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Research Project Report 상세보기
An Economic Validity Analysis on Marine Transportation Safety Facility
Report No. 2013-04 Research Manager Kim Soo Yeop
File


An Economic Validity Analysis on Marine Transportation Safety Facility


1. Purpose
○ The study justified constant infrastructure investment with its analyses on economic validity of investment into marine transportation facility.
-In addition to proving investment effects, it built a consensus on governmental support for certain areas, such as safety, environment and security which have difficulties in inducing private investment.
○ The study analyzed economic effects of prevented marine accidents caused by various investments in marine transportation infrastructure. 
- It examined economic effects of preventable and reducible marine accidents as well as effects of relevant industrial development.


2. Methodologies and Feature
1) Methodologies
○ The study conducted preceding research and literature analyses on marine transportation.
○ For the analysis, it targeted the Vessel Traffic Service (VTS) which is relatively in larger scale than other marine transportation facility.
○ It examined budget, investment details, number of marine accidents and their damages over the last five years.
○ It evaluated research materials in different areas, such roads and railways, which used the contingent valuation method (CVM).
○ It held expert workshops to gather opinions on economic effect analyses and to set policy direction.
2) Feature
○ Marine transportation facility is public goods for the general public and their safety. The study used the Contingent Valuation Method (CVM), a method to estimate economic value of non-market goods, such as environmental goods.
○ In order to analyze economic effects of marine accidents preventable by the VTS, the study estimated costs caused by marine accident cases.
-It conducted surveys with people and shipping companies in local areas where VTS is to be established in the future.


3. Results
1) Summary
○ Out of the total budget for establishing marine transportation environment until 2016, KRW225.4 billion is earmarked for expanding marine transportation control infrastructure, KRW 194.9 billion is for VTS facility expansion and KRW 30.5 billion is for coastal VTS expansion.
○ According to a survey with people in areas where marine transportation control center is to be built (Tongyoung), the yearly benefit from building new VTS is estimated at KRW 11billion.
-If fees are paid in the form of income tax for five years from 2014, corresponding benefits during the same period will reach KRW 47.3 billion in current value.
-An analysis on economic validity of VTS establishment in Tongyong showed the B/C ration stood at 3.193, far higher than 1. The Net Present Value (NPV) was KRW 32.5 billion and the Internal Rate of Return (IRR) turned out to be 37.4% which was higher than social discount rates of 53.5%. On balance, the establishment has reasonable economic validity.
2) Policy contribution
○ Marine transportation safety facility requires continuing investment because more ships will come to and go out ports with increasing marine leisure and economic activities. Moreover, larger and faster ships call for accident prevention and marine environment protection.
○ Current marine transportation facility is usually made in advanced nations. Therefore, local manufacturing of such facility will lead to industrialization of the field.

3) Expected benefits
○ The study can be used as a case analysis on investment in marine transportation facility in the future.
-Marine transportation facility is basic infrastructure for safety, which makes investment into them free from economic validity. However, once economic validity is secured, budget negotiation and persuasion of the public can become easier and more meaningful.
○ The study raised the need for a basic unit analysis system on marine accidents. 
- The estimation of marine accident costs by the Korea Transport Institute has big significance and role. Nevertheless, that is not specified for marine transportation and has limited data. The study paves the ground for discussion on constant data and work system for future research on estimation of marine accident costs.
○ The study induces continual investment into marine transportation facility. 
- Generally speaking, investment into safety facility or system cannot gather attention even for a short period of time unless accidents occur or such investment becomes a social issue.
-However, one marine accident, particularly within controlling zone, can produce loss of lives and property damages, paralyzing port function and generating environmental pollution. Therefore, the study can encourage advance investment for accident prevention.

Research Project Report 상세보기
An Economic Validity Analysis on Marine Transportation Safety Facility
Report No. 2013-04 Research Manager Kim Soo Yeop
File


An Economic Validity Analysis on Marine Transportation Safety Facility


1. Purpose
○ The study justified constant infrastructure investment with its analyses on economic validity of investment into marine transportation facility.
-In addition to proving investment effects, it built a consensus on governmental support for certain areas, such as safety, environment and security which have difficulties in inducing private investment.
○ The study analyzed economic effects of prevented marine accidents caused by various investments in marine transportation infrastructure. 
- It examined economic effects of preventable and reducible marine accidents as well as effects of relevant industrial development.


2. Methodologies and Feature
1) Methodologies
○ The study conducted preceding research and literature analyses on marine transportation.
○ For the analysis, it targeted the Vessel Traffic Service (VTS) which is relatively in larger scale than other marine transportation facility.
○ It examined budget, investment details, number of marine accidents and their damages over the last five years.
○ It evaluated research materials in different areas, such roads and railways, which used the contingent valuation method (CVM).
○ It held expert workshops to gather opinions on economic effect analyses and to set policy direction.
2) Feature
○ Marine transportation facility is public goods for the general public and their safety. The study used the Contingent Valuation Method (CVM), a method to estimate economic value of non-market goods, such as environmental goods.
○ In order to analyze economic effects of marine accidents preventable by the VTS, the study estimated costs caused by marine accident cases.
-It conducted surveys with people and shipping companies in local areas where VTS is to be established in the future.


3. Results
1) Summary
○ Out of the total budget for establishing marine transportation environment until 2016, KRW225.4 billion is earmarked for expanding marine transportation control infrastructure, KRW 194.9 billion is for VTS facility expansion and KRW 30.5 billion is for coastal VTS expansion.
○ According to a survey with people in areas where marine transportation control center is to be built (Tongyoung), the yearly benefit from building new VTS is estimated at KRW 11billion.
-If fees are paid in the form of income tax for five years from 2014, corresponding benefits during the same period will reach KRW 47.3 billion in current value.
-An analysis on economic validity of VTS establishment in Tongyong showed the B/C ration stood at 3.193, far higher than 1. The Net Present Value (NPV) was KRW 32.5 billion and the Internal Rate of Return (IRR) turned out to be 37.4% which was higher than social discount rates of 53.5%. On balance, the establishment has reasonable economic validity.
2) Policy contribution
○ Marine transportation safety facility requires continuing investment because more ships will come to and go out ports with increasing marine leisure and economic activities. Moreover, larger and faster ships call for accident prevention and marine environment protection.
○ Current marine transportation facility is usually made in advanced nations. Therefore, local manufacturing of such facility will lead to industrialization of the field.

3) Expected benefits
○ The study can be used as a case analysis on investment in marine transportation facility in the future.
-Marine transportation facility is basic infrastructure for safety, which makes investment into them free from economic validity. However, once economic validity is secured, budget negotiation and persuasion of the public can become easier and more meaningful.
○ The study raised the need for a basic unit analysis system on marine accidents. 
- The estimation of marine accident costs by the Korea Transport Institute has big significance and role. Nevertheless, that is not specified for marine transportation and has limited data. The study paves the ground for discussion on constant data and work system for future research on estimation of marine accident costs.
○ The study induces continual investment into marine transportation facility. 
- Generally speaking, investment into safety facility or system cannot gather attention even for a short period of time unless accidents occur or such investment becomes a social issue.
-However, one marine accident, particularly within controlling zone, can produce loss of lives and property damages, paralyzing port function and generating environmental pollution. Therefore, the study can encourage advance investment for accident prevention.

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