Water

Dams and Development E-Paper Contents

p. -1 of 74 BACK | NEXT Home Page of Dams and Development Foreword I. Why an e-paper on dams and development? II. Assessing options III. Participatory processes IV. Social impacts V. Environmental impacts VI. Benefit distribution VII. Dam safety and sustainability VIII. Existing projects IX. Improving governance X. What other organizations say XI. ADB, Dams, and Development XII. References Contact Us

Economic Analysis of Dam Projects

Economic analysis of a project goes beyond an assessment of efficient use of resources to consider the broader economic, policy and institutional environment within which it is proposed. ADB's Guidelines for the Economic Analysis of Projects states:

'The application of economic logic should occur early in the project cycle, rather than simply at the appraisal stage. It should lead the analyst to ask whether the investment operation being analyzed represents an appropriate role for government or whether a policy change or institutional change might be broader reaching and more sustainable than a proposed physical investment. The analysis of investment operations and the analysis of policy-based alternatives can flow from the application of the same forms of economic logic. (para 8)

Options assessment also needs to consider the implications on the national budget:

'..some large projects may have considerable repercussions within the local and the national economy … A project can also be seen as large in a national context, where it may have a substantial impact upon foreign exchange revenues, expenditures or budget resources, particularly for Bank-financed projects in borrowing countries with smaller population and economies. For such projects, there should be a discussion of national affordability'. (Economic analysis, para 112)

Economic analysis provides one set of criteria for project selection:

'After determining the scope of the project on the basis of demand and other factors, and having identified, quantified and valued the costs and benefits of the project alternatives, the next step is to identify the least-cost or most effective alternative to achieve the purpose of the project'. (Economic analysis, para 116 - see also Appendix 19)

'Quantitative risk analysis associates a probability of occurring with different values of key variables. ..'Decision makers will compare the scale of net benefits from different projects with their riskiness..' (Economic analysis, para 152 - see also Appendix 21 and the Handbook for Integrating Risk Analysis in the Economic Analysis of Projects)

Such criteria can be then considered together with social and environmental aspects in selecting options.

Back Dams and Development	Next Contact Us