ALTERNATIVE COSTS AND TOTAL ECONOMIC BENEFITS: AN INPUT - OUTPUT STUDY OF THE ASWAN DAM (EGYPT)

This study empirically assesses the alternative costs and total economic benefits of the Aswan Dam to the Egyptian economy. The chief analytical tool is a static version of Leontief's Input - Output model.;The study measured the total benefits from the intermediate use of the Dam's additional electricity in terms of the possible increases in domestic sectors output, employment and their contributions to net foreign earning. The magnitude of these benefits is found to depend on which of two alternative growth strategies is considered: balanced versus unbalanced. In the balanced growth strategy, the additional electricity is distributed among all sectors in proportion to their contribution to total final demand, whereas in the unbalanced growth strategy, sectors with large growth potential, i.e., those possessing the highest forward and backward linkages, are given preferential treatment.;The study finding reveals that total benefits to the national economy are greater if the unbalanced growth strategy that emphasizes sectors with strong forward linkages is pursued.;As for the agricultural benefits, the study measured the direct ones in terms of the gains in farm income and the reduction in agricultural surplus labor. The indirect benefits would be felt primarily in terms of the generation of additional income and the stimulation of new employment in chemical, transportation and service sectors.;The alternative costs are measured in terms of the net drain on the Egyptian economy if conventional methods are used to produce amounts equal in value to the Primary Products of the Dam. The study finding indicates that the project is a very efficient source of electric power and for irrigating additional land, and hence is economically justified in these terms alone.;The most significant regional result of the construction expenditures on the Dam is found to be an improvement in the comparative advantage of the Aswan Region's raw-material oriented industries. This finding suggests that allocation of additional investment toward these industries would lead toward a creation of a regional growth pole.;National policy implications of the study are that the Aswan Dam is the basis for future economic development in Egypt. If the maximum benefits of its electric power are to be realized, Egypt's development policy should emphasize the allocation of the country's limited investment funds to the creation and/or expansion of a "growth industry" in each of the economy's key processing sectors with the strongest forward linkages. These sectors are found to be: chemicals; food processing; spinning and weaving; iron and steel. Moreover, two other key primary sectors should continue to be developed, namely transportation and agriculture. The latter will continue to be the dominant sector of the Egyptian economy, because of its labor absorptive capacity, its production of foodstuffs, and its role as a source of intermediate inputs to agro-based industries which generate over half of all exports under each of the two development strategies examined.