The heart of the investment evaluation process is the identification and analysis of options. Financial analysis is a method of measuring and evaluating the relative merits of public or private investment projects which identifying the option that best conforms to the financial and economic goal. Financial analysis is useful in planning and decision-making as it provides a common framework in which all of the important effects of investment choices can be made visible and, to the extent possible, quantified. It is a key tool in the quest for value for money.
Bangkok is one of the fastest-growing, most economically dynamic and socially progressive cities in Southeast Asia. For transportation, today almost all are filled in and converted from using canals into traffic-filled streets. Several elevated highways, and a partially-finished ring roads around Greater Bangkok, have been built to overcome the jams.
In 1999 an elevated two-line Sky train (officially called BTS) metro system was opened. The first line of the underground Bangkok Metro opened to the public in July 2004. In July 2004, a new MRT subway system was launched connecting the northern train station of Bang Sue to Hua Lamphong railway station near the city center, going through the eastern part of the city. It connects to the BTS system at BTS Stations of a Mo Chit, Asok, and Sala Daeng.
Bangkok is one of the fastest-growing, most economically dynamic and socially progressive cities in Southeast Asia. For transportation, today almost all are filled in and converted from using canals into traffic-filled streets. Several elevated highways, and a partially-finished ring roads around Greater Bangkok, have been built to overcome the jams.
In 1999 an elevated two-line Sky train (officially called BTS) metro system was opened. The first line of the underground Bangkok Metro opened to the public in July 2004. In July 2004, a new MRT subway system was launched connecting the northern train station of Bang Sue to Hua Lamphong railway station near the city center, going through the eastern part of the city. It connects to the BTS system at BTS Stations of a Mo Chit, Asok, and Sala Daeng.
Figure 1 Existing Route of Bangkok Mass Rapid Transit Map
As the transportation system has become more complex, its impacts have become more pervasive. A mass rapid transit network will provides mobility and access is essential to Bangkok and its economic resurgence and social interaction. In response, efforts to improve transportation involve consideration of a variety of issues. Therefore, public sector need to fixing problems with the existing transportation infrastructure and expanding capacity to meet future needs. Moreover, developing a framework for considering the public investment for transportation will affect and be affected by future changes in land-use, social, economic, environmental characteristics and concerns.
As the transportation system has become more complex, its impacts have become more pervasive. A mass rapid transit network will provides mobility and access is essential to Bangkok and its economic resurgence and social interaction. In response, efforts to improve transportation involve consideration of a variety of issues. Therefore, public sector need to fixing problems with the existing transportation infrastructure and expanding capacity to meet future needs. Moreover, developing a framework for considering the public investment for transportation will affect and be affected by future changes in land-use, social, economic, environmental characteristics and concerns.
Figure 2 New Route of Bangkok Mass Rapid Transit Map
Bangkok Mass Rapid Transit (BMRT) is the one of mega-project in Thailand which expands the transportation capacity and improves efficiency of mobility and accessing to important areas in Bangkok. With the project’s characteristic which complex and using large amount of money to capital, government or public sector can not subsidize alone by the limited budget and capability. The government is encouraged to prepare capital investment programs, covering periods of at least 3-5 years. The first year would typically form the basis for a capital expenditure budget. This would impact upon the current budget, for contributions to the capital budget on a pay-as-you-go basis. Moreover, it would also impact on future current budgets, including provision for expenditure on debt service for loan financing and for operation and maintenance of the assets so provided (Jones, 2001).
The government found that their tax revenues are not providing sufficient resources to meet these needs, and official development assistance has not been able to fill the gap. The government for realize that their limited financial resources are not sufficient to cover the needed capital the project. It is becoming increasingly clear that governments cannot meet the continually growing demand transportation services acting alone. The government need more investment for the project coupled with constrained government financial resources is prompting a search for new ways to develop capital projects by think of alternate sources of finance, technical excellence and support
One of the most viable options is to involve the private sector. This is done through association with private sector on a project-to-project basis and generally termed as PSP-private sector participation, PPP- Public private partnerships, PFI -Private Finance Initiatives etc. These usages though done interchangeably have slight differences in their specific definitions and operational frameworks but for the genera understanding it conveys the meaning of involvement of private sector in public services. The term “public-private partnership” (PPP) describes a spectrum of possible relationships between public and private actors for the cooperative provision of the project.
The project is crucial to develop a base case financial plan and assesses the sensitivity if the profitability of the project and the projected return on equity investment to various contingencies. Analysis of these factors almost always requires modeling and extensive sensitivity analysis. In order to select the best possible investment program, operation criteria are needed which enable the decision having the greatest project efficiency to be determined with sufficient exactness. The financial analysis is tool for appraisal capital investment of the project to optimize the type of mass rapid transit system installed to meet the well-being of people and private sector participation. In particular, it is the concern to show how far the financial analysis can assist public decision-makers in preparing their investment plans. However, even in these cases financial analysis contributes to rational decisions, insofar the (empirical) effects of investment projects is of major importance for all decision, even when in situations economic efficiency is not the standard governing the direction of political action (Georgi, 1973).
