chap4 project.pptx ajsjdjr aka djf fiona management s

1
Chap: 4PROJECT IDENTIFICATION
CONTENTS:
Project Identification
Source of Project Ideas
Who Identifies Projects
Project Concepts and Profiles
Prioritization and Ranking
Identification of Commercial Project Ideas

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Introduction
 Project identification is the process of
searching for and subsequently finding
potential projects that might be realized to
generate benefits in excess of costs that
accrue to the society and contribute towards
the attainment of development objectives.
The generation of promising investment
(and/or project) ideas is among the major
stages in the project cycle. It is the first stage
in the project planning process.

3
Conti…
 Project identification is made in rather general
terms with broader scope at the first glance and
then, the idea will be progressively developed.
According to the UNIDO model, opportunity studies
and/or assessments of existing investment
opportunities are considered very essential and
hence, should precede the task of identification.
opportunity studies generally provide useful
insights about possible/potential areas for
investments. Generally speaking, a range of
alternative project ideas needs to be considered,
and even alternative versions of the same project
may be conceived.

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3.1. Project Identification
 The search for promising project ideas is the first
step towards establishing a successful venture. The
key to success lays in getting into the right business
at the right time. The objective is to identify
investment opportunities, which are prima facie
feasible and promising and merit further
examination and appraisal. Project identification is
the process of finding projects that could contribute
towards achieving specified development
objectives. In principle, project identification
should be an integral part of the macro-planning
exercise, with sectoral information and strategies
being the main sources of project ideas.

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Conti…
 In practice, projects often are not derived from
national and/or sectoral plans, however. Instead,
projects may originate from several sources.
Irrespective of their origin, project ideas generally
should aim at overcoming constraints on the national
development efforts (be it material, human, or
institutional constraint) or at meeting unsatisfied
needs/ demand for goods and services. The prevailing
constraints, needs, and demands should be
interpreted broadly to include, for instance, foreign
exchange constraints that might indicate the need to
undertake projects for export promotion or import
substitution.

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Conti…
 The variety of projects makes it impossible to
prepare an exhaustive list of sources from where
project ideas emanate; but much depending on
the experience and imagination of those
entrusted with the task of initiating development
project. In general, one can distinguish two levels
where project ideas are born: macro-level and
the micro-level.

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3.2. Sources of Project Ideas
3.2.1. Macro Sources of Project Ideas
Among the various institutions and sources, the
following macro sources are considered the
major ones in order to generate project ideas,
especially in developing countries:
Federal/Central or Regional Governments;
Bilateral and Multilateral Agreement; and
International Development Agencies
In general, in developing countries, the
government remains to be the major source of
project ideas.

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Conti…
The following are presumed to be the major
reasons for governments to be important sources
of project ideas in developing nations:
They often have the necessary resources for
undertaking opportunity studies;
They do also have unlimited access to data &
information;
They do have the required facilities to conduct
survey, studies, and reviews;

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Conti…
Moreover, such governments are fully familiar
with the development objectives, priorities, and
strategies.
In this regard, the development goals, priorities,
and strategies often are not clearly
communicated to groups (individuals and/or
institutions) at micro-level.
The development goals in such contexts also
seem to be ambiguous to groups at the micro-
level and/or may not be consistent with the
interests of local groups.

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Conti…
Specifically, project ideas often emanate from the
following macro sources:
National policies, strategies, and priorities as
may be enunciated (or articulated) by
government from time to time.
National, sectoral, sub-sectoral, or regional plans
and strategies supplemented by special studies,
called opportunity studies, conducted with the
explicit aim of translating national, sectoral, sub-
sectoral, and regional programs into specific
projects.

