In this paper we report on an evaluation of the feasibility of a port improvement project at General Santos City in the Philippines. For an analysis of this project, which is an expansion of an existing facility, the financial and economic analyses are conducted with and without the project. To identify the variables that would have an important impact on the project’s net present value and to assess the nature of the variability of the returns from this investment, a sensitivity and risk analysis is carried out. From this analysis we find that the proposed expansion plan of the port is neither financially nor economically justified. The mean and median of both financial and economic incremental net present values (NPVs) are significantly negative, showing that the financial and economic NPVs with the project are much lower than those without the project. This project turns out to be one that is sensitive to the time at which the project is started. The country will benefit if the project is postponed, but it should be postponed for a decade. Even with the expected poor financial and economic performance, the project does have major beneficiaries. The shippers of goods and livestock, and the shipowners will receive substantial benefits from the project. They will be strong and vocal proponents of this project because, while they receive most of the benefits of the project, they pay only a small share of the cost.
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Find related papers by JEL classification: H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
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