HIAS-E-87

Economic Viability of Large-scale Irrigation Construction in
21st Centry sub-Saharan Africa:
Centering around the Estimation of Construction Costs of
Mwea Irrigation Scheme in Kenya
Masao Kikuchi(a) , Yukichi Mano(b) , Tim Njagi(c) , Douglas Merrey(d) , and Keijiro Otsuka(e)(a) Chiba University(b) Hitotsubashi University(c) Mwea Oﬃce, National Irrigation Board(d) independent consultant(e) Kobe University

August, 2019

Hitotsubashi Institute for Advanced Study, Hitotsubashi University
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Economic viability of large-scale irrigation constructionin 21st century sub-Saharan Africa:
Centering around the estimation of construction costs of Mwea
Irrigation Scheme in Kenya

Masao Kikuchi1), Yukichi Mano2), Tim Njagi3), Douglas Merrey4), and Keijiro Otsuka5)
1) Chiba University, 2) Hitotsubashi University, 3) Mwea Office, National Irrigation Board, 4) independent
consultant, 5) Kobe University

Abstract
The main reason for the success of the 20th century Green Revolution in Asia was thedevelopment of large-scale irrigation projects. But, since the late 1990s, these investments wereout of the development agenda, partly because the success of the Green Revolution reduced theneed for such irrigation development and partly because the lower-than-expected performance ofmany large-scale irrigation projects resulted from difficulties in designing, constructing, operating,and managing large-scale irrigation schemes. This was the case in sub-Saharan Africa (SSA) as
well. During the past decade, however, large-scale irrigation development seems to be comingback in SSA as a means to promote a Green Revolution there. This revival has evoked heateddiscussion as to whether the conditions that made the large-scale irrigation projects an infeasible
option have been overcome. This paper examines whether large-scale irrigation construction in
SSA is economically feasible by estimating how much it would cost if the Mwea Irrigation
Scheme in Kenya, one of the best performing irrigation schemes in SSA, were to be constructedtoday as a brand-new scheme. The results show that the new construction of the Mwea Scheme
may be economically viable if the shadow price of rice is as high as the world price that prevailed
during the mini-rice crisis in 2008-2013; however, the viability is marginal, by no means robust.
The project costs per unit of beneficiary irrigated area of our ‘Mwea Project’ and a few 21stcentury large-scale irrigation projects under planning or under construction are two to four times
higher than those of 20th-century counterparts. For such expensive projects to be economically
viable, the agricultural performance of these projects must be two to four times higher as well,which means, in terms of rice yield, 9 t/ha/year to 20 t/ha/year. There is certainly untapped1potential in SSA for large-scale irrigation development, either construction of new schemes orrehabilitation of the existing ones, but the economically feasible potential remains limited.
International donor agencies and national governments wanting to plan large-scale irrigation
projects are recommended to assess seriously whether their plan is economically andtechnologically feasible and indisputably superior to other types of irrigation development, manyof which were not available during the construction boom in the 20th century but are available
now.

I. Introduction
For enhancing food security and reducing rural poverty, sub-Saharan Africa (SSA) has long been
awaiting a Green Revolution (Otsuka and Kalirajan, 2006; Diao et al., 2008; Ejeta, 2010; Pingali,2012). There have recently been signs that an African Green Revolution has begun (Sanchez etal., 2009; Nakano et al., 2012; Otsuka and Larson, 2012). There were three technological basesthat made the Asian Green Revolution possible in the second half of the last century, i.e., highyielding varieties, chemical fertilizers, and irrigation (Diao et al., 2008; Estudillo and Otsuka,2012). Among these, irrigation is by far the most basic technological foundation, as assured watersupply is a prerequisite for effective fertilizer application, without which the high yielding
potential of the seeds is not fully exploited. Among developing regions in the world, SSA is theregion where irrigation has been least developed (Balasubramanian et al., 2007; Diagne et al.,2013), despite its rich endowment of fresh-water resources (You et al., 2010; Zwart, 2013; Xie etal., 2014). The rich water endowment is a possible blessing for the Green Revolution in SSA.
However, there are many ways to tap water for crop production and there have been serious
debates in the last few decades as to what type of irrigation developments SSA agriculture shouldseek.
A major mode of irrigation development during the 20th century Green Revolution waslarge-scale projects to construct, rehabilitate, or modernize irrigation infrastructure (irrigation‘hardware’ such as dams, tanks, headworks, canal systems, and field development), funded byinternational donors, implemented by the government of recipient countries, and operated andmaintained, after construction, by national irrigation agencies (Jones, 1995; Inocencio et al., 2007).
Most of irrigation development in the latter-half of the 20th century was borne by these projects.
Though they undoubtedly contributed to the Green Revolution, large-scale irrigation projects had
nearly disappeared from the agricultural development agenda of developing regions in the worldby the late 1990s, for good reasons. One of them was the success of the Green Revolution thatbrought about historic low prices of cereal crops by the end of the 20th century. In the case of rice,2the world price in 2000 was as low as 25% in real terms of the level prevailing during the preRevolution period. Such low crop prices made it virtually impossible to justify large-scale
irrigation projects which were generally costly (Jones, 1995; Inocencio et al., 2007).
A more serious reason was that many large-scale irrigation projects implemented in thelatter half of the last century were full of problems and defects; inadequate designs, faulty
construction, less-than-satisfactory achievements, and poor, dysfunctional operation andmaintenance (O&M). When evaluated at the time of construction completion, one-third of thelarge-scale irrigation projects were ‘failure’ projects (‘failure’ if the ex post internal rate of returnis less than 10%) (Belli, et al., 1998; Inocencio et al., 2007), and the risk of ‘failure’ increased to50%, equivalent to the risk of failure in simple gambling such as coin-toss betting, when evaluatedat six to eight years after completion (the World Commission on Dams [WCD], 2000). The modeof O&M of these schemes was so institutionally defective that many irrigation schemes
constructed or rehabilitated, even non-failure projects, rapidly deteriorated (Adams, 1990; Ostrom,
1992; World Bank, 2005). Moreover, implementation of large-scale irrigation rehabilitation
projects created and spread the ‘build-neglect-rebuild’ syndrome, depriving national irrigation
agencies of incentives to maintain their irrigation systems well (Huppert et al., 2003; Lankford etal., 2016).
It became apparent that there was no reason to pursue large-scale irrigation projects ofthis type anymore, and good reason not to do so. Furthermore, growing environmental concerns
worked against large-scale new construction projects involving the construction of large dams
and relocation of inhabitants. The World Commission on Dams (WCD) as well as the World Bank
proposed such agricultural development options as improving the performance and productivityof existing irrigation schemes through institutional reforms for O&M, small-scale farmer-led
irrigation development, investing in micro-irrigation technology and in-field rainwater
management, rather than resorting to large-scale irrigation projects (WCD, 2000; World Bank,
2005).
This virtual ‘ban’ on large-scale irrigation projects was most effective in SSA where the20th century Green Revolution had not taken root, and the irrigation sector was characterized bymore handicaps than any other developing regions. Moris (1986) argued, while enumerating one
after another poorly performing large-scale irrigation projects implemented since the 1960s, thatlarge-scale irrigation development in SSA led by donors and governments was always
problematic because of poor design without due understanding of grass-root conditions,
inadequate technology choice, and inefficient bureaucratic O&M; his arguments were socomprehensive that nearly all his arguments became the broad consensus by the end of the century.
Biswas (1986) pointed out nine reasons why large-scale irrigation development projects in SSA
were bound to be handicapped, resulting, almost without exception, in unsatisfactory performance3

or failure. FAO (1986), Oliveres (1989, 1990), Jones (1995), and Inocencio et al. (2007)
denounced large-scale irrigation projects for their high costs and low performance. Moigne andBarghouti (1990) stated that large-scale irrigation schemes in SSA had run into many serious
problems such that the confidence of potential investors had been shaken, and that new schemes
should not even be considered unless lower-cost technologies or production systems with higher
returns were identified. The shift of focus in the irrigation sector from large-scale projects led bydonors and governments to farmer-led small-scale projects, from ‘hardware / physicalinfrastructure’ to ‘software / institutions’, and from gravity irrigation to micro-irrigation
technology was apparent towards the mid-2000s (NEPAD, 2003; Rockström et al., 2007; World
Bank, 2007; Lankford, 2009; Burney et al., 2013). By 2017 or so, “farmer-led irrigation” hadbecome the dominant focus of efforts to expand irrigation in SSA (e.g. Woodhouse et al., 2017;
Lefore et al., 2019; Thomas Reuters Foundation, 2018).
However, parallel to this development, large-scale irrigation projects, including projects
to construct new schemes, have also gradually come back to center stage. For example, a loan
agreement was signed in 2007 between Kenya and Kuwait Fund for Arab Economic Development
for financing the Bura Irrigation and Settlement Scheme Rehabilitation Project (arehabilitation/modernization project to increase the project area from 2,500 ha to 6,100 ha)(Reliefweb, 2007; NIB, 2018); a loan agreement was signed in 2010 between Kenya and Japan
International Cooperation Agency (JICA) for financing the Mwea Irrigation Development Project(a rehabilitation/modernization project to increase the project area from 7,900 ha to 8,900 ha)(JICA, 2010); and the World Bank approved in 2017 a loan for financing the Shire Valley
Transformation Program in Malawi (a new construction/rehabilitation project with project area of
42,000 ha) (World Bank, 2017a,b). Of these, the original Bura Irrigation and Settlement Project,
implemented in 1979-1987, was the most infamous project in SSA for its disastrous failure (Moris,
1986; Adams, 1990; World Bank, 2007). The current rehabilitation project, which commenced in2013 with the National Irrigation Board as implementing agency as before, was at only 30%
completion as of 2018, 38 months behind the construction schedule (Business Today, 2018). The
irrigation development in Shire Valley was first envisaged in the 1940s and its implementation
has been considered a few times since then, but the construction plan has been abandoned every
time because the construction costs were too high (Harrison, 2018).
Why have these types of irrigation investments been resurrected? Have there been any
changes in the conditions that once made large-scale irrigation development an undesirable,
infeasible option? One possible reason could be a food crisis in 2008 which pushed up all foodprices sharply. In the case of rice, the world price (Thai 5% broken Bangkok FOB) soared up to
US$ 650/t in 2008 from US$ 326/t in 2007, or from the historic low price of US$ 173/t in 2001
(year averages in current prices) (World Bank, 2019b). Such a surge in food prices may have4

