Transport Notes
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The goal of Transport Notes series is dissemination of recent experiences and innovations in the World Bank Group’s transport sector operations.
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1 - 10 of 18
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Publication
Projects with Significant Expected Restructuring Effects
(World Bank, Washington, DC, 2005-01)This note focuses on the economic evaluation of more conventional infrastructure investments, and specifically on two types of projects which may result in significant economic restructuring - relocation of economic activities, generation of new activities, or changes in the way that current activities are undertaken. The two examples used: new urban rail lines and major new barrier crossings serve simply as examples of a much wider issue. The issue is that whenever projects bring about a large step change in transport costs, there is a stimulus for a reorganization of economic activity outside the transport sector. -
Publication
Low Volume Rural Roads
(World Bank, Washington, DC, 2005-01)The objective of this note is to advise on an appropriate economic appraisal methodology that should be used for the assessment of Low Volume Rural Roads - that is roads upon which less than 200 motorized vehicles per day travel. Section 1 of this note sets out the reasons that Low Volume Rural Roads require a slightly different consideration from other transport projects. Section 2 discusses the approaches to economic evaluation that can be used for low volume rural roads, whilst Section 3 presents the manner that the consumer surplus method can be extended to account for the characteristics of low volume rural roads. Section 4 contains a summary of the main points of the note. -
Publication
Valuation of Accident Reduction
(World Bank, Washington, DC, 2005-01)The objective of this note is to advise on a desired and workable method that can be used to place values on accident reduction. The first section of this note identifies the need to categorize accidents if accidents are to be valued, and suggests a method of categorization. Following, it identifies the components of cost that make up total accident costs, while further sections suggest methods that can be used to value casualty related costs, and incident related costs. Other Sections discuss how accident valuation may vary between modes, and suggest that accident valuations are consistent with those utilized in other Bank projects (e.g. health projects). Final Sections discuss the manner that accident costs vary with time, and the relationship between the valuation and the accident prediction m model. The final Section summarizes the principal recommendations of the note. -
Publication
Demand Forecasting Errors
(World Bank, Washington, DC, 2005-01)Demand forecasts form a key input to the economic appraisal. As such any errors present within the demand forecasts will undermine the reliability of the economic appraisal. The minimization of demand forecasting errors is therefore important in the delivery of a robust appraisal. This issue is addressed in this note by introducing the key issues, and error types present within demand forecasts (Section 1). Following that introductory section the error types are described in more detail: measurement error (Section 2), model specification error (Section 3) and External or Exogenous Errors (Section 4). The final section presents a discussion on how to manage demand forecasting errors (Section 5). -
Publication
Treatment of Induced Traffic
(World Bank, Washington, DC, 2005-01)Induced traffic can be an important part of the economic appraisal particularly when the objective of the investment is to stimulate economic development; it's importance, however, is not restricted to such situations. The omission of induced traffic from the economic appraisal, or its incorrect treatment, may lead to either over or underestimations in the user benefits (consumer surplus) of an investment. In addressing this issues, this note, considers: the importance of induced traffic for the economic appraisal (Section 1); what constitutes induced traffic (Section 2); the situations in which induced traffic is likely to be relevant (Section 3) and the manner in which it can be modeled (Section 4) and user benefits calculated when it is present (Section 5). The annexes show the relative importance of including the benefits of induced traffic in the evaluation of an urban transport project; where the standard "rule of one half" breaks down in some situations that are often present in Bank projects, while another shows a numeric integration technique that can be used as a valid alternative to the rule of one half in many of these situations (and coincidently, provides a more precise evaluation even where the "rule of one half" gives an acceptable estimation). -
Publication
Where to Use Cost Effectiveness Techniques Rather Than Cost Benefit Analysis