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Conti…
 General surveys, resource potential surveys, regional
studies, master plan and statistical publications, which
indicate directly or indirectly investment opportunities.
 Constraints on the development process due to shortage
of essential infrastructure facilities, problems in the
balance of payments, etc.
 Government decisions to correct social and regional
inequalities or to satisfy basic needs of the people
through development projects
 A possible external threat that necessitates projects
aiming at achieving, for example, self-sufficiency in
basic material, energy, transportation, etc.
 Unusual events such as droughts, floods, earthquake,
hostilities, etc.

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3.2.2. Micro Sources of Project Ideas
Apart from the macro sources for generating
project ideas, there are diverse kinds of
institutions and/or economic entities that are
considered micro sources of project ideas. The
following are among the major micro sources of
investment (or project ideas):
Private and Public Enterprises;
Local Groups or Organizations;
Consumer Groups and Associations;
Financial Institutions/Credit Associations;
Cooperatives, Farmers’ Unions, etc;
New Technology Suppliers and so on.

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Conti…
In general, project ideas that emanate from the
micro-sources are obtained (and/or generated)
based on one or many of the following
conditions:
 The identification of unsatisfied demand or
needs;
 The existence of unused or underutilized natural
or human resources and the perception of
opportunities for their efficient use;
 The need to remove shortages in essential
materials, services, or facilities that constrain
development efforts;

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Conti…
 The initiative of private or public
enterprises in response to incentives
provided by the government;
 The necessity to complement or expand
investments previously undertaken;
 The desire of local groups or
organizations to enhance their
economic status and improve their
welfare;

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3.3. Who Identifies Projects?
 There are quite large number of institutions
and/or groups that often identify investment
opportunities (or generate project ideas) in
the society. These entities may be private
firms, public enterprises, government UNITs,
local or international development agencies,
financial institutions, as well as profit seeking
or not-for profit organizations. Listed below
are the major groups that are involved, by
large, in the identification of projects in the
society:

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Conti…
Small producers organizations/producers’
unions;
Large scale individual private sector
producers;
Product marketing organizations;
Private sector companies
(local/multinational);
State owned enterprises & organizations;
Government ministries, authorities, agencies,
and commissions;
Development banks (local as well as foreign);

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Conti…
International development agencies, aid
agencies, and self-aid associations;
Local governments and state, regional, and sub-
regional authorities;
Local political & pressure groups such as
opposition parties;
Local and/or international NGOs;
Credit institutions (such as credit unions, savings
and loan associations, saving banks, commercial
banks) and cooperatives; and so on.

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3.4. Project Identification Studies and
Process of Idea Generation
3.4.1. Identification Studies
 When we are more concerned about
project identification, the formal task of
conducting identification studies,
(opportunity studies), is one of the best
available option to project planners,
which is critically important to
generate and/or come up with useful
information.

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Conti…
Objective of Identification Studies:
The major objective of identification
studies is to collect sufficient data
and/or generate beneficial information
concerning the background, technical,
economic, social, and environmental
aspect of a potential project.

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Conti…
 In general, there are four approaches for conducting
project identification studies. These are area studies,
industrial studies, resource-based studies, and
sectoral studies. In this regard, each of the
approaches focuses on relatively unique aspects and
pay attention to some important variables (or
considerations). One may follow any one of these
approaches depending on the appropriateness for
the type of project being pursued and the
significance it has to the concerned. Exhibit 3.1
depicts the main approaches for project
identification studies together with the relevant
aspects to be assessed and the major considerations
therein.

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Exhibit 3.1: Project Identification Studies
Approaches Aspects Considerations
Area Studies ØIdentification of
opportunities in a given
area such as localities,
regions, states, etc.
Backward (less developed
and or
Marginalized areas.
Industry Studies Identification of
opportunities in the
industrial sector.
Specific marketable
product
Diversification
opportunities
Import substitution
and export
possibilities; etc.
Development
plans &
programs;
investment
policies;
Economic policies; and
industrial policies.

