Comments on Factsheet of Working Group 2

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  • Tomsolna
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Re: Financial and Economic Analysis Revisited

Who is Tom? web.comhem.se/t.alberts/
In summary several decades of work in internatiuonal co-operation.
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  • Tomsolna
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Re: Financial and Economic Analysis Revisited

Dear all,

As an economist with decades of work experience in rural/agricultural debelopment it was interesting to discover SuSanA and its WG 2.

In the 60:s NPV and BCR were used and there were tables to calculate the discounted values. Quite a lot of work involved. With modern computers and not least the explosion in PC technology it became technically easy to calculated the Internal Rate of Return, IRR. In 1981 with an Apple II+ and VisiCalc I managed to estimate IRR using an iteerative process.

There are several disadvantages with NPV and BCR. The most important one is that the analyst(s) has to decide on the rate of discount. This often involves political considerations and are often subject to controvers. Moreover, often one can often find different discount factors even within a given country. This means that you cannot compare different projects unless the same discount factor has been used.
So eliminate BCR and NPV from the text. Something could be added as a footnote.

I am not quite sure about the audience for the Fact sheet. In my view somebody with only some knoweldge of economics should be able to understand the text. And one of the most important conclusions a FIRR 10% while the EIRR 70%. This has far reaching policy implications.And the use of sensitivity analysis is very important.
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  • sjoerdnienhuys
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  • Technical advisor on low-cost sanitation, worked for Aga Khan in the Himalayas, PUM in Asia,/Afica and Latin America, SNV in Nepal, DGIS in Latin America UNhabitat in Africa, and Waste /Gouda in India on ECO sanitation and biogas
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Re: Update of Factsheet 2

Finance factsheet 2.

On par. 4, elaborating the health bullet point seems better. “Health expenses include bills for medicines and curing. Reducing these expenses are a major motivation for low-income people to improve their sanitation system. Poor health, due to poor sanitation, can lead to physical inability to work and subsequently to loss of income. Also worm diseases or diarroea can lead to malnutrition and lack of brain development, having a permanent impact on learning ability and future income.”


On page 4. There should be established a clear link in the planning phase between increased water supply and increased cost of each type of sanitation before the water supply is being improved. Dry toilets should have low water tariffs, pour-flush higher water use tariffs and full-flush the highest with the obligation to take care of the sewerage output.

Par.5. Since people are correctly reserved about handling human excreta, the text should be very clear when is spoken of raw sewerage or fully processed or composted human and animal excreta. In addition it should be mentioned that fully processed human excreta is harmless to handle. A single text line at the end of the storey is not enough, every mention should be clarified, otherwise many readers will disregard any system that handles (general) human excreta.
Sjoerd from The Netherlands.
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  • philfei
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Re: Update of Factsheet 2

Dear Sjoerd,

thank you for your message regarding the factsheet 2.

In your first posting you are mentioning the relation between sanitation and health. Are you thinking about including a new bullet point or what exactly are you proposing to add/change? A reference to quote would be ideal.

Regarding your second posting on adding water supply to the costs of sanitation, I agree with you that it is not easy to differ between all existing costs in the WASH sector (sanitation, water supply and hygiene). How and where to make the cut if you are interested only one specific component. But of course there is still space for further discussions.

Your third posting is on the definition of the term of human excreta. I think this sentence is exactly what you are mentioning. Please correct me if I am wrong.
„Many of the argued (or predicted) benefits of reuse oriented sanitation are hypothetical or heavily related to context-specific programme conditions.“

Thanks again for your input and looking forward to you answers.

Cheers,
Philipp
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

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  • sjoerdnienhuys
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  • Technical advisor on low-cost sanitation, worked for Aga Khan in the Himalayas, PUM in Asia,/Afica and Latin America, SNV in Nepal, DGIS in Latin America UNhabitat in Africa, and Waste /Gouda in India on ECO sanitation and biogas
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Re: Update of Factsheet 2

In the finance factsheet 2, parragraph 5 (economic benefits) it should be clarified whether the text refers to 'raw human excreta' or 'fully processed human excreta'. There exist strong resistance against the use on non-processed or raw human excreta for fertilizer.

When 'fully processed human excreta' is used as fertilizer it will be beneficial to mention that this can be safely handled. In addition it can be mentioned for what agricultural products it is largely accepted such as bananas, wheat, maize, etc. In some countries the use of 'fully processed human excreta' for food-root crops is still not entirely accepted.
Sjoerd from The Netherlands.
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  • sjoerdnienhuys
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  • Technical advisor on low-cost sanitation, worked for Aga Khan in the Himalayas, PUM in Asia,/Afica and Latin America, SNV in Nepal, DGIS in Latin America UNhabitat in Africa, and Waste /Gouda in India on ECO sanitation and biogas
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Re: Update of Factsheet 2

In the finance factsheet, page 4, the cost of sanitation need to be included with the watersupply cost (backward) and sewerage cost (forward). Only by including these two cost aspects the real cost of sanitation can be planned.
If a high- or low-flush water operated sanitation is choosen, additional (drinking) water supply is needed, having a considerable cost, as well as additional sewerage treatment cost.
Choosing a dry toilet system including UDT, biogas or composting, the backward and foreward costs will be greatly reduced.

