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Water 2017, 9(11), 821; https://doi.org/10.3390/w9110821

Combining Econometric, Cost–Benefit, and Financial Methodologies in a Framework to Increase Diffusion and to Predict the Feasibility and Sustainability of Irrigation Schemes: A Case Study in Kurdistan, Iraq

Dipartimento di Scienze Economiche, Università di Bologna, via Angherà 22, 47900 Rimini, Italy
Received: 27 July 2017 / Revised: 4 October 2017 / Accepted: 20 October 2017 / Published: 26 October 2017
(This article belongs to the Collection Water Policy Collection)
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Abstract

This paper applies ex ante econometric, cost–benefit, and financial methodologies to increase participation in an irrigation project and predict its financial feasibility and social sustainability in Shahrazoor, Kurdistan, Iraq. I investigated the socio-economic, psycho-cultural, and financial factors that determine participation. The socio-economic part of the econometric analysis showed that the project was appreciated more by poorer and economically weaker farmers who rely on agriculture than by those who rely on livestock activities. The psycho-cultural part of the econometric analysis emphasized that the project was appreciated more by literate farmers who adopt a maximization (rather than habit) approach. The cost–benefit analysis applied to the irrigation project was tailored to poorer and weaker farmers (i.e., costs of the irrigation scheme and benefits from new cultivation patterns were defined with reference to small farms) by including indirect benefits from both irrigation (e.g., flood control) and hydropower (e.g., eliminated GHG emissions), and determined a 7.1% mean internal rate of return; this was affected more strongly by uncertainty in crop prices than by uncertainty in indirect benefits. The financial analysis highlighted values for water prices, financial returns, and loan rates that met government and farmer budgets. A single framework summarized the main relevant social, economic, and financial conditions, and, by including insights from sensitivity analyses, determined the feasibility and sustainability of the irrigation project. Provided that the water price charged to farmers is between 0.32 and 0.57 USD/m3, and the loan interest rate paid by farmers is smaller than 3.0%, the irrigation project in Shahrazoor is financially feasible for 13.6% of all reliable economic solutions and socially sustainable for 35.8% of the solutions. View Full-Text
Keywords: irrigation project; econometric analysis; cost–benefit analysis; financial analysis; development; Middle-East; Kurdistan; Iraq irrigation project; econometric analysis; cost–benefit analysis; financial analysis; development; Middle-East; Kurdistan; Iraq
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Zagonari, F. Combining Econometric, Cost–Benefit, and Financial Methodologies in a Framework to Increase Diffusion and to Predict the Feasibility and Sustainability of Irrigation Schemes: A Case Study in Kurdistan, Iraq. Water 2017, 9, 821.

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