Moreover the government pays little attention to classical financial and economic analysis techniques in order to identify its strengths and weaknesses. Therefore, to optimize the best alternative on appraisal or analysis the project to gain the most financial and economic returns, it is essential to focus on activities, output and outcome on proposed infrastructure projects set by either public or private.
The case study of BMRT is analyzed on selecting the type of mass rapid transit and its PPP structure which optimize social, economic and financial term. Especially, consideration of the project output in term of finance is very significant to meet the private sector participation.
Mr. Warut Neamnoi conducted a study which main objective was to develop the suitable Capital Investment Analysis (CIA) framework recognizing activities, output, and outcome of BMRT project. In order to achieve the main objective, the 3 sub-objectives were also needed to accomplish: (1)to develop the structure of activities, output, and outcome of BMRT project; (2) to investigate parameters of the classical financial and economic analysis techniques in order to identify its strengths and weaknesses (coverage of activities, output, and outcome) spanning all project life cycle; and (3) to propose and test the analysis model applicable to serve as a framework for decision making on selection of mass transportation modes (Bus Rapid Transit, Light Rail Transit, Heavy Rail Transit, etc.) applicable for BMRT project.
Conclusions
The proposed CIA has been developed from the study of many CIA of important/reputation organizations and CIA of developed country by capturing the essence process and cutout redundant processes, and developed as the new standard for CIA. The OOF is developed as the enhancement tool for CIA, not only the proposed CIA but it also can be applied to any CIA to improve discovering project parameter in order to make CIA more accurate in the analysis process. CIA with OOF has been successfully developed by combining the strengths and deplete the weakness of them and set as the new standard CIA.
According to the Case study, the CIA with OOF has been applied with Purple-Line of BMRT project. Since, the project is mega-project which is very complex and the project owner is GOT which some information is classified, the CIA with OOF was applied as best as it can. The CIA of Purple-Line of BMRT project is gone through 16 steps by combination of the Proposed CIA 14 steps which are: 1) Project Purpose and Identification; 2) Traffic Analysis; 3) Demand Analysis; 4) Feasibility and Option Analysis of System; 5) Procurement and Technology Analysis; 6) Price Analysis; 7) Financial Capacity Analysis; 8) Financial Analysis; 9) Economic Analysis; 10) Sensitivity Analysis; 11) Risk Analysis; 12) Social Analysis; 13) Environment Analysis; 14) Project Evaluation. OOF has been applied to every step of CIA by improve the quality of parameter. Although, the CIA of Purple-Line of BMRT project is not specify which MRT system should be installed for this line and how should the values capture setup with the project, depending on the government make the policy with the project that the government expect for overall economic return or prefer on financial return or project financial sustainable.
His thesis abstract is copied and posted.
ABSTRACT
Capital Investment Analysis (CIA), is using as a tool for project feasibility analysis which very essential for design the project to ensure an adequate demand, financial, and economic to access the investor objectives. Without CIA process, the project cannot safely implement and successful as it might wish. Unfortunately, traditional CIA that has been used by each different organizations, some of them are not complete with adequate analysis functions to deal with standard CIA and affect to unsuccessful of the project or make loss. To address this problem, the CIA is developed for standardize the CIA to compatible with all projects and scenarios.
The Output Outcome Framework (OOF) is developed by validating of cause-effect in term of activity, output and outcome of the project. The developed OOF is then integrated into CIA. The case study of Bangkok Mass Rapid Transit is presented in order to exemplify the application of the developed OOF into CIA.
Bangkok Mass Rapid Transit (BMRT) is the one of mega-project in Thailand which expands the transportation capacity and improves efficiency of mobility and accessing to important areas in Bangkok. With the project’s characteristic which complex and using large amount of money to capital, government or public sector can not subsidize alone by the limited budget and capability. The government is encouraged to prepare capital investment programs, covering periods of at least 3-5 years. The first year would typically form the basis for a capital expenditure budget. This would impact upon the current budget, for contributions to the capital budget on a pay-as-you-go basis. Moreover, it would also impact on future current budgets, including provision for expenditure on debt service for loan financing and for operation and maintenance of the assets so provided (Jones, 2001).
