financial and economic analysis for phanomxay subproject · eighth year after construction. to...

Greater Mekong Subregion East–West Economic Corridor Agriculture Infrastructure Sector Project (RRP LAO 44138)

Financial and Economic Analysis for Phanomxay Subproject

A. Introduction

1. Phanomxay subproject command area is 250 ha of which 70 ha is currently irrigated with a cropping intensity of 113%. There are 126 families which own land within the command area. This proposal to expand the effective irrigation area to 250 ha, allowing cropping intensity to increase to 190%. In addition, there will be 5.9 km of village roads and associated bridges constructed which will enhance product quality by improving opportunities for moving crop to drying and storage in the village as well as improve opportunities for product buyers to access farmers, hence creating competition, and increased farm-gate prices.

2. There are two important features of the Phanomxay subproject: (i) there is a low ratio of irrigation investment to village road expenditure (around 1:1); and (ii) at $6,195 per ha, Phanomxay costs are relatively high – about 32% higher than the other two subproject sites.

3. In order to ensure every likelihood of successful outcomes for the investment, the design includes: (i) expenditure to develop an effective Water User Group (WUG), with a small office building and necessary equipment, and training to WUG members on how to run and maintain an irrigation scheme in a sustainable manner but in a way that is inclusive, transparent and equitable; and (ii) provision of an on-site village extension service to farmers.

B. Approach and Methodology

4. While civil works costs are specific to requirements for the site, other project costs have been allocated to the Phanomxay subproject economic analysis on a pro-rata basis. Further the project management costs associated with delivery of the wider project have been excluded from the subproject analysis. The farming system has been modeled for the without and with project situations, and on this basis, a benefit flow (in both financial and economic terms) has been developed. The subproject investment costs (without and with the project) have been established, as well as O&M costs for the twenty year asset life.

5. On this basis, the incremental benefit flows for Phanomxay subproject have been established in both financial and economic terms. These benefit flows are the basis for assessment of subproject feasibility. 6. To develop a model for the analysis, a number of assumptions are made regarding future practice (both “with” and “without” the subproject) and about the valuation of inputs and outputs. These include:

Subproject life is counted as 20 years. That is, assuming adequate maintenance, the irrigation system should be able to maintain its expected benefits for 20 years before another major renovation may be required.

“Without” the subproject present cultivation patterns and technology are expected to continue for the life of the project.

“With” the subproject, the full command area is expected to continue to be irrigated throughout the life of the project, allowing farmers to adopt appropriate cropping patterns and technology.

Some agricultural outputs may be consumed within the household, but are valued as if sold.

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Some agricultural inputs such as farm labor are provided by the farm household but are valued at the market rate as if hired.

Values are expressed in constant 2013 prices so as to exclude inflation.

The Lao PDR Kip is the unit of account. The exchange rate used is Kip 7,900 per US dollar

7. In order to assess the Project’s contributions (and costs) to the economy of Lao PDR it is necessary to convert financial values into their economic equivalents. Economic valuations exclude transfers from one part of society to another (i.e. taxes and subsidies) and attempt to facilitate the comparison of project benefits and real opportunity costs to the economy by translating all prices into a common, undistorted footing. Basic assumptions (in addition to those above) used in the economic analysis include:

The analysis uses the domestic price numeraire and for traded goods a shadow exchange rate factor (SERF) of 1.11 is applied.

For rural labor, a shadow wage rate factor (SWRF) of 0.9 is applied.

Transfer payments such as taxes and subsidies are excluded in the calculation of economic values.

To calculate the economic net present value (ENVP) of the subproject a discount rate of 12% is used as representing the opportunity cost of the capital invested.

8. In the analysis, estimated results of year 10 of the subproject (i.e. year 2023) were used as a snapshot of the annual subproject profile in ‘with’ and ‘without’ estimations.

Table A: Key Indicators for the Bung Xe Irrigation Subproject

Irrigated command area with subproject ha 250

2013 irrigates area (without subproject) ha 70

Incremental Subproject output

Expected incremental production (year 10)

Sticky Rice t 645

White Rice t 356

Tomatoes t 148

Chillies 54

Expected total incremental Net crop economic value (year 10) Million kip 2,022

Household

Estimated number of households benefitted No. 126

Sticky Rice t/hh 5.12

White Rice t/hh 2.83

Tomatoes t/hh 1.17

Chillies 0.43

Expected total incremental average economic benefit (year 10) 000 kip/hh 16,045

The Poor

Estimated number of poor beneficiary households No. 13

Incremental benefit per poor households (year 10) Milliom kip 0.5

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Total incremental benefit of the poor (year 10) Million kip 6.8

Share of poor of total incremental benefits % 0.3

Economic Returns

ENPV Million kip 2,238

EIRR % 15.9

C. Subproject Benefits

‘Without’ project scenario, it is assumed that the irrigated area will shrink by 10% a year and ‘with’ project, it is estimated that 250 ha will be brought under irrigation.

Changes in command area land use, cropping pattern, crop intensities and crop yields were based on the locally collected data during the feasibility study in the subproject areas.

Due to the availability of irrigation water, irregularly irrigated land both in ‘dry’ and ‘wet’ season now will get enough water for irrigation. Construction starts after the rainy season of 2015 - causing, during construction, a loss of 2015 irrigated coverage. System is assumed to be operational in 2016 with irrigation coverage maximized by 2017. Partial benefits will start from 2016.

The net value of incremental crop production has been calculated for each year throughout the life of the subproject. During the years of construction it is assumed the value of crop production may drop. After construction is completed, though, the value of incremental crop production will increase to reflect irrigated production on the entire command area of 250 ha. After an initial surge this incremental value will continue to gradually grow throughout the life of the project (assuming adequate maintenance of the system) due to the expected “without” subproject contraction of the irrigated area during this time period (due to continuing deterioration of the irrigation infrastructure).

5.9km of village roads will be constructed which will carry number of benefits including reduced transit time, increased access to farm lands and irrigation facilities etc. The incremental benefit from road operations and maintenance savings is estimated at 391 million Kip by year 10.

Due to road improvement, there is an anticipated reduction in vehicle operating costs (Table 15).

The proposed project investments will encourage farmers to move to more profitable cropping systems, with improved yields and significant incremental output of both white rice and vegetables.

The combination of improved access to reliable irrigation water, provision of functional crop extension support will result in enhanced farmer returns.

A snapshot of year 10 in the life of the subproject would indicate that incremental crop

production within the command area can be expected to be more than 1,001 tons for

paddy, 148 for tomatoes and 54 for chillies per year.

