Applying economic analysis to technical assistance projects

The author recommends using more quantitative economic analysis in appraising technical assistance loans and loan components. After giving a brief history of tecnhical assistance and the problems commonly associated with it, he describes classifications of technical assistance, proposes a new typology to be used for project appraisal, suggests methods for screening projects, and discusses different levels of economic analysis. He shows how the typology and economic analysis could be applied to 40 projects in the Europe and Central Asia region, Although some of the suggested approaches are sophisticated and demanding, much of it relies on fairly simple techniques. The author estimates that roughly 60 percent of the technical assistance in his sample was suitable for quantitative analysis. Using four case studies, he demonstrates how quantitative economic analysis could be used more frequently in the appraisal process. The author recommends that all technical assistance be classified according to the methodology suitable for its appraisal and evaluation. In cases in which little or no quantitative analysis is used, the staff officer can and should provide a justification -in which case it should still be possible to conceptualize the problem in economic terms. Essential technical assistance should be included when calculating the economic rate of return on a project. When technical assistance is excluded from this calculation, a strong justification for such assistance should be given or it should be omitted from the project. In his sample, the author estimates that about 80 percent of the technical assistance in investment projects was not essential for project implementation. In the 12 projects for which an economic rate of return was calculated in the appraisal, the technical assistance was not included in the estimate -even though 53 percent of this technical assistance was deemed necessary to the project.