reminded policy makers in SSA and international donors of the vulnerability of world’s foodproduction and the need to enhance food security by increasing domestic food production. Thishas perhaps prompted them to bring back large-scale irrigation projects as a quick and effectivemeans to increasing food production (Lankford et al., 2016). Higher food prices push them
towards that direction, ceteris paribus, by increasing the profitability of such projects.
Another reason could be recent advances in yield-increasing technology of food crops.
In the case of rice, the present technology gives a yield of 6 t/ha, or even higher, if grown undergood conditions; and farmers in some large-scale irrigation schemes in SSA are attaining thatyield level for two crops per year (Tinsley, 2009; You et al., 2010; Nakano et al., 2012; Bartier etal., 2014). Since the availability of such technology also improves the ex-ante economic
performance of large-scale irrigation projects, particularly when coupled with higher crop prices,
policy makers in SSA could be encouraged to go for such projects.
The recent re-emergence of large-scale irrigation projects has evoked many heatedreactions, mostly objecting to this trend (Burney et al., 2013; Lankford et al., 2016; Crow-Miller
et al., 2017; Merrey and Sally 2017; Woodhouse et al., 2017; Harrison, 2018; Pittock et al., 2018).
All of these studies share the same basic question, raised explicitly by Crow-Miller et al. (2017),
that is, “do these new projects have different justifications from those of the past? (p.195)” Themode of large-scale irrigation development in the latter half of the last century was so defectivethat many projects failed to attain their planned level of performance. Unless national
governments and international donors are sure that they have found effective remedies for thedefects of large-scale irrigation projects of the mode in the 20th century, they surely would not go
for new large-scale projects, -- or would they? The recent story of the Bura Rehabilitation Projectin Kenya reported by Business Today (2018) is appalling because the problems- narratives,
exactly same in nature, were found in so many project-completion and post-project-evaluation
reports of failed large-scale irrigation projects implemented 20 to 40 years ago. As alreadymentioned, the original Bura Irrigation Settlement Project was a spectacular failure, but the failure
had been anticipated before the project (Chambers, 1969; Moris, 1973), and the details of the
failure were reported (Moris, 1986; Adams, 1990; World Bank, 1990a, 1990b). The recent Bura
Project could be another example of ‘informed amnesia’, ‘where the major actors involved inirrigation development tend to ignore past mistakes, despite ample proof of the futility of theirefforts’ (Veldwisch et al., 2009; p.21).
The purpose of this paper is to assess whether it is economically feasible to constructlarge-scale irrigation schemes in SSA, and if it is, under what conditions. We approach thesequestions through estimating the cost of constructing an existing irrigation scheme, the Mwea
Irrigation Scheme in Kenya (abbreviated henceforth as Mwea Scheme), if it were constructed
now. In the next section, we give an overview of large-scale irrigation projects implemented
5during the last four decades of the 20th century, mostly financed by the World Bank (WB), withspecial reference to the cost structure of these projects. We then present the estimated costs of
Mwea Scheme construction project in the third section, followed by the fourth section which
examines the economic viability of the project. Concluding remarks are in the fifth section.
II. Irrigation Projects in the 20th Century
We first review large-scale irrigation projects implemented in the last four decades of the 20th
century with respect to their project costs. To fully understand the costs, we first need to know thecharacteristics of large-scale irrigation projects as public investments. Second, the cost ofirrigation projects consists of two components, direct construction costs (hardware costs) andindirect overhead costs (software costs). The former costs are irrigation scheme specific, andtherefore relatively easier to estimate. For the indirect overhead costs, we need to obtain
information from past irrigation projects. Both are necessary to understand the investment costs.
1. Characteristics of 20th century irrigation projects
In order to understand the nature of the costs of large-scale irrigation projects, we examine 182
irrigation projects implemented during the latter half of the 20th century. These irrigation projects,
selected from 314 irrigation projects in the database prepared by Inocencio et al. (2007), are thosefor which project costs are reported with appropriate breakdown. The sample projects include 59
new construction projects and the remaining 123 are rehabilitation projects (Table 1). Since SSA
was a late comer to irrigation development in the 20th century, the sample projects include only
19 SSA projects, of which only eight are new construction projects.
The top part of Table 1 re-confirms the salient features of irrigation projects in SSA
found by Inocencio et al. (2007): compared to other developing regions in the world, (1) the
project size, measured by the total irrigated area benefited by a project, was smaller, on average,
less than one fourth of the average size of non-SSA regions; (2) the unit project costs was higher
in SSA: more than 60% more expensive to create new irrigated fields and nearly four times as
expensive to rehabilitate existing ones; and (3) the risk of project failure was higher in SSA.
Cost over-run is an oft-mentioned problem of irrigation projects. Hirschman (1967)
advanced, based on his observation of 11 World Bank development projects, the Hiding-Handprinciple: policy makers and project planners underestimate the cost and the real risk ofdevelopment projects, but, since they also underestimate their abilities to deal with risks and solve
problems that bring about higher-than-expected project benefits, development projects of highcosts and high risk, which would otherwise be never started, are tried out with good results for6society. Challenging this Hirschman’s principle by examining a sample of 2,062 public works
projects, Flyvbjerg and Sunstein (2016) found that Hirschman’s benevolent Hiding-Hand did notwork in nearly 80% of the projects, which implies that, if any Hiding-Hand is behind the public
works projects, it is usually a malevolent one, under which unrealistic optimism applies both tothe estimation of difficulties/costs and to creativity/benefits, resulting in erroneously accepting
non-viable projects. Whether the Hiding Hand is ‘benevolent’ or ‘malevolent’ depends, practically,on the degrees of cost-overrun and of under-estimation of the benefit of respective projects.
Large-scale irrigation projects under consideration are typical public works projects. In
fact, Hirschman’s sample of 11 projects includes three large-scale irrigation projects and morethan 10% of Flyvbjerg and Sunstein (2016)’s sample projects are dam-construction projects. Our‘All data’ show that 44% of projects had the cost-overruns (the bottom part of Table 1). At thesame time, large numbers of projects experienced cost-underruns. However, the degree of overrun
was much higher than that of underrun; for overruns 40% to 52% on average and as much as176% to 254% for the maximum, whereas, for underruns 24% to 27% on average and 81% to
94% for the maximum (minimum), respectively for non-SSA and SSA. These patterns are quite
similar to those of 258 transportation infrastructure projects studied by Flyvbjerg et al. (2002),
who denounced the underestimation of project costs for not being able “to be explained by error
but is best explained by strategic misrepresentation, i.e., lying (p.279)”. There were quite a few
such cases among the 20th century irrigation projects. The cost-overrun was a highly significant
determinant of the project costs, but not of the internal rate of returns (IRR) (Inocencio et al.,2007).
Since the IRR is a discount rate that equates the present value of the benefit and thepresent value of the cost, a cost overrun reduces the ex-post IRR and so does a benefit overestimation. Table 1 shows that an IRR over-estimation was far more common than an underestimation, and this IRR over-estimation occurs in most cases either because benefit overestimation occurs together with cost under-estimation or because the degree of benefit underestimation is smaller than the degree of cost overrun. There were cases of IRR underestimation,
but the number of such projects was smaller than that of projects that overestimated IRR, and thedegree of underestimation was less than that of overestimation. These findings suggest that the
malevolent Hiding Hand dominated in the 20th century irrigation projects: policy makers andplanners of these projects had strong tendencies to overestimate the likelihood of success by
underestimating costs and overestimating benefits. In particular, the optimistic and unrealistic
estimation of benefits was the most serious defect of the majority of the irrigation projects. The
ex-ante IRR based on such assumptions were “so misleading as to be worse than worthless,because decisionmakers might think they are being informed when in fact they are being
misinformed” (Flyvbjerg and Sunstein, 2016; p.11).
7