D. Returns per Household

9. There are 126 beneficiary households in 250 ha. The average farm size within the command area is 1.98 ha. This land is often located in two or more widely separated parcels. If the “average” farm can be assumed to have representative proportions of irrigated and non-irrigated command area land “without” the subproject, this household land will be able to produce 19 million Kip in incremental net crop income in the “with” subproject scenario in the

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year 10 snapshot (returns will continue to grow per year over the remaining life of the Subproject.) Assuming a household size of 6 people, this means that per person incremental net crop income will increase by 2.9 million Kip.

10. The incremental net crop income noted above assumes all labor inputs are a cost (valued at the prevailing rate for farm labor in the area). “With” the subproject, however, different cropping patterns and increased crop inputs will be applied compared to the “without” subproject situation. These differences will call for an increased amount of farm labor. For the part of the incremental labor that is drawn from the farm household itself, these (wages) comprise part of incremental household income (in addition to incremental net crop revenue) - although the additional time commitment to on-farm work may partly have an opportunity cost of work and income off the farm. For the “average” household, the incremental labor requirements in year 10 come to 30 days a year or 1.0 million Kip. The part of this figure that is not hired labor and is not off-set by lost employment opportunities off the farm represents an increase in household income. The portion of the figure that goes toward hired labor can be seen as income for other households (which may or may not have land within the command area).

11. In addition to the quantified benefits associated with crop production which have been included in this analysis there are additional, less easily quantified benefits associated with this subproject. For example, main and primary canals generally are associated with access paths along their lengths. These paths also serve as ways for people to get to their fields - and for some households may get an access to schools, health services, etc.

E. Site Feasibility

5.1 Financial feasibility

12. The financial internal rate of return (FIRR) is assessed at 8.2% and the Benefit : Cost Ratio is 1.7:1. Given that this exceeds the weighted average cost of capital (WACC) of 3%, and taking account of the household financial indicators outlined above, indicates the Phanomxay subproject is financially feasible.

5.2 Economic feasibility

13. To calculate the economic returns of the subproject, the net incremental value benefits (both VOC savings as well as producer surplus in terms of crop production) is determined for each year of project life and arranged as a stream of cash flow. Costs are similarly arrayed - with construction costs falling in the first two years followed by annual maintenance costs in each subsequent year and a somewhat more major periodic maintenance expenditure every eighth year after construction. To calculate the cash flow of net project economic benefits the cost cash flow is subtracted from the benefit cash flow.

14. The Phanomxaay Irrigation-road subproject is expected to be economically viable in that the economic internal rate of return (EIRR) has been calculated to be 15.9% and the net present value (ENPV) of the investment is 2,238 million Kip.

5.3 Sensitivity Analysis

15. Sensitivity tests indicate that the envisioned investment in the Phanomxay site is robust, yielding reasonable economic returns even under the following pessimistic conditions: a 20% decrease in area, yield, or price, or a 20% increase in investment costs, operation costs, or production costs.

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F. Poverty Impact

16. Out of the total households in this subproject 13 households are considered “poor”. While the actual location of the farms of the poor households is not known, it is likely that a high proportion of these farms are in the non-irrigated (“without” the subproject). This non-irrigated land produces much less value in the way of crops per ha than does the irrigated area. A way of calculating the amount of incremental crop benefit going to poor households is to assume that all of them farm in the non-irrigated (“without”) lower section of the system. A further assumption is that poor households have an average farm size around 50% of that of the over-all average farm size in the area. In aggregate these poor farm households can be expected to have incremental net crop income from the Subproject of 20.0 million Kip (in the year 10 snapshot) or 0.3% of the over-all incremental net crop income from the subproject. This translates into 0.5 million per poor household.

17. For the same poor households the incremental labor inputs (in year 10) from the subproject come to 30 days per year - which, at the wage for on-farm labor, would be valued at 1.0 million Kip. Some of this, again, might be in the form of hired labor while some of the increased household labor contributions may have an opportunity cost in regards to other paid jobs.

18. A note could be made regarding labor inputs in the construction activities of the subproject. Local poor households having some significant level of under-employment may well share in this temporary work. It is not clear from the preliminary cost estimates as to how many days of manual labor will be involved in construction or how much of that labor will come from the local area (rather than being brought in by the contractors). However, it is likely that a significant number of labor days will go to local households, especially from the poor households.

Detailed calculations supporting the above analysis are given in Tables 1-18.

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Table 1 : Command Area Land Use With and Without the Project: Phanomxay Irrigation Sub-Project

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

sub-project year -1 1 2 3 4 5 6 7 8 9 10 11

Without Project Schedule assumptions

Wet Season

Well Irrigated ha 67 67 67 67 67 60 54 48 44 43 43 43

Irregularly irrigated ha 50 50 50 50 50 45 41 36 33 30 30 30

Unirrigated ha 134 134 134 134 134 145 156 165 174 178 178 178

Total Wet Season Area ha 250 250 250 250 250 250 250 250 250 250 250 250

Dry Season



Unirrigated ha 136 136 136 136 136 148 158 167 175 183 183 183

Total Dry Season Area ha 250 250 250 250 250 250 250 250 250 250 250 250

With Projecta/b/c

Wet Season



Unirrigated ha 134 134 134 13 13 13 13 13 13 13 13 13


Dry Season



Unirrigated ha 136 136 250 13 13 13 13 13 13 13 13 13


a/ With Project command area is assumed to be ha: 250 wet season. 250 dry season

b/ Construction starts after the rainy season of 2015 - causing, during construction, a loss of 2015 irrigated coverage. c/ System is assumed to be operational in 2016 with irrigation coverage maximized by 2017. Partial benefits in 2016.

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Table 2: Crop Pattern With and Without the Project

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ..2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Project

Wet Season

Well Irrigated Paddy - Sticky Rice ha 67 67 67 67 67 60 54 48 44 43 38 38

Irregularly Irrigated Paddy - Sticky Rice ha 50 50 50 50 50 45 41 36 33 30 27 27

Unirrigated Paddy - Sticky Rice ha 134 134 134 134 134 145 156 165 174 178 185 185


Dry Season


Well Irrigated Tomatoes ha 2 2 2 2 2 2 2 1 1 1 1 1

Well Irrigated Chillies ha 2 2 2 2 2 2 2 1 1 1 1 1


Fallow ha 136 136 136 136 136 148 158 167 175 183 190 190


With Project

Wet Season


Well Irrigated Paddy - White Rice ha 33 33 50 119 119 119 119 119 119 119 119 119


