Measuring costs and benefits of export promotion projects : findings from A.I.D. experience

This paper explores methodologies for ex post impact analysis of export promotion projects. The paper discusses several types of benefits: direct benefits (foreign exchange earnings, employment generation, returns to local capital, value added); indirect benefits (e.g., new or stronger institutions to promote investment and exports and an improved policy environment for export-oriented investment); and externalities (benefits or costs, either to unassisted firms or to others, resulting from the project-related activities of assisted firms). The following conclusions are reached. (1) Rigorous cost-benefit analysis of promotion projects is extremely difficult to perform ex post. Substantial data are needed for such analysis (requiring an unjustifiably large expenditure of scarce evaluation resources), and the reliability of the results is questionable. (2) More limited cost-benefit analysis based on data gathered in short field trips (as done for this report) provides only a rough estimate of the rate of return. (3) Where time and financial resources are limited, a rate of return calculation based on employment benefits may serve as a useful proxy for a more complete analysis. (4) Promotion projects can have significant indirect impacts, but measuring such impacts poses significant challenges. Learning from other firms, for example, has potentially large benefits. (5) Performance monitoring is essential in promotion projects, but formal cost-benefit analysis is likely to be impracticable in most circumstances. Often more appropriate are less ambitious measures such as setting specific targets linked to government objectives (e.g., job creation), use of intermediate measures (e.g., an increase in the number of export leads being actively pursued), and periodic surveys of assisted firms. (Author abstract, modified)