Lợi ích của phân tích lợi ích chi phí (CBA) đối với các dự án đầu tư công tại Việt Nam

Nội dung text: Lợi ích của phân tích lợi ích chi phí (CBA) đối với các dự án đầu tư công tại Việt Nam

1. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 ADVANTAGES OF COST BENEFIT ANALYSIS (CBA) IN PUBLIC INVESTMENT PROJECTS IN VIETNAM LỢI ÍCH CỦA PHÂN TÍCH LỢI ÍCH CHI PHÍ (CBA) ĐỐI VỚI CÁC DỰ ÁN ĐẦU TƯ CÔNG TẠI VIỆT NAM Hoang Thi Thu Ha National Economics University hoangthuha@neu.edu.vn ABSTRACT These days, many governments and investors are more interested in public programs and public projects that promote the welfare of the whole society rather than simply maximizing financial returns. Therefore, public investment projects should be assessed from different viewpoints, from private benefit-cost analysis to benefit-cost analysis to all members of the referent groups, for example sub- groups or social groupings. The following article will present Cost-Benefit Analysis - the method for evaluating public investment projects based on the comparison of the benefits and costs of the project from an comprehensive social - economic point of view. Accordingly, all benefits and costs are taken into account and quantified in order to calculate the net social benefits. This method have been using in many developed countries since 1930s but it seems unpopular in some developing countries. Besides, it will provide readers with the general picture of public investment in Vietnam in the period of 2011- 2018. Base on this foundation, this article will also discuss the need for applying Cost-Benefit Analysis to the public investment project appraisal and selection in the country. Keywords: CBA, allocative efficiency, net social benefits, public project evaluation, willingness to pay. TÓM TẮT Hiện nay, các chính phủ và nhiều nhà đầu tư quan tâm hơn tới các chương trình công cộng, các dự án thúc đẩy các lợi ích chung của cả xã hội hơn là chỉ tối đa hóa lợi nhuận tài chính. Do vậy, các dự án đầu tư công cần phải được đánh giá dựa trên nhiều quan điểm, từ phân tích lợi ich chi phí trên quan điểm tài chính đến phân tích lợi ích chi phí dự án trên quan điểm của tất cả các nhóm liên quan trong xã hội. Bài viết dưới đây sẽ trình bày phương pháp phân tích lợi ích chi phí - phương pháp đánh giá các dự án đầu tư công trên cơ sở so sánh lợi ích và chi phí của dự án trên quan điểm kinh tế xã hội toàn diện. Theo đó tất cả các lợi ích và chi phí sẽ được tính toán và lượng hóa nhằm đưa ra lợi ích xã hội ròng của dự án. Phương pháp này đã được sử dụng rộng rãi tại nhiều quốc gia phát triển từ những năm 1930 song vẫn chưa được sử dụng rộng rãi tại các quốc gia đang phát triển. Bên cạnh đó, bài viết cũng cung cấp một bức tranh toàn cảnh về hoạt động đầu tư công tại Việt Nam giai đoạn 2011 - 2018. Trên cơ sở đó, thảo luận về sự cần thiết của việc áp dụng phương pháp phân tích lợi ích chi phí trong quá trình thẩm định và lựa chọn các dự án đầu tư công tại Việt Nam. Từ khóa: CBA, hiệu quả phân bổ, lợi ích xã hội ròng, đánh giá dự án đầu tư công, mức sẵn sàng trả. 1. Introduction to cost- benefit analysis method 1.1. The concept of cost- benefit analysis The cost benefit analysis (CBA) method was first developed in the 1930s in the United States when the Federal government decided to carry out projects for the improvement of the waterway system which were funded by the Government of the dry Central and West states. Before that, in 1667, the famous British economist William Petty had established disease prevention programs in London using CBA. The concept of CBA was further developed by many economists. CBA is a systematic process of analyzing the impacts of a project from different viewpoints; for example, it can take account of the benefits and costs to the owners of the equity in a private firm (private benefit- cost analysis). Alternatively, it can be broadened to include all benefits and costs to members of the referent group. (Harry Campbel, Richard Brown, 2003). 394
2. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 CBA is a policy assessment method that quantified in monetary terms the value of all consequences of a policy to all members of society. The terms policy and project can be used interchangeably. More generally, CBA applies to policies, programs, projects, regulations and other government interventions. The aggregate value of a policy is measured by its net social benefits. The net social benefits are calculated by social benefits minus social costs. (Boardman, Vining, Greenberg, Weimer, 2010). CBA is a method for assessing the economic efficiency of proposed public policies through the systematic prediction and valuation (i.e., monetization) of social costs and social benefits. While individual decisions focus on benefits and costs to the individual, CBA considers the benefits accruing to and the costs