The Project’s incremental impact on the economy is assessed using two development scenarios—expected development pathways in the project area both with the Project and without the Project. In the without-Project option, it is assumed that present conditions and practices in the Klang River Basin will continue unabated. In the with-Project case, IRBM institutional arrangements will be studied, working committee will be established, and demonstration projects will be implemented with associated sub-catchment groups.
The economic costs of the Project include all capital costs, including resettlement costs and recurrent costs, and are based on average 1996 market prices. The financial (local market) costs of Project inputs and benefits are converted to economic values using conversion factors (construction = 0.96; petroleum products = 0.94; nonelectric machinery = 0.98; electric machinery =
0.81; motor vehicles = 0.78; real estate and dwellings = 0.89; and other services
= 0.86). The economic life of the Project is assumed to be 30 years, as its impacts are long-term in nature.
The economic benefits of the Project consist of directly quantifiable benefits, indirect benefits (indirect use values), and nonuse values. The major benefits are summarized in Table 1, including quantified and non- quantified environmental benefits. The quantifiable benefits of project interventions are summarized in Table 2 where it is shown that the net present value of the Project’s environmental benefit stream as a percentage of net present value of all project benefits is about 60 percent.