Irregularly Irrigated Paddy - White Rice

0 0 0 0 0 0 0 0 0 0 0 0

Not irrigated paddy - Sticky

134 134 100 13 13 13 13 13 13 13 13 13


Dry Season


Well Irrigated Tomatoes ha 4 4 0 14 14 14 14 14 14 14 14 14

Well Irrigated Chillies ha 4 4 0 14 14 14 14 14 14 14 14 14


Fallow ha 139 139 250 24 24 24 24 24 24 24 24 24


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Table 3: Crop Yields per ha With and Without Project

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 ..2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Project

Wet Season

Well Irrigated Paddy - Sticky Rice t/ha 1.8 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6

Irregularly Irrigated Paddy - Sticky Rice t/ha 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5 2.5

Unirrigated Paddy - Sticky Rice t/ha 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3 2.3

Dry Season


Well Irrigated Tomatoes t/ha 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0 8.0

Well Irrigated Chillies t/ha 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0 3.0



With Project

Wet Season


Well Irrigated Paddy - White Rice t/ha 2.4 2.4 2.4 2.0 2.4 3.0 3.0 3.0 3.0 3.0 3.0 3.0


Irregularly Irrigated Paddy - White Rice t/ha 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Non irrigated Paddy - Sticky t/ha 1.8 1.8 1.8 1.6 2.0 2.5 2.5 2.5 2.5 2.5 2.5 2.5

Dry Season


Well Irrigated Tomatoes t/ha 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0 11.0

Well Irrigated Chillies t/ha 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0



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Table 4: Crop Production With and Without the Project

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Project

Wet Season

Well Irrigated Paddy - Sticky Rice t 119.7 172.9 172.9 172.9 172.9 155.6 140.0 126.0 113.4 111.1 111.1 111.1

Irregularly Irrigated Paddy - Sticky Rice t 125.0 125.0 125.0 125.0 125.0 112.5 101.3 91.1 82.0 73.8 73.8 73.8

Unirrigated Paddy - Sticky Rice t 307.1 307.1 307.1 307.1 307.1 333.8 358.0 379.7 399.2 408.8 408.8 408.8

Dry Season


Well Irrigated Tomatoes t 15.3 15.3 15.3 15.3 15.3 13.8 12.4 11.1 10.0 9.0 9.0 9.0

Well Irrigated Chillies t 5.7 5.7 5.7 5.7 5.7 5.2 4.6 4.2 3.8 3.4 3.4 3.4



With Project

Wet Season


Well Irrigated Paddy - White Rice t 79.8 79.8 120.0 231.6 285.0 356.3 356.3 356.3 356.3 356.3 356.3 356.3


Irregularly Irrigated Paddy - White Rice t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Not irrigated paddy - Sticky t 240.3 240.3 180.0 20.3 25.0 31.3 31.3 31.3 31.3 31.3 31.3 31.3

Dry Season a/


Well Irrigated Tomatoes t 42.0 42.0 0.0 156.8 156.8 156.8 156.8 156.8 156.8 156.8 156.8 156.8

Well Irrigated Chillies t 15.3 15.3 0.0 57.0 57.0 57.0 57.0 57.0 57.0 57.0 57.0 57.0



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Table 5: Incremental Crop Production

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Over-all Incremental Crop Production

Sticky Rice

Wet Season well irrigated paddy t -43.2 -96.4 -57.9 105.0 169.1 271.9 287.5 301.5 314.1 316.4 316.4 316.4

Wet Season Irregularly Irrigated paddy t -10.0 -10.0 -10.0

-125.0

-125.0

-112.5

-101.3 -91.1 -82.0 -73.8 -73.8 -73.8

Wet Season unirrigated paddy t -66.7 -66.7

-127.1

-286.7

-282.1

-302.6

-326.7

-348.4

-367.9 -377.6 -377.6 -377.6

Dry Season well irrigated paddy t 13.8 -88.0

-209.6 399.1 539.5 747.7 766.6 783.6 798.8 812.6 812.6 812.6

Dry Season Irregularly Irrigated paddy t -15.0 -15.0

-130.0

-130.0

-130.0

-117.0

-105.3 -94.8 -85.3 -76.8 -76.8 -76.8

Dry Season unirrigated paddy t 251.1 251.1 450.0 43.9 43.9 43.9 43.9 43.9 43.9 43.9 43.9 43.9

Total paddy - "sticky" t 129.9 -25.1 -84.5 6.2 215.4 531.4 564.7 594.6 621.5 644.7 644.7 644.7

White Rice

Wet Season well irrigated paddy t 79.8 79.8 120.0 231.6 285.0 356.3 356.3 356.3 356.3 356.3 356.3 356.3

Wet Season Irregularly Irrigated paddy t 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Total paddy - "white"

79.8 79.8 120.0 231.6 285.0 356.3 356.3 356.3 356.3 356.3 356.3 356.3

Dry Season well irrigated tomatoes t 26.8 26.8 -15.3 141.5 141.5 143.0 144.4 145.6 146.7 147.7 147.7 147.7

Dry Season well irrigated chillies t 9.6 9.6 -5.7 51.3 51.3 51.8 52.4 52.8 53.2 53.6 53.6 53.6

Incremental Crop Production per Household

1001.0 1001.0

Number of Households

a/ 126

Paddy - sticky rice t/hh 1.03 -0.20 -0.67 0.05 1.71 4.22 4.48 4.72 4.93 5.12 5.12 5.12

Paddy - white rice t/hh 0.63 0.63 0.95 1.84 2.26 2.83 2.83 2.83 2.83 2.83 2.83 2.83

Tomatoes t/hh 0.21 0.21 -0.12 1.12 1.12 1.13 1.15 1.16 1.16 1.17 1.17 1.17

Chilies t/hh 0.08 0.08 -0.05 0.41 0.41 0.41 0.42 0.42 0.42 0.43 0.43 0.43

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Table 6: Economic Total Crop Production Value With and Without the Project (2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Project Total Production Value

Paddy - sticky rice

Wet Season well irrigated paddy million Kip 238 325 308 301 295 261 230 202 180 174 173 173

Wet Season Irregularly Irrigated paddy million Kip 249 235 223 218 214 188 166 146 130 115 115 115

Wet Season unirrigated paddy million Kip 612 577 547 535 525 559 587 610 633 639 636 636

Dry Season well irrigated paddy million Kip 215 394 373 365 358 316 278 245 218 193 192 192

Dry Season irregularly irrigated paddy million Kip 259 244 232 227 222 196 173 152 135 120 119 119

Total paddy - sticky million Kip 1,573 1,776 1,683 1,647 1,614 1,520 1,434 1,356 1,295 1,242 1,235 1,235

Rice straw (assume 10% of paddy value) million Kip 157 178 168 165 161 152 143 136 130 124 123 123

