CHAPTER THREE

PROJECT IDENTIFICATION
 Outline
• Project Identification
• Source of Project Ideas
• Project Concepts and Profiles
• Prioritization and Ranking
• Opportunity, pre-feasibility, feasibility and
support studies
 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 to 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.
• Project identification is made in general terms
with broader scope at the first glance and then,
 the idea will be progressively developed.

• According to the UNIDO model:

assessments of existing investment opportunities are
considered very essential and
 hence, should precede the task of identification.
 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,
 profit seeking or not-for- profit organizations.
• The major groups that are involved in the identification
of projects in the society:
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);
etc.
 How Project Ideas Come About
• The idea of a project may come to our mind
basically from:
 observing existing opportunities and problems in a
given context.
• Such ideas generally emanate from :
 Polices review & opportunity studies made by central
government ministries;
 Review of past projects;
 Private sector, cooperatives, and state enterprise plans;
 Brainstorming (bright ideas) through unsystematic discussions;
 Need analysis (existence of unsatisfied demand); and
 Need to tackle unexpected or undesirable events such as
drought, earthquake, flood, natural catastrophes, and other
similar hazards.
 Stages of Project Identification
Pre-Identification
Identification of Projects &
Screening out potentially promising