incurred by all members of society – hence the terms social benefits and social costs. (Boardman, 2015). From the point of the investment project, CBA is a comprehensive comparison and evaluation of the costs and the benefits of the project from the view of the entire economy and the whole society. The benefits that derive from the project are the contribution of the project to the implementation of the overall development objectives of the economy. The cost that the economy has to suffer when an investment project is carried out are all natural resources, material wealth, labor cost (as well as the environmental loss) that be devoted to the investment project instead of using for other purposes. In this framework, CBA can be viewed as an extensive analysis of financial aspects with at least three important adjustments which are as follows: (i) estimate shadow price or economic price (instead of market price) for market-based benefits and costs in non-competitive market, (ii) monetize all non-market price benefits and costs and put them into the cash flow calculation. (iii) replace the financial discount rate with the social discount rate. In addition, CBA also refers to the distribution of benefits and costs to project beneficiaries such as local governments, domestic banks, local workers, and surrounding residential communities. In developing countries, the government intervention is often stronger than in developed countries. Therefore, the need for analyzing benefits and costs from the point of the entire economy is more important. CBA can be used for both prospective (projects appraisal) and retrospective (projects evaluation). The prospective sense refers to the process of actually deciding whether resources are to be allocated to the project or not. The retrospective sense refers to the process of reviewing the performance of a project. A CBA is also used to make a choice between two or more mutually exclusive projects. CBA is carried out by identifying and attaching monetary value to each input and output of the project. Then compare the values of the inputs and outputs. Basically, if the project benefits bring more value to the society than the cost it consumes, the project will be considered worthy and should be implemented. In the case of having to choose the best project among many proposed projects, cost-benefit analysis will help selecting the project that will bring the greatest net benefits. It is also possible to use cost-benefit analysis to assess the sensitivity of project outputs in case of risks and uncertainties. The decision makers therefore will takes the results of the analysis, together with other information into account in coming to a decision. In reality, it seems to be difficult to conduct a quality cost- benefit analysis. For example, determining what is the cost and what is the benefit also requires careful consideration. Besides, while some inputs and outputs may have popular and stable prices, others have variable prices during the implementation of the project. And there may be some inputs and outputs that can hardly be added market prices or quantified by money. For some reasons, CBA has not been widely used in many countries, especially in developing countries. 1.2. The major steps in cost- benefit analysis CBA may be intimidating and complex. To help making the process of conducting a CBA more manageable, it can be broken down into eight steps, which are listed below: 395
3. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 1.2.1. Identify problem and suggest some solutions Problem identification is the determination of the gap between the current situation and the status that the government and society want to achieve. Like all problem-solving methods, CBA provides information that helps improve the distance and push the current status to the desired position in the most effective way. Based on this theory, some solutions/alternatives will be given to bridge this gap in reality. The amount of solutions/alternatives should be less than six because neither decision makers nor analysts can handle comparisons among such a large number of alternatives. 