Total:

1,730 1,954 1,851 1,811 1,776 1,672 1,578 1,492 1,425 1,366 1,358 1,358

Paddy - white rice million Kip 0 0 0 0 0 0 0 0 0 0 0 0

Tomatoes million Kip 41 41 41 41 41 37 33 30 27 24 24 24

Chilies million Kip 26 26 26 26 26 23 21 19 17 15 15 15

Total Without Project Production Value million Kip 1,797 2,021 1,918 1,878 1,843 1,732 1,632 1,541 1,469 1,405 1,398 1,398

With Project Total Production Value a/

Paddy - sticky rice




Dry Season well irrigated paddy million Kip 242 229 0 1,061 1,280 1,568 1,536 1,504 1,484 1,464 1,456 1,456


Total paddy - sticky million Kip 1,531 1,445 840 1,818 2,193 2,687 2,632 2,577 2,542 2,508 2,494 2,494

Rice straw million Kip 153 145 84 182 219 269 263 258 254 251 249 249

Total

1,684 1,590 924 2,000 2,413 2,955 2,895 2,834 2,797 2,759 2,744 2,744

Paddy - white rice



Wet Season unirrigated paddy million Kip 653 616 1,046 100 98 96 94 92 91 89 89 89

Total paddy - white million Kip 990 934 1,523 720 842 1,004 983 962 949 936 931 931

Rice straw million Kip 99 93 152 72 84 100 98 96 95 94 93 93

Total

1,089 1,027 1,676 792 927 1,104 1,082 1,059 1,044 1,030 1,024 1,024

Tomatoes million Kip 131 131 0 487 487 487 487 487 487 487 487 487

Chilies million Kip 79 79 0 295 295 295 295 295 295 295 295 295

Total With Project Production Value million Kip 2,983 2,827 2,600 3,573 4,121 4,842 4,758 4,675 4,622 4,570 4,549 4,549

Incremental Economic Crop Production Value

Paddy - sticky million Kip (45.8) (363.8) (927.1) 188.5 637.2 1,283.6 1,317.3 1,342.7 1,371.7 1,393.1 1,385.4 1,385.4

Paddy - white million Kip 1,089 1,027 1,676 792 927 1,104 1,082 1,059 1,044 1,030 1,024 1,024

Tomatoes million Kip 89 89 (41) 445 445 450 453 457 460 462 462 462

Chilies million Kip 53 53 (26) 269 269 272 274 276 278 280 280 280

Total million Kip 1,186 806 681 1,695 2,278 3,109 3,126 3,134 3,154 3,165 3,152 3,152

Total in U.S. $ $ 150,101 102,032 86,260 214,563 288,417 393,591 395,718 396,708 399,186 400,629 398,936 398,936

a/ As the area irrigated during construction will be less than normal, there will be a decrease in irrigated crop production during that period.

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Table 7: Physical Inputs for Major Crops Without & With the Project

(Constant 2014 Lao PDR Kip for items in monetary units)

WS Well Irrigated Paddy Stcky

WS Irregularly Irrigated Paddy Stcky

WS Unirrigated

Paddy Stcky

WS Well Irrigated Paddy White

WS Irregularly Irrigated Paddy White

DS Well Irrigated Paddy Stcky

DS Irregularly Irrigated Paddy Stcky Tomatoes Chillies

Without Project

Inputs amount/ha

Seed kg/ha 75 75 75 75 75 100 100 5 5

Urea kg/ha

100 100 100 100 100 150 150 300 150

DAP kg/ha

100 100 100 100 100 150 150 200 150

Agro-Chemicals l/ha

1 1 1 1 1 1 1 2 1

Bags #/ha

26 24 20 22 20 35 30 1600 600

Land Preparation Kip/ha

787.5 787.5 675 787.5 787.5 787.5 787.5 787.5 787.5

Harvesting fees (8% of yield) Kip/ha

211 300 275 257 400 284 420 0 0

Fuel Kip/ha

675 675 675 675 675 675 675 360 360

Labor person-days

32 28 25 33 30 38 38 80 58

Water fees (O&M) Kip/ha

100 100 0 125 100 250 200 250 250

Electricity Fee Kip/ha

180 180 0 180 180 360 360 270 270

Note: WS - Wet Season; DS - Dry Season

With Project

Seed kg/ha 50 50 50 50 50 50 50 5 5

Urea kg/ha

200 175 150 200 175 300 200 600 300

DAP kg/ha

200 175 150 200 175 300 200 400 300

Agro-Chemicals l/ha

1 1 1 1 1 1 1 4 2

Bags #/ha

36 35 30 30 27 48 45 2200 800

Land Preparation Kip/ha

787.5 787.5 675 787.5 787.5 787.5 787.5 787.5 787.5

Harvesting fees (8% of yield) Kip/ha

386 320 300 404 330 442 400 0 0

Fuel Kip/ha

675 675 675 675 675 675 675 360 360

Labor person-days

32 30 28 37 35 36 33 90 64

Water fees (O&M) Kip/ha

250 250 0 250 250 500 500 450 450

Electricity Fee Kip/ha

200 200 0 200 200 400 400 360 360

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Table 8: Total Crop Economic Costs With and Without the Project (2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Project Total Production Cost

Paddy





Dry Season irregulary irrigated paddy million Kip 240 236 233 232 230 206 185 165 148 133 133 133

Total paddy million Kip 1,446 1,427 1,409 1,401 1,393 1,333 1,279 1,230 1,188 1,151 1,149 1,149

DS Tomatoes million Kip 12 12 12 12 12 11 10 9 8 7 7 7

DS Chillies million Kip 9 9 9 9 9 8 7 7 6 5 5 5

Total Without Project Production Cost million Kip 1,467 1,448 1,431 1,423 1,415 1,352 1,296 1,245 1,202 1,164 1,161 1,161

With Project Total Production Cost

145,525

Paddy




Wet Season well irrigated paddy White million Kip 155 153 226 534 531 528 525 522 520 519 517 517

Wet Season Irreg. Irrigated paddy White million Kip 0 0 0 0 0 0 0 0 0 0 0 0



Total paddy million Kip 1,626 1,592 1,090 2,146 2,130 2,116 2,102 2,088 2,080 2,073 2,066 2,051

DS Tomatoes million Kip 36 36 0 134 134 134 134 134 134 134 134 134

DS Chillies million Kip 25 25 0 92 92 92 92 92 92 92 92 92

Total With Project Production Cost million Kip 1,687 1,653 1,090 2,371 2,356 2,341 2,327 2,313 2,306 2,298 2,291 2,276