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Conti…
Resource- Based
studies
opportunities in exploiting
natural resources
Natural resource analysis
Import substitution;
Export possibilities
Resource allocation &
utilization policies;
industrial policies; and
other policies &priorities.
Sectoral Analysis/
Studies
Satisfaction of social
needs/removing
sectoral problems:
Agriculture sector,
Manufacturing
sector,
Health sector,
Education sector,
Service sector, etc.
Sectoral strategies;
sectoral priorities;
existing unsatisfied
needs; sectoral
development level; etc

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3.4.2. Project Idea Generation Process
The aspects indicated in 1 through 7 below more or less
explain the process of generating project ideas.
1. Survey & Review of Endowments and Facilities
(Infrastructures):
 Surveying, reviewing, and analyzing existing policies,
resource endowments, and socio-economic variables.
 Natural Resources: review of the natural resource
endowments of the country.
 Human Resource: review of educational standards and
facilities.
 Socio-Economic Variables: review of various socio-
economic factors. This, among others, includes:
 Housing facilities & standards; Utilities services; Health
and nutrition services; and Income distribution.

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2. Field Survey and Interview:
This includes asking people regarding what
goods or services they want, which helps to
identify if any unsatisfied need exists. It also
involves:
Obtaining information about their existing
problems may be through directly asking them
(i.e. people about what their problems are).
Asking the public UNIT closest to the people at
the grass-root level about their problems and/or
needs (asking him/her what the community
needs/what the people need).

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3. Observing and Analyzing Prevailing Situation:
Observation and analysis of the prevailing
situation is also an important means in order for
generating project ideas. This includes:
Observation & examination of current demand &
supply situation for goods/services;
Examination of past & future
consumption/production trends for goods and
services;
Observing possibilities for improvement of goods
and services (both in terms of quality &
quantity);
Observing opportunities & threats in the
invention & introduction of new technologies,
etc.

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4. Participating in Deliberations, Discussions, and
Trainings:
Participating in various discussion forums and
deliberations made in seminars, workshops, and
conferences (both local and international) are
believed to be important for generating useful
investment ideas.
Meeting at different levels within the
organization;
Educational & training programs; and the like.

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5.Brainstorming:
 Brainstorming is also an important
means for generating project ideas. In
brainstorming sessions, a group of
people suggests different ideas
regarding future activities very quickly
before analyzing and/or considering the
source of the idea more carefully.
Brainstorming is essential before
detailed analysis of an idea of a project
as well as before detailed planning.

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6. Exposures to Publications & Media:
Reading various publications (scientific or
otherwise) and exposures to different
communication media is essential for generating
project ideas. This may include:
Print media such as journals, books, magazines,
newsletter, news papers, etc;
Audio-visual media (discussions and reports on
radio, TV, etc); and
Visual media (cinema, video, etc).

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7. Informal Discussions and Meetings:
 In addition to the above aspects, it is also useful
to take note of ideas thrown in informal (or non-
formal) discussions and meetings.
 This also includes exchange of ideas in
friendship/fraternal gatherings and get-
togethers.
 In a nut shell, all the above aspects and/or
procedures might eventually lead to the
generation of project ideas about which we
develop feeling of feasibility. The individual(s) or
entities generating the idea(s) develop a kind of
feeling that the identified project(s) might be
feasible candidate(s) for further and more

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Conti…
 Therefore, the feeling of feasibility is a
good basis for identification of
potentially promising projects that
worth considering. Eventually, the
project idea generated becomes an
eligible candidate for further study and
preparation. Such ideas need be
thoroughly analyzed and assessed
based on tangible facts and data.

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3.5. Approaches to Project Idea Generation
 Broadly speaking, project ideas are said
to be generated through one of the
following two approaches: Top – Down
(Macro) Approach or Bottom – Up
(Micro) Approach. Each of these
approaches is discussed next.

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CONTI…
 The Government need not go down
because the problem might be
understandable. However, such projects
may not relate to the existing reality in
particular vicinity and hence, might
encounter resistance and/or
implementation constraints, as the
people in the context might lack
interest to cooperate with.