1.2.2. Identify the benefits-cost of each alternative Step 2 requires analysts to identify the impacts of each proposed alternative, arrange them into groups of benefits or costs and select measurement indicators. In this situation, the term "impacts" is quite broad to refer to both inputs (required resources- costs) and outputs (gained benefits) of the project. On the whole society, the general principle is to calculate all benefits and costs regardless of who receives or pays them 1.2.3. Monetize (attach money value) to all impacts The analyst next has to monetize each of the impacts. To monetize is to value in money. For some projects, some benefits and costs may have social value, some may have financial value and others that cannot be measured by either of these values. For example, there are some economic and social benefits that are measurable in money, such as the incremental value of production value, contribution to the State budget or per capital income. Some economic benefits are difficult to value in monetary term, such as the benefits gained from culture and education investment projects, improving environment and landscape projects or protecting the wild life projects. Some techniques referred to as Travel Cost Method, Contingent Valuation Method and Hedonic Pricing Method can be used to estimate the monetary value of those impacts 1.2.4. Set up an annual cost benefit spreadsheet to calculate the present value of costs and benefits The annual benefits and costs of each alternative is presented into a spreadsheet according to the years they have arisen. By then, net benefits can be calculated in each year. The process of listing and calculating annual net benefits will help analysts understand the “structure” of the project and the benefit- cost flow over time. 1.2.5. Calculate the net social benefits of each alternative In order to calculate the total net benefits, it is not possible to simply add the annual net benefits together because people tend to put different importance on the benefits received at different time. Therefore, the total net benefit will be calculated in 2 steps: Step 1: the project's net benefit is converted to its present value by dividing it by (1+s)t, where “s” is the social discount rate. Step 2: The present value of each annual net benefit will be summed and the final result will be produced. 1.2.6. Compare alternatives of the project according to net social benefits In this step, the alternatives will be ranked according to their net social benefits. The alternative with the highest net social benefits will commonly be chosen, the lowest net benefits option is ranked last and the least desirable option. A negative net benefits shows that the project is not economically desirable. 1.2.7. Sensitivity analysis There may be considerable uncertainty about both the predicted impacts and the appropriate monetary valuation of each unit of the impact. Sensitivity analysis attempts to deal with such uncertainties by: - Find out some variables reflecting risk. 396
4. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 - Find out the “amplitude fluctuations” of one or more specific variables. - Identify the variables by which the ranking of alternatives will be changed. - Identify the variables that make the net social benefit change most (or be sensitive most). Sensitivity analysis helps analysts ensure the stability of the net social benefit in case of uncertain situations. It provides the information of the variables that make the net social benefit fluctuate most and then suggest some solution for managing them in the future implementation phase. 1.2.8. Make a recommendation After the previous steps, the analyst have evidence to point out whether an alternative is worth doing or not, or determine which alternative is most desirable. If the net benefit (after eliminating the risk) is a positive number or a benefit/cost ratio is greater than 1, the project will be effective and should be implemented. If there are many options, the greatest positive net benefit will be chosen because normally analysts will encourage the option of having the largest net social benefits. Generally, CBA is one input to the economical decision making process- one that attempts to push it toward more efficient resource allocation. 2. Public investment in Vietnam and the need to conduct cost benefit analysis for public investment projects 2.1. Overview of public investment in Vietnam 2.1.1. Achievement Public investment is an important issue in Vietnam's socio-economic development strategy. Therefore, the data given by the General Statistics Office of Vietnam shows that the scale of domestic public investment tends to increase continuously, from VND 341.5 trillion in 2011 to VND 519.8 trillion in 2015 and achieved approximately 600 trillion VND in the last 2 years. However, in terms of proportion, the proportion of public investment capital tends to decrease, from about 40% in the period of 2011-2015 to 35% in the period of 2016-2018. Table 1: Investment in the period of 2011-2018 Unit: Trillion 2011 2012 2013 2014 2015 2016 2017 2018 Total 924.4 1010.1 1094.5 1220.7 1366.4 1485 1667.4 1856.6 State 341.5 406.5 441.9 486.8 519.8 557.4 594.9 619.1 Non state 356 385 412.5 468.5 528.5 579.7 676.3 803.3 Foreign invested sector 226.8 218.5 240.1 265.4 318.1 347.9 396.2 434.2 Structure (%) 2011 2012 2013 2014 2015 2016 2017 2018 Total 100 100 100 100 100 100 100 100 State 36.9 40.2 40.4 39.9 38.0 37.5 35.7 33.3 Non state 38.5 38.1 37.7 38.4 38.7 39.0 40.6 43.3 Foreign invested sector 24.5 21.6 21.9 21.7 23.3 23.4 23.8 23,4 Source: General Statistics Office of Vietnam, 2019 Public investment capital is largely invested in infrastructure development, including physical infrastructure (roads, airports, ports, water supply and drainage, electricity, telecommunications, etc) and 397
5. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 soft infrastructure (healthcare and education services, etc). The new infrastructure has made an important contribution to the production and business activities of the economy as follows: - Transport infrastructure: A number of important and large-scale traffic works such as Noi Bai airport, Tan Son Nhat airport, Da Nang airport, Can Tho airport, Vinh airport, Phu Quoc airport, Lien Khuong airport, Pleiku airport, Tho Xuan airport, Cai Mep - Thi Vai international gateway ports (Ba Ria - Vung Tau) were invested to connect more efficiently among the regions in the country and with the international trade net work. The new transport infrastructure has also promoted commercial activities, reducing logistic costs for many domestic goods and therefore improve the competitiveness of goods. - Energy infrastructure: Many big projects have been completed and being built such as: Lai Chau Hydropower; Duyen Hai, Vung Ang I and Vinh Tan II thermal power plants; electricity transmission to Phu Quoc, Ly Son, Co To and Van Don islands in order to better meet the needs for production and daily life as well as to ensure national security and defense. - Urban infrastructure: Urban technical infrastructure, especially in big cities have been invested in some recent years, such as radial traffic axes, ring roads, stereoscopic intersections at major intersections, urban bypasses, some major urban belts and railways in Hanoi and Ho Chi Minh City. The construction works of water supply and drainage, solid waste collection and treatment were also invested to solve the problem of flooding and garbage in big cities. - Infrastructure of industrial and economic zones were centrally completed by the local authorities to attract more domestic and foreign investors and solve the shortage of houses and essential social infrastructures (kindergartens, schools, clinics, etc) for workers in industrial zones, especially in some large industrial zones in Bac Ninh, Thai Nguyen, Binh Duong and Dong Nai. - Infrastructure for education and training, science and technology, health, culture and other social items got more attention of public investment: Many public projects building facilities for education were carried out, including in ethnic minority and disadvantaged areas. The construction works for medical and healthcare services were completed and put into operation. Series of large-scale, beautiful cultural and sport constructions (cultural houses, stadiums, children play grounds) were built in many communes, helping improve the spiritual life of people in rural and remote areas. - Irrigation infrastructure: Focused on investing in new construction and improvement rural irrigation works toward multi-purpose direction. Many large-scale projects in the Central, Central Highlands, Northern Midlands and Mountains, Red River Delta, and Mekong River Delta have been completed, contributing significantly to boost productivity and quality of the agricultural production. - Infrastructure works to boost new rural areas were also widely invested in localities throughout the country, whereby the rural face has been changed, people's lives have been successfully improved. 2.1.2. Some limitations It can be seen that the Law on Public Investment in 2015 has brought positive results in tightening discipline and improving efficiency in public investment area. As a result, although public investment capital has decreased in proportion, it still has an important contribution to the economic growth and the development in the country. Apart from remarkable results achieved, quite a few limitations remained in the public investment process. In particular: Table 2: Expenditure structure in the total state budget expenditure in the period of 2011-2018 Unit: % 2011 2012 2013 2014 2015 2016 2017 2018 Total state budget expenditure 100 100 100 100 100 100 100 100 - Normal expenditure 70.5 73.7 76.1 73.9 75.4 70.5 71.7 68.7 - Development investment expenditure and 29,5 26.3 23.9 26.1 23.8 25.7 25.3 31.3 other expenses Source: General Statistics Office of Vietnam, 2019 - Although public investment spending in Vietnam has decreased in proportion to the total state budget expenditures, this ratio remains relatively high compared to other countries in the region. 398
6. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 According to the calculations by World Bank in 2017, public investment spending in Vietnam is significantly higher than that of Indonesia (3.3%), Korea (4.2%) and Singapore (6.1%). High public investment spending shows that the demand for infrastructure development in the economy is excessive. It will put more pressure on the economy if the efficiency of public investment is not improved. - The allocation of investment capital for public projects has not ensured the principle of concentration and efficiency. Vietnam seems to make little progress in concentrating capital for key projects and in avoiding fragmentation of State Budget investment capital. Total public investment in the period of 2016-2020 is VND 2000000 billion which was allocated to 9620 projects. The VND 260000 billion of government bond capital was also allocated to all 63 provinces and cities of the country (Vietnam National Assembly, 2018). It suggests that the average public capital per project and the public capital granted to each locality is too small. Experiences of developed countries show that investment resources from the state mostly focus on projects that have spillover effects and good impact on the whole society. For example, in Australia, the medium-term public investment plan for 2018 focused on only 4 major projects. In South Korea, only 5 projects were invested in by the public sector out of a total of 20 highway projects. But in Vietnam, if we do the division mechanically (take the total capital divided by the projects), we couldn’t have any real large size project. As a result, the number of uncompleted projects is still huge. While the transitional projects have not been allocated enough capital, many new start-up projects continue to be financed. That is the reason why the phenomenon of slow progress and cost overruns is serious and becomes the most frequently problems in Vietnam. Table 3: The state capital concentration by sector (The Herfindahl - Hirschman index) Source: Vietnam annual economic report, National Economics University 2018 - The situation of waste and loss in public investment is still complicated and is not yet solved thoroughly. The wasteful use of state budget results from the thinking of “free- money” and unconvincing arguments about the effectiveness of public investment projects. Recently, the society has been frustrating with the situation of public investment spending for the wrong purposes or to serve the achievement obsession such as: luxury events and celebrations in many poor provinces, more headquarters and monument buildings than human's policies implementation. These projects only benefit a small group but not the entire economy in the sense of public investment. - Public investment has not focused on cost savings purpose. There is no mechanism to pressure investors and contractors to reduce public investment costs. Estimated costs of the projects are often based on these spending quotas and regimes established by the State, which are, nevertheless, often outdated or incomplete, and so are often being capitalized to push up estimated costs. These are then submitted to senior authorities for approval but the appraisals of public investment projects are made by 399
7. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 the agencies directly under those making investment decisions and, therefore, may lose some quality due to the lack of independence. - Public investment projects have not been remarkably effective: capital recovery for some completed projects was not as originally planned. Typically, a few construction projects imposed charges, but after many years of operation the fees collected were not sufficient for maintenance or renovation of construction works. Consequently, their quality would not be guaranteed, and hardly would beneficiaries feel satisfied with investment outcomes. Inefficient public investment also exacerbated the public debt situation. Vietnam now is in the group of high Public debt/ GDP ratio compared to many developing countries. Although the public debt ratio in Vietnam is still within the 65% public debt ceiling allowed by the National Assembly, the increasing debt scale is making the share of national interest payment higher and accordingly, the budget proportion for development investments in some coming year may be declined. Table 4: Comparison of Public debt/ GDP between Vietnam and other countries in the period of 2011-2018 Unit: % 2011 2012 2013 2014 2015 2016 2017 2018 Vietnam 44.7 48.4 52.0 55.0 57.4 59.9 58.5 57.8 Average of developing countries 30.3 30.6 31.5 32.6 36.7 40.6 42.8 44.1 Oil exporting countries 17.9 17.2 17.9 18.5 22.9 27.6 30.3 31.7 Asia 39.3 40.1 40.7 41.4 42.4 43.4 42.6 42.9 Latin America 23.3 26.4 31.5 32.5 33.5 35.4 36.0 37.8 Sub-Saharan 23.6 23.1 24.5 26.2 31.6 36.6 39.2 41.7 Source: IMF, Fiscal Monitor, 2018 2.1.3. Causes of limitations The following reasons for the aforementioned issues could be regarded: - First, the allocation of public investment capital across