287,292

Incremental Economic Crop Production Cost

Paddy million Kip 180 166 (319) 745 737 783 823 858 892 922 917 902

DS Tomatoes million Kip 23 23 (12) 121 121 122 123 124 125 126 126 126

DS Chillies million Kip 16 16 (9) 83 83 84 84 85 86 86 86 86

Total million Kip 219 204 (340) 949 941 989 1,031 1,068 1,104 1,134 1,130 1,115

Total in U.S. $ $ 27,774 25,881 (43,080) 120,082 119,112 125,192 130,540 135,167 139,686 143,562 143,026 141,098

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Table 9: Economic Operations & Maintenance Costs With and Without the Project

(2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Without Maintenance Costs

Wet Season well irrigated paddy 000 Kip 5,985 5,985 5,985 5,985 5,985 5,387 4,848 4,363 3,927 3,846 3,846 3,846

Wet Season Irregularly Irrigated paddy 000 Kip 5,000 5,000 5,000 5,000 5,000 4,500 4,050 3,645 3,281 2,952 2,952 2,952

Wet Season unirrigated paddy 000 Kip 0 0 0 0 0 0 0 0 0 0 0 0

Dry Season well irrigated paddy 000 Kip 13,473 13,473 13,473 13,473 13,473 12,125 10,913 9,821 8,839 7,955 7,955 7,955

Dry Season irregularly irrigated paddy 000 Kip 10,000 10,000 10,000 10,000 10,000 9,000 8,100 7,290 6,561 5,905 5,905 5,905

DS Tomatoes 000 Kip 478 478 478 478 478 430 387 348 313 282 282 282

DS Chillies 000 Kip 430 430 430 430 430 387 348 313 282 254 254 254

Total O&M 000 Kip 35,365 35,365 35,365 35,365 35,365 31,829 28,646 25,781 23,203 21,195 21,195 21,195

Without Electricity Fees

Wet Season well irrigated paddy 000 Kip 12,263 12,263 12,263 12,263 12,263 11,036 9,933 8,939 8,045 7,880 7,880 7,880

Wet Season Irregularly Irrigated paddy 000 Kip 9,220 9,220 9,220 9,220 9,220 8,298 7,468 6,721 6,049 5,444 5,444 5,444

Wet Season unirrigated paddy 000 Kip 0 0 0 0 0 0 0 0 0 0 0 0

Dry Season well irrigated paddy 000 Kip 22,083 22,083 22,083 22,083 22,083 19,875 17,887 16,099 14,489 13,040 13,040 13,040

Dry Season irregularly irrigated paddy 000 Kip 18,440 18,440 18,440 18,440 18,440 16,596 14,936 13,443 12,098 10,889 10,889 10,889

DS Tomatoes 000 Kip 529 529 529 529 529 476 428 385 347 312 312 312

DS Chillies 000 Kip 516 516 516 516 516 464 418 376 339 305 305 305

Total Electricity 000 Kip 63,050 63,050 63,050 63,050 63,050 56,745 51,071 45,964 41,367 37,869 37,869 37,869

Total Without Project Operations and Maintenance

000 Kip 98,415 98,415 98,415 98,415 98,415 88,574 79,717 71,745 64,570 59,064 59,064 59,064

$ 12,458 12,458 12,458 12,458 12,458 11,212 10,091 9,082 8,173 7,476 7,476 7,476

15

Table 10: Incremental Crop Labor

(2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

sub-project year

1 2 3 4 5 6 7 8 9 10

Without Project Crop Labor Days

Paddy

Wet Season well irrigated paddy person-days 2,128 2,128 2,128 2,128 2,128 1,915 1,724 1,551 1,396 1,367 1,367

Wet Season Irregularly Irrigated paddy person-days 1,400 1,400 1,400 1,400 1,400 1,260 1,134 1,021 919 827 827

Wet Season unirrigated paddy person-days 3,338 3,338 3,338 3,338 3,338 3,629 3,891 4,127 4,339 4,444 4,444

Dry Season well irrigated paddy person-days 2,275 2,275 2,275 2,275 2,275 2,048 1,843 1,659 1,493 1,344 1,344

Dry Seaon irregularly irrigated paddy person-days 1,900 1,900 1,900 1,900 1,900 1,710 1,539 1,385 1,247 1,122 1,122

DS Tomatoes person-days 153 153 153 153 153 138 124 111 100 90 90

DS Chillies person-days 111 111 111 111 111 100 90 81 73 65 65

Total days person-days 11,305 11,305 11,305 11,305 11,305 10,799 10,344 9,935 9,566 9,259 9,259

Total Without Project Labor Days person-days 11,305 11,305 11,305 11,305 11,305 10,799 10,344 9,935 9,566 9,259 9,259

With Project Crop Labor Days

Paddy

Wet Season well irrigated paddy person-days 1,064 1,064 1,600 3,800 3,800 3,800 3,800 3,800 3,800 3,800 3,800

Wet Season Irregularly Irrigated paddy person-days 1,500 1,500 1,500 0 0 0 0 0 0 0 0

Wet Season unirrigated paddy person-days 1,400 1,400 1,400 0 0 0 0 0 0 0 0

Wet Season well irrigated paddy White person-days 1,230 1,230 1,850 4,394 4,394 4,394 4,394 4,394 4,394 4,394 4,394

Wet Season Irreg. Irrigated paddy White person-days 0 0 0 0 0 0 0 0 0 0 0

Dry Season well irrigated paddy person-days 1,903 1,903 0 7,097 7,097 7,097 7,097 7,097 7,097 7,097 7,097

Dry Season irregularly irrigated paddy person-days 1,650 1,650 0 0 0 0 0 0 0 0 0

DS Tomatoes person-days 344 344 0 1,283 1,283 1,283 1,283 1,283 1,283 1,283 1,283

DS Chillies person-days 245 245 0 912 912 912 912 912 912 912 912

Total days person-days 9,336 9,336 6,350 17,485 17,485 17,485 17,485 17,485 17,485 17,485 17,485

Total With Project Labor Days person-days 9,336 9,336 6,350 17,485 17,485 17,485 17,485 17,485 17,485 17,485 17,485

Incremental Labor Days

Paddy

Wet Season well irrigated paddy person-days (1,064) (1,064) (528) 1,672 1,672 1,885 2,076 2,249 2,404 2,433 2,433

Wet Season Irregularly Irrigated paddy person-days 100 100 100 (1,400) (1,400) (1,260) (1,134) (1,021) (919) (827) (827)

Wet Season unirrigated paddy person-days (1,938) (1,938) (1,938) (3,338) (3,338) (3,629) (3,891) (4,127) (4,339) (4,444) (4,444)