33
Conti…
 In general, the top-down approach for
project idea generation helps to identify
implementation entities at given local
area that may or may not be consistent
with the needs in the context. In other
words, such projects have long-term
orientations that, perhaps, need not
necessarily be compatible with the
existing reality in the locality.

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3.5.2. Bottom – Up Approach
 A bottom – up idea generation process requires
base line surveys, which is based on the realities
existing in different localities.
 Such projects might be easy to implement (or
realize) due to their fitness to the realities in a
given context.
 May get community support, successfully
implemented, and the potential benefits might
easily be visualized (seen) by the society. This
may help to create good will and positive images
towards the institution.

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3.6. Project Identification: Steps and Problems
3.6.1. Steps in Project Identification
Project identification generally involves four
major steps. These are:
Step 1: Generation of project ideas;
Step 2: Screening of project ideas (giving priorities
based on resources, compatibility to objectives,
its potentials to enhance competitiveness, and
value adding in the society);
Step 3: Identification of candidate projects passing
the screening criteria; and
Step 4: Propose for pre-feasibility/feasibility
studies.

36
Conti…
 In this regard, once a list of project ideas
has been put forward, the first step is to
select one or more of them as potentially
promising. This calls for a quick
preliminary screening by experienced
professionals who could also modify
some of the proposals. At this stage, the
screening criteria are vague and rough,
that become specific and refined as
project planning advances.

37
Conti…
During the preliminary screening, to
eliminate ideas that are not prima facie
promising, it is required to look into aspects
pertaining to the following:
Compatibility with the promoter,
Consistency with government priorities,
Availability of inputs,
Adequacy of market,
Reasonableness of costs, and
Acceptability of risk level.

38
Conti…
During preliminary selection, the analyst
should eliminate project proposals that:
Are technically unsound and risky;
Have no market for the output;
Have inadequate supply of inputs;
Are very costly in relation to benefits;
and
Assume an overambitious sales and
profitability target.

39
Conti…
 Obviously, since the criteria tend to be
somewhat nebulous (vague, imprecise,
and ill defined), much depends on the
experiences and sense of objectivity of
the professionals applying them. It is,
however, necessary to conduct this
screening, even with indistinct criteria,
in order to reduce the number of
project alternatives to a manageable
level to which more work and time will
be devoted.

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Conti…
 Indeed, project planning can be viewed
as a process of elimination, i.e.
elimination of inferior alternatives. As a
result of the preliminary screening
exercise, a project profile, an opportunity
study report, or an identification study
report, as appropriate, is prepared
showing which project alternatives
should be rejected and which ones may
be advanced to the next stage.

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3.6.2. Problems in Project Identification
a. Ambiguity regarding the
Development Goals (Objectives) of
the nation:
 People may not clearly identify the
national development goals.
 The development goals may not be well
communicated, may not be in the best
interests of some groups, or may not get
full-hearted acceptance from the public.

42
Conti…
b. Priority Issues in the Existing
Development Goals (Objectives):
 Conflict of views regarding the development
priorities and goals set (that might entail lack
of interest & commitment).
 Differences in views regarding critical
aspects of national priority.
 Differences in prioritizing sectoral goals &
objectives.

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Conti…
c. Limited Data and Obstacles in
Information Flow and accessibility:
 Problems in data and information flow;
 Constraint (bottlenecks) for accessing
data;
 Limited availability of data &
information;
 Data may not be dependable (reliable)
for use; and so on.

44
Conti…
d. Conflict of Interest between Local Beneficiary
Groups [as some group(s) might bear the cost
while benefits accruing to others].
 What are the costs & benefits of identified
projects?
 Who bears the costs & benefits in the society?
 Is benefits accruing to other groups while the
cost paid by a given local group (UNIT)?
 Find mechanisms to compensate those bearing
the costs.
 Unless compensated otherwise, the
consequences might be unfavorable, severe, and
costly as well.

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