sectors and provinces still based on administrative management. Government allocated capital but ministries, branches and localities decided the total investment, leading to that the locals submitted supplemental list or spread investment, lacked focus, which soared demand for capital. This way of allocation did not reach the criteria of giving priority for locals, regions in difficulty, or for special urgent projects. It is very common that in Vietnam, the investment decision is often based on socio-economic development requirements (which can be considered as unlimited) and the ability to mobilize capital (the project owner self-proposed and often unproven), while the criteria for socio-economic efficiency, responsibility for capital repayment have not been strictly regulated and have no legal binding. So it is necessary to have a comprehensive assessment of the proposed projects in order to help the decision maker to select the best investment portfolio. - Second, there still exists a gap between the quality of Vietnam’s investment management mechanisms compared to international good practices, especially at the stage of designing, appraising and selecting projects. The two major constraints revealed by provincial authorities are: (1). lack of an investment intention report template and guidelines; (2). absence of methodologies and guidelines on the preliminary assessment of the socio-economic effectiveness of public investment projects (Glenn P. Jenkins & Mikhail Miklyaev & Shahryar Afra & Majid Hashemi, 2017). In particular, the selection of public projects still relies mainly on qualitative criteria (there have not had quantitative criteria to assess and select public investment projects yet). Therefore, many public projects have not met the requirement of improving benefits for the whole society. 400
8. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 For example in the field of transport infrastructure, the lack of a national criteria system in assessing socio-economic efficiency of public investment projects, including social discount rates, project evaluation timeframes, common social ratios for project removal/ acceptance has significantly reduced the ability to select the worthy public projects as well as limited the effectiveness of these projects. Besides that, in some transport infrastructure projects, their benefits were inflated to get high efficiency on paper but then caused serious damage in their actual implementation and operation. Therefore, it is necessary to develop criteria for evaluating the economic -social -environmental efficiency of each type of infrastructure projects as a basis for approval of the projects and sort the investment priority order. - Third, socio-economic analysis is one of the mandatory contents to prove the feasibility of an investment project in accordance with the Law on Investment but the nature of this analysis is assessing the project's contribution to the economy from the investor's perspective. This means that the investor from his point of view to show the project's impacts to the social economy. Typically, for private investment projects, these impacts are usually simple and easy to quantify such as the number of labor employed by the project, the additional contribution to the local budget. For public investment projects are the project's contribution to the implementation of socio-economic development strategies and socio- economic development objectives. The lack of a comprehensive cost benefit analysis methodology from a socio-economic point of view as well as the shortage of quantitative indicators for project impacts assessing that make the evaluation and selection of public investment projects become less effective. - Forth, many unstable factors affect the cost of the project but have not been carefully taken into account in pre-investment phase and will lead to project adjustment. For examples, when prices of construction materials increase, proposal to change project capital have to consider to approve. Whether the adjustment is permitted in this case also depends upon the availability of capital from the State budget or other sources but it will put the State in passive condition and present a risk to the effective implementation of the project. 