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Aneks A se vezuje za pitanje Socio-ekonomski kontekst analize iza Studiju izvodljivosti (opravdanosti)

ANNEXADEMAND ANALYSISDemand forecasting is an important step in the feasibility study of a project, as it allowsus to assess how much of a good or a service will be requested in the future, as well asthe revenues that can be expected from the sale of that good or service.

Demand forecastingtechniques

Several techniques can be used for demand forecasting, depending on the data available,the resources that can be dedicated to the estimates, and the sector involved.

Interviewing experts Kvalitativna metoda prikupljanjamisljenja eksperata

Whenever, for budget or time reasons, a quantitative methodology for demandforecasting cannot be applied, interviewing experts can provide independent externalestimations of the expected impact of a project. The advantages of this approach arelow cost and speed. Of course, this kind of estimation can be only qualitative or, ifquantitative, very approximate. Indeed, this approach can be recommended only for avery preliminary stage of the forecasting procedure.

Trend extrapolation

Extrapolation of past trends involves fitting a trend to data points from the past, usuallywith regression analysis.

Multiple regressionmodels

In the regression technique, forecasts are made on the basis of a linear relationshipestimated between the forecast (or dependent) variable and the explanatory (orindependent) variables.

Aneks B se vezuje za finansijsku i ekonomsku analizu, kada jepotrebno odrediti odgovarajucu diskontnu stopu.

ANNEXBTHE CHOICE OF THE DISCOUNT RATE

The financialdiscount rate

Tri pristupa odredjivanja ove stope:

- the first one estimates the actual (weighted average) cost of capital. Thebenchmark for a public project may be the real return on Government bonds (themarginal direct cost of public funds), or the long-term real interest rate on

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commercial loans (if the project needs private finance), or a weighted average ofthe two rates.

- the second approach establishes a maximum limit value for the discount rate as itconsiders the return lost from the best investment alternative. (prinos koji se mozeostvariti na najbolji portfolio);

- p oc i o d o dr ed je ne d is ko n tn e s to pe i k or ig ov at i j e i sk us tv en immu l t i p l i ka to rom

It should be noted that as long as the FDR is taken as a real discount rate, the analysisshould be carried out at constant prices. If current prices are used throughout thefinancial analysis, a nominal discount rate (which includes inflation) must be employed.

The socialdiscount rate

The main theoretical approaches arethe following:

- a traditional view proposes that marginal public investment should have the samereturn as the private one, as public projects can displace private projects; (javniprojekti kao zamena privatnim)

- another approach is to derive the social discount rate from the predicted long-termgrowth in the economy, as further explained below in the social time preferenceapproach; - Dominantan metod

- a third, more recent approach, involves decreasing marginal discount rates over timeand is designed to give more weight to project impacts on future generations.(degresivna diskontna stopa)

Still, consensus is growing around the social time preference rate (STPR) (drustvenastopa vremenske preferencije) approach. This approach is based on the long term rateof growth in the economy and considers the preference for benefits over time, takinginto account the expectation of increased income, or consumption, or public expenditure.An approximate and generally used formula for estimating the social discount rate fromthe growth rate can be expressed as follows:

r = eg+ p

where r is the real social discount rate of public funds; g is the growth rate of publicexpenditure; e is the elasticity of marginal social welfare with respect to publicexpenditure, andp is a rate of pure time preference.

The EC, DG Regio, has suggested a 5.5% SDR for the Cohesion countries and 3.5% for theothers.

For our practical purposes, it may be useful to reinterpret the STRP formula in termsof consumption. Let us suppose g is the growth rate of consumption, e is the elasticityof marginal utility with respect to consumption, and p is the inter-temporal preferencerate.

The first component of the STPR formula is a utilitarian preference; the second one (p)is a pure time preference. The pure inter-temporal preference reflects consumersimpatience (psiholoski uslovljena preferencija, nestrpljivost u potrosnji; vise sevrednuje sadasnja naspram buduce potrosnje).

The utilitarian part measures the utility reduction of a marginal Euro caused by increasesin real income. This means that in a developing economy where future consumption willbe plentiful compared to the present level, individuals will require more compensation forpostponing consumption. The social rate of time preference represents, in fact, theminimum return that individuals demand for giving up some of their current consumptionin exchange for additional consumption in the future.

All the values in the formula are country specific, especially those of consumption growth

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(g) that depend directly on GDP. Social and individual preferences affect the marginalutility parameter (e); life expectancy and other individual characteristics influence thetime preference parameter (p).

