Public Project Economic Evaluation System

Public project is the foundation in maintaining social activities, and also the lifeline in supporting the economy in both urban and rural area. It plays an important role in development of sustainable economy and in building of a harmonious society. Particularly, the role of public project seems more decisive under the expansion policy of domestic demand. In the Fifth Session of the 10^th NPC, Premier Wen proposed the scope and field of public investment during a certain time in the future, which includes major projects related to long-term development, projects of water conservancy, energy base, railway lines, infrastructures and main arteries. The government should guide social capital to invest more on rural communities, middle and western regions of China, social affairs, project with independent innovations, resources saving techniques, and environmental protection. The reformation of investment system should be deepened and regulations of strategic decision making and accountability system should be improved. This shows that the government will increase the amount of investment in public projects in order to realize the goal in the long-run development. And the perfection of the regulations in strategic decision and accountability system is a guarantee to accomplish the goal.Presently, China's decision-making mechanism of public projects is not perfect yet, and there is a high error rate in decision-making, which leads to the low efficiency in investment. In order to improve the efficiency, more attention should be paid to the feasibility study and project appraisal of public project. At the same time, we should perfect the economic theory and system of method to make the investment more scientific.For a long time, there is no specific evaluation system in public projects." financial evaluation" and "national economic evaluation" ,two levels of method, are adopted, which obviously contains the theory of "efficiency is weight more than equity" put forward during the early time of the reformation and open up. The traditional ways of evalution become a restriction in accomplishing the goal of public project economic evaluation. Therefore, it is necessary to compile related economical theory and form a systematic method to serve for the public project economic evolution system, adjusting to the characteristic of economic development in the new situation of China considering a forward looking. "The 11^th five years" plan addresses recycling economy, social harmony and economic development, and to build a new socialist countryside. All are required a change in the mode of economic growth, which changes form the mode in pursuit of rapid economic growth to the mode concerning more about harmonious society, income distribution, and recycling economy development mode of sustainable development. So, in order to appraise the welfare contained in a public project, the concept of economic feasibility, social equity, and environmental sustainable development can be used in the future. The public project decision-making process appears such a trend that it changes from single criteria government decision-making to multi-criteria, multi-level public decision-making, which acquires continuous innovation in the method of public project evaluation.Solving the problem of public goods pricing, cost-sharing, external effects, governmental transfers, and other issues is the key to construct a perfect public project evaluation system. This paper tries to capture new features and regulations of public project evaluation in new situation through in-depth and systematic research, and find out ways to solve the problems. To supply and perfect current evaluation system in the prospect of pluralist values, and to establish a index system to evaluate macro economical effects and social effects depending on sustainable development and recycling economic theories on the basis of current index system., and trying to construct a scientific, adaptable, and complete system to guide the practice of public project evaluation and feasibility study.Nine chapters are involved in six parts.The first part, chapter 1, introduce the background of the subject and purport of this study, define the concept of public projects and related area, and explore studies both domestic and abroad. This part is the preparation and basis of the analysis in the following parts.The second part, chapter 2, introduce the public goods theory, external theory, theory of public projects analysis, sustainable development respectively, explain the nature, the characteristic, the classification, the external policy, and government behavior in the decision-making process as well as the starting point of public project selecting, which forms the foundation of public project economical evaluation system.The third part, chapter 3, is to compare the mechanism in decision-making with an international comparison included public investment area, mode of public project construction, public project decision-making system and so on. And point out the referable experiences in international practice. This comprehensive and systematic comparison in public project economic evaluation system between demestic and abroad may show the direction for the development of public project economic evaluation in our country.The fourth part is the chapter 4. A way of thinking which help to construct the public project economic evaluation system is put forward through the value of efficiency, fairness, participation, and sustainable development of multi-beneficiary in modern society. Four crucial factors including pricing of public goods, sharing of investment, external effect, and government transfers. Four levels are involved in the public project economics evaluation system, including financial analysis, economic analysis, macroeconomic and social effect analysis, and risk analysis.The fifth part contains three chapters, chapter 5, 6, and 7, which gives detailed information of content of assessment, methods, and index system respectively in the financial analysis, economic analysis, macro economical and social effect analysis, and usage of methods in different industries. In chapter 5, the identification of financial cost and benefit in the public project is the main focus. A public project analysis frame is established upon current investment system according to the characteristic of public project and the way to analyze financial survival ability is also specified. Analysis in chapter 6 starts from the identification of the economic cost and benefit using methods of cost-benefit analysis and cost-effect analysis to calculate economic cost and benefit, and go on with the evaluation of technical thinking path of the "platform mode" option value of public project by real options. In chapter 7, the necessity of macro economical and social effect analysis in a major public project is emphasized,and content of macro economical and social effect is analyzed,. And establish an index system for public project upon the theory of sustainable development and recycling economy. In chapter 8, different ways of identification and calculation are applied in different industries according to the different features they have. This chapter is also the application of the theory introduced in chapter 5 to 7.The sixth part, chapter 9, gives the conclusion of the study together with the shortcomings which need further studies in future.