However, it should be mentioned that, although the malevolent Hiding Hand was morecommon in public works projects, there were projects that were under the benevolent Hiding
Hand. Flyvbjerg and Sunstein (2016) showed that the malevolent Hiding Hand dominated the
benevolent one by a factor 3.5 to 1. For irrigation projects, this ratio was 2.3 to 1 in SSA and 2.7
to 1 in non-SSA, if we take the ratio of the number of IRR-overestimated projects to that of IRRunderestimated projects. A good example was the Office du Niger Consolidation Project
implemented in Mali in 1989-1999, which recorded a cost overrun of 250% (3.5 times as muchas appraised cost) and IRR underestimation of -90% (ex-ante 16% versus ex-post 30%) (World
Bank, 1999), which implies that the rate of benefit underestimation was larger than that of thecost overrun; a typical benevolent Hiding Hand case. But such projects were a small minority.
2. Cost structure of 20th century irrigation projects
The cost of large-scale irrigation projects consists not only of direct construction costs but also of
various indirect, overhead costs. In this section, the cost structure of public irrigation projects is
examined based on the cost data of the 182 projects, by classifying the project cost into four costgroups:(1) Costs or expenditures for civil works directly related to the construction of irrigation
infrastructure, including materials and equipment used for these purposes, and indirect
construction costs such as field administration and supervision, safety control, and contractor’s
profit (henceforth referred to as ‘Civil-work’ costs);(2) Indirect or overhead costs or expenditures for management, including project
preparatory surveys and studies, system designing and blueprints, engineering management andsupervision during the implementation, and general project administration and management(‘Management’ costs);(3) Overhead costs or expenditures for agricultural support, O&M equipment, O&M
planning, and training of irrigation officials, water users’ groups, and farmers (‘Ag-support’costs); and(4) Other overhead costs or expenditures, such as land acquisition, land compensation,
relocation, construction of settlements and other social infrastructures (‘Other-overhead’ costs).
Three additional qualifications on these costs are to be added: First, equipment andvehicles used for the purpose of constructing irrigation infrastructures and facilities are includedin ‘Civil-work’ costs, but those used for O&M are included in ‘Ag-support’ costs; second, many
works, tasks, and services included in ‘Management’ and ‘Ag-support’ costs are carried out by
consultants under Technical Assistance contracts; and third, costs for land acquisition andcompensation and associated social infrastructure construction included in ‘Other-overhead’ cost8

could be important cost items particularly in new construction projects.
One thing clear in reading the project reports of irrigation projects is that there are few
useful data or guidelines for engineering consultants / contractors to use for accounting theseoverhead costs while making budget proposals of irrigation projects. Certainly, there are‘guidelines’ of some sort: “price and physical contingencies are to be 15% of the estimated costs”,“general administration costs for a project are to be 5% of the total project costs”, etc. How theseguidelines are to be set and adjusted for according to specific conditions and environments is notclear. Of course, the diversity of conditions and environments under which an irrigation projectis planned and implemented are so enormous that it is very difficult, or even impossible, to provide
ready-made guidelines of general applicability. However, it would be useful to study what levels
of indirect, overhead costs irrigation projects in the past incurred.
The four groups of project costs of 20th century irrigation projects are shown in Table 2
as percentage shares in the total project cost for SSA and other developing regions. The share ofoverhead costs in SSA was 39% on average and the ratio of the total project cost to Civil-workcosts was 1.63, much larger than in other regions.
The unit total project cost and four unit-component-costs are all correlated negatively
with project size (Fig. 1). The strong scale economy of irrigation project costs was pointed out by
Inocencio et al. (2007) for the total project cost and by Fujiie et al. (2011) for some overhead
costs. This study reveals that ‘Civil-work’ cost, which includes some indivisible inputs / elements,
such as heavy construction equipment, dams, headworks, and reservoirs, also had a strong scaleeconomy.
Using the data drawn in Fig. 1 together with some sample specific characteristics,
regression equations are estimated for the unit-total-project-cost and four unit-component-costs(Table 3). The project size has a highly significant negative coefficient for all the unit costs. Scaleeconomy exists in all the component costs, including ‘Civil-work’ costs. Among the component
costs, ‘Management’ cost was subject to the strongest degree of scale economy. Since theregression equations are of the double-log linear form with respect to project size, its coefficient
is nothing but elasticity. ‘Management’ cost has the highest elasticity: a 10% increase in the
project size decreases the cost by as much as 6.5%, closely followed by ‘Ag-support’ cost. As
expected, the unit total project cost of rehabilitation projects is significantly lower than that of
new construction projects, which is brought about by lower ‘Civil-work’, ‘Management’, and‘Other-overhead’ costs, but not by ‘Ag-support’ cost. Failure projects have higher unit total project
cost than successful ones, due to higher ‘Civil-work’ cost, and the overhead costs do not have any
significant relation with ‘failure’. There was a tendency that the newer the projects, the lower theunit ‘Civil-work’ and ‘Management’ costs, resulting in lower unit total project cost. This suggeststhat the performance of 20th century irrigation projects in terms of the unit cost to generate or to9rehabilitate a unit of irrigated land was improved as project experience accumulated.
The most important result of the regression analyses is that the higher unit project cost
to develop irrigation infrastructure in SSA was due wholly to the small size of the irrigation
projects implemented there and not for SSA-specific reasons. The SSA regional dummy is notstatistically significant in all the regression equations for the four component-costs, and therefore
so was in the total project cost equation.
III. Estimation of Project Costs of Mwea Scheme
We try to estimate the project costs of Mwea Irrigation Scheme in Kenya, if the scheme as it ispresently were constructed now as a brand-new scheme.
1. The Mwea Irrigation Scheme
Mwea Irrigation Scheme, situated 65 km south of Mt. Kenya, 90 km northeast of Nairobi, and650 km northwest of Mombasa, is a river-diversion surface irrigation scheme, taking water fromtwo of many tributaries in the Upper Tana basin on the heavily watered southeastern slopes of Mt.
Kenya (Map 1). Such a favorable water potential, coupled with a gently sloping terrain and fertile
black soil of volcanic origin in the plain, makes the Mwea plain an ideal physical environment toconstruct an irrigation scheme (Moris, 1973). The construction of Mwea Scheme was started in
1954 as a settlement scheme with the primary purpose of providing agricultural land for landlesspeople, the number of whom was increasing due to population pressure and the effects of an
emergency under Mau Mau Uprising (Chambers, 1969, 1973).
The ample water sources in the area have given the scheme resilient expandability. As
shown in Table 4, starting from 2,000 ha of the first construction phase in the 1950s, the Scheme’s
net irrigable area increased to 5,000 ha by the early 1970s, and to 6,000 ha by the late 1980s. A
modernization/rehabilitation project, implemented in 1989-1991with assistance from JICA (thefirst Mwea Irrigation Project; a JICA grant-aid project; henceforth referred to as Mwea Project1990), expanded it to 8,500 ha, and the construction of the second Mwea Irrigation Development
Project, another on-going modernization/rehabilitation project by JICA (henceforth referred to as
Mwea Project 2017), is expected to expand the Scheme’s irrigable area to as much as 8,910 ha,
including the three out-grower sections developed by farmers themselves with assistance fromthe World Bank.
The favorable water and soil conditions have made the Mwea Scheme one of the best
rice irrigation schemes not only in SSA but also in the world. The average farmers’ rice yield at
Mwea from 1961 to 1971 was as high as 6.4 t/ha (Veen, 1973). It should be noted that this high10

yield level was attained with Sindano, a japonica variety with some indica variety characteristics,
which was a pre-Green Revolution variety. This was an exceptionally high yield level for irrigatedrice in the 20th century. Even after the rice Green Revolution, 4 t/ha was the normal target yieldof many irrigation projects, which was rarely attained. The Mwea Scheme was mentioned as the
only successful irrigation scheme among many schemes in East Africa (Chambers and Moris,
1973), or even in Africa (Biswas, 1986).
The scheme experienced radical changes in the institutional framework for O&M at theturn of the century; the management of the Scheme by the National Irrigation Board (NIB) was
taken over by farmers’ groups in 1998 (Kabutha and Mutero, 2002) and the mode of O&M wasfurther reformed in 2003 to a joint-management arrangement between NIB and farmers’ groups(water-users associations) (Abdullahi et al., 2003). The farmers’ takeover of the management was
the result of their protest against the NIB management under which they had been treated as quasi
slave tenants with virtually no discretion as to their rice production and marketing. Under joint
management, NIB concentrates on O&M of the main systems, leaving the maintenance of thesecondary and tertiary systems, rice production, and marketing to the farmers’ discretion.
This joint management by the NIB and the farmers seems to have been successful to theextent that the reforms had no effect on the yield performance of the Scheme. The rice yield
declined to 5 t/ha in the 1980s and further to a level less than 4 t/ha by the end of the 2000s (Table4). This decline was due mainly to the shift in the rice variety to Basmati which was higher quality
but lower yield than Sindano. If we look at the yield of Sindano, no declining trend had been
observed for the five decades since the 1960s, and the average rice yield of the Scheme in 2017
was more than 6.2 t/ha with new recently developed high-yielding Basmati varieties. The
cropping intensity of the Scheme has improved from the earlier intensity of 1.0/year to nearly
2.0/year by 2017, mainly resulting from the efforts to implement water rotations and to introduce
rice ratoon harvesting. The Mwea Scheme as of 2017 with such a high level of productivity could
be said to be a top-class irrigation scheme in SSA.
2. Project costs at the initial stage
Data on the expenditures for constructing the Mwea Irrigation Scheme at its initial construction
phase from 1954 to 1968 are reported by Sandford (1973). By 1968, an irrigated area of 3,129 ha
had been developed. Although the primary purpose of this study is to estimate the cost to construct
the Mwea Scheme as operating in 2017, we examine, as a reference, the investment costs and its
economic performance at the initial stage.
The expenditure data at the initial stage consists of capital and recurrent expenditures.
Reflecting the fact that the construction project was implemented by the government as a11

