National Economic Parameters

Abstract

This chapter discusses the national economic parameters (NEP) required for project analysis. Such parameters are national in that they apply to all projects regardless of their sector, and they are economic because they reflect the shadow price of the items concerned. A typical set of NEP covers CFs for unskilled and skilled labour, some of the main non-traded sectors, some aggregate CFs, such as a consumption conversion factor (CCF) and a standard or average conversion factor (ACF), and the discount rate. A project analyst can apply these parameters directly to the project under analysis so that, for example, the discount rate or a conversion factor for electricity does not need to be re-estimated for every project. Some shadow pricing will still need to be done at the project level, relating to the main project output and key inputs, and probably also to labour. However, the existence of a set of NEP allows the project analyst to focus on parameters that are treated most accurately on a specific project-by-project basis.