welfare Economics
A. The competitive demand price for a given unit of
an item measures the value of that unit to the
demander
• Willingness to pay
B. The competitive supply price for a given unit of a
good or service measures the value of that unit to
the supplier
• Opportunity cost
C. Costs and benefits accruing to different groups
should be added up to determine overall economic
benefits; i.e. A dollar is a dollar no matter to whom
it accrues
Illustration of Basic Postulates
Postulate A:
Willingness to Pay
Postulate B:
Opportunity Cost
Price
Price
Market Supply Curve
Market Demand Curve
d
P0
s
P0
Qo
Quantity
per year
Qo
Quantity
per year
Non-Tradable Commodities
• A good or service is considered non-tradable
when its domestic price is determined by local
demand and supply.
• An increase in demand (or supply) by a project
could affect the amounts demanded by domestic
consumers (or produced by other suppliers).
Non - Tradable Good
Price
S Domestic Supply
Em
* PCIF * (1+Tm) + Fm
Distorted World
Supply Price
Pm
Em * PFOB* (1-tx) - Fx
Distorted World
Demand Price
D Domestic Demand
Quantity
per year
Steps to Estimate the Economic Value of a NonTradable Good or Service
1) Adjust for distortions in the market for the item (whether
input to, or output of, the project).
2) Correct for the foreign exchange premium if there is an
impact on the quantity supplied by other suppliers in the
market (ws).
3) Correct for distortions in the markets for the inputs used to
produce the item. Correction is applied to the proportion of the
item produced by other suppliers in the market (ws).
Non-Tradable Goods
Economic Benefits of Project Output (No Distortions)
Price
S0
A
S0 + Project
C
P0
P1
G
F
E
B
D
D0
Q s Q0
1
Value of
Resources
Saved
d
Q1
QT
Quantity
Value of
Increased
Consumption
Calculating the Economic Value of Non-Tradable
Goods
Economic Value = W s P s
+
Wd Pd
= weighted average of supply (Ps) and demand (Pd) price

Supply Elasticity
Where:
Ws =
Supply Elasticity - Demand Elasticity
Demand Elasticity
Wd =
- 
-
=
Supply Elasticity - Demand Elasticity
Ps =
=
Supply Price
P d = Demand Price
- 
 = (defined positively)own price elasticity of supply
 = (defined negatively) own price elasticity of demand
Potable Water Supply Expansion:
The Manila South Water Distribution Project
The Economic Benefits of Water to Paying Customers
Drinking Water
Washing Water
S
37.8 pesos
18.9 pesos
S
S +Project
S +Project
5.69 pesos
5.135 pesos
5.135 pesos
D w/ Project
D w/ Project
Q
s1
Q
o
Q
d1
Q
T1
Cubic Meters Per Day
Q
d1
- Q
s1
= Incremental Project Water consumed by Paying Users
Q
s1
Q
o
Q
d1
Q
T1
Cubic Meters Per Day
Step One: Adjusting forNon-Tradable
Distortions Goods
in the Market for Good or Service
Economic Benefits of Project Output (Tax on Output)
Price
S0
A
d
m
0
m
1
P 0 =P
d
(1+ts) N
G
P 1 = P (1+ts)
s
m
P0 =P 0
s
S0 + Project
F
E
J
m
P 1 =P 1
H
B
D0
D
D0
s
Q 1 Q d/s
0
Value of
Resources
Saved
Value of Increased
Consumption
d
Q1
Net of Tax
Quantity
Economic Benefits
Ws P
m
0
+ W d P m0 (1+ t s )
Example
W s =1/3, W d=2/3 Pm=120, t s =0.15
Pe=1/3(120)+2/3(120)(1+0.15)=132
Pe=40+80(1.15)=132
Non-Tradable Goods
Economic Benefits of Project Output (Subsidized Output)
Price
S0
After subsidy
s
m
P 0 = P 0 / (1-k)
s
S0
H
After Subsidy
A
m
S 0+Project
F
P 1 = P 1 / (1-k)
E
d
m
P 0 = P 0
I
J
d
m
P 1 =P 1
G
B
C
D
D0
Q s Q d/s
1
0
Quantity
Qd
1
Economic Benefits
Ws
Value of
Resources
Saved
Value of
Increased
Consumption
P m0
+ W d P m0
(1-k)
Example