settlement project and the scheme was owned by the government with all the settled farmers as
tenants, recurrent expenditures included not only O&M expenditures but also all labor costs,
including those related to the construction, such as engineering and project management, andcosts for inputs used in current rice production, such as fertilizers and chemicals, rice sacks, andfuel for machinery. We exclude the recurrent expenditures for O&M and those for rice production
and add the rest to the capital expenditures to obtain the total construction (project) cost for 1954
- 1968, which was US$ 4.12 million in current (nominal) prices or US$ 3.92 million in 1960
prices. The unit cost per ha was US$ 1,255 in 1960 prices. The recurrent O&M expenditure in1968 was US$ 28,454/year, or US$ 9.09/ha/year, both in 1960 prices. Throughout this paper, we
use the same deflator for project costs in US dollars, which is compiled by linking the Word Bank
world GDP implicit deflator (1960-2017) (World Bank, 2019a) with the IMF's world export priceindex (1945-1960).
3. Project costs if the Scheme were newly constructed in 2017
Since 1968, the total irrigated area of the Mwea Scheme has increased to 8,500 ha, mainly becauseof the improvements made by the modernization/rehabilitation project implemented in 1989-1991(Mwea Project 1990). In this study, we tried to estimate how much the construction costs of the
Mwea Scheme would be, if the Scheme, with the present infrastructure and operating performance,
were constructed as a brand-new scheme. The target scheme for the cost estimation is the one
fully developed by Mwea Project 1990. Three out-growers’ sections, for which the World Bank
assisted farmers to construct paddy fields, are not included, mainly because data on the costs ofirrigation and drainage canals and on-farm roads in these sections constructed by farmers are notavailable. This exclusion, however, has little effect on our cost-benefit analysis of this ‘newconstruction’ project. Our preliminary examination of the data related to the out-growers’ sections
shows that the cost-lowering effect of the inclusion of these sections is largely canceled out by
the benefit-lowering effect of these sections due to lower yields and lower cropping intensity.
At first in this study, it was planned that an experienced international engineering
consultant company (the Consultant, hereafter) would undertake the estimation of the project
costs of the scheme. Later on, however, we found it better that the Consultant specialized in theestimation of ‘Civil-work’ costs, i.e., the costs directly related to the construction of irrigation
infrastructures and irrigation facilities. Three groups of overhead costs were to be estimated basedon the past experiences of irrigation projects implemented in developing regions in the world andof those of Mwea Scheme itself. Since levels of the overhead costs depend on various conditions
and natural, social, and economic environments surrounding the irrigation scheme in question, it
is very difficult to estimate them accurately. Therefore, we provide a few alternative levels of
12estimates of the overhead costs.
3-1. Estimation of direct construction costs
The direct construction costs, i.e., ’Civil-work’ cost, estimated by the Consultant are presented inTable 5. The basic method of estimation was by summing up the products of the quantity and theunit cost of each structure or facility for the entire irrigation infrastructures and irrigation facilities
in the scheme. The quantities of structures and facilities were enumerated, measured, andidentified by a detailed inventory survey conducted in the field in 2017-2018, while referring todetailed design drawings of the past projects implemented in the scheme (Mwea Project 1990 and
Mwea Project 2017) (JICA and Nippon Koei, 2018). The unit costs are taken from JICA’s internal
records for the on-going Mwea Project 2017. These unit costs include the contractor’s indirect
costs, consisting of corporate overhead expenses, such as supervising construction works andsecurity and safety control, and corporate profit. These indirect costs are estimated to be 25% of
the direct unit cost comprising costs for labor, materials, and equipment.
Of the 15 irrigation infrastructures in Table 5, New Nyamindi Headworks (#1),
Nyamindi Headrace (#3), and Link Canal-I (#8) were irrigation structures newly constructed by
the Mwea Project 1990, so that their “quantities” must be the same as of the time of the costestimation in 2017 (Link Canal-II was also newly constructed by Mwea Project 1990, but had
some more additional construction works afterward). Since the Project Completion Report of
Mwea Project 1990 (Nippon Koei, 1993) gives the actual construction costs of these structures,
we can compare our estimated costs with actual ones. Although their “unit costs” could not be thesame because the prices of the cost components, such as labor, concrete, iron bars, etc., havechanged over time at different rates, the estimated costs must not be so different from the original
construction costs if the changes in currency value are properly accounted for. Deflating the actual
costs in 1990 prices to 2016 prices, the summation of the original construction costs of these threestructures were US$ 6.65 million, which are compared to our estimate of US$ 6.35 million (#1 +#3 + #8). The difference of less than 5% suggests that the Consultant’s estimation of ‘Civil-work’
cost is reasonably accurate.
3-2. Estimation of overhead costs
Three sets of data are available for giving us reference information about how much of overhead
costs a large-scale irrigation project generally needs.
The first data set is the cost structure of 20th century irrigation projects, which we havealready seen in Table 2 for the sample means. The percentage shares of four component costs inthe total project cost shown in Table 6 are computed, using their projected values obtained byinserting the project size of 8,500 ha into the respective estimated regression equations in Table
13

3. In spite of the existence of strong scale economy in the unit project cost, the cost structure ofthis size differs only slightly from that for over-all sample means. A salient feature of the cost
structure of irrigation projects in SSA is that the overhead costs account for a higher percentage
in the total project cost than in other developing regions. The shares of three overhead cost groups
are all higher in SSA than in other regions with ample margins. As a result, the ‘Total project cost
/ Civil work’ ratio of SSA is 1.69 for successful new construction projects in SSA, which is higher
than 1.44 in other regions. Reasons for this feature could be a result of the relatively shorter historyof irrigation development in SSA. There are a relatively limited number of experienced
construction engineers, irrigation engineers, consultants, and contractors in the region, whichmakes ‘Management’ costs higher. Little experience with irrigated agriculture and the O&M ofirrigation schemes increases the need to support technology development, institution building,and training for farmers and irrigation officials, which makes ‘Ag-support’ costs higher.
The second data set is given by the project completion report of Mwea Project 1990
implemented in 1989-1992 and the third data set is of Mwea Project 2017. Both, reporting project
costs with cost breakdowns (Nippon Koei, 1993 and JICA internal data), provide us withinvariable project cost data, the former of ex-post and the latter of ex-ante, and thereby the
structure of project costs, which are summarized in Table 7.
Mwea Project 1990 data set reports the direct construction costs separately from indirect
project costs, but some of line items under the indirect project costs seem to be ‘Civil-work cost’in our cost classification. If all indirect construction costs as reported are included in‘Management cost’ (Cost structure i in Table 7), the total share of overhead costs is more than
50% and ‘Civil-work’ cost and ‘Total project cost / Civil work cost’ ratio is as high as 2.27. If an
indirect cost item, which is supposed to belong to ‘Civil-work’, is adjusted for, the ‘Total project
cost / Civil work cost’ ratio becomes 1.76 (Cost structure ii), which is at a comparable level as anaverage 20th century successful new construction project in SSA of the same size. If, in addition,
another cost item seemingly belonging to ‘Civil-work’ cost is adjusted for, the ratio is further
reduced to 1.52 (Cost structure iii), a level still higher than that of 20th century successful new
construction projects in non-SSA regions.
As reported, the ‘Total project cost / Civil work cost ratio’ for the planned project costsof Mwea Project 2017 is also high, 1.93 (cost-structure iv in Table 7). This is partly because taxes(VAT and tariffs) and interests are included in the planned costs. Theoretically, taxes, subsidies,and interests are not to be included in the project costs as well as in the project benefits, since they
are merely transfer of income, to be canceled out between payers and receivers. The cost structurethat purges them from ‘Other-overhead cost’ is shown as cost structure v) in Table 7. The resulting‘Total project cost / Civil work ratio’ is 1.73, which is close to the ratio of 20th century irrigation
projects and of Cost structure ii of Mwea Project 1990.
14

3-3. Estimated project costs for constructing the Mwea Irrigation Scheme
Table 8 summarizes the estimated costs for constructing the Mwea Scheme today as a brand-new
scheme and compares them with each other and with those of 20th century irrigation projects.
The unit project cost per ha at the initial construction phase of 1954-68 with the 3,000
ha of irrigated area is estimated to be US$ 10,071 in 2016 prices, which is higher than the average
unit cost of 20th century successful new construction projects in SSA. The deflation of the dollar
value over more than a half-century is a hazardous operation, particularly because for years before
1960 our deflator is linked with the IMF’s World Export Price Index, which is said to havesubstantial bias as a world price index (Silver, 2007). However, the difference between them islarge enough to allow an inference that the construction of the Mwea Scheme in the initialconstruction phase was costlier than the average 20th-century successful new construction
projects not only in non-SSA but also in SSA.
The total project cost to construct the Mwea Scheme as of 2017 is estimated by assuming
three levels of ‘Project cost / Civil-work cost ratio’. For this ratio = 1.5 (low estimate), the unit
project cost per ha is estimated to be US$ 13,706, which is substantially higher than that of theinitial construction phase. This is expected because Mwea Project 1990 not only rehabilitated andmodernized the existing irrigation infrastructures but also constructed many new ones, resulting
in a large increase in the irrigated area. If the ‘Project cost / Civil-work cost ratio’ is higher as in
the high estimate, the unit project cost would be US$ 18,275, which is more than twice as that of
the 20th century ‘successful’ new construction projects in SSA.
IV. Economic Viability of Mwea Scheme (New) Construction
We examine the economic profitability of constructing the Mwea Scheme as of 2017 as a newscheme by estimating the internal rate of return (IRR) of the investment based on the project costs
estimated thus far. Since the basic purpose of this study is to examine whether it is economicallyworth investing in large-scale irrigation projects financed and implemented by public institutions,such as national governments and international donor agencies, as a means to enhance foodsecurity in SSA, the IRR we estimate is the ‘economic’ IRR, as against ‘financial’ IRR thatmeasures private profitability. Although the IRR was, and still is, an indicator which is mostconveniently used in assessing the economic performance, ex ante as well as ex post, of largescale irrigation projects, it has long been criticized for its many defects. As early as in the 1980s,
Tiffen (1987) strongly warned against the use of the IRR as the single most decisive criterion inplanning irrigation projects or in evaluating the post-project performance, for its defects. The mostserious defect is its inability to assess the sustainability of projects. The IRR is a static indicator
15

