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The document discusses considerations for project selection and feasibility studies at the national level. It covers economic considerations for investment projects including responding to changing circumstances. It also discusses management of investment projects at different levels and factors to consider in project analysis like market analysis, technical analysis, economic analysis, financial analysis, social analysis, institutional analysis, and environmental analysis.

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Altaf Hussain
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18 views

Presentation - B

The document discusses considerations for project selection and feasibility studies at the national level. It covers economic considerations for investment projects including responding to changing circumstances. It also discusses management of investment projects at different levels and factors to consider in project analysis like market analysis, technical analysis, economic analysis, financial analysis, social analysis, institutional analysis, and environmental analysis.

Uploaded by

Altaf Hussain
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CHAPTER NO.

02
PROJECT SELECTION CONSIDERATIONS
AND FEASIBILITY STUDIES
At the end of the chapter we will be able to…….
1. What should be the considerations and priorities in setting up projects at micro and
macro level?
2. Project analysis
3. Feasibility studies
4. Project reports
5. Over-all project cycle (a project work comprises several distinct stages)
ECONOMIC CONSIDERATIONS FOR
INVESTMENT IN PROJECTS
• Investment in projects is an integral part of economic development.
• A good project approach leads a nation towards rapid economic development by way of:
I. Setting investment opportunities within a national plan strategy
II. Getting the right policies
III. Combining projects investments with technical assistance
IV. Training people and strengthening organizations
• The best way to keep a nation on the path of sound economic development is to practice the
following:
I. Responding to changing circumstances
II. Combining rational economic choice with informed political judgment
III. Avoiding past mistakes
IV. Maintaining a steady pace
2.3 MANAGEMENT OF INVESTMENT
PROJECTS AT NATIONAL LEVEL
• Management of projects takes place at the following levels:

I. AT NATIONAL LEVEL (plans for investment are formulated and the macro-economic frameworks

of policies are laid down for economic growth.

II. AT SECTORAL LEVEL (priorities for investment are determined within each sector)

III. AT PROJECT LEVEL (the individual projects are identified, prepared and implemented, and

attention is given to their economic, technical, financial, social and other dimensions)
2.3.1 PROJECT INVESTMENT PLANNING
FOR DEVELOPMENT
Project investment planning is directed increasingly towards new goals. A country
having a wide potential follows a strategy with two elements:

I. A macro-economic framework of policies: (spurs economic growth and influence desired


behavior from public and private entities.)
 fiscal and monetary policy, exchange rates, wage and trade policies, and all aspects of economic
growth.

II. Public sector investment programme:


 Allocates scarce resources to high-priority public needs.
2.3.2 PRICING POLICIES
2.3.3 INVESTMENT IN PUBLIC SECTOR
PROJECTS
2.5.4 ANALYSIS OF PROJECT
 The examination of all the costs or problems of a project before work on it is started.
 A multidimensional project analysis is carried out by doing these
1. Market Analysis
2. Technical Analysis
3. Economic Analysis
4. Financial Analysis
5. Social Analysis
6. Institutional Analysis
7. Environmental Analysis
8. Logistic Analysis
1. Market Analysis
 Marketing research that yields information about the marketplace. Two questions are
answered in this analysis.
 What would be the aggregate demand of proposed product or service?
 What would be the market share of the project under appraisal/ analysis?
For assessment of above two things a wide variety of information (major issues) are required such
as
 Past and future consumption trend and supply position
 Production constraints
 Export and import position
 Demand elasticity
 Consumer’s behavior - preferences, attitudes and requirements
 Channel of distribution
 Marketing policy of organization
2. Technical Analysis
 Whether the prerequisites for the success of project are considered?
 Good choices with regard to location, size, process, machine etc.
 Major issues
 Preliminary tests and studies
 Availability of raw material, power and other inputs
 Optimal scale of operations
 Choice of suitable production process
 Choice of appropriate machines and equipment
 Effluent and waste disposal
 Proper layout of plant and building
 Realistic work schedules
 Socially acceptable technology
3. Economic Analysis
 Whether the prerequisites for the success of project are considered?
 Good choices with regard to location, size, process, machine etc.
 Social cost - benefit analysis
 Direct economic benefits and costs in terms of shadow prices
 Impact of project on distribution of income in society
 Impact on level of saving and investment in the society
 Impact on fulfillment of national goal
- self sufficiency
- employment
- social order
4. Environmental Analysis/ Ecological
 Impact of project on quality of
 Air
 Water
 Noise
 Vegetation
 Human life

 Major projects, such as these, cause environmental damages


 Power plants
 Irrigation schemes
 Industries like bulk drugs, chemicals and leather processing

 Likely damages and cost of restoration


5. Financial Analysis
 Whether the project is financially viable?
 Two considerations
1. Servicing debt
2. Meeting return expectations
5.Financial Analysis (Continued)
 Investment and phasing of total cost
 Means of financing
 Cost of capital
 Projected profitability
 Break even point
 Cash flows in the project
5. Financial Analysis (Continued)
 Investment is worthwhile or not?
- Net present value
- Internal Rate of Return
- Payback period
 Loan returning capability
- Debt servicing coverage ratio
 Level of Risk
6. Social Analysis
 Impact of investment project on
- People (intended beneficiaries) and their lives. (traditions, values social organization)
- in order to have support from the community for a successful project.
 Social analysis should be based on
- Sociocultural and demographic characteristics of project population.
- Organization of the project population to carry out productive activities.
- Project’s cultural acceptability, its capacity to adapt to people’s behavior, needs, and
bring about changes in them.
- Strategy to ensure commitment and sustained participation of the project population
throughout the project life cycle.
 Social analysis requires professional qualification and experience because human behavior
can not be predicted perfectly.
 In developing countries, existence of women in society is usually ignored. So do not do it.
 Example of projects are health, education, rural development, power, communication,
infrastructure.
7. Institutional Analysis
 Done to determine the capabilities of the institution in terms of its administration,
managerial, technical other staff to implement the project.
 Reasons for poor institutions.
- Low wage and salary
- Political influence in operations and staff hiring
- inexperienced and inefficient employees
 To improve the institutions
- suitable wage and salary, minimize the gape between private and public sector salary
and other perks.
- absence of political influence
- Privatization
- Public-Private Partnership

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