Dry Season well irrigated paddy person-days (372) (372) (2,275) 4,821 4,821 5,049 5,253 5,438 5,604 5,753 5,753

Dry Season irregularly irrigated paddy person-days (250) (250) (1,900) (1,900) (1,900) (1,710) (1,539) (1,385) (1,247) (1,122) (1,122)

DS Tomatoes person-days 191 191 (153) 1,130 1,130 1,145 1,159 1,171 1,182 1,192 1,192

DS Chillies person-days 134 134 (111) 801 801 812 822 831 839 847 847

Total days person-days (3,199) (3,199) (6,805) 1,786 1,786 2,292 2,747 3,156 3,525 3,832 3,832

Total Incremental Labor Days person-days (3,199) (3,199) (6,805) 1,786 1,786 2,292 2,747 3,156 3,525 3,832 3,832

Incremental days/hh

a/ person-days (25) (25) (54) 14 14 18 22 25 28 30 30

Incremental fin. value of labor inputs/hh 000 Kip/hh (800) (800) (1,701) 447 447 573 687 789 881 958 958

Incremental Fin. Labor Incomeb/

million Kip (100,757) (100,757) (214,344) 56,272 56,272 72,194 86,524 99,421 111,028 120,710 120,710

a/ Some of the incremental days will be from family labor (to the extent that it is underemployed Without the Project) and the remainder will be in the form of hired labor.

16

Table 11: Net Incremental Economic Crop Benefits (2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

sub-project year

1 2 3 4 5 6 7 8 9 10

Without Proj. Net Econ Crop Benefit miillion Kip 330 573 488 456 428 380 336 295 267 241 236 With Project Net Econ Crop Benefit miillion Kip 1,296 1,174 1,509 1,202 1,765 2,500 2,431 2,362 2,317 2,272 2,258

Incremental Economic Value of Production miillion Kip 1,186 806 681 1,695 2,278 3,109 3,126 3,134 3,154 3,165 3,152 Incremental Economic Crop Cost miillion Kip 219 204 (340) 949 941 989 1,031 1,068 1,104 1,134 1,130

Net Incremental Economic Crop Benefit miillion Kip 966 602 1,022 746 1,338 2,120 2,095 2,066 2,050 2,031 2,022 Incremental Road O&M Savings miillion Kip 0 0 0 391 391 391 391 391 391 391 391

Total Incremental Benefit:

966 602 1,022 1,137 1,728 2,511 2,485 2,457 2,441 2,421 2,412

Incremental Average Crop Benefit per Householda/

Number of households 126 Economic benefits/hh 000 Kip/hh 7,670 4,775 8,109 5,924 10,615 16,828 16,626 16,398 16,270 16,118 16,045

"Without" project financial crop income per hh 000 Kip/hh 2,838 4,929 4,197 3,921 3,682 3,270 2,890 2,543 2,296 2,076 2,035 "With" project financial crop income per hh 000 Kip/hh 11,157 10,107 12,993 10,346 15,196 21,522 20,923 20,329 19,943 19,557 19,438 Financial crop benefits/hh 000 Kip/hh 8,319 5,178 8,796 6,425 11,513 18,252 18,033 17,785 17,647 17,481 17,403 U.S. $ equivalent/hh $/hh 1,053 656 1,113 813 1,457 2,310 2,283 2,251 2,234 2,213 2,203 Percent increase in crop income per household. % 293% 105% 210% 164% 313% 558% 624% 699% 768% 842% 855%

Incremental Average Crop Benefits per Personb/

Ave. number of persons/hh 6

Economic benefits/person 000

Kip/person 1,278 796 1,352 987 1,769 2,805 2,771 2,733 2,712 2,686 2,674

Financial benefits/person 000

Kip/person 1,386 863 1,466 1,071 1,919 3,042 3,005 2,964 2,941 2,914 2,900 U.S.$ equivalent/person $/person 175 109 186 136 243 385 380 375 372 369 367

Incremental Ave. Financial Crop Benefits for Poor Households --- assumed to be located in "without" subproject unirrigated area

Ave. farm size per household (ha) 1.98

Unirrigated ha 'without' net cr. ben. million Kip 54 43 33 29 26 25 23 20 18 16 15

Same ha 'with' net crop benefit million Kip (6) (12) (22) (33) 8 62 58 54 51 48 47

Same ha incremental cr. Ben million Kip (60) (54) (55) (62) (18) 38 36 34 33 32 32

This figure per ha million Kip (1.0) (0.9) (0.9) (1.0) (0.3) 0.6 0.6 0.6 0.5 0.5 0.5

This figure per average household million Kip (2.0) (1.8) (1.8) (2.1) (0.6) 1.3 1.2 1.1 1.1 1.1 1.1

Percent Households that are Poor 10.0%

Households in without project unirr. ha 67.3

Number poor hh if all in this area 12.6

Assumed poor hh farm size (ha) 1.00

Incremental ben per poor hh million Kip (1.0) (0.9) (0.9) (1.0) (0.3) 0.6 0.6 0.6 0.5 0.5 0.5

Total incremental ben of the poor million Kip (12.5) (11.4) (11.5) (13.1) (3.7) 7.9 7.5 7.1 6.9 6.8 6.8

Share of poor of total incremental benefits %

-0.3% 0.4% 0.4% 0.3% 0.3% 0.3% 0.3%

Incremental farm labor "income" of poor on own land

Unirrig. ha "without" labor inputs

person-days 3,338 3,338 3,338 3,338 3,338 3,629 3,891 4,127 4,339 4,444 4,444

Same ha "with" labor inputs

person-days 3,338 3,338 3,391 9,337 10,152 10,885 11,545 12,139 12,431 12,431 12,431

Same ha incremental labor inputs

person-days 0 0 53 5,999 6,814 7,256 7,654 8,012 8,092 7,988 7,988

This figure per ha

person-days 0.00 0.00 0.40 44.94 46.95 46.62 46.37 46.16 45.53 44.94 44.94

This figure per poor hh

person-days 0.00 0.00 0.40 44.94 46.95 46.62 46.37 46.16 45.53 44.94 44.94

Equivalent financial wage/poor hh 000 Kip 0 0 13 1,416 1,479 1,469 1,461 1,454 1,434 1,416 1,416

a/ Variations in net incremental economic crop benefits are due to disturbances during construction, the phasing in of improved crops, and changes in certain projected crop and fertilizer prices.