The table 1 does not give the water consumption, nor the sewerage output per sample project. Maybe this can be aded in the future edition. With these added figures the cost aspects of certain systems wth their backward and foreward costs can be better understood.
Sjoerd Nienhuys
www.nienhuys.info
Sjoerd from The Netherlands.
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  • sjoerdnienhuys
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  • Technical advisor on low-cost sanitation, worked for Aga Khan in the Himalayas, PUM in Asia,/Afica and Latin America, SNV in Nepal, DGIS in Latin America UNhabitat in Africa, and Waste /Gouda in India on ECO sanitation and biogas
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Re: Update of Factsheet 2

In factsheet 2, parragraph 4, the economic benefits releted to health are much wider than listed. At the family houshold level the health expenses related to curing medicines (worms and diarrea) are often considerable. Poor health such as weakness by chronical intestinal disease directly leads to poor work performance and low physical productivity leading to lack of income. Intestinal diseases lead to poor nutrition and therefore indirectly to reduced mental capacities or reduced learning ability having long-term impact on working ability.
In several countries where I worked, the reduced medical bills were one of the strongest arguments for improving sanitation. In this respect people can have a good understanding for long-term economic benefits of better sanitation systems.
Sjoerd Nienhuys
www.nienhuys.info
Sjoerd from The Netherlands.
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  • philfei
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Re: Update of Factsheet 2

Dear all,

during the phase of updating factsheet 2 on „Financial and economic analysis“ there have been some comments and questions coming up. Please find the latest version of the factsheet attached with the original comments. Please feel free to start the discussion.


1. Comment/question by Christoph on Fig. 3 Example capital cost range of different sanitation options:
“As I don´t have the original reference I´m just able to comment on the presented. I think this figure mixes up between costs for the “ultimate beneficiaries” and the overall costs. I guess (please correct me that the flush to sewer does NOT include the bathroom installation and if it does so, how many? Normally these figures present the cost per connection (house) in the case of the sewer without costs for the bathroom. Are the house connections included? Probably it includes as well the treatment (at least it should). On the other hand the pit latrine…is treatment included, I doubt that but on the other hand for sure the toilet itself is included…. So finally I guess this figure compares apples to peaches. I think there has to be done a separation regarding the costs between the three view points.”

2. Comment/question by Christoph on calculation costs in relation to GDP or average income:
„You can not go from the middle income (the gap is too large in developing countries) do you go from the poverty limit? Than you have a problem the poorest which should be the main aim. Do you go from a "medium of people below poverty level", than you come extremely low and not realistic... or yes ..that has to be the target...these aspect would be interesting for myself.“

„That is not a good indicator to compare countries. A poor zone as in Brazil Northeast give an impression that the costs are not that relevant.“

„There is a severe problem related to that point the middle income is not a good indicator asI mentioned above. For instance the example from Brazil mentiones that very poor housholds had to use up to 3% of their income. The number 0,1-0,2% gives the idea that the solution is perfect. The reasen is in the large difference between middle income and poor income.“

3. Comment/question by Christoph on software costs as % of investment:
„That [Example from China] was for operator training AND CONSULTANT!!!, not for santiation awareness or education!!“

4. Comment/question by Guy on common parameter to compare projects:
„I would disagree that the NPV is the ‘main’ parameter. The development banks tend to prefer the IRR, and I personally prefer the BCR. The NPV does not give a ‘relative’ measure of return but only the overall return. So a hydro-electric dam has a NPV much much greater than a household toilet, but that is obvious!“

You are welcome to start the discussion.

Looking forward to your contributions.

Cheers,
Philipp
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

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  • Elisabeth
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Re: Update of Factsheet 2

Dear Philipp,

Thanks. Please put the open questions about this factsheet here on the forum (and on the WG 2 mailing list) for all to see, as I am curious to know what they are, and not everyone is on holidays right now anyhow (and even if they are, a bit of forum posting is a nice thing to do, even during holidays). :cheer:

Hope that everyone had a nice Christmas (for those people who celebrate Christmas, that is)!

Cheers,
Elisabeth
Dr. Elisabeth von Muench
Freelance consultant on environmental and climate projects
Located in Ulm, Germany
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  • philfei
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Re: Update of Factsheet 2

Dear all,


I would like to announce that the SuSanA factsheet 2 – Finance and economics has been updated. Thanks to all authors and contributors for their efforts.

Please find the latest version in the SuSanA Library:

susana.org/lang-en/library/rm-susana-pub...peitem&type=2&id=609


There are still some open questions and comments, which should be discussed, but with regards to holidays, I would suggest to start next year.

Cheers,
Philipp
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

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  • christoph
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Re: Update of Factsheet 2

Hi,

By the service Sanitation Updates sanitationupdates.wordpress.com
I came across an OECD (2011) report . Meeting the challenge of financing water and sanitation : tools and approaches.
It contains interesting figures which might be good to put in in the factsheet (Figure 3.1).
The document provides an interesting overview. Main points for myself are:
• It discusses the often mentioned aspect 1 € in water and sanitation brings benefit of 7€ (with sources).
• It discusses the financial numbers for reaching MDG (or not reaching)
• It gives interesting ideas about how to close the gap of financing Water and Sanitation (although unfortunately no magic formula :( )
• It discusses a bit the often mentioned aspect “costs for Water and wastewater should not be more than 5 % of household income”. The question is always which income is the base!

A point I found very good expressed for sustainable sanitation, are the negative benefits of water availability (feces, effluent, greywater in the streets) and sewers without treatment (point source contamination for water bodies). They include a figure for that as well (Figure 1.3).


Yours
Christoph
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  • philfei
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Re: Update of Factsheet 2

Dear all,

thanks to Jonathan and Doreen for your effort to improve the factsheet. I made some changes and tried to simplified the sentence mentioned by Doreen. Please find the latest version attached and feel free to make more changes.
[attachment:2]wg02_susana-factsheet-costs-economics-v2091011-jnp-plf.doc[/attachment]


Cheers,
Philipp
Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH

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