W s =1/3, W d=2/3 Pm=90, k =0.40
Pe=1/3*(90/(1-0.4))+2/3*(90)
Pe=1/3(150)+2/3(90)=110
Non-Tradable Goods
Economic Costs of Project Input
(Subsidized Input)
Price
S0
H
s
m
P 1 = P 1 / (1-k)
C
After Subsidy
G
s
m
P 0 = P 0 / (1-k)
S
B
D
P
P
d
1=
d=
0
P
m
1
P
m
0
0
I
E
F
J
A
D0+Project
D0
d
Q1
d/s
Q0
Q
Quantity
s
1
Economic
m Costs
Ws
Value of
Postponed
Consumption
Value of
Additional
Resources
P0
+ Wd P
(1-k)
m
0
Example
W s =1/3, W d=2/3 Pm=90, k =0.40
Pe=1/3(90/(1-0.4))+2/3(90) ; Pe=1/3(150)+2/3(90)=110
Example 1: Project Uses Electricity
(Sales Tax, Subsidy on Cost of Electricity Production, No Other
Distortions)
Pesos/KWh
P s = .169
1
S0
L
P s = .167
0
P d = .122
1
P d = .120
0
H
S
After Subsidy
A
B
P m = .102
1
P m = .100
0
E
G
D0
F
D Net of Tax + Project
Wd
Q
d
1
5.8
Ws
Qo Q
D Net of Tax
s
1
6.0 6.1
Quantity
(Million kWh/Yr)
m
Financial Market Price (P 0)Net of Tax = .100 pesos/kWh
m
Financial Demand Price (P d0 = P 0 + Tax) = .120 pesos/kWh
s
m
Financial Supply Price, (P 0 = P 0 + Subsidy) = .167pesos/kWh
Economic Price (Pe) = Wd * Pd + Ws*Ps.
If Wd = 2/3, and Ws = 1/3, then
Pe = 2/3(.120) + 1/3(.167) = .136 pesos/kWh
Tradable Commodities
Classification of a Project’s Inputs and
Outputs
A good or service is considered tradable when an increase in
demand (or supply) by a project does not affect the amount
demanded by domestic consumers
• An increase in demand for an IMPORTABLE commodity results
in an increase in demand for imports
• An increase in demand for an EXPORTABLE commodity results
in a reduction in exports
• When a project produces a tradable commodity, there will be
either a reduction in imports or an increase in exports.
An Importable commodity includes imported goods and
domestically produced goods that are close substitutes for
imported goods
An Exportable commodity includes exported goods and close
substitutes for exported goods
Importable Good
Price
S Domestic Supply
Distorted World
Supply Price
Pm
Em * PCIF * (1+Tm) + Fm
D Domestic Demand
Q
s
o
Q
d
o
Quantity
per year
Imports = Q d - Q so
o
Em = Market Exchange Rate
FM = Domestic Freight to Market
Tm = Rate of Import Tariff
PCIF=Price of imports at entry point to country, including international freight
and insurance changes expressed in units of foreign currency
Project Supplies More of an Importable Good
Price
S domestic
S w/ project
Em * PCIF* (1+Tm) + Fm
S world
D domestic
Q1
Q2
Q3
Quantity
Project reduces quantity imported. No change in domestic consumption.
Project Demands More of an Importable Good
Price
S domestic
Em * PCIF * (1+Tm) + Fm
S world
D domestic
Q1
Q2
Q3
D w/ project
Quantity
Project requirements will be met by additional imports (world supply).
Domestic consumption is not affected.
Exportable Good
Price
S Domestic Supply
Em * PFOB * (1-tx) - Fx
Distorted World
Demand Price
Pm
D Domestic Demand
Exports = Q so- Q
d
o
Q
d
o
Q
s
o
Quantity
per year
Em = Market Exchange Rate
tx = Export Tax
Fx = Freight and Trading Costs to Port
PFOB=Price of exports at point of export from country in units of foreign currency
Project Supplies More of an Exportable Good
Price
S domestic
S w/ Project
D world
Em * PFOB * (1-tx) - Fx
D domestic
Q1
Q2
Q3 Quantity
Project increases exports. Domestic consumption remains unchanged.
Project Demands More of an Exportable Good
Price
S domestic
Em * PFOB * (1-tx) - Fx
D world
D w/ Project
D domestic
Q1
Q2
Q3
Quantity
Project requirements will reduce quantity exported.
Consumption of previous consumers remains unchanged.
