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Economic Evaluation Of Port Development Projects by the Benefit Cost Analysis

Economic Evaluation Of Port Investments


T he existing master plan sets the long-term development strategy for ports, which will influence the future levels of traffic that uses them. These developments may be either towards improving existing facilities or building new ones. Any other kind of activity that is performed to increase the intensity of port use can also be considered as port development. These can be in the field of enacting new legislation or reorganisation of existing facilities. In any case, an economic evaluation of a port development investment should be considered before any action is taken.This is a decision making process where profitability of the new investment is questioned. The evaluation for such a port development project requires a succession of cost and benefits over the whole useful life of the project. The main costs in a port development project are construction costs and maintenance costs; the benefits are mainly transportation cost savings and reduced return time. Fundamental characteristics of these costs and benefits are that they are transmitted to other participants in the trade rather than to the port authority. The matter of getting costs and revenues on a basis where they may be equitably and conveniently compared can be done by several investment appraisal methods. In this paper, evaluation of a port deepening project will be discussed by using the benefit-cost methods. The costs and benefits of such a project will be identified by showing how the port depth affects the unit price of transportation costs.