estimated, for example, at the time of project completion with an assumption that the benefit thenlasts for the life-time of the project, but it may decline due to poor O&M. As explained earlier,this was indeed the case for many 20th-century irrigation projects (Tiffen, 1987; WCD, 2000).
Another related defect is that the IRR, when it is higher than 10%, is insensitive to a project life
span of more than 30 years, because the benefits of the distant future are discounted to nearly null.
This feature of IRR makes it an inadequate criterion to assess project sustainability. The static
nature of IRR also makes it difficult to cope with risk and uncertainty associated with theestimation of costs and benefits, resulting in under-estimation of costs and over-estimation of
benefits. Tiffen (1987) states that, given the uncertainty attached to its estimation, the IRR of 8%or less should be ruled out as within the margin of error that could include a negative outcome.
Although all these arguments still remain valid, we are going to use the IRR, while keeping thesedrawbacks in mind, because no better convenient alternative is available.
1. The internal rate of return (IRR)
The IRR is a discount rate that equates the present value of project costs and the present value of
project benefits. In this study, the IRR is defined as r that satisfies the following equation:<(1 + /)0 K = ;=*+([3($ − &)⁄(4 + 1)] (1 + /)<>= + ;)*+($ − &)⁄(1 + /))Eq. (1)

where K = project investment, R = returns from the investment, c = O&M cost, m = average
gestation period of investment in years, J = the year a partial benefit starts accruing before the full
benefit is attained, N = lifespan of the scheme in years, and r = internal rate of return. It is assumed
that the partial benefits reach the full benefit linearly from no benefit in the year (J - 1) years
before the completion of the project. The second term of the right-hand side of Eq. (1) can be
written as:n()∑()*+ ($ − &) / (1 + r) = (R - c) ∑)*+ 1/(1 + /)= (R - c) [ ((1 + r)N - 1) / r(1 + r)N ].
Inserting this to Eq. (1) and transferring the right-hand terms of the equation to its left-hand side,
we obtain:
4(1 + /)0 1 − ∑3=1[3($ − &)⁄(4 + 1)] (1 + /)4−3

8−($ − &) [ ((1 + /)− 1) / /(1 + /)8 ] = 0

Eq. (2)‘r’ that satisfies Eq. (2) can be obtained by using any numerical computation software. The Goal
Seek function of Microsoft EXCEL is the most easily available software to compute ‘r’. Readers
can check the results of our IRR estimation easily by inserting Eq. (2) and assumed parameters in
the Goal Seek function.
16

It should be noted that the cost and benefit in Eq. (1) are both confined to those directly
related to the project. There are indirect costs, such as negative environmental effects, as well as
indirect benefits, such as positive linkage and multiplier effects of increased agricultural
production, both bought about by the project. These indirect costs and benefits, which must be
included in the cost-benefit analysis of large-scale irrigation projects, are not included in this study,as the case for irrigation project reports in general, because of the difficulty in obtaining necessarydata.
2. Assumptions on variables and parameters
We estimate the IRR for the ‘initial construction phase project’ (as of 1968) and the ‘after-themodernization project’ (as of 2017). Both are ‘new construction projects’, the project costs ofwhich are presented in Table 8.
2-1. Common assumptions
The returns from the investment (R): Since the Mwea Scheme is an irrigation scheme meant
for rice production, we measure the return (R) in Eq. (1) as value-added (income) generated in
the rice production in the irrigated area created by the project:
R = P a b Y,

Eq. (3)where R = returns (US$/year), P = rice price (US$ / ton of milled rice), a = rice milling rate, b =value-added ratio, and Y = increase in rice (paddy) production (t/ha/year) due to the project, which
may be expressed as Y = gy, where y = rice (paddy) yield per season and g = cropping intensity(no. of crops/year). Since Y is the increase in crop output due to the projects, the output in the
Scheme area before the production, if any, must be deducted. However, since the area where
Mwea Scheme was constructed had been vacant except for extensive stock grazing (Moris, 1973),
we assume no output in the area before the project.
Value-added ratio (b): b is the ratio of the value-added to the value of total output in riceproduction, the value-added is the total output value less current inputs, and the current inputs are
the inputs the entire value of which is transferred to the output within a production cycle, such as
seeds, fertilizers, and fuel for tractors. If other non-land production factors used in the crop
production after the project have some opportunity costs, they must be deducted from the valueadded of the after-project crop production. This adjustment can be made through adjusting b. In
this study, we assume two levels of b; 0.8 and 0.5. The former level is the value-added ratio withno opportunity costs for other non-land factors. The actual expenditures on current inputs in the
Scheme took about 20% of the rice output value in 1964-68 (Sandford, 1973) as well as in 2016
(our survey), though the composition of current inputs differs between these two periods; a higher
17

share of fertilizer in 2016 for the principal crop is counterbalanced by the ratooning that requires
little fertilizer. The latter level is the opportunity-cost-adjusted value-added ratio obtained byassuming positive opportunity costs for labor and machine rental, evaluated at the market prices
based on our survey in 2016. These opportunity costs could be subject to overestimation. The
opportunity cost of labor may be much lower because the farmers who settled in the Scheme area
were landless people who could not find productive employment opportunities in their originalplaces (Chambers, 1973). In 1964-68, unlike in 2016, the costs of large farm machineries used
for rice cultivation are included in the capital costs of the construction project in an inseparable
way from heavy construction machineries. It can be expected, however, that the appropriate valueadded ratio to be used in the estimation of the IRR certainly lies in the range bounded by thesetwo value-added ratios.
Scheme’s life span (N): It has been a convention in planning irrigation projects to assume alifespan of 50 years for a newly constructed scheme. All people working in the irrigation sector
know how fictional it is; virtually no irrigation scheme constructed in the second-half of the 20th
century fulfilled this life-span. The Mwea Scheme, too, has had two modernization/ rehabilitation
projects with about 20-year intervals since the initial construction phase, which means its lifespan
was no more than 30 years. Also, the IRR of larger than 10% is nearly completely insensitive tothe lifespan over 30 years, as explained earlier. These considerations lead us to assume a lifespanof 30 years in both projects.
Rice price (P): The rice price to be used in Eq. (2) is the shadow (or opportunity) price of ricethat consumers in Kenya have to pay if there is no domestic rice production. It is economicallyjustified for the governments and international donor agencies to help increase domestic riceproduction through constructing an irrigation scheme, only when the unit cost of producing ricein the scheme could be lower than the unit cost of importing rice from abroad. Although the priceof rice varies greatly according to its quality, the public concern about the food problem as a basis
for public investments on irrigation requires rice under consideration to be of ordinary quality. In
this study, Thai 5% broken or Thai A1 super (broken rice) is taken as representative rice ofordinary quality in the world rice market. Thai 5% broken was considered as a relatively higher
grade among various grades of rice in the second half of the 20th century, but in this century,
particularly since the mid-2010s, rapid increases in the export of high-quality, high-grade rice,
such as Jasmin (aromatic long-grain) rice, have made it a relatively low grade rice. This isdemonstrated by changes in the price difference between Thai 5% broken and Thai A1: the FOB
price at Bangkok of the former was more than 50% higher than that of the latter on average until
the mid-1990s, but the difference reduced to only 3% in 2014-2018.
It should be noted that the shadow price has been subject to large fluctuations from 1948
to 2018 (Fig. 2). Here, we point out three salient features in the past trend of the world price in18the 2016 constant prices, First, the world had experienced periodic sudden price soaring or foodcrisis, from the one in the early 1950 due to the Korean War to the world food-crisis in 1974, until
the end of the 1970s. However, except for these crisis periods, the price was at around US$ 600/t
in constant prices. Second, the price began to decline in 1980 due to the Green Revolution and by
2001 reached a level as low as one-third of the pre-Revolution period. Third, the price in current
prices jumped up to the historically highest level in the food-crisis of 2008, but its peak price wasat the pre-Revolution period level of US$ 600/ton once deflated to the 2016 constant prices.
2-2. Initial construction phase project
Cost-side parameters
Average gestation period of investments (m): Since the irrigated area increased steadily year
by year in the initial construction phase (Sandford, 1973), the average gestation period is assumed
to be 1 year.
O&M cost (c): Assumed to be US$ 9.1/ha/year in 1960 prices, based on the O&M expenditures
in 1968 (the last year of this ‘project’) as reported in Sandford (1973).
Benefit-side parameters
Cropping intensity (CI) after the project (g): From the construction in the 1960s to 1989, rice
was planted in the Scheme once a year during May-February (Veen, 1973; JICA, 1989), so thecropping intensity after the project was 1.0.
Increase in paddy production (Y): Veen (1973) reported that the average paddy yield (y) in the
Mwea Scheme from 1961 to 1971 was 6.4 ton/ha/season, which, coupled with CI, gives Y = gy =6.4 t/ha/year.
Rice milling rate (a): Assumed to be 65% based on IRRI (2013).
Rice price (P): Sandford (1973) assumed in his cost-benefit analysis 29 cent per lb. of shadow
price while referring to the producers’ rice price in Tanzania, adjusted for transportation andmarketing costs. This price was roughly equivalent to US$ 89/t in 1960 prices. In retrospect, this
could have been an estimate that gives the lower-bound shadow price. The construction of the
Mwea Scheme was planned in the early 1950s when the world rice price soared due to the Korean
War (Fig. 2). The Bangkok FOB price of Thai 5% broken was US$ 138/t in 1960 prices on average
from 1951 to 1954, which could be converted to the Mombasa CIF price of Thai A1 of US$ 105/t
by adding the insurance and freight costs (to be explained in the next sub-section). Let us assume
this as the higher-bound shadow price.
Year partial benefits start accruing (J): Since the gestation period of the construction
investments is short, J is assumed to be null.
2-3. The ‘after-the-modernization’ project19