Estimation of the elasticity of the marginal utility of consumption, e :Meru elasticnosti marginalne korisnosti moze da predstavlja stepen progresivnosti

poreza na dohodak. Sto je veci stepen progresivnosti poreza, veca je elasticnost iodatle veca drustvena diskontna stopa.

The formula is the following: e = Log(1-t) / Log(1-T/Y)where tis the marginal rate of income tax; Tis the total income tax liability andYthe total taxable income.

ANNEXCPROJECT PERFORMANCE INDICATORS

This annex explains how to calculate and use the main project performance indicators forCBA analysis: Net PresentValue (NPV), Internal Rate of Return (IRR) and the Benefit-Cost Ratio (B/C).

The Net PresentValue

NPV is a very simple and precise performance indicator. A positive NPV, NPV>0, meansthat the project generates a net benefit and it is generally desirable either in financialterms or in economic terms. When different options are considered, the ranking of the

NPVs of the alternatives indicates the best one.

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The Internal Rate ofReturn

The Internal Rate of Return (IRR) is defined as the discount rate that zeroes out the net

present value of flows of costs and benefits of an investment, that is to say the discountrate of the equation below:

NPV (S) = [St/ (1+IRRt)] = 0

The Internal Rate of Return is an indicator of the relative efficiency of an investment, andshould be used with caution. The relationship between NPV and IRR is shown in the graphbelow.

Figure C.3 The internal rate of return Figure C.4Multiple IRRs

NPV

NPV

IRR

i i

IRR IRR IRR

NEDOSTACI INTERNE STOPE PRINOSA

1. If the sign of the net benefits, benefits minus costs, changes in the different yearsof the projects lifespan (for example - + - + -) there may be multiple IRRs for asingle project. In these cases the IRR decision rule is impossible to implement.

2. The IRR contains no useful information about the overall economic value of aproject. This can be illustrated by graphing the NPV as a function of the discountrate (r). Consider Figure C.5 that displays the NPV schedule for two alternativeprojects. Project A has a substantially higher NPV for any discount rate in theeconomically relevant range (i.e. for any rless than 30%), yet it crosses the axis tothe left of project B, and consequently has a lower IRRi.e. IRRA = 40% < IRRB =70%.

Figure C.5 IRR and NPV of two mutuallyexclusive alternatives

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Source: Ley(2007).

Since welfare depends on NPV, not IRR, it is apparent that project A dominates B. Forinstance NPVA(r) exceeds

NPVB(r) by about US$ 1.6 million for a discount rate in the neighbourhood of 10%

3. the sensitivity to economic life: when projects with different economic livesare to be compared, the IRR approach inflates the deliverability of a short-lifeproject niza IRR se dodeljuje kracem projektu

4. Osetljivost na vremenski raspored rezultata: projekti koji u pocetku ne obezbedjujuu duzem vremenskom periodu pozitivne neto novcane tokove i onda pred krajpocnu da ih stvaraju, imace nizu IRR od projekata kod kojih je raspored netonovcanih tokova ravnomerniji

5. the IRR indicator cannot deal with cases in which time-varying discount rates areused. In these cases, the Net Present Value rule allows discount rate changes tobe incorporated easily into the calculation.

One advantage of the IRR (under reasonable assumptions) is that it is a pure numberand this makes it easier to compare projects that are similar, apart from their size.

Benefit-cost ratio(B/C)

The benefit-cost ratio is the present value of project benefits divided by thepresent value of project costs:

B/C = PV (I)/PV(O)

where I are the inflows and O the outflows. IfB/C >1 the project is suitableLike the IRR, this ratio is independent of the size of the investment, but in contrast to IRRit does not generate ambiguous cases and for this reason it can complement the NPV inranking projects where budget constraints apply.

The main problems with this indicator are:

- it is sensitive to the classification of the project effects as benefits rather than costs.It is relatively common to have project effects that can be treated both as benefitsand as cost reductions and vice versa. Since the Benefit- Cost ratio rewards projectswith low costs, considering a positive effect as a cost-reduction rather than a benefitwould only result in an artificial improvement of the indicator;Da li npr. ustede u troskovima da klasifikujemo kao povecanje koristi ili kao manjenjetroskova? B/C vise vrednuje projekte sa manjim troskovima, tako da nije svejedno kakoklasifikujemo efekte.

- it is not appropriate for mutually exclusive projects.

ANNEXDTHE PROJECTS IMPACT ONEMPLOYMENT AND THE OPPORTUNITY

COST OF LABOURDifferent types of unemployment imply different formulas for estimating shadow wage

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rates (SWR).

