Economic appraisal has always been a pivot for project evaluation. In the abovementioned paper, a new model based on the theory of measures for estimating economic effect generated by road network is developed in the form of imputed value added to road. The validity of this model is verified by another model applying the traditional approach together with the consideration of shadow pricing. The two models are compared in terms of benefit-cost ratio using the federal land development authority (FELDA) as the case study. The new model deploys the concept of value added being regarded as the index of benefit. Consideration is given to the imputation of the value added to the production factors involved such as labour, capital and infrastructure i.e. roads. The annual cost of construction and maintenance of road network is considered as cost stream. The contribution by FELDA and its subsidiaries in terms of gross national product (G.N.P.) to the nation is a basis for computing the maintenance cost due to FELDA related activities. The benefit-cost ratio of each year is computed based on the yearly imputed value added to road and the road cost. A distribution of various lengths of road network for other equivalent FELDA complexes are selected for analysis and their costs are estimated. Their respective benefit-cost ratios are computed and the mean benefit-cost ratio is taken as a global figure to verify the value derived from the new model. There is great advantage in the new model in terms of simplicity and it gives rise to a point value for the nation as a whole whereas the traditional method can only be applied to complex or project basis. (A)
Abstract