Cost-side parameters
Average gestation period of investments (m): The average gestation period depends on theconstruction period of the project. The average construction period of the 20th-century irrigation
projects in SSA was seven to eight years for new construction as well as rehabilitation projects,
and the planned construction period of the on-going modernization project, Mwea Project 2017,
is eight years. For this ‘construction’ project, we assume that the total project cost is equallydistributed during the construction period of eight years, which leads to m = 4.5 years.
O&M cost (c): Assumed to be US$ 189 /ha/year in 2016 prices, based on JICA’s field study
conducted in Mwea Scheme in 2009 (unpublished). This cost includes recurrent expenditures for
O&M and the depreciation cost of O&M equipment.
Benefit-side parameters
Cropping intensity after the project (g): As in earlier years, the main rice crop in the Scheme isplanted in the short-rain season from July to December. All farmers in the Scheme plant the main
crop, about 90% of them harvest a ratoon crop in late-January to February, and about 10% of
farmers plant the second main crop, instead of ratooning, from February to May. Including the
ratoon crop, therefore, CI is 2.0/year.
Increase in paddy production (Y): Based on our field surveys conducted in the all sections of
Mwea Scheme in 2016 and 2018, the average yields, 6.2 t/ha/crop for the main crop (first
harvesting) and 2.8 t/ha/crop for ratoon crop, are assumed to be the paddy yields in the project.
With the CI of 2.0, and assuming the same yield as the main crop for the second crop, the total
paddy production is 9.3 t/ha/year. It should be noted that this yield performance belongs in the
top group among large-scale irrigation schemes in SSA. Other irrigation schemes in the top groupare the Kpong Irrigation Scheme in Ghana, attaining 13 t/ha/year (Tinsley, 2009), and the Senegal
River Valley in Senegal (Nakano et al., 2011) and the Office du Niger in Mali (Bartier et al., 2014),
both attaining 10t/ha/year.
Rice milling rate (a): Assumed to be 70% based on our survey.
Rice price (P): Referring to Fig. 2, we set three price-regimes: low, medium, and high. The lowprice regime extends from 1986 to 2004 with the average world price of US$ 292 /t in 2016 prices,
the medium price regime from 2014 to 2018 with the average price of US$ 386 /t, and the highprice regime from 2008 to 2013 with the average price of US$ 495 /t. These FOB prices at
Bangkok are converted to the CIF prices at Mombasa, Kenya, of US$ 346 /t, US$ 440 /t, and
US$ 549 /t, respectively, by adding the freight rate of US$ 45 /t, which is the average container
freight rate from Asia to Africa over 2010-2017 in 2016 prices (data are from UNCTAD, 2018),
and the insurance cost of US$ 10 /t (in 2016 prices; data are from our survey in Uganda). We
assume US$ 350 /t, US$ 450 /t, and US$ 550 /t as the shadow prices, respectively.
Incidentally, the high-price level roughly corresponds to the farm-gate price of rice in20

Mwea Scheme, if adjusted for the import tariff of 35% and the importers’ handling charge of 10%.
The average (paddy) rice price received by Mwea farmers in 2016 was Ksh 55/kg, or US$ 774
per one ton of milled rice with 70% of milling rate and the exchange rate of US$ 1 = Ksh 101.5,
while the high-price regime Mombasa CIF price, when adjusted for the tariff (35%) and importers’
handling charge (10%) to be ready to go into the Kenyan domestic rice market is US$ 798/ton in2016 prices. This is not because the world price of ordinary rice in this year is high, but because
many farmers in Mwea Scheme at present plant Basmati varieties which are non-ordinary
varieties that command in the consumer markets in Nairobi a price higher than those of ordinary
varieties. These data are also consistent with the data obtained from a Nairobi consumer market
survey in 2008-09 by JICA (unpublished), which shows that the price of Thai long grain rice (Ksh
182 /kg) is slightly higher than that (Ksh 140-160 /kg) of Mwea ordinary, a popular brand ofBasmati rice produced in Mwea Scheme.
Year partial benefits start accruing (J): Referring to other projects and You et al. (2010), J isassumed to be three years, i.e., partial benefits start accruing three years before the full benefits
are realized.
3. Results of estimation
The results of IRR estimation for the two ‘projects’ are summarized in Table 9. In the latter-halfof the last century, the World Bank, the Asian Development Bank, and other international donor
agencies, adopting the interest rates of 10% - 12% for their loans, used these levels as the thresholdlevels of the IRR below which projects were considered unacceptable (Belli et al., 1998; Inocentio
et al., 2007). The interest rate for lending has declined in this century; ranging at present mostly
from 5% to 8% for countries in SSA, including 7.83% for Kenya (World Bank, 2019c).
Considering the argument by Tiffen (1987) that the IRR less than 8% could be within the marginof error, it would be preferable for a project to have the IRR that is higher than 8%.
The ‘As of 1968’ project is an apparently ‘successful’ project, even for the lower shadow
price of rice and the lower value-added ratio. Sandford (1973) estimated the NPV of the projectwith the rice price of US $ 89/t for three discount rates, 5%, 10%, and 15%. The NPV declines as
the rate increases but remains positive at 15%, and its declining trend indicates that it would reachnil at the discount rate of about 18%, which is close to our estimation for b=0.8.
The results for the ‘As of 2017’ project show that the IRR is sensitive to the assumptions
made on project cost, rice price, and value-added ratio. The sensitivity is particularly high forvalue-added ratio. If b=0.8, i.e., if no opportunity cost for non-land factors, the IRR is higher than
8% for the rice price of US$ 450/t or higher, regardless of the level of project cost. However, forb=0.5, i.e., if the opportunity costs are fully accounted for at the market prices, the IRR barely
21

exceeds 8% only if the project cost is low and the rice price is high. All this suggests that the new
construction of the Mwea Scheme with the irrigation infrastructure as of 2017 may beeconomically viable, but the viability is marginal, by no means robust.
It may seem strange that the ‘As of 1968’ project with the cropping intensity of 1.0 isapparently ‘successful’ whereas the ‘As of 2017’ project with a higher cropping intensity is only
marginally ‘successful’. The difference stems primarily from the difference in the rice pricerelative to the project costs; it was higher for the former project in the high-rice-price era before
the 20th-century Green Revolution than for the latter project in the low-rice-price era after the
Revolution. Even during the mini-rice-crisis of 2008–2013, the rice price, once deflated, is lower
than the non-crisis price level in the pre-Revolution period (Fig. 2).
4. Some large-scale irrigation projects in the 21st century
As stated repeatedly, the Mwea Scheme is one of the best irrigation schemes in SSA, in terms ofwater availability, rice yield, and cropping intensity. Though tapping water from two rivers, it isa simple river-diversion type of irrigation scheme, with no water storage capacity, and yet theinvestment project to construct it is only marginally successful. A straightforward implication isthat there would be few large-scale irrigation construction projects in SSA which are economically
viable.
For example, in the case of World Bank’s Shire Valley Transformation Program Phase
1 Project in Malawi, the planned unit project cost is US$ 15,000 /ha in 2017 prices (World Bank,2018), the same level as the medium estimate for our Mwea Scheme new construction project.
This project is not a pure new construction project with nearly 70% of the net irrigated area ofprivate estates’ sugar-cane area which has been successfully irrigated by pumps (World Bank,
2017a). If the IRR of 11% for the investment is to be attained, as targeted in its Project Appraisal
Report (World Bank, 2017b), the performance of irrigated agriculture in the Project area (mainly
crops with some livestock and aquaculture) must be far better than that of the Mwea Scheme.
Similar cases are irrigation developments being envisaged by the Millennium Challenge
Corporation in Burkina Faso, Mali, and Senegal, the indicative unit project costs of which range
from US$ 15,000 /ha to US$ 34,000 /ha (Merrey and Sally, 2017). Another example is suppliedby the on-going Mwea Irrigation Development Project supported by JICA (the ‘Mwea Project2017’ in this paper), which is a modernization/rehabilitation project, with the unit project cost of
US$ 23,000 /ha in 2009 prices (JICA, 2010), which is higher than our high-estimate for new
construction. For this JICA project, too, the IRR of the investment is expected to be 10.8%.
It should be noted that the unit project costs of these recent large-scale irrigation projects
are far higher than those of the 20th century ‘success’ projects (Table 8). On the other hand, it
22

seems that these 21st century large-scale irrigation projects aim at an IRR of more than 10% liketheir 20th century counterparts. The crop performance that satisfies the target IRR is accordingly
higher than that of the last century. Some of the recent projects are non-rice schemes, but if we
evaluate the performance of these schemes according to ‘rice-scheme equivalent’, the IRR of 10%
for a new construction project under the high-price regime for the world rice price, with theopportunity-cost-adjusted value-added ratio of 65% (the median for the Mwea ‘As-of-2017’
project), and other basic parameters as in the Mwea ‘As-of-2017’ project, the unit project cost of
US$ 15,000/ha and of US$ 30,000/ha require that the average rice yield of the scheme must be
more than 9 t/ha/year and 20 t/ha/year, respectively; the former performance level is about thelevel of the Mwea Scheme’s performance as of 2016-18 and the latter one is a high level that has
thus far been achieved by few irrigation schemes in the world. Likewise, the IRR of 10.8% for
the JICA’s rehabilitation project mentioned above with 13% increase in the net irrigated area, shift
from single cropping to the cropping intensity=1.9, 50% yield increase, and the opportunity-costadjusted value-added ratio of 65%, and under the high-price regime, the unit project cost of
US$ 21,500/ha in 2016 prices (excluding interests and taxes but including price contingencies)
requires the rice yield of 8.7 t/ha/season after the project. All these examples suggest that theirrigation project planners in the 21st century have the same strong tendency to over-estimate theproject benefits as their 20th century counterparts.
You et al. (2010) examine how much irrigation potential Africa would have for largescale irrigation development if a part of water stored by the existing dams were diverted for
irrigation and find for SSA a potential area of 1.4 million ha if the investment cost is US$ 3,000/haand IRR > 12%, and 5.6 million ha if the investment cost is US$ 8,000/ha and IRR > 0%. You etal. (2014) examine the same for Kenya and conclude “… under low-cost assumption, 58 dams of
73 are profitable. At high cost level, the number is 52. If we raise the IRR cutoff value to 12%, 32
dams are economically feasible. We showed that there is considerable scope for the expansion of… dam-based … irrigation in Kenya (p.34)”. The first two statements on ‘profitability’ are basedon IRR>0% and the third one on the low-cost assumption of US$ 5,000/ha (stated so in the text
but data in the online supplementary material indicate it is US$ 3,300/ha). We wonder if it is at
all meaningful to assume a level of construction cost as low as US$ 3,000/ha (or US$ 3,300/ha)
without considering such overhead costs as agricultural supports or to adopt IRR > 0% as acriterion for profitability. If the civil-work cost alone is considered as the construction costs, theIRR of the Mwea ‘As-of-2017’ project is 10% or higher under all the assumptions except for thecase under the low-price regime with b=0.5 (Table 9). However, such results, which are obtained
not including other indispensable costs, such as scheme designing, engineering and project
management, and planning and preparation for O&M after the completion of the project, are not
only meaningless but, as pointed out by Flyvbjerg and Sunstein (2016), misleading.
23