(World Bank, Washington, DC, 2005-01)Cost Benefit Analysis, and the measures of economic performance that can be derived from it (see Note 6: When and How to Use NPV, IRR and Adjusted IRR), is the preferred method for demonstrating the economic justification of transport investments. Such an approach, however, relies on the ability to be able to measure costs and benefits in monetary terms (see Note 5: Framework), which renders it problematic for projects where the majority of benefits cannot be readily monetised. Such a project could be a Low Volume Rural Road (see Note 21: Low Volume Rural Roads). In such situations consideration should be given to the use of measures derived from cost effectiveness or weighted cost effectiveness (also known as Multi Criteria Analysis) techniques as the basis for the decision regarding whether to invest or not. Cost effectiveness techniques are also a very useful tool for project screening or ranking. Such a screening process ensures that projects that are subjected to a more detailed analysis (including cost benefit analysis) are those that best fit with the objectives of the investment (e.g. poverty alleviation). Section 1 of this note outlines the situations in which cost effectiveness techniques should be used, whilst Section 2 describes the two main types of approaches. Section 3 discusses the issue of economic viability and cost effectiveness whilst Section 4 presents a summary of recommendations. -
Publication
Notes on the Economic Evaluation of Transport Projects : Fiscal Impacts
(World Bank, Washington, DC, 2005-01)The Economic Evaluation Notes are arranged in three groups. The first group (TRN-6 to TRN-10) provides criteria for selection a particular evaluation technique or approach; the second (TRN-11 to TRN-17) addresses the selection of values of various inputs to the evaluation, and the third (TRN-18 to TRN-26) deals with specific problematic issues in economic evaluation. The Notes are preceded by a Framework (TRN-5), that provides the context within which we use economic evaluation in the transport sector. Transport projects have an impact not only on citizens and businesses, but on governments - central, regional and local. Financing and managing the project will place demands on the government's capital and current accounts. Whether these demands are greater or smaller, and how they are phased over time, will depend on the financing mechanisms used and the extent to which the public sector is involved. Alternative approaches for private finance and management are described in the World Bank's 'Public-Private Options' toolkit. In this note, we consider how the appraisal should take the financial effects into account, and how they fit within the appraisal results, as described in the Framework. -
Publication
Evaluation of Public Sector Contributions to Public-Private Partnership Projects
(World Bank, Washington, DC, 2005-01)The Bank requires that any public sector contribution to a collaborative effort between the public sector and private enterprises in the transport sector be analyzed and justified in economic terms. This Note will set out the basis for making such an analysis. The general principles underlying this analysis are that: 1) public contributions to public-private partnership (PPP) projects should be justified on the basis of external benefits from the project, compared with the scenario where no public contribution is made. 2) these external benefits are benefits for the wider economy or society which will arise from the project, but which will not be appropriated by the private partner in the contract; 3) by implication, the social welfare gain must be greater than the amount of public money invested multiplied by the cost of public funds. In practice, a range of different reasons can be - and have been - put forward to explain public contributions to PPP projects, including the following: 1) to pay for positive externalities, such as decongestion or improvements in environmental quality; 2) to contribute to the cost of mitigating negative externalities, which private providers often have little incentive to take into account when designing the project; 3) to secure network improvements necessary for economic development or other planning benefits, for which users are in the short term unable to pay. These are considered one by one in Sections 2, 3, and 4. -
Publication
Evaluation Implications of Sub-Optimum Pricing
(World Bank, Washington, DC, 2005-01)The note focuses on three specific ways in which sub-optimal pricing can impact on project benefits: 1) through congestion and overcrowding (Section 1); 2) through overpricing and loss of user benefits (Section 2); and 3) through financial deficits which have implications for the rest of the economy (Section 3). Sections 1-3 of the Note seek to give practical advice on each situation, including how to approach the economic analysis of the situation, and the key implications for project appraisal. If pricing policy is not known with certainty at the time of the appraisal, then alternative pricing policies must form part of the risk and uncertainty analysis. This is covered in Section 4. Conclusions are given in Section 5. -
Publication
Notes on the Economic Evaluation of Transport Projects
(World Bank, Washington, DC, 2005-01)Experience has shown that money compensation payments to individual citizens are ineffective when used alone as a means to achieve the Bank's aims and World Bank for evidence on the Bank's experience]. Instead, the Bank's advice is that compensation payments should be a part of a wider, coordinated package of development assistance. It is not the purpose of this Note to describe how such a package should be developed, or indeed how the package as a whole should be evaluated. Rather, the question addressed in this Note is the narrower one: How should money compensation payments be evaluated? Section 2 begins by asking what costs the payments are intended to compensate for, and on what basis the value of compensation should be estimated. Section 3 continues to consider how institutional arrangements affect the way compensation payments are designed and channeled in practice. Section 4 turns to the benefits of resettlement compensation and Section 5 brings these strands together to consider how compensation payments should be evaluated within the economic evaluation of World Bank transport projects.