Catalog

	Table of Contents
p. 56 of 74 BACK | NEXT I. Introduction II. Background III. The Economic Rationale of A Project IV. Macroeconomic and Sectoral Context V. An Integrated Approach To Economic Analysis VI. Identification and Quantification of Costs and Benefits VII. Valuation of Economic Costs and Benefits VIII. Large Projects, Linkages, and National Affordability IX. Least-Cost and Cost-Effective Analysis X. Investment Criteria: Economic Viability XI. Discount Rate XII. Uncertainty: Sensitivity and Risk Analysis XIII. Sustainability of Project Effects XIV. Distribution of Project Effects XV. Projects and Policies XVI. Appendices Appendix 1: Key Questions For The Economic Analysis of Projects Appendix 2: Project Economic Rationale: Market and Nonmarket Failures Appendix 3: The Project Framework Appendix 4: Identification and Measurement of Consumer Surplus Appendix 5: Treatment of Working Capital Appendix 6: Depletion Premium Appendix 7: The Use of Constant Prices In The Economic Analysis of Projects Appendix 8: General Methodology For Building Up Project Statements Appendix 9: Economic Evaluation of Project Output and Input Appendix 10: Economic Price of Traded Goods and Services Appendix 11: Valuation of Nontraded Outputs and Inputs Appendix 12: Shadow Wage Rate and The Shadow Water Rate Factor Appendix 13: The Economic Price of Land Appendix 14: Treatment of Resettlement Components of Projects Appendix 15: Calculating Economic Prices At The Domestic Market Price Or World Market Price Levels Appendix 16: Estimating The Shadow Exchange Rate Factor and The Standard (Or Average) Conversion Factor Appendix 17: Example of An Economic Rate of Return: An Irrigation Rehabilitation Project Appendix 18: Effect On Net Foreign Exchange and Budget Flows: An Example Appendix 19: Least-Cost Analysis and Choosing Between Alternatives Appendix 20: Estimating The Economic Opportunity Cost of Capital Appendix 21: The Treatment of Uncertainty In The Economic Analysis of Projects: Sensitivity and Risk Analysis Appendix 22: User Charges, Cost Recovery, and Demand Management: An Example For Piped Water Appendix 23: Financial Returns To Project Participants: An Illustration Appendix 24: Economic Evaluation of Environmental Impacts Appendix 25: Distribution of Project Effects Appendix 26: Impact On Poverty Reduction Appendix 27: Difference Between Economic and Financial Prices Appendix 28: Use of Economic Prices In Measuring Effective Protection Appendix 29: Exchange Rate Issues In Project Analysis XVII. Others

Guidelines for the Economic Analysis of Projects : XVI. Appendices

---

Appendix 14 : Treatment of Resettlement Components of Projects

1. The costs of resettlement should be included in the project financial and economic costs, in addition to the economic price of land. Projects with no change in land use are likely to involve no resettlement. However, most projects involve a change in land use. For many, the resettlement of population and economic activities will be small. For some, it may form a significant proportion of the project costs.

2. The Bank requires that the involuntary resettlement of populations be treated as an integral part of project design. A resettlement plan is required, and assistance can be provided for its design and implementation. The financial cost of the resettlement component of projects is eligible for Bank financing.

3. The financial costs of resettlement may include

• compensation for lost income for a specified period,
• compensation for the loss of assets or the reconstruction costs of housing and workshops,
• compensation for temporary production losses during relocation,
• the cost of removal, and
• the cost of managing the resettlement process.

Compensation for lost income for a specified period is a transfer payment and reflects the opportunity cost of lost production from the land and should be excluded from the costs of resettlement where the economic price of land has already been estimated. Other forms of compensation payments need to be substituted by the actual costs of removal and reconstruction. Where compensation schemes are welldeveloped and funded, the financial costs of resettlement may exceed its economic cost. Where compensation schemes are rudimentary, the financial costs may be less than the economic costs.

4. In estimating the economic costs of resettlement, not only should transfer elements be excluded, but all resource costs should be converted to shadow prices. Table 1 illustrates the calculation of the economic costs of resettlement from their financial costs.

5. In this case, there is a welldeveloped compensation scheme, and the economic costs of resettlement are less than the financial costs. The economic cost at shadow prices should be included in the project resource flow in addition to the economic price of land.

¹ Using world price numeraire, standard conversion factor = 0.90.
² Seven years lost average production per hectare.
³ Net income from one harvest/three months workshop net income.
⁴ Economic cost of land calculated separately.

6. A minimum requirement in planning resettlement, sufficient in most cases, is that no person should be worse off after resettlement than before. However, resettlement can also be seen as an opportunity to improve the living standards of those being resettled, through resettlement with development. Compensation payments may be used voluntarily to establish a new economic activity with improved prospects. In other cases, changes in economic activity and living standards must be planned along with the project causing the resettlement. Net benefits to those being resettled can be greater with the project than without. Any estimated increase in net benefits as a result of resettlement, measured in shadow prices, should be subtracted from the estimated economic costs of resettlement.

Back Appendix 13: The Economic Price of Land	Next Appendix 15: Calculating Economic Prices At The Domestic Market Price Or World Market Price Levels