V. Conclusions
The historical trends of the world rice price in Fig. 2 remind us of a fact that the boom in irrigation
investment in the last quarter of the 20th century was induced and enhanced by repeated foodcrises in the 1960s and 1970s (Hayami and Kikuchi, 1978). The intermission in large-scale
irrigation investment from the late 1990s to the 2000s might have been due more to the low-priceregime in the world rice market resulting from the success of the Green Revolution, which madeit difficult to justify costly irrigation projects, than to deliberate reflection about the poor
performance of many large-scale irrigation projects implemented during the boom period. The
fact that large-scale irrigation projects come back as soon as the 2008 rice crisis occurred seems
to support this contention.
Our exercise to evaluate the economic viability of large-scale irrigation development by
estimating the cost of constructing the Mwea Irrigation Scheme, one of the best irrigation schemesin SSA, as a brand-new scheme shows that the investment performance of such a project may
exceed the acceptable IRR level of 8% to 10% when the high-price regime of 2008-2013 prevails
in the world rice market and if the opportunity costs of the non-land production factors used in
the crop production after the project are not high. The results imply that high rice prices, coupledwith the high performance of irrigated agriculture, as high as 9 t/ha/year in terms of rice yield,
would justify expensive large-scale irrigation development, the project cost of which is as high as
US$ 15,000/ha or even more expensive. Though rare, there are some irrigation schemes in SSA
which attain such high levels of crop performance. It is certain that there is untapped irrigation
potential in SSA for large-scale irrigation development, construction of new schemes orrehabilitation of existing ones, and there would be some large-scale projects which areeconomically justified, even in SSA where such projects generally suffer from scale-diseconomy.
Should we welcome them as promoting SSA’s Green Revolution?
For the answer to this question to be ‘Yes’, many conditions must be satisfied. Above
all, we would ask if we have invented a way to overcome the ‘malevolent hand’ that works inlarge-scale irrigation projects. Is it not that higher project costs and higher potential agricultural
productivity of large-scale irrigation projects in this century creates much more room for the
malevolent hand to maneuver for underestimating project costs and overestimating project
benefits? How to break the vicious cycle of the ‘build-neglect-rebuild’ syndrome to prevent the
moral hazard in scheme maintenance from occurring? What about appropriate institutionalframeworks for effective O&M for scheme sustainability? The project overhead costs include thecosts for planning, preparing, and training for O&M, which is one of the reasons for the escalationof the project costs in recent years. However, it is a necessary but not sufficient condition for24

effective O&M to be provided in an irrigation scheme with such costs. By now various methods
in irrigation development, aside from large-scale irrigation, have been identified and elaborated
in SSA, many of which could be more profitable than large-scale projects in terms of the IRR.
When planning a large-scale irrigation project, a serious comparison must be made with these
irrigation methods, based on detailed grass-root studies of the area planned for the project, which
was rarely done in the 20th-century large-scale irrigation development.
Unless these problems and defects inherent in large-scale irrigation development are
overcome, we conclude that the promotion of such projects results in a substantial waste ofresources.

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31

Table 1. Characteristics of 20th century large-scale irrigation projects
Sub-Sahara Africa
All data
Cost data
Number of projects
New construction
Rehabilitation
Total
Mean project area (1000 ha)
New construction
Rehabilitationb
Mean unit project costs (US$ 1000/ha)
New construction
Rehabilitationc% failure projects
New construction
Rehabilitation

Non-SSA regions
All data
Cost data

26
19
45

8
11
19

100
169
269

51
112
163

10
54

16
68

68
269

68
278

14.5
8.2

13.0
6.8

6.6
2.3

7.9
1.8

50
37

63
45

33
21

45
24

All datad

Cost overrun
No. of projects (%)
Rate of overrun (%): mean (sd) max
Cost underrun
No. of projects (%)
Rate of underrun (%): mean (sd) max
IRR over-estimatione
No. of projects (%)
Rate of over-estimate (%): mean (sd) max
IRR under-estimation
No. of projects (%)

a

52

44
(70)

-27

53
(21)

91

62
(67)

All data
40

48
(42)

176

-81

-24

51
(20)

-94

295

46

71
(35)

196

254

27

Rate of under-estimation (%): mean (sd) max

-44

(28)

26
-106

-33

(23)

-305

a) 'All data' consists of 314 irrigation projects analyzed by Inocencio et al. (2007), and 'Cost data' is a subset of this database, consisting of 182 projects, for which projects costs are reported in their Project
Completion Report with an appropriate cost-breakdown. Irrigation projects are classified either in new
construction or in rehabilitation projects.
b) In 2000 constant prices, from Table 6 of Inocencio et al. (2007)..
c) A project is 'failure' if the internal rate of returns (IRR) of the project investment, estimated at the time of
project completion, was less than international donors' interest rate for lending (11%).
d) Rate of cost overrun = (project cost reported at completion - project cost at appraisal) / project cost at
appraisale) Rate of IRR over-estimation = (IRR at appraisal - IRR at completion) / IRR at appraisal

32

Table 2. Cost structure of 20th century irrigation
projectsa

NonSSA…… % ……
SSA

Civil-work cost
Management costAg-support cost
Other-overhead cost

61
27
8
4

77
14
4
6

Total (total project cost)

100

100

1.63

1.30

Total project cost / Civil work costba) The means for 182 large-scale irrigation projects, which
is a subset of the projects studied by Inocencio et al.
(2007). As to the cost components, see the text.
b) The ratio of the total project costs to Civil work cost.

33

Table 3. Results of regression analysis, regressing unit total project cost and unit component costs (US$ /ha; in logarithm) on total project area (in logarithm) and some project-specific variables

Ln Total area (1000 ha)
Rehabilitation
FailurebcYear starteddSub-Sahara Africa
Intercepte2R
No. of observationsa

LnTotal project
cost
Coef. p-value

Coef. p-value

Coef. p-value

Coef. p-value

Coef. p-value-0.512 2E-29-0.486 6E-26-0.650 6E-31-0.648 1E-15-0.380 0.013-0.688 8E-08-0.684 3E-07-0.559 3E-04-0.1490.528-1.080 0.009

0.420 0.001

0.458 7E-04

0.239 0.126-0.1350.577

0.257 0.562-0.026 0.003-0.030 9E-04-0.024 0.023-0.001

0.971

0.002 0.963-0.070 0.712-0.2290.249

0.201 0.390

0.556

0.117

0.405 0.654

60.788 4E-04 68.331 1E-04

54.994 0.008

8.299

0.803

3.373 0.960

Ln
Civil work

Ln
Management

Ln
Ag. support

Ln
Other overhead

0.731

0.701

0.707

0.480

0.267

182

182

182

157

86

a) For the definition of component costs, see Table 2.
b) A dummy variable that takes 1 if the project is rehabilitation project and 0 if new construction project.
c) A dummy variable that takes 1 if the internal rate of returns of the project is less than 11% and 0 if 11% or higher.
d) The year the project started.
e) A dummy variable that takes 1 if the project was of Sub-Saharan Africa and 0 if otherwise.

34

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N EL NV N
RL JM KNNW O UUa Ka A 5 A J R WJU
J JTNW Ka
OJ V N L
N J RN %)''= RW V JWJPNV NW KN NNW A 5 O V NJMTN NL WMJ a
MR RK R W a NV JWM I G 4 J N
N cJ LRJ R W2 N RJ a
MR RK R W a NV JWM KNU
J N JKUR NM%)''0

RPJ NM JMMa J NJ 3 . 0'' J 2 DRLN aRNUM 3 5 J V J R %J2 J WRWP(%J ERWMJW ,%'J1 (%. L
aNJ (%' O ORUJW RWP JWM '%.
O J WRWP

)''.

)'(.

)'(.

