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Social costs and benefits of the World Expo 2025


Publication number: 2016-12
Authors: B. Hof, W. Rougoor & B. Tieben
Commissioned by: Ministry of Economic Affairs, Ministry of Infrastructure and the Environment, and Ministry of Foreign Affairs
Published by: SEO Amsterdam Economics
ISBN: 978-90-6733-804-2

The organization of a World Expo in Rotterdam in 2025 would require investments by private parties and by various governments. To support a central government’s decision, the social costs and benefits of the World Expo 2025 for the Netherlands as a whole were studied by commission of the Ministry of Economic Affairs, the Ministry of Infrastructure and the Environment and the Ministry of Foreign Affairs. This was done by performing a cost-benefit analysis (CBA) based on key indicators (‘indices CBA’). A more detailed analysis was not possible in view of the duration of the study and the available data. The results of the analyses give a broad indication of what the determining factors are for the balance between social benefits and costs for the Netherlands as a whole. The objective is to include all effects on welfare.

The plans for the organization of the World Expo 2025 have several phases and sub-projects. As a first step in the study, an assessment has been made of whether the final business plan World Expo 2025 contains sufficient data to answer the clients' questions. The conclusion of this assessment is that there is insufficient data to carry out a CBA regarding the components Invitation to the World, Expo Works and Accessibility. Consequently, the CBA focuses primarily on the components Bidding and Lobbying, Space: Property and Land, and World Expo 2025. Accessibility was analysed in a more qualitative manner using additional data.

The balance of the social benefits minus the costs is dependent on the assumptions regarding the number of visitors to the World Expo. This report considers the scenario with 17.3 million visitors as the most realistic of the supplied scenarios. With this number of visitors, the calculated balance of social benefits minus costs has a bandwidth of approximately minus €180 million to nearly zero. Hereby, the costs and benefits of the component Accessibility and the balance of the items that were not calculated in this CBA (the so-called ‘memo items’) were not taken into account.

The current indication is that the necessary extra investments in transport infrastructure (‘Accessibility’) result in social costs that are approximately €500 million to €800 million higher than the social benefits. These social costs and benefits have been analysed assuming that the World Expo 2025 will attract 21.3 million visitors. At a lower number of visitors (such as the scenario of 17.3 million visitors, which in our opinion is more realistic) it is likely that less transport bottlenecks will arise and a smaller package of solutions with lower costs will suffice. However, the extent of these possible savings is unclear at this point in time. It is recommended to further investigate the impact of a variation in the number of visitors on the costs and benefits of the accessibility solutions and the World Expo as a whole.

The conclusion regarding Accessibility rests on the assumption that the investments in transport infrastructure are done specifically for the World Expo. If it turns out that these investments would be done anyway, even if the World Expo would not take place, this could have a significant impact on the balance of social benefits minus costs. This is true in particular for the new connection with the ‘Westoever’, which is a large contributor to the costs.

The assumptions regarding the number of visitors and the spending of international visitors have a major effect on the outcome of the CBA. In addition, variations in the expected real estate profits significantly contribute to the bandwidth of the outcome.
 
Not all components of the plans for the World Expo 2025 were analysed in this CBA. The component ‘Invitation to the World’ falls outside of the scope of this CBA, for instance, due to a current lack of clarity about its programming and the absence of data for the calculation of costs and benefits. The business plan for the World Expo 2025 calculates social benefits of €51 billion for this component. This calculation has not been adopted since the sources on which this calculation is based are unsuitable for allocating social benefits to the Expo. The calculation refers to developments that will partly take place no matter if the Expo is held or not. Depending on the programme the Expo's ‘Invitation to the World’ will be able to strengthen and accelerate the economic transition, but to which extent it may do so is unknown.

The items (‘memo items’) that could not be calculated in this CBA (of the components of the World Expo business plan that were analysed) are partly smaller items and partly items whose size could be substantial. For the latter items this includes possible effects on trade and export, the possible valuation of an icon effect linked to the realization of the ‘Westoever’ connection in Rotterdam, and possible positive effects on the quality of life and air quality as a result of improvements to public transport.

On the website of the Government of the Netherlands the KCBA can also be found as an attachment to the Letter to Parliament regarding the nomination for the World Expo 2025.


Category: 2016, Bert Tieben, Bert Hof, Ward Rougoor, Financial Markets & Finance