The government found that their tax revenues are not providing sufficient resources to meet these needs, and official development assistance has not been able to fill the gap. The government for realize that their limited financial resources are not sufficient to cover the needed capital the project. It is becoming increasingly clear that governments cannot meet the continually growing demand transportation services acting alone. The government need more investment for the project coupled with constrained government financial resources is prompting a search for new ways to develop capital projects by think of alternate sources of finance, technical excellence and support
One of the most viable options is to involve the private sector. This is done through association with private sector on a project-to-project basis and generally termed as PSP-private sector participation, PPP- Public private partnerships, PFI -Private Finance Initiatives etc. These usages though done interchangeably have slight differences in their specific definitions and operational frameworks but for the genera understanding it conveys the meaning of involvement of private sector in public services. The term “public-private partnership” (PPP) describes a spectrum of possible relationships between public and private actors for the cooperative provision of the project.
The project is crucial to develop a base case financial plan and assesses the sensitivity if the profitability of the project and the projected return on equity investment to various contingencies. Analysis of these factors almost always requires modeling and extensive sensitivity analysis. In order to select the best possible investment program, operation criteria are needed which enable the decision having the greatest project efficiency to be determined with sufficient exactness. The financial analysis is tool for appraisal capital investment of the project to optimize the type of mass rapid transit system installed to meet the well-being of people and private sector participation. In particular, it is the concern to show how far the financial analysis can assist public decision-makers in preparing their investment plans. However, even in these cases financial analysis contributes to rational decisions, insofar the (empirical) effects of investment projects is of major importance for all decision, even when in situations economic efficiency is not the standard governing the direction of political action (Georgi, 1973).
Moreover the government pays little attention to classical financial and economic analysis techniques in order to identify its strengths and weaknesses. Therefore, to optimize the best alternative on appraisal or analysis the project to gain the most financial and economic returns, it is essential to focus on activities, output and outcome on proposed infrastructure projects set by either public or private.
The case study of BMRT is analyzed on selecting the type of mass rapid transit and its PPP structure which optimize social, economic and financial term. Especially, consideration of the project output in term of finance is very significant to meet the private sector participation.
Mr. Warut Neamnoi conducted a study which main objective was to develop the suitable Capital Investment Analysis (CIA) framework recognizing activities, output, and outcome of BMRT project. In order to achieve the main objective, the 3 sub-objectives were also needed to accomplish: (1)to develop the structure of activities, output, and outcome of BMRT project; (2) to investigate parameters of the classical financial and economic analysis techniques in order to identify its strengths and weaknesses (coverage of activities, output, and outcome) spanning all project life cycle; and (3) to propose and test the analysis model applicable to serve as a framework for decision making on selection of mass transportation modes (Bus Rapid Transit, Light Rail Transit, Heavy Rail Transit, etc.) applicable for BMRT project.
Conclusions
The proposed CIA has been developed from the study of many CIA of important/reputation organizations and CIA of developed country by capturing the essence process and cutout redundant processes, and developed as the new standard for CIA. The OOF is developed as the enhancement tool for CIA, not only the proposed CIA but it also can be applied to any CIA to improve discovering project parameter in order to make CIA more accurate in the analysis process. CIA with OOF has been successfully developed by combining the strengths and deplete the weakness of them and set as the new standard CIA.
According to the Case study, the CIA with OOF has been applied with Purple-Line of BMRT project. Since, the project is mega-project which is very complex and the project owner is GOT which some information is classified, the CIA with OOF was applied as best as it can. The CIA of Purple-Line of BMRT project is gone through 16 steps by combination of the Proposed CIA 14 steps which are: 1) Project Purpose and Identification; 2) Traffic Analysis; 3) Demand Analysis; 4) Feasibility and Option Analysis of System; 5) Procurement and Technology Analysis; 6) Price Analysis; 7) Financial Capacity Analysis; 8) Financial Analysis; 9) Economic Analysis; 10) Sensitivity Analysis; 11) Risk Analysis; 12) Social Analysis; 13) Environment Analysis; 14) Project Evaluation. OOF has been applied to every step of CIA by improve the quality of parameter. Although, the CIA of Purple-Line of BMRT project is not specify which MRT system should be installed for this line and how should the values capture setup with the project, depending on the government make the policy with the project that the government expect for overall economic return or prefer on financial return or project financial sustainable.
His thesis abstract is copied and posted.
ABSTRACT
Capital Investment Analysis (CIA), is using as a tool for project feasibility analysis which very essential for design the project to ensure an adequate demand, financial, and economic to access the investor objectives. Without CIA process, the project cannot safely implement and successful as it might wish. Unfortunately, traditional CIA that has been used by each different organizations, some of them are not complete with adequate analysis functions to deal with standard CIA and affect to unsuccessful of the project or make loss. To address this problem, the CIA is developed for standardize the CIA to compatible with all projects and scenarios.
The Output Outcome Framework (OOF) is developed by validating of cause-effect in term of activity, output and outcome of the project. The developed OOF is then integrated into CIA. The case study of Bangkok Mass Rapid Transit is presented in order to exemplify the application of the developed OOF into CIA.