17

Table 12: Economic Project Costs

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

I. Investment Costs

A. Civil Works million Kip

979 9,884 - - - - - - - - -

B. Vehicles, Equipment & Materials million Kip

77 41 - - - 7 - - - - -

C. Training & Capacity Building million Kip

48 63 58 58 52 9 9 9 - - -

D. Consulting Services million Kip

202 170 140 108 83 64 68 57 48 - -

Total Investment Costs million Kip - 1,306 10,158 198 166 135 80 77 66 48 - - II. O&M Costs - With Project

- - - - - - - - - - -

A. O & M of Civil Works million Kip - 74 86 439 439 439 439 439 439 439 439 439

B. O & M of Vehicles and Equipment million Kip

- 17 17 17 17 17 17 17 17 17 17

- - - - - - - - - - -

Total Recurrent Costs million Kip - 74 103 456 456 456 456 456 456 456 456 456

18

Table 13: Economic Rate of Return

(2013 Constant Lao PDR Kip) 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2034

sub-project year

1 2 3 4 5 6 7 8 9 10 21

Net Incremental Economic Benefit million Kip 602 1,022 1,137 1,728 2,511 2,485 2,457 2,441 2,421 2,412 2,427

Full Phanomxay Economic Investment Costs million Kip

1,306 10,158 198 166 135 80 77 66 48 0 0

Net Incremental O&M Costs million Kip

(24) 5 358 358 368 377 385 392 397 397 397

Residual Value of Civil Works Investment (5%) million Kip

Net Project Economic Benefits million Kip (680) (9,142) 581 1,204 2,008 2,029 1,995 1,982 1,976 2,015 2,030

EIRR % 15.9% ENVP million Kip 2,238

19

Table 14: Vehicle Operating Cost Derivation: Sub-Project (2013 Constant Lao PDR Kip)

Motor Cycles (100 ccs)

Financial

Economic

Financial cost per km

Economic cost per km

Rate Unit Price Price C/F Price Price

7,500 10,000 12,500

7,500 10,000 12,500

Kip '000 $

Kip '000 $

km/yr km/yr km/yr

km/yr km/yr km/yr

Investment cost 1 cycle 6,800 850.0 0.88 5,984 748.0

Economic life 7 year

Depreciation 14% year 971 121.4 0.88 855 106.9

Operating cost

km/yr

Fuel consumption (gasoline) 3.5 lt/100 km 10.4 1.3 0.88 9.15 1.1

341 455 569

300 400 501

Lubricant 1 lt/400 km 25 3.1 0.88 22.00 2.8

59 78 98

52 69 86

Repairs and maintenance 5.0% year 340 42.5 0.95 323.00 40.4

42.5 56.7 70.8

40.4 53.8 67.3

Insurance 1 year 185 23.1 0.95 175.75 22.0

23.1 23.1 23.1

22.0 22.0 22.0

Operating cost

$/km

0.06 0.06 0.06

0.06 0.05 0.05

Kip/km

496.5 490.3 486.6

441.8 436.0 432.4

Depreciation cost

$/km

0.016 0.012 0.010

0.014 0.011 0.009

Kip/km

129.5 97.1 77.7

114.0 85.5 68.4

Vehicle Operating Cost (VOC)

$/km

0.078 0.073 0.071

0.069 0.065 0.063

Kip/km

626.0 587.5 564.3

555.8 521.4 500.8


500 1,000 1,500

500 1,000 1,500

Kip '000 $

Kip '000 $

km/yr km/yr km/yr

km/yr km/yr km/yr

Investment cost 1 tractor 20,000 2,500 0.88 17,600 2,200.0


Depreciation 14% year 2,857 357 0.88 2,514 314.3

Operating cost

km/yr

Fuel consumption (diesel) 17 lt/100 km 9.3 1.2 0.88 8.2 1.0

99 198 296

87 174 261

Lubricant and coolant 7.0 lt/4,000 km 25 3.1 0.88 22.0 2.8

3 5 8

2 5 7

Repairs and maintenance 5.0% year 1,000 125.0 0.95 950.0 118.8

125.0 250.0 375.0

118.8 237.5 356.3

Insurance 1 year 120 15.0 0.95 114.0 14.3

15.0 15.0 15.0

14.3 14.3 14.3

Operating cost

$/km

0.48 0.47 0.46

0.44 0.43 0.43

Kip/km

3,864.8 3,744.8 3,704.8

3,557.8 3,443.8 3,405.8

Depreciation cost

$/km

0.714 0.357 0.238

0.629 0.314 0.210

Kip/km

5,714.3 2,857.1 1,904.8

5,028.6 2,514.3 1,676.2


$/km

1.197 0.825 0.701

1.073 0.745 0.635

Pickup Trucks (diesel)


2,500 5,000 7,500

2,500 5,000 7,500

Kip '000 $

Kip '000 $

km/yr km/yr km/yr

km/yr km/yr km/yr

Investment cost 1 truck 220,000 27,500 0.88 193,600 24,200.0


Depreciation 10% year 22,000 2,750 0.88 19,360 2,420.0

Operating cost

km/yr

Fuel consumption (diesel) 13 lt/100 km 9.3 1.2 0.88 8.2 1.0

378 756 1,133

332 665 997

Lubricant and coolant 4.5 lt/4,000 km 25 3.1 0.88 22.0 2.8

9 18 26

8 15 23

Repairs and maintenance 3.0% year 6,600 825.0 0.95 6,270.0 783.8

825.0 1650.0 2475.0

783.8 1567.5 2351.3

Insurance 1 year 700 87.5 0.95 665.0 83.1

87.5 87.5 87.5

83.1 83.1 83.1

Operating cost

$/km

0.52 0.50 0.50

0.48 0.47 0.46

Kip/km

4,157.1 4,017.1 3,970.5

3,862.7 3,729.7 3,685.3

Depreciation cost

$/km

1.100 0.550 0.367

0.968 0.484 0.323

Kip/km

8,800.0 4,400.0 2,933.3

7,744.0 3,872.0 2,581.3


$/km

1.620 1.052 0.863

1.451 0.950 0.783

Kip/km

12,957.1 8,417.1 6,903.8

11,606.7 7,601.7 6,266.7

20

Table 15: Vehicle Operating Cost Summary

A. Financial Operating Costs Annual Financial Vehicle Operating Costs

Capital Cost

Assumed

Without

With

Incremental

Cost

Annual

Project

Project

a/

Savings/vehicle

Utilization/yr

Kip million Kms

Kip million Savings: 40% Kip million


6.8

10,000

5.87

3.94

1.94 Hand Tractors (small, with trailer) - diesel 20.0

1,000

6.60

4.42

2.18

Pickup Trucks (diesel) 220.0 5,000 22.00 14.74 7.26

B. Economic Operating Costs Annual Economic Vehicle Operating Costs

Capital Cost

Assumed

Without

With

Incremental

Cost

Annual

Project

Project

a/

Savings/vehicle

Utilization /yr

Kip million Kms

Kip million Savings: 33% Kip million


6.8

10,000

5.21

3.49

1.72 Hand Tractors (small, with trailer) - diesel 20.0

1,000

5.96

3.99

1.97

Pickup Trucks (diesel) 220.0 5,000 19.36 12.97 6.39

a/ Assumes concrete road surface; Assumes 33% reduction in vehicle operating costs