2.2. The significance of using CBA in Public investment projects in Vietnam It can be seen that public investment activities have made significant contributions to improve the welfare of all members of the economy, but there still exist some limitations. Meanwhile, CBA has been considered as an useful tool to boost the effectiveness of investment projects, widely used in OECD member countries and some big institutions in the world. Some countries have mandatory application of CBA in public investment projects depending on their different capital scale. Applying CBA in public projects will bring us many advantages, including: - First, CBA takes into account all impacts of the project that happen to all groups of the economy thanks to its rigorous steps in analysis process. Therefore all benefits and costs of the project will be calculated, without missing any items. This method overcomes the subjective assessment from the investor's perspective when considering the project's impacts on the socio-economy. This is also entirely consistent with the characteristics of public investment projects that bring maximum benefits to all members of the society. In the context of constrained resources, Vietnam needs to focus on the investment projects that benefit as many groups as possible. - Second, CBA provides precise data for the calculation. A typical feature of public investment projects is using social resources to provide social benefits. The objectives in these projects are excessively broad and vague, which ease the process of preliminary screening but seriously compromise its quality. So the biggest challenge for these projects is how to identify and quantify the benefits and costs, especially those have nonmarket value. CBA estimates and totals up the equivalent money value of the benefits and costs to the community of projects to establish whether they are worthwhile. This means that all benefits and costs of a project would be measured in terms of their equivalent money value and in particular times. It is not only the financial costs that must be considered, but also the potential positive and negative impacts on the community as well as the possible environmental changes that could affect our future generations. 401
9. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 There are some techniques in CBA can be use to calculate nonmarket value. With such benefits that cannot be quantified in term of money (eg, fresh air, improved water resources, reduced noise pollution), Hedonic pricing method often be applied. For example, the difference in real estate prices can approximate the value of tranquility - the price the user is willing to pay extra to enjoy quietness (although in fact, there may be other problems arising in this deal). So the procedure for evaluating the monetary value of noise is based on the behavior of the property market. Certain studies have shown significant relationships between the level of exposure to noise and the depreciation of property values (CGP, 2001). In other example, the benefits of a public investment project to dredge heavily polluted canals near the residential areas will be measured by the willingness to pay by the people in order to get a cleaner environment in Contingent valuation method. Similarly, the costs in CBA are calculated by the opportunity cost of the investment. Opportunity costs represent the benefits a government misses out on when choosing one alternative over another. For example, the local government wants to fund VND 500 billion for park construction investment project. If this capital is used to fund other projects of the private sector, it will bring a revenue of VND 550 billion. Thus, the real cost of this capital is the lost income of VND 550 billion rather than the VND 500 billion cash expense and VND 550 billion is an opportunity cost. Or the preservation of the wild environment by eliminating the income from the use of wood or pasture for cattle- the lost money from timber or livestock is the opportunity cost of preserving the environment. With the specific and meticulous calculation of the impacts of such public investment projects, it will help to calculate the criteria for evaluating the efficiency of public investment projects more accurately. Therefore opportunity to limit investment projects with ambiguous benefits will be realized. - Third, in many countries, governments sometimes are fluctuated by social arguments. Therefore, the allocation of public investment capital is still mechanically distributed to all the locals and sectors. But when all the corresponding benefits and costs of the project are monetized, the evaluation criteria for project selection will become clear and transparent. Projects with negative net benefits value or have smaller net benefits value comparable to other projects will not be allowed. The comparison and evaluation of investment projects based on quantitative criteria will help the decision-making process more effectively, the spread distribution therefore will be solved thoroughly. - Fourth, CBA provides not only quantitative evaluation indicators but project analysis in case of risks and uncertainties. Identifying potential risks, assessing the sensitivity of efficiency evaluation criteria can help investors be proactive in project management. When investors have opportunities for gaining additional information about costs or benefits, they may be