Guidelines for Conducting Extended Cost-benefit Analysis of Dam Projects in Thailand

Dam construction has long provided valuable economic benefits to Thailand in distributing low-priced electricity and supporting low-income farmers by providing them with free-flowing irrigation water; this promotes domestic consumption and investment. Even though many benefits are expected from dam construction, a dam project needs to be carefully evaluated using costbenefit analysis (CBA) before approval. Decision-makers have to review the negative effects of the construction and operation of a dam. These effects are sometimes difficult to measure in monetary terms. Each impact requires the use of particular techniques to determine their monetary value; the choice depends on the characteristics of a particular impact and what relevant information is available. The primary data technique incorporates the market price approach, revealed preferences approach, and stated preferences approach. The secondary data technique is also called the benefits transfer method. An erroneously-conducted CBA can lead policy-makers to make a wrong decision on a project. Therefore, in order to provide policy-makers with accurate information and right recommendations on a project alternative, an analyst has to identify all potential project impacts, apply appropriate valuation methods and select the correct criteria. This report provides basic guidelines for analysts to conduct a proper CBA on dam projects and includes a case study of the Kwae Nai Dam in Thailand that will give useful insight into the practical applications of a CBA.