Estimating The Economic Prices of Tradable Goods
1. Adjust for commodity - specific trade distortions
• Financial prices for the commodities demanded (or supplied) by a project
must be adjusted for commodity-specific distortions and costs that drive a
wedge between their international prices and their domestic market prices
• Taxes and Subsidies are transfers between consumers, producers, and the
government. Therefore, they are not part of the real resources consumed
or produced by a project.
2. Value the foreign exchange at the economic (shadow) exchange rate
(Ee)
• Multiply the CIF and FOB prices at the border by the economic price of
foreign exchange (Ee)
• Alternatively, add a foreign exchange premium [(Ee/Em) - 1], or [(Ee/OER) 1], per unit of foreign exchange demanded (or supplied) by a project.
3. Adjust for handling and transportation costs
• The economic costs of handling and transportation that are necessary to
move trade commodities to or from the point of entry must be included
• In the case of imported commodities, these costs should be added to the CIF
price.
• In the case of exported commodities, these costs should be subtracted from
the FOB price.
Visayas Communal Irrigation Project
Basic Facts
•
The National Irrigation Administration (Philippine National Agency) proposes to
rehabilitate 55 damaged communal irrigation systems and to build 25 new
systems in Visayas.
•
The project’s additional components include water protection and erosion
control, the strengthening of irrigation association, and the development of
agricultural extension services.
•
The goal of the project is to alleviate poverty, while improving environmental
sustainability of the region.
The life of project is 20 years.
•
•
The economic benefits arise from the increased production of rice and corn,
which must otherwise be imported.
•
The foreign exchange premium is 24.6%.
•
The project is expected to cost approximately 480.910 million pesos (US$19.78
million).
•
The project will be financed with US$15.1 million loan from the International
Fund for Agricultural Development, and remaining funding would be provided
by the Philippine government.
Table 1: Project Supplies an Importable Good (Rice)
CIF World(US$)
CIF Rice (pesos/ metric ton)
PLUS:
Transport and Handling charges
Trading margin
Wholesale price, Manila
LESS:
Transport cost, project area
to Manila
Ex-mill price of Rice
LESS
Milling cost
Pre-milled value
Paddy price equivalent (65%)
LESS
Grain dealer margin (4%)
Transport and handling cost farm to mill
Farm gate price of Paddy
Conversion factor (EV/FP)
Financial
Unadjusted
Unadjusted
Price
(A)
Conversion
Factor
(B)
Economic
Value
(C =A*B)
$314.8
7659
1
205
472
8336
515
Foreign
Exchange
Content
Foreign
Economic
Value
(D)
Exchange
Premium
(E=A*D*0.246)
=C+E
7659
100 %
1884
9543
1.00
0.68
205
320
30 %
10%
15
12
220
332
10095
1.00
515
30%
38
553
7821
9542
346
7475
4859
1
346
50%
43
389
9153
5950
194
130
4534
1.25
0.68
1.00
132
130
10%
30%
5
10
137
140
5673
Table 2: Project Uses an Importable Good (PESTICIDES)
CIF World (US$)
CIF pesticides (pesos)
(per 1000 liters)
PLUS
Tariff
Handling and Port Charges
Importer Price, Manila
PLUS
Transport cost,
Manila to project area
Dealer's margin
Financial
Unadjusted
Unadjusted
Price
Conversion
Factor
(B)
Economic
Value
(C=A*B)
1
201
155
4394
515
201
(A)
$166
4038
Price at local market
PLUS
5110
Local transport cost
120
Price at farm gate
Conversion Factor (EV/FP)
5230
1.15
Foreign
Exchange
Content
Foreign
Economic
Value
(D)
Exchange
Premium
(E=A*D*0.246)
F=C+E
4038
100%
993
5031
0
1.00
0
155
0%
30 %
0
11.4
0
166
5197
1.00
0.68
515
137
30%
10 %
38
5
553
142
5892
1.00
120
30%
8.9
129
6021
Table 3: Project Uses an Exportable Good (Seeds)
Financial
Price
(Pesos)
(A)
FOB PADDY SEED (pesos/ ton)
6326
LESS
Port Handling and transportation
155
From IRRI to port of Manila
IRRI Exporter Price
Unadjusted
