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Introduction


Economic impact assessment is one of the tools used to provide information for making decisions about forestry projects. The objective of the present volume is to provide user-friendly guidelines to a practical approach for assessing the economic impacts of forestry projects.

The role of projects

Projects are a principal means governmental and nongovernmental organizations use to encourage and shape development. Successful development depends to a considerable degree on success in identifying, designing, implementing and managing projects which contribute to meeting goals.

Projects constitute a definable set of inputs that are transformed through activities into a definable set of outputs. Projects have impacts on people, both through the changes in outputs which they produce and through the activities that produce the outputs. It is these various impacts that are of concern in an economic assessment. The project development process involves a number of phases or stages as indicated in figure 1. As also indicated in figure 1, economic impact assessments are carried out at different stages in the project development process to provide decisionmakers with the information they need about economic and financial impacts as the process proceeds.

The role of economic impact assessments

Assessments are nothing more than systematic analyses. Economic impact assessments examine the socioeconomic and financial impacts of an activity, set of activities, or set of changes in a particular situation.

Assessments of likely economic impacts of potential or proposed projects are termed ex ante impact assessments. Assessments that are done after a project is implemented, looking back on what happened, are termed ex post assessments. The methodologies used for both ex ante and ex post impact assessments are similar. The major differences between ex ante and ex post assessments are in the purposes for the assessments, the kinds of information used in the assessments, and the ways in which that information is obtained.

Typically, ex ante impact assessments are conducted during the project identification and project preparation stage of the project process. They use estimates of future events and conditions. The purpose of an ex ante assessment is to provide information for decisionmakers to evaluate and make choices among project alternatives. Ex ante assessments deal with events that may (or may not) take place in the future. They must rely on uncertain estimates of these future events, and cope with a lack of information applicable to the particular circumstances under consideration. Because they deal with an uncertain future, strategies for dealing with uncertainty play a key role in ex ante assessments.

Project Development Process

Figure 1. The project development process.

Ex post impact assessments are conducted after project completion, or after completion of certain segments of a project, e.g., during project implementation in a monitoring and evaluation activity. The purpose of an ex post assessment is to provide information for decisionmakers to help them judge the effectiveness and/or efficiency of completed projects, to improve the implementation of existing projects, and to improve ex ante assessments of future projects, i.e., to increase institutional learning. Ex post assessments deal with events that took place in the past. For information about these past events, analysts must rely on records of past events, or upon special studies to estimate the results of past activities if the funds, time, and expertise available and other considerations make this possible. Unfortunately, records of past events for many development projects may not be readily available. Records of past activities may never have been kept, or they may be missing, incomplete, inconvenient to assemble and use, unreliable, or inappropriate for the planned use.

Another type of assessment is the economic feasibility or performance assessment. The objective is to analyze, ex ante, the feasibility of some proposed project or action; and, ex post, the performance of a project or action. While these types of assessments are relevant and important for decisionmakers, the present guidelines deal only with ex ante and ex post impact assessments.

We need to stress here that economic impact assessment is not a mechanistic accounting exercise, but rather an attempt to assess in a variety of ways the real value to society and to individual groups within society of a project or activity. The intent is that such assessment provide background for making more informed decisions regarding the use of scarce resources available to society. Monitoring and evaluation assessments are important during the implementation of a project. They deal with events as they occur and, thus, the information generated can be used to steer the project in response to changing circumstances and to events as they are better understood. Monitoring and evaluation also provides information toward the end of a project that is useful in deciding what to do with the project at termination, e.g., to extend it, to reorient the project purpose, to expand it and so forth.

The economic assessment process

The basic impact assessment process is described in part I. It should be the same regardless of the stage in the project development process and regardless of the economic impact question being addressed. In carrying out the approach, the assessor, or assessment team, will be

1. specifying the questions to be answered (see chapter 1);
2. developing the overall assessment approach (see chapter 2);
3. answering the questions asked (the analysis process) (see chapter 3); and

The basic economic assessment process (step 3, answering the questions) is described in part II. This process also should be the same regardless of stage or question. It involves the following:

1. defining and quantifying the inputs and outputs of the project (see chapter 4);

2. estimating unit values (either market prices or economic values, depending on the question being answered) (see chapter 5);

3. calculating the relevant measures that will answer the questions being addressed (see chapter 6); and

4. dealing with issues of risk and uncertainty (sensitivity analysis) (see chapter 7);


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