21

Table 16: Import parity price of Sticky Rice

Unit Dec-12 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Projected w orld market price in Bangkok (a) $/t 540 540 520 500 498 496 494 492 490 488 486 484

Thailand (constant 2005 $)a/ $/t 467 440 414 391 382 374 366 358 350 345 340 338

MUV (2005=1.00)b/ 2005 1.16 1.23 1.26 1.28 1.30 1.33 1.35 1.37 1.40 1.41 1.43 1.43

MUV (2013=1.00) 1.00 1.00 1.02 1.04 1.06 1.08 1.10 1.12 1.14 1.15 1.16 1.17

Rice FOB Bankok (constant 2013 $) 540 540 508 480 469 459 449 439 430 423 417 415

less: Quality adjustment to 25% brokenb 20% 432 432 406 384 375 367 359 351 344 339 334 332

less: Quality adjustment Sticky to White rice 15% 367 367 346 326 319 312 305 299 292 288 284 282

- Insurance and freight (Bkk to Lao border) $/t 30 30 30 30 30 30 30 30 30 30 30 30

Border price $ 397 397 376 356 349 342 335 329 322 318 314 312

Border price (Kip) 7900 3,137,880 3,137,880 2,966,464 2,814,827 2,755,491 2,702,748 2,650,005 2,597,261 2,544,518 2,511,554 2,478,589 2,465,403

Transport to Project area 0.94 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240

Conversion of rice to paddy 65% 2,091,778 2,091,778 1,980,358 1,881,794 1,843,225 1,808,942 1,774,659 1,740,376 1,706,093 1,684,666 1,663,239 1,654,668

Processing (milling) cost 0 0 0 0 0 0 0 0 0 0 0 0

Millgate price 2,091,778 2,091,778 1,980,358 1,881,794 1,843,225 1,808,942 1,774,659 1,740,376 1,706,093 1,684,666 1,663,239 1,654,668

Transport - farm to mill 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000

Import parity price at farmgate 1,991,778 1,991,778 1,880,358 1,781,794 1,743,225 1,708,942 1,674,659 1,640,376 1,606,093 1,584,666 1,563,239 1,554,668

Import parity price of rice at farmgate Kip/kg 1,992 1,992 1,880 1,782 1,743 1,709 1,675 1,640 1,606 1,585 1,563 1,555

Local farmgate price (at harvest time) 1,800

Ratio of import parity to local farmgate price 1.11

Source: World Bank Commodity Price Projections ( Sept 2012) / (a) current $ FOB price Bangkok // (b) ratio of 25% broken to 5% broken is derived from World Bank Prospects for the Global Economy // © Adjustment from non- glutinous

Table 17: Import parity price of "White" Rice (current prices)

Unit Dec-12 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023

Projected w orld market price in Bangkok (a) $/t 540 540 520 500 498 496 494 492 490 488 486 484

MUV (2013=1.00) 1.00 1.00 1.02 1.04 1.06 1.08 1.10 1.12 1.14 1.15 1.16 1.17

Rice FOB Bankok (constant 2013 $) 540 540 508 480 469 459 449 439 430 423 417 415

less: Quality adjustment to 25% brokenb 10% 486 486 457 432 422 413 404 395 387 381 376 373

- Insurance and freight (Bkk to Lao border) $/t 30 30 30 30 30 30 30 30 30 30 30 30

Border price $ 516 516 487 462 452 443 434 425 417 411 406 403

Border price (Kip) 7900 4,076,400 4,076,400 3,849,526 3,648,830 3,570,297 3,500,490 3,430,683 3,360,875 3,291,068 3,247,439 3,203,809 3,186,357

Transport to Project area 0.94 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240 80,240

Conversion of rice to paddy 65% 2,701,816 2,701,816 2,554,348 2,423,896 2,372,849 2,327,475 2,282,100 2,236,725 2,191,350 2,162,991 2,134,632 2,123,288

Processing (milling) cost 0 0 0 0 0 0 0 0 0 0 0 0

Millgate price 2,701,816 2,701,816 2,554,348 2,423,896 2,372,849 2,327,475 2,282,100 2,236,725 2,191,350 2,162,991 2,134,632 2,123,288

Transport - farm to mill 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000

Import parity price at farmgate 2,601,816 2,601,816 2,454,348 2,323,896 2,272,849 2,227,475 2,182,100 2,136,725 2,091,350 2,062,991 2,034,632 2,023,288

Import parity price of rice at farmgate Kip/kg 2,602 2,602 2,454 2,324 2,273 2,227 2,182 2,137 2,091 2,063 2,035 2,023

Local farmgate price (at harvest time) 2,600

Ratio of import parity to local farmgate price 1.00

Source: World Bank Commodity Price Projections ( Sept 2012) / (a) current $ FOB price Bangkok // (b) ratio of 25% broken to 5% broken is derived from World Bank Prospects for the Global Economy // © Adjustment from non- glutinous

22

Table 18: Sensitivity Analysis

Change* Sensitivity New New Switching New New New

Factor EIRR ENPV Value** FIRR FNPV

B:C ratio

Base Case 15.9% 8.2% 1.7

Investment Costs million Kip 100% +120% 12.3% 1817 122% 5.5% -4187 1.4:1

Operations & Maintenance Costs million Kip 100% +120% 14.8% 1580 176% 6.8% -2765 1.7:1

Production Costs million Kip 100% +120% 13.6% 869 135% 5.1% -3634 1.7:1

Dry Season Irrigated Area Increment ha 100% -20% 15.4% 1896 n.a. 10.4% -869 1.7:1

Rice Yields t 100% -20% 6.7% -3002 92% -4.5% -7900 1.1:1

Rice Price Kip/kg 100% -20% 6.7% -3002 92% -4.5% 7821 1.1:1

Vegetable Yields t 100% -20% 14.1% 1185 55%

Vegetable Prices Kip/kg 100% -20% 14.1% 1185 55%

* Enter Sensitivity Factor e.g. Investment Costs = 120% to calculate EIRR impact.

** Switching value is % change in variable required to make ENPV zero

financial and economic analysis for phanomxay subproject · eighth year after construction. to...

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