Catalog

	Table of Contents
p. 7 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 A. Scope of Economic Analysis B. The Project Framework C. Financial and 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 XVII. Others

Guidelines for the Economic Analysis of Projects : V. An Integrated Approach To Economic Analysis

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B. The Project Framework

24. The Project Framework provides a conceptual framework for analyzing both directly productive projects, for which a direct market demand exists for valuing project outputs, and indirectly productive projects, for which demand is derived from nonmarket goals. Such an integrated approach to project appraisal helps to prevent the misallocation of resources. It is particularly appropriate for projects where benefits are difficult to quantify and value. It provides a framework for identifying and comparing alternative means of achieving objectives.

25. In the Project Framework, a project is seen as being made up of a series of means-ends relationships, beginning with input-output linkages, then output-purpose linkages and, finally, purpose-goal linkages. For each foreseeable year of project implementation and operation, explicit verifiable targets are set at each level for each objective. The Project Framework is thus both an appraisal tool and a means by which the project can be monitored for

• implementation efficiencytesting the input-output linkage;
• operational effectivenesstesting the input-output-purpose linkage; and
• impact significanceinput-output-purpose-goal linkage.

26. The Project Framework provides for the identification, quantification, and valuation of project objectives or targets for inputs, outputs, project effects, and sector impacts. The approach adopted for economic analysis depends on the extent to which project inputs, outputs, effects, and impacts can be identified, quantified, and valued. For directly productive projects operating in a relatively competitive market environment, the economic effects of purpose level achievements can be measured mainly in terms of incremental income. On the other hand, in the case of indirectly productive projects, the best that can be expected is to be able to value project effects indirectly in terms of the project's impact on the market value of the product for which the project produces an intermediate input or of the cost of an alternative, in terms of cost savings.

27. The application of the Project Framework approach to project design provides an analytical framework for both the economic and social analysis of directly and indirectly productive projects. By enabling the application of the same criteria, the integrated framework ensures transparency and accountability, and promotes efficient resource use (see Appendix 3).

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