Competitive labourmarkets

Even under full employment and in competitive labour markets, shadow wages maydiffer from market wages because of the social cost of displacing workers from one

activity to another. These costs also lead to frictional unemployment (3%). The labourmarket functions relatively well and only small corrections are necessary due toproje c t -specif ic t r anspo r t, training, relocation and other costs not captured by the wage.

Markets with informalactivities

Obracunska zarada se utvrdjuje na osnovu gubitaka output-a, koji inace nastaju uneformalnom sektoru, pri premestanju radnika u formalni sektor.The lost annual output mof hiring a new employeeA conversion factor cAdditional costs of transferring workers (training, relocation, etc.) z are subjected to

conversion factor d,A very simple formula is:

SWR = mc+ zd

Markets with involuntary unemployment Nezeljenanezaposlenost

The shadow wage here will be usually higher or at least equivalent to the reservationwage. Rezervaciona zarada predstavlja naknadu za nezaposlene.

A simple formula for the shadow wage is:SWR = n(u/L) + zd

Where L is the project labour input, u the decrease in unemployment (number ofunits), n is the reservation wage and zis again the relocation costs.

The link between the informal sector and involuntary unemployment. With a correctionto the former c we obtain the following formula that merges the two situations.

SWR = n(u/L) + m(e/L) + zd

m is the opportunity cost of output forgone (measured by the wage) in the prior activity,e the decrease in employment. c becomes (e/L) which is a weight for the loss ofemployment in displaced activities. Further correction d can be added for relocation

costsz.

Where detailed statistical information on the local labour market is not available,unemployment is sizeable, and unemployment benefits are not available or extremelylow, a shortcut formula can be used to determine the conversion factor for the labourcost:

SWR = W(1-u)(1-t)

where W is the market wage, u is the regional unemployment rate, t is the rate ofsocial security payments and relevant taxes. The conversion factor here is (1-u)(1-t).

ANNEX FEVALUATIONOFHEALTH&

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ENVIRONMENTAL IMPACTS

METODI SU ISPITNA PITANJA!!!

TOTAL ECONOMIC

VALUEThe monetary measure of a change in an individuals well being due to a change in environmental quality iscalled the total economic value of the change. The total economic value of a resource can be divided into usevalues and non-use values:

Total economic value = use values +non-use values.

Use values include benefits from the physical use of environmental resources, such as a recreationalactivity (sport fishing) or productive activities (agriculture and forestry). In this context uncertainty stemsfrom a combination of the individuals uncertainty about future demand for the resource and uncertaintyabout its future availability. Non-use values refer to the benefits individuals may obtain fromenvironmental resources without directly using them. For example, many people value tropical ecologicalsystems without directly consuming or visiting them. The components of non-use values are existence valueand bequest value. Existence value measures willingness-to-pay for a resource for some moral, altruistic orother reason and is unrelated to current or future uses. Bequest value is the value that the current generationobtains from preserving the environment for future generations.

When environmental service markets are available, the easiest way to measure economicvalue is to use the actual related market price. For example, when marine pollutionreduces fish catches, market values for the lost harvest are easily observed in the fishmarket. When there is no market, the price can be derived through non-marketevaluation procedures. The starting point of the evaluation, as for all costs and benefits, is looking at theindividual preferences. A benefit is measured by the individual willingness-to-pay tosecure it, and a cost is measured by the willingness to accept a compensation for the loss.

Three main methodologies can be applied for estimating the monetary value ofchanges in non-market goods:

- Revealed Preference Methods Metod otkrivenih preferencija- Stated Preference Methods Metod utvrdjenih preferencija

- Benefit Transfer Method Metod transfera koristi

1. Metod otkrivenih preferencija (ispoljeno ponasanje)

This approach implies that the valuation of non-market impacts is based on theobservation of the actual behaviour and, especially, on the purchases made in actualmarkets. Consequently, the focus is on real choices and implied willingness-to-pay.

The strength of these approaches is that they are based on actual decisions made byindividuals.

The main specificmethods are:

- hedonic pricingmethod

- travel costmethod

- averting or defensivebehaviour method

- cost of illnessmethod

Metod hedonistickog utvrdjivanja cena

The starting point is the fact that the prices of many market goods are functions ofabundle of characteristics. It is possible to describe any house e.g. by the number ofrooms, location, structure, age, etc.

