3.4.5  Economic and Social Impact Assessment

The social impact analysis can be a very important part of the general appraisal of PPP Projects, since many infrastructure initiatives cause severe impacts on communities surrounding the site on which they are implemented.

Social impact analysis is an exercise aimed at identifying and analyzing such impacts in order to understand the scale and reach of the project's social impacts. It also ensures that these impacts are mitigated, to the extent possible, and fully considered in the approval decision.

However, social impact analysis can be expensive and time consuming, so the full analysis process cannot be justified for all projects. At a minimum, all projects should review project data to identify if material social impacts exist. If they do, a full social impact analysis should be conducted.

The social impact analysis can address a very broad set of issues related to changes in the social, economic, and cultural condition in which the surrounding community live and work. Specific types of social issues and possible impacts associated with a project can vary considerably depending on the nature of the project, its size and location. For example, a hospital in a remote rural area may have a much narrower set of social impacts than a greenfield toll road that crosses several communities. In all cases, experienced professionals should use their technical judgment to determine which issues should be subject to inquiry.

The social impact assessment should identify the impacts of the project in the community and classify them in terms of significance. It also provides recommendations for actions that can avoid, minimize, or compensate the adverse social impacts of the project. The social impact assessment indicates the total adverse social consequences that cannot be mitigated, and presents them as a relevant consideration in the approval decision to procure the project.

Infrastructure projects lead to a wide range of direct and indirect economic impacts. Some areas are:

  Positive outcome on the country GDP can be achieved when counting direct and indirect impacts

  Economic growth

  Increased labor market opportunities and job productivity

  Increased taxes

  Environmental impact

Hence, the economic value of any infrastructure PPP project should be analysed by quantifying the economic and social impacts, positive and negative, throughout the life of the infrastructure PPP project.