)'(

A J JU DN
LN JWJPNV NW C SNL O I UM 5 JWT J RV UNV NW NM
CJMMa ORNUM RW A MN N J AJWM J J B
P N
NL R W N N
MN NU NM %RPJ NM JMMa J NJ 3 / ,'' J2 DRLN aRNUM 3 -%)JK2 )%' L
aNJ (%(O OR
J N RWP JWM '%0 O J WRWP
4 V MN WRbJ R W N JKRUR J R W
SNL = 6 4 U JWSNLJ KNNW W
P RWP A N F RKJ MJV JWM RWT 6 JWJU J N
KN L WL NM
R R
8J J NJ R
KN N JWMNM JWM N JKRUR J R W JWM RV
NV NW ONJ
O N L NV N%
4O N L V UN R W2 R RPJ NM J NJ 3 / 0(' J RWLU MRWPP N
NL R W() '' J JLL MRWPNa RW )'(. )'(/ %J WO V J R W
LN J N 6 JV KN (0-0 6 JV KN (0. HNNW (0. = 6 4(0//2 (0/02 (00. A R W NR (00JK J JWM
N)'') 4KM UUJ R N JU%)'' : 5 5 )'(' JWM
Na RW )'(- JWM )'(/%K F N NRP NM J N JPN RW )'(- NRP 3 UJW NM J NJ Ka R RPJ R W WR KJ NM W
ORNUM
Na%
35

Table . Direct construction cost of Mwea Irrigation Scheme estimated by
the Consultant, in 2016 prices
Structures / facilities / works
1 New Nyamindi Headworks
2 Thiba Headworks
3 Nyamindi Headrace
4 Nyamindi Main Canal
5 Nyamindi Branch Canal-1
6 Nyamindi Branch Canal-2
7 Nyamindi Branch Canal-3
8 Link Canal-I
9 Link Canal-II
10 Thiba Main Canal
11 Thiba Branch Canal-1
12 Thiba Branch Canal-2
13 Thiba Branch Canal-3
14 Thiba Branch Canal-4
15 On-farm Development
Total

Quantity

875 m
4,880 m
6,460 m4,649 m
3,560 m
10,887 m
3,509 m
9,417 m3,418 m
4,900 m5,825 m
16,100 m
8,502 haa

Estimated cost
Ksh million US $ million b
132.3
1.303
58.5
0.576
80.6
0.794
111.6
1.100
99.6
0.981
87.0
0.858
39.4
0.388
431.3
4.250
152.8
1.505
428.9
4.226
75.8
0.747
74.7
0.736
143.4
1.413
382.9
3.772
5,586.3
55.037
7,885.0
77.685a) The irrigation infrastructures and facilities, the original construction costs of whichwere estimated, are of those that existed at the time of the project appraisal of Mwea
Irrigation System by JICA for a modernization project. For details, see JICA and Nippon
Koei (2018).
b) Exchange rate in 2016: US $ 1.00 = Ksh 101.50.

36

Table 6. Cost structure of 20th century irrigation projects at theaproject size of 8,500 ha
SSA

Non-SSA.......... % ….....
All projects
Civil-work cost
Management costAg-support cost
Other-overhead cost
Total project cost
(Total project cost / Civil work cost
New construction projects
Civil-work cost
Management costAg-support cost
Other-overhead cost
Total project cost
(Total project cost / Civil work cost
Successful new construction projects
Civil-work cost
Management costAg-support cost
Other-overhead cost
Total project cost
(Total project cost / Civil work cost

60
19
13
7
100
1.66

71
15
9
6
100
1.42 )

60
18
11
11
100
1.67

70
13
7
9
100
1.42 )

59
19
12
10
100

69
14
8
8
100

1.69

1.44 )a) The total project cost and component costs are first estimated at the
project size of 8.5 (1000 ha) by using the regression equations obtainedin Table 3 (inserting the means or the relevant values for the non-scalevariables), and then the percentage compositions are computed. For thecomponent costs, see the text and Table 2.

37

Table 7. Cost structures of Mwea Project 1990 and Mwea Project 2017
Mwea Project 1990
(actual costs)
Civil-work cost (%)
Management cost (%)
Ag-support cost (%)
Other overhead cost (%)
Total (%)
Total project cost / Civil work cost
Civil-work cost (%)
Management cost (%)
Ag-support cost (%)
Other overhead cost (%)
Total (%)
Total project cost / Civil work costi) As reported
44
41
15

a

Mwea Project 2017
(appraised costs)

b

b

100
2.27
c
ii) Adjustment 1
57
29
15
100
1.76
iii) Adjustment 2

Civil-work cost (%)
Management cost (%)
Ag-support cost (%)
Total (%)
Total project cost / Civil work costeiv) As reported
51
15
6
29
100
1.97
f
v) Adjustment
58
17
7
19
100
1.73

d

66
20
15
100
1.52

a) JICA grant-aid project implemented in 1989-1991 to modernize and rehabilitate the Mwea
Scheme. Data are from Nippon Koei (1993).
b) The reported line-cost items are sorted out to direct construction costs and indirect /overhead
costs as reported in the Report. None of 'other overhead' cost is reported.
c) Transfer 'packing & transport costs' of construction materials from overhead cost to 'civil-work
cost'.
d) In addition to packing & transport costs, transfer 'common temporary infrastructure costs'
from overhead cost to 'civil work cost'.
e) The on-going JICA loan-aid project to modernize the Mwea Scheme. Data are from JICA
internal records.
f) Exclude 'interests', 'commitment charges', and 'taxes' (VAT and tariffs).

38

Table 8. Construction costs of Mwea Scheme at the initial construction stage and after the firstamodernization project, in comparison with those of 20th-century large-scale irrigation projects
Remarks
I.

Initial construction phase (as of 1968)
1. Project cost c

US $ '000

2. Project areaha

3. Unit cost per hab3,925 In 1960 prices
3,129 Irrigated area developed by 1968

US $ / ha

1,255 In 1960 prices

US $ / ha

10,071 In 2016 prices

II. After the modernization phase (as of 2017)
1. Project costs e :d

In 2016 prices

Civil-work cost

US $ million

77.69 From Table 6 of this paper.

Low estimate

US $ million

116.53 Project cost / Civil-work cost = 1.5

Middle estimate

US $ million

132.06 Project cost / Civil-work cost = 1.7

High estimate

US $ million

155.37 Project cost / Civil-work cost = 2.0

2. Project area

ha8,502 Grant aid area in 2017

3. Unit cost per ha :In 2016 prices

Civil-work cost

US $ /ha9,137

Low estimate

US $ /ha

13,706

Middle estimate

US $ /ha

15,533High estimate

US $ /ha

18,275

III. Unit cost of 20th-century 'success' projects in SSA f

In 2016 prices.

1.

New construction

US $ /ha

8,347

2.

Rehabilitation

US $ /ha

5,085a) The deflator used is constructed by linking Word Bank's world GDP implicit deflator (1960-2017) with IMF's
world export price index (1945-1960). For the years concerned, the deflator takes the following values: 2016 =1.0000, 2000 = 0.6860, and 1960 = 0.1246.
b) Actual capital and construction-related recurrent expenditures for 1954 - 1968. Data are from Appendix tables ofSandford (1973).
c) Consists of civil-work costs, management costs, ag-support costs (tractors and vehicles for O&M, and otheroverhead costs (land acquisition and social infrastructure). Labor costs for O&M are also included because it was
not possible to separate from other labor costs. Recurrent expenditures on current rice production are notincluded.
d) Project costs, which are the costs if the Scheme is constructed now as a brand-new scheme with irrigation
infrastructure in place in 2017.
e) Three levels of 'Project cost / Civil-work cost' ratio are assumed, based on Tables 6 and 7.
f) Data from Table 7 of Inocencio et al. (2007), converted from 2000 prices to 2016 prices.

39

Table 9. Internal rates of return (%) to the investment for newly constructing Mwea Irrigation
Scheme in 1968 (3,129 ha) and in 2017 (8,502 ha) a
I. As of 1968 (in 1960 prices) b
1. b=0.8
Rice price = US$ 89 /t
Rice price = US$ 105 /t

19.1
22.1

2. b=0.5
Rice price = US$ 89 /t
Rice price = US$ 105 /t

II. As of 2017 (in 2016 prices)

12.1
14.3
c

Low cost

Medium cost

High cost

Civil-work cost
alone

8.7
11.1
13.3

7.6
10.0
12.0

6.4
8.6
10.5

12.4
15.4
18.0

4.6
6.7
8.5

3.8
5.8
7.5

2.8
4.6
6.2

7.5
10.0
12.2

1. b=0.8
Rice price = US$ 350 /t
Rice price = US$ 450 /t
Rice price = US$ 550 /t

2. b=0.5
Rice price = US$ 350 /t
Rice price = US$ 450 /t
Rice price = US$ 550 /ta) For the estimation formula and assumptions, see the text.
b) For the 'initial construction phase project'. Unit cost data from Table 8. b = (opportunity-cost-adjusted) valueadded ratio. For details, see the text. The low rice price is the one used by Sandford (1973) based on the rice
price in Tanzania and the high rice price is the Mombasa CIF price of Thai A1 (1951-1956 average).
c) For the 'after the modernization phase project'. Unit cost data from Table 8. b = (opportunity-cost-adjusted)value-added ratio. For details, see the text. The rice price is the Mombasa CIF price of Thai 5% broken: low
price (1986-2004 average), medium price (2014-2018 average), and high price (2008-2013 average).

40

Unit Total cost (US $ /ha)r = - 0.796 ** (n = 182)

1000000
100000
10000

1000
100
10

Unit Civil-work cost (US $ /ha)r = - 0.767 ** (n = 182)

100000
10000
1000
100
10

Unit Management cost (US $ /ha)r = - 0.814 ** (n = 182)

100000
10000
1000
100
10
1

Unit Ag. support cost (US $ /ha)r = - 0.685 ** (n =157)

10000
1000

100
10

1

Unit Other-overhead cost (US $ /ha)r = - 0.517** (n = 86)

10000
1000

100
10

1
0

1

New

10

100

Rehabilitation

1000

10000

Total project area (1000 ha)

Fig. 1 Correlation between project-size (total area) and unit costs
41

US $ /mt (2016 constant prices)

US $ /mt (current prices)

1400

700

1200

600

1000

500

800

400

600

300

400

200

200

100

0
1940

1950

1960

1970

1980

2016 constant prices

1990

2000

2010

0
2020

Current prices

Fig. 2. World rice price (Thai 5% broken FOB Bangkok),
1948-2018
Data sources: For 1960-2018, World Bank Pink Sheet 1960-2018 (World
Bank, 2019a) for both current and constant prices. Before 1960, the current
price series compiled using the data from IRRI (2000) and Barker et al.
(1985) is linked with the World Bank series, and deflated by the IMF World
Export Price Index (1948-1960).

42