able to value the information by explicitly modeling the uncertainty inherent in their decisions. This also contributes to reducing the situation of project adjustment, which often affects the financial budget plan. - Fifth, every society has certain goals, some of them would be: improving economic welfare and people's living standard, ensuring social justice and improving environmental quality. Improving economic welfare is an increase in total social welfare. It is measured by the increase in net benefits generated from production and consumption of goods and services. Ensuring social justice is to make the reasonable distribution of net benefits among individuals in society and is often explained by the increase in opportunities for those who suffer most. The goal of improving environmental quality includes the improvement of the surrounding environment and human living conditions. It means any kind of better changes that people desire. CBA will show which projects contribute the most to economic benefits, including environmental results. Therefore, based on CBA, projects will be selected to ensure the sustainable development objectives in terms of both economy, society and environment purposes. - Sixth, public investment programmes and projects, as per the Public Investment Law, are subject to evaluation by different types of review, including ex ante, mid-term, terminal and post- completion reviews. Compliance with these requirements, however, is reportedly poor. A greater emphasis on outcomes might support a more effective approach to project. CBA in sense of both 402
10. INTERNATIONAL CONFERENCE FOR YOUNG RESEARCHERS IN ECONOMICS & BUSINESS 2019 ICYREB 2019 prospective and retrospective can provide project evaluative tools, including ex ante, ex post, in medias and other comparative types of CBA which is useful to all decision makers. 3. Conclusion The implementation of CBA method in public investment projects is necessary, especially in the current situation in Vietnam. The application of CBA will help overcome the weakest stage in the process of designing and evaluating public investment projects: to accurately quantify the benefits and costs of project, reveal their real social-economic value and select appropriate quantitative evaluation criteria. Since then, the selection of public investment projects will be more objective and scientific. This is also one of the steps to help Vietnam get closer to the international good practices in improving the effectiveness of public investment area. REFERENCE [1] Anthony Boardman, David Greenbeg, Aidan Vining and David Weimer (2010), Cost-Benefit Analysis: concepts and practice ( 4th Edition), Prentice Hall. [2] CGP, 2001. Transports: choix des investissements et couˆt des nuisances, Commissariat Général au Plan, La Documentation Franc-aise. [3] Diep Gia Luat, Dang Van Cuong, Bui Duy Tung (2015), Enhancing Quality and Efficiency of Public Investment in Vietnam up to 2020, Journal of Economic Development 23(1) 02-24 [4] Harry Campbel, Richard Brown (2003), Benefit- Cost Analysis- Financial and economic appraisal using spreadsheets, Cambridge University Press. [5] Harry Campbell, Richard Brown (2015), Benefit- Cost Analysis- Financial and economic appraisal using spreadsheets, Cambridge University Press. [6] Bộ môn Kinh tế Tài nguyên & Môi trường (2003), Nhập môn Phân tích Lợi ích chi phí, Tái bản lần 1, NXB Đại học Quốc gia. [7] Đại học Kinh tế quốc dân (2018), Đánh giá kinh tế Việt Nam thường niên 2018- Hướng tới chính sách tài khóa bền vững và hỗ trợ tăng trưởng, NXB Đại học Kinh tế quốc dân [8] Krystyna Brzozowska (2007), Cost-Benefit Analysis in Public Project Appraisal, Engineering economics. 2007. No 3 (53). [9] Glenn P. Jenkins & Mikhail Miklyaev & Shahryar Afra & Majid Hashemi (2017), Prioritization of Public Investment Projects in Vietnam, Development Discussion Papers 2017-08, JDI Executive Programs. [10] Sebastien Damart, Bernard Roy (2009), The uses of cost–benefit analysis in public transportation decision-making in France, Transport Policy 16 (2009) 200–212. [11] Bùi Tất Thắng (2018), Đầu tư công: Những vấn đề đặt ra cho năm 2018, accessed at trao-doi/trao-doi-binh-luan/dau-tu-cong-nhung-van-de-dat-ra-cho- nam-2018-135411.html on 15th of March, 2019 [12] Quang Hong Doan, Tuan Minh Le, and Duong Anh Nguyen, Public Investment in Vietnam, accessed at 1286300587143/I_Public_Investment_in_Vietnam.pdf on 10th of April, 2019 [13] World Bank (2015), Fiscal Decentralization review in Vietnam: making the whole greater than the sum the parts, Summary Report. [14] World Bank (2017), Vietnam Public Expenditure Review, Summary Report. [15] White, R & Smoke, P (2005), East Asia decentralizes: making local government work, World Bank. [16] General Statistics Office, Statistical Yearbook and Socio-Economic annual Report 2011-2018. 403