Conversion
Factor
(B)
1.00
Unadjusted
Economic
Value
(C=A*B)
6326
Foreign
Exchange
Content
(D)
100. %
Foreign
Exchange
Premium
E=A*D*0.246
1556
Economic
Value
Adjusted
F =C+E
7882
1.00
155
30%
11.4
166
6,171
PLUS:
Transport cost, IRRI to
local market
Dealer's margin
515
235
Price at Local Market
6921
PLUS:
Local transport cost from market
to farm (project)
Farm Gate Price
7041
Conversion Factor (EV/FP)
1.22
120
7716
1.00
0.68
515
160
30%
10%
38
5.8
553
166
8435
1.00
120
30%
8.9
129
8564
Table 4: IRRI Supply an Exportable Good (Seeds)
Financial
Price
(Pesos)
[A]
FOB Manila
FOB Manila
Unadjusted
Conversion
Factor
[B]
Unadjusted
Economic
Value
[C= A *B]
Foreign
Exchange
Content
[D]
Foreign
Exchange
Premium
[E=A*D*.246]
Economic
Value
(Adjusted)
[F = C+E]
1.00
6326
100%
1556
7882
155
30%
11.4
166
US$260
6326
(Pesos/ Ton)
LESS:
Port Charges and
Transportation to
IRRI
155
IRRI Gate Price
6171
Conversion factor
1.25
(EV/FP)
1.00
7716
Summary for Tradable Goods
Economic Cost of Imported Input: CIF (adj. For
Economic Exchange Rate) + Economic Cost of Freight to
Project
Economic Value of Import Substitute Production: CIF
(adj. For Economic Exchange Rate) + Economic Cost of
Local Freight from Port to Market - Economic Cost of
Local Freight from Project to Market
Economic Cost of Exportable Input: FOB (adj. For
Economic Exchange Rate) + Economic Cost of Local
Freight from Export Producer to Project - Economic Cost
of Local Freight from Export Producer to Port
Economic Value of Export Production: FOB (adj. For
Economic Exchange Rate) - Economic Cost of Local
Freight from Project to Port
Stakeholder
Analysis
DISTRIBUTIONAL/STAKEHOLDER
IMPACTS
FOR ALL INPUT AND OUTPUT VARIABLES:
NPV economic = NPV financial + S Stakeholder Impacts
–
Stakeholder Impacts are often called externalities of project
Example of a non-traded good with a sales tax:
Economic Value = Financial Value + Change in Government Tax
Revenues + Increase in Consumer Benefits Loss in Profits
to other producers
Financial, Economic and Distributive Effects of Project to Supply
Non-Traded Goods with no Distortions
P
S
S + Project
A
P0
P1
C
B
D
QS
Q0 Qd
Q
Financial Value of Output = QsCBQd or P1 (Qd -Qs)
Economic Value of Output = QsCABQd
Difference (Economic - Financial) = CAB
CAB = P1P0AB -P1P0AC
= Gain in Consumer Surplus - Loss in Producer Surplus
Economic Value = Financial Value + Gain in Consumer Surplus - Loss in
Producer Surplus = Financial Value + Distributive Impacts
Financial, Economic and Distributive Effects of Project to Supply
Non-Traded Goods with Unit Tax
P
d
S
E
(P0+T) = P 0
S + Project
Pd
1
F
s
P0
A
C
B
s
P1
Dn
QS
Q0
Qd
D
Q
Financial Value of Output = QsCBQd
Economic Value of Output = QsCAQ0+ Q0ABQd +AEFB
AEFB = Increase in Government Revenue
CAB = P s Ps AB - P s P s AC
1 0
1 0
s s
d
Since P P AB = P P d EF Therefore, CAB = P d P dEF - P s1P sAC
1 0
1
0
1
0
0
= Gain in Consumer Surplus - Loss in Producer Surplus
Economic Value of Output = Financial Value of Output + Change in Government Tax
Revenues + Increases in Consumer Surplus - Loss in Producer Surplus
Measuring Distributive Impact from Financial and
Economic Values of Inputs with Tariffs
P
S
B
PW(1+t)
Pw
C
F
A
E
G
H
D + Project
D
Qs
Qs
Qd
0
1
1
Q
Qd Qd
0
2
Financial Cost of Importable Goods = Q d CFQ d
1
Economic Cost of Importable Goods =
Q d1
2
GHQ d2 (Ee / Em)
Where (Ee / Em - 1) = Foreign Exchange Premium (FEP)
d
d
Difference (Financial Cost - Economic Cost) = GCFH - Q 1 GHQ2 (Ee / Em - 1)
= Gain in Tariff Revenues to Government - Loss in Government Revenues from
Additional Use of Foreign Exchange in Importing This Input
Port Rehabilitation and Expansion:
The Makar Project
Basic Facts:
• Makar Port, located in General Santos City at the northern side
of Sarangani Bay, a well-protected bay in Mindanao, lies along
the main north-south trading axis which skirts Mindanao on its
western shore.