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The Hedonic pricing method should identify the contribution of each significantdeterminant of house prices in order to estimate the marginal willingness-to-pay for eachcharacteristic.

Hedonic studies of the property market have been used to identify the value of non-market goods such as traffic noise, aircraft noise, air pollution, water quality andproximity to landfill sites. A house near an airport, for example, will be purchasedat a lower price than a house located in a quiet area. The difference in values

can be viewed as the value attached to noise.

Metod transportnih troskova

The travel cost approach seeks to put a value on the individuals willingness-to-pay foran environmental good or service, like for instance a nature park or an archaeologicalarea, by the costs incurred to consume it. (spremnost da se podnesu transportni troskovi)

The value of the nature park or archaeological area can be measured with reference tovalues expressed in the markets for trips to those areas. For zones located far from thenature park the number of visits is zero because the cost of the trip exceeds the benefitderived from the trip.

Specific problems with this approach are related to multiple purpose trips; because

many trips have more than one destination, it is difficult to identify which part of the totaltravel cost is related to one specific destination.

Since only the benefits of the direct consumption of the environmental services areconsidered in this approach, non-use values (option value and existence value) cannot beconsidered.

Metod odvracanja/odbrambenog ponasanja

The main assumption is that individuals can insulate themselves from a non-market badby adopting more costly behaviours to avoid it.The way to avoid exposure to specific non-market goods is the purchase of a market-goodto defend the consumer from the bad. The value of each of these purchases can beconsidered the implicit price for the non-market good that individuals want to avoid.

An example could be the installation of double-glazed windows to decrease exposure toroad traffic noise. Double- glazing is a market good that can be seen as a substitute for anon-market good (absence of road traffic noise) and so the cost of purchasing it can beconsidered as the price of the non-market good.

Specific problems with theseapproaches could be:

- many averting behaviours or defensive expenditures are related to joint products (e.g.heating and insulation from noise) pa se ucinjeni troskovi se ne mogu precizno alocirati

Metod troskova lecenja

Like the defensive expenditures method, this one focuses on expenditures on medical

services and products made in response to the health effects of non-market impacts.The difference between the two methods is that usually the decision concerning healthcare expenditure is not made by individuals alone, but involves social administrators,politicians and taxpayers.

2. Metod utvrdjenih preferencija

Stated preference approaches are survey-based and elicit peoples intended futurebehaviour in the markets. Through an appropriately designed questionnaire, ahypothetical market is described where the good in question can be traded. A randomsample of people is then asked to express their maximum willingness-to-pay for (orwillingness to accept) a supposed change in the goods provision level.

The main specific

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methods are:

- contingent valuationmethod

- choice modelling

method.

Metod kontigentnog vrednovanja

Ovo je kako ja shvatam metod Istrazuju se stavovi ispitanika o nekom dobru (kako bi seotkrili najvazniji faktori koji uticu na stavove). U sledecoj fazi se ispitanicima nudi to dobropod razlicitim uslovima (razliciti scenariji) kako bi se otkrila njihova spremnost da plate(odnosno vrednost) to dobro pod tim posebnim uslovima.A evo i tog dela na engl:

- investigating the attitudes and behaviour related to the goods to be valued inpreparation for answering the valuation question and in order to reveal the mostimportant underlying factors driving respondents attitude towards the public good;

- presenting respondents with a contingent scenario providing for a description of thecommodity and the terms under which it is to be hypothetically offered. The finalquestions should aim to determine how much they would value the good if confrontedwith the opportunity to obtain it under the specified terms and conditions;

- asking questions about the socio-economic and demographic characteristics of therespondents in order to check the extent to which the survey sample is representativeof the population involved.

Metod modeliranjaizbora

Respondents have various alternative descriptions of a good, differentiated by theirattributes and levels, and are requested to rank the alternatives, to rate them or to choosetheir preferred option.

3. Metod transfera koristi

Koriste se ranije procenjene vrednosti jedinica netrzisnih dobara, koje se koriguju ili nekoriguju, i primenjuju se na drugom mestu (npr. procena u jednoj zemlji se moze primenitiu drugoj zemlji)

This method consists of taking a unit value for a non-market good estimated in anoriginal study and usingthis estimate, after some adjustments, to value benefits (or costs) that arise when apolicy or project is implemented elsewhere.

The interest shown in this approach is due to the opportunity to reduce the need forcostly and timeconsuming original studies of non-market goods values.

Clearly, the main obstacle in using this approach is that Benefit Transfer can give rise to seriously biased

estimates. Nekriticka primena rezultata