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Economic Evaluation Of Port Investments

Economic Evaluation Of Port Investments


SUMMARY


T he master plan sets the long-term development strategy for the port, which will influence the future levels of traffic that uses it. These developments may be either improving existing facilities or building new ones. Any other kind of activities that are performed to increase the intensity of port use can also be considered as port development. These can be in the field of law or reorganization too. In any way, an economic evaluation of 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 require a succession of costs 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 trans- port cost savings and reduced turn-round time. A 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 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 cost.