• The objectives of the project are to increase the capacity and
improve the efficiency of cargo handling facilities at the port to
accommodate future flows
• The project will cost approximately 635 million pesos1
• Seventy-five percent of the total project cost will be provided as
a grant by the US Agency for International Development
(USAID) and the other 25% will be provided from counterpart
contribution by the Philippine government
Port Rehabilitation and Expansion:
The Makar Project
Project Outcome
•
Deterministic case appeared good with partial financial analysis
NPV Financial (with Project)=10,760,000 million pesos
•
Full analysis shows project provide a negative economic performance
• Project was implemented
Port Rehabilitation and Expansion:
The Makar Project
Incremental Financial-Economic Analysis
NPV (Total Investment Point of View)
NPV (Economic Point of View)
With Project
Without Project
Incremental
(000s of Pesos)
(000s of Pesos)
(000s of Pesos)
10,760
19,453
(8,693)
(105,576)
25,683
(131,259)
Note: Peso is the Philippine currency and in Year 1 is equal to 0.037 US dollar (1994)
FINANCIAL ANALYSIS
Incremental Financial Cash Flow Statement (Real)
(in
Year 1
thousands Peso)
Year 2
Year 3
Year 4
Year 5
Year 6
Year 10
Year 15
Year 16
3,000
69
155,088
158,157
3,000
69
219,215
222,284
3,000
69
79,719
82,788
1,359
216
1,576
3,000
1,000
69
5,645
2,276
243
2,519
3,000
2,000
69
7,588
6,895
425
7,319
3,000
6,000
69
16,388
8,120
452
8,572
3,000
9,000
69
20,641
340,810
340,810
103,995
93,124
1,100
198,219
(40,063)
(8,693)
.
153,285
139,002
1,100
293,386
(71,103)
49,006
57,285
1,100
107,392
(24,604)
9,017
1,100
79
158
(1,353)
9,001
(3,356)
9,017
1,100
54
109
(123)
10,157
(2,569)
9,017
1,100
64
128
(123)
10,186
6,202
9,017
1,100
19
38
(123)
10,051
10,589
(390)
(779)
1,230
61
340,750
RECEIPTS
Port Revenues - local
Port Revenues - foreign
Total port revenues
Rental income from Container Yard I
Rental income from Container Yard II
Other Income
USAID Grant and Government Contribution
Liquidation Values:
Total Cash Receipts
69
22,148
22,217
EXPENDITURES
Investment cost-non tradable
Investment cost-tradable
Operating Cost:
Loss of rental income from term. shed
Change in Cash balance
Change in Accounts Receivable
Change in Accounts Payable
Total Expenditures
NET CASH FLOW
NET PRESENT VALUE (at 9%)
22,631
2,758
1,100
26,489
(4,272)
Economic Benefits
Makar Port Project
• Additional port revenue from expansion in
traffic including foreign exchange premium.
• Additional rental income from containers
yards.
• Reduction in waiting time of ships.
• Reduction in animal weight loss from
waiting on ship.
ECONOMIC ANALYSIS
Incremental Economic Net Benefit Flow Statement
(in thousands Peso)
RECEIPTS:
Port revenues - local
Port revenues - foreign
Total Port Revenues
Benefit to ship owners due to
reduction in ships' waiting time
Benefit to shippers due to reduction
in animal weight loss
Rental income from Container Yard I
Rental income from Container Yard II
Other Income
USAID Grant and Government Contribution
Liquidation Values:
Total Cash Receipts
EXPENDITURES:
Investment cost-non tradable
Investment cost-tradable
Operating Cost:
Loss of rental income from term. shed
Change in Cash balance
Change in Accounts Receivable
Change in Accounts Payable
Total Expenditures
NET CASH FLOW
NET PRESENT VALUE (at 10.3%)
INTERNAL RATE OF RETURN
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 10
Year 15
Year 16
-
-
-
-
1,359
249
1,608
2,276
280
2,556
6,895
488
7,383
8,120
520
8,639
-
-
-
-
25,484
31,264
33,539
35,444
36,491
-
69
69
3,000
0
69
3,069
3,000
0
69
3,069
3,000
0
69
28,553
13,331
3,000
1,000
69
50,272
13,906
3,000
2,000
69
55,070
16,204
3,000
6,000
69
68,100
19,715
3,000
9,000
69
76,914
316,916
316,916
45,422
54,059
9,044
1,100
1,100
80
160
(1,329)
100,581 9,056
(72,028) 41,216
9,044
1,100
55
111
(121)
10,190
44,880
9,044
1,100
65
130
(121)
10,219
57,881
9,044
1,100
20
39
(121)
10,082
66,832
(397)
(793)
1,208
19
316,898
21,818
96,550
2,596
87,515
1,100
1,100
25,514
185,165
(25,445) (182,096)
(131,259)
5.88%
141,822
130,373
1,100
273,295
(270,226)
STAKEHOLDER ANALYSIS
(in thousands Peso)
ITEM
RECEIPTS:
Total Port Revenues
Benefit to ship owners/shippers due to
reduction in ships' waiting time
Benefit to livestock shippers due to
reduction in animal wt. loss
Rental income from Container Yard I
Rental income from Container Yard II
Other Income
USAID Grant
Liquidation Values:
Total Cash Receipts
EXPENDITURES:
Investment cost-nontradable
Investment cost-tradable
Operating Cost:
Loss of rental income from term. shed
Change in Cash balance
Change in Accounts Receivable
Change in Accounts Payable
Total Expenditures
NET CASH FLOW
(A)
(B)
PV Financial at
PV Economic at
Economic Discount Economic Discount
Rate of 10.3%
Rate of 10.3%
(C)
PV of
Externalities
(B - A)
(D)
(E)
Government
Shipowners/
Shippers
Allocation of Externalities
25,677
25,928
250
250
-
-
187,684
187,684
-
187,684
22,100
23,895
577
404,200
81,587
558,037
77,025
22,100
23,895
577
75,867
413,076
77,025
(404,200)
(5,720)
(144,961)
(404,200)
(5,720)
(409,670)
77,025
264,709
280,673
245,332
44,000
9,203
223
446
(1,145)
578,732
(20,695)
260,925
230,517
44,135
9,203
227
454
(1,126)
544,335
(131,259)
(19,749)
(14,815)
135
4
8
20
(34,397)
(110,564)
(19,749)
(14,815)
135
4
8
20
(34,397)
(375,272)
264,709
Potable Water Supply Expansion:
The Manila South Water Distribution Project
Economic Benefits
• Economic benefits will be generated as a result
of additional consumption by new connections
(paying customers).
• Additional benefits will be generated by
increased consumption of water by non-paying
customers.
• Saving in the resources. The resources that are
released by reduction of water supplied from
water vendors and wells are an economic
benefit to economy.
Stakeholder Impact
Manila South Water Distribution Project
(A)
PV Financial
at Economic
Discount Rate
of 10.30%
BENEFITS
Revenue Generated Water
Change in accts. Receivables
Benefits from
non-revenue water
TOTAL BENEFITS
COSTS
Investments
Civil works
Equipment and materials
Office buildings
Consulting services
Land
In-house eng. services
Taxes and duties
Operating and maintenance
Wages
Chemicals
Power
Maintenance
Income tax
Change in accts. payable
Change in cash balance
TOTAL COSTS
NET BENEFITS
(B)
(B-A)
PV Economic
at Economic
PV of
Government Non-Paying
Discount Rate Externalities
Users
of 10.30%
2,148.23
(86.22)
4,515.02
(181.21)
2,366.79
(94.99)
2,062.01
939.92
5,273.74
939.92
3,211.73
510.32
624.87
7.11
3.39
28.00
81.26
162.32
500.11
778.59
7.25
3.39
28.00
54.72
0.00
(10.21)
153.72
0.14
0.00
0.00
(26.53)
(162.32)
710.43
102.19
130.22
89.50
710.43
98.10
139.34
85.92
0.00
(4.09)
9.12
(3.58)
(11.54)
1.87
2,439.94
(11.54)
1.87
2,396.19
0.00
0.00
(43.75)
(377.93)
2,877.55
3,255.48
Paying
Users*
Engineering
Services
2,570.50
(103.17)
Water
Vendors
(203.71)
8.18
939.92
10.21
(153.72)
(0.14)
26.53
162.32
4.09
(9.12)
3.58
17
940
2,467
* As these are the net benefits of the externalities, this includes the the benefits
of the consumer surplus on drinking and wash water, minus the loss in well owner's
producer surplus, due to the fact that the well owners are the consumers.
27
(196)