cee ee cei tet on slic capo cued Oupat cf) Flee prac” a | ton Redeks whit had we efpeut on 1Ue ep: Ve ie ye SE ts Oy Gini | gan cl et Price System of | tostow in del hos PI omen Thee i ii | ieee je traded it on egenomic Analysis. Five whe Se Senegal at ne Ce a : Se eee evn dpe ded ev a pcs tons SS a Se Se ase ics nasty Pepa pee ete, Senan le ee ce ‘analysis of projects ts more complex than that dicssion imped eater Gis deagases Between traded and nonsraad ares = i ee prc Enccemagccacecnecnihateiaes Siete es oe cet cc i eee i one fete coef RAE cae Son rj i Sn pete three main obecuve: Ae ficient tization ofthe exiting sures ofthe eon ay “Ine growth ofthoveresoures over ine REE cquty in the diiibtion of consumption beween {ere socal lass and income eros he eon oe in ono of ng Sie ty ti nd Oe eines ones eee as et oin Ca Av Sreme cree Mainpage fe ee sche pone ca aaron nso Se te aia jinn poeta 0 enw fn om te tf feo te eps a fom ep ect I Pectves noted nbove. 52 t i uded over the life of ment of whether goods will hee objecies noted ore rom esse essing SSH ps rok i true te emis netmapr l p e at nL a a ees mS | “| = unis che Se Leterme SoA eas econo anal se fa tbe stcaton of commodiaey on se fae policy, Se ciescanae Oe See ieee ct ae wilt Creve wer bie 3 Fennec. bel a0 sles my mean that ‘Scanned with CamScannerey Madcopte Prat nats n Developing Comune Coed Commodity shift from one etepory tothe o ‘Stet ner a cern yeof Fe role of government unde she cassis ra of seamen a ply tin dr af i ug min hei Src nian tee ag A ton cal Sea oars eS Eoeraent ral cn For caamp See ea 4s output similar To imports if quota congas poner Siva siceltye pect nge toupee the o's cee hae. Howe. blocked by trade policy. The sugsestion was made eats fone tt ool soa a vt pice hey aie otal wattage st tees hy a mle Th ree ‘ccing ez win eed oe anc sh Ire tok of ce! pists ind ace we eee Sune e's putcaar pity eccrine te hore in asesing ti aby a cle tat he mete open wade zones teen cowie, alunite nner fone canbe rae waeinig cancer cnoy nary for gras eae ere th oo yr ae en sean ancestor dreiy pesuine sy tte conmy aa ee eae an indy, wi be waded Ta mow eee ea ro aoa come il towed ae may be aoa for vaso reson ite cama erty. and gh asp et ae sumer fs ay be cai ou domestica. TH aa each map baton ie Se shane sch poet an wae ot a een ht sch on dont ae Sn ed good he cn ot at Faery go posnbiy of these acti taking pace crab Li rma pat each sors op PtP seca aa gas may te notre Dsus oa aaa adi rau se gods don ics es re here me manasa a rt ah os i canna Beet san g oer oi Unat wrod Ete abana ¢y ed acs Atentonesld Bae ober § pie por ua by world mkt sda and which ae woe Tacipete hy heel consis, onside eat Sir, lym quality sabience foods may sho alt Siteangey TOT eter scepter Eee {led bate of poverment ect os hip or Suey eer po aoe protean cat: Many of be paces Seca wa igen lndutateation inthe 9G a 97s bad the lt may {Sunt of mating toch be oda str node for peoket ane However th ted ia any counts fr tae okt releed wal tw more rtetaty eal pod to erated ar races we es Taligion oF Taanen Goons) Shades pig. See yailasion oF Tame cooos] 2 Shado Oat The imporan of ts sian of ome hat redken pee naw peso wo a a ces ee Smee of BES It ec ellns sng mean! ms Me pe ibang, éomneoal ‘ele pre Thy ede ee et ty can price t-wond Wade od ae thre se ot gor pane ae te Pane Sry spss oy eens of ara te, i tecing touts ono se ati th ne to spose te sed Nod rs may venga Se ee padi tebe ect done rameters oes aes mtn po a ain wh TENAiESic rune pace of dd eaten apna ro Ph antyParhfrer Fo srr gra at aa re SEE or “ee 9 i eetions and source of supply. For §206h Ma pre esol sn pore 2 cata nate Sed pe quot can be i as Howe wee Inputs t ing punts and Ove Al rs i ‘Scanned with CamScanner6 Proiet Analyis tm Dewtoping Courier ‘onl foign exchange fr imports al age ena Seige Sta DERI a our, wis addonaLcaponesne Setoldinthemon erat of he pasilemariet: An steecie recede ote uli 886 prota man feropize the diay ann cae i conven or anal 0 Bcd 0 the atin tha the gaend or supply ofan nal per ea he {pee Si RN pe Tg ent no sn fo inponts des no push op Thar pes, nor a “Sbpi a por Ses ars Tes ‘Siumptin frall br gs itary eon poe See Sacco e's ap er So pg hanged by a projet the relevant concept isa mag oat tha te Kei per uit expr manga ven ssn the fc tha pees eh expres he sane coon tee ower tena om three lena ae, ce rough about byte sup of ew pa These ca et alae ihe ste pice seed {rhe maa bt the nwa mine he os en fo ‘xiling exporters per wnit of output from he-nee projec.” — utr acts won psa eqs eee cae ig a ua ia tesrly eur tease oS ches or bese of Jumping, whee gas ae Sold Bee {tat do ot coer long-rancontot pads. Is ongran we, ‘tome paresartose jah shouldbe el San dpa. BORDER PARITY PRICING ‘Word piesae normaly measured as bond ies eta ti ‘al of aed goed atte border or rae. Ses bee = for Dus A po Wet Pe Srtm fom ain tte et rt nl sae am ST eerie st mt Bi hep ol Ta estes Pant, mae pc mooi es ‘eg a ae re iting to transport and distribution (including pon hantay oe tei be esto etna ie ber ea See ee eee nee Sipe "She nc ached at rc cn a ace ‘Se pm ben scene Se ‘Sie esouress ht go to tantport and der ‘5 rot len andthe bn To ses ef "The procedure is clear for goods tat ae tae ty ty projet For example, whe s profes persis cep Betas any price to the profes is the fob ox tinas he wane (Ad frangort and duibaton: Tame Lac cost mex fe Grint since real rues are equed belo the pod ea be Soe Siar, whee a profes wp an inpot is ons pasig pes ‘he if rice plu anspor and diibetimco “The tals hss suphformard sence» prt Goss st ‘ctaly import or export the ods coset bt peas oes ‘Wat se import (import subst) end wm dome od oul have been poral (experi) or could ave be Dosed (inportles) ‘The complation hee i tat mist 3 ‘evant af te oe ranspest apd dsbsan ot: se a Aifrece between stale Shoe nk ‘cured he = a ‘ial, dome patocon ose myer eters os ‘xchange given by the border pie per eit casper ==, ‘isubaton cont betwen he projet and fhe conammpns CO. S37 the capital iy sks than be uanspor aod dsibson o> etwcenthe border andthe capital ty. hs saving in al cars er anit of cut aos bent o be ded to the pi 0 {he the order periy price. Where domestic proucion fab ‘Scanned with CamScanners Project Analysis in Developing C4 ie igh transport and dltibution con ‘ a ‘Bate fom the if price. Similar seg ill 8 Nt pice. Sina arguments apply nine free mat be aca gnats exporabe the Toh bribution costs having th een anspor ey ior export. Where pa oO rok ad othe pat po sisan aional cst thatmasebo ogee GAPE ice more resourecs 20 into transport nea ce input bad been exported (simtary net cone ut th the sertaed trom the export pe), Free cae SANEE must be posses, iets Soo puto thé proee a tsa ‘ewe 5.1 Transport and dsribation element in border pay eng Ftd cea tewcen te pret und poguces ho wry domain Fes tsa teach projet and he Gomi consi em Ft ewan te domenicconemotion ene ud eH ‘hand Dy to cons between the port and producers wh supply domenti aput win cote Ps yen Be Sige dct pecs eos = Sauk tmmnaer so eDy-(re Bd PONIES Bo ve a sis ee Word Price Sytem of Economie Anas “The quate siifiance ofthe additional adjestmeat fore ier enon a ary iy ean eo Sempra lr coms it prone ee ina nr pc tem ts cannon comer oid Ing oct ertecy athe offs exchange rte: so that te sad0w Pip of waded good can be expressed SP, ~ (WP, x OER) + TeCFr * DFS) and its conversion factor a6 CF, ~ 5 where "SE and. DP, ae respectively the shadow price and domestic Inarket pees of fo the projet ives te if or fob prc a in forsign erreney, QER its official exchange cate, Fes Oy ae espetnay, the net anspor and buon Gots of vat dome makes prices Sa Ce and Crp ae, repecey, te conversion factors for “ingport and dstouton "Te signon Zhang D, can be ether postive or aegatve depending pon the pe of traded good tvolved, Ina word pice analy there al costa and benefits mast be expres at world prices, onverionfacors are required to convert T, and D, to cots st world prices. “The pppreach can be strated witha simple name sta sok A import sobatitate project produces an outpt with « ci si fat currency of 100 per unit and domestic exarony Pre of 120, ‘Transport and ditbution costs fom the por 0 eeesoimers are 13 per wal at domestic market pies, However the Seat e acted closer to the consumption centre and fram the rofetto consumer hess costs are ony 5 pero. The shadow. Pre ee output ofthe proj i therefore the i ices th Pre orig transport and datibution cost of 10, The et ok ae seer O sat domestic market pees and must be converted 1 Tre equivalent Ifthe CF fr transport and dibaion TarAD ahadow pie ofthe good i 108, and is CFs 020. ‘Scanned with CamScanner10 Prot Aalst in Developing Counies* SP = 100 + (15-5) x 08 = 108 ana cr = 108 18 - 050 ‘VALUATION OF NON-TRADED GooDs By definition production or we of nontraded goods bya project ‘il eetrate no iret gins or loses in foreign exchange, Tht ‘aluation requires an estimate of tet forcign exchange eat ‘als, which tes account of thers eign exchange ea Depending upon how sch goods ret os prope ther aay ‘egirs cher detail formation on thet con of soppy oy CStimates of ther work to domestic users or consume Both iterates can pote demanding probes for accurate valaton tn ths chapter nonszaded goode are considered only ae noel inpets. The parler probleme thit arte when they ue poget # ‘outputs are discussed in Chapter 7, "Nonvtaded inputs to a projet may be either i vaiable o fed” supply Inthe fist ease. demand from 4 project gonets» apy fesponie so that production increaser to met the needa of Ie rot. Ia the scond theres supply constraint, so that addon ‘demand from a projet lors ster dses to forgo thie ee ‘ens, and ithe marke spot conteale, wil erst a pee ie \NON-TRADED INPUTS IN VARIABLE SUPPLY 3 In practic itis common that the Fit cate is asumed on the {rounds hat say ou tose apasiy sopping orn Sides ass short phenomenon, aed that over e Me oft he mapper athe wi ae lc 0 proj new investment he spp {Rent projet demand. Th shadow pce of nowt pat deh sai pe by th oe arial ct of ional spy ns Wold pice sas this sop ost ast, ctor pct wih lips info te producon Of he sone Waded good valued a an equal wrt re Tn aha ler or nse pod ich rode by raed inputs eter ontaded tate and labour, hs canbe expres as Word Price System of Economic Anais yy. Srp Seg Pooh® Daw Pathe + Laut, gy “nae gureninett ee PSL rent mt is the domestic market price of and CF, converts histo woes Seperate raibihe domesic market pee of" and CF, comer th im ese ecient ne Wis te market wage for category L and CF, converts iso World paces. All items in (3.2) refer to marginal not average cost IW shouldbe clear thatthe cos at word prices of non-ridel ‘asviy ke lst or road transport, not necessarily the sane as cost per KWH of tonmile in another county. Even if Poth ‘punts face the same world prices, due to productivity and lecbical diflerences one would expect unit costs to sifer The rowed imlied an be “Table $1 domestic ‘market lstrated with @ numerical example for 8454 simplifed cost breakdown in Rs. per KWH st eaten ate Sty it a epee aa ‘importable, ly, locally supp ‘materials are arate 0 St abdonal dna Gon tte ae oy 00H Uhr requtemenis, Bosh ae ohh f nord pis ig comer cos olowing the mince tote oat ported with a very low rt local ters have eat 8 Import ‘Scanned with CamScannerx Praer Analysis n Deconng Couns se $1, Mueation of conversion cnn "ator for non idedaciy, i ante corn = sa TR EE Spenne com —_ oe TE tri Er ae Late re tals foo SRB aw tt ons sane om Bee gm 10.00, aes ie CF or Bcrcty = 2238 ite The labour employed in the electricity sett is daagaregated ito skied and unskilled, and both wage costs per KWH are converted {o world prices using labour conversion factors. The derivation of ‘onversion factors for labour is diselsted Separately below. What is required is to estimate Iabour's opportunity cost at world prices (050s eatimated, “The unit capital costs fa on-iraded itvty can be found by ‘plying «capital resovery factor, based on the economic dicount ‘ae andthe length of life of the ases, to tol investment cov This wl give a annual ca : atvy, which ean be converted to pet ng Oy the total units to be supplied per year. tn this exarpt the estimated Spit eharge of Rs 120/KWH i divided eaually betes eaup- ‘Men and buildings. Equipment covers imported items wsed In Work Pie Sytem of Ecnamic Analysis 0 letricty generation and ite CF of 095 is derived fom a ‘omparzon between Dorder parity and projet pres, Bulings fran be adjuted by a CF for constrotion, aken tobe 75. Ava omtaded'acusity 9 consiraction conversion factor must be Gerved iso by revaluing corte of proguction. (Appendix 51 Iosrates how a CF for exsiuction cam be estimated} "Any annaal profit generated In supplying 2 nontraded input that ave above the estimated snowal capa chare wil be sp Droit that i owners of expt in the notaded sector ail be lening profits above the opportunity cos fate of earn on capita Surplus profits arse from s monopole or protected market proton, und ae anther form of tanfer payment, They ave an lonomic val of aero. this example no sorpius profi are Involves Tn Tale $.1 the revalued cost of electricity at shadow prises adds per KWh, in comparison withthe staal electricity tar of 300 "This means that when locity cost are broken down ito fiferent components and valued at world prices, they come (0 Gpprotimately 83 per cont of the tari, Therefore, although etic Het ie aot traded internationally by the economy, ‘in be given wold price equivalent value derived (fom is Unit fest of production at word pre "This simplified example fgnores = couple of theoretical complica: tion that should be noted briefly. Fis ll nontraded sectors wil seas inputs some goods produced by ser nontraded sectors. In this example the onstructon sector wil provide inputs to lectity fs part of the buildings clement of capital costs, and these onstruction ems mist be valued at shadow prices. HOWever, eticy will in ton be am input into construction, so that the Shadow pie of eeetrcity wil be one of he factors determining the Shadow price of consiucton. The inerdependence implies that a ‘onsistet solution must be bated on simultaneous valuation of al noncraded goods and lbour, sine workers’ ouxput foregone will, have some nor-itaded component The computational procedure that allows for this interdependence is discussed in Chapter 1) Nevertheless, there are shortcut procedures that are used i practice. and where non-traded inputs are not major cst item Sn approximate treatment will be all thatis required. Secondly, cost ddataron non-raded sectors should be marginal nt average costs ind reer tothe likly source of aiional supply. Therefore. if « 2 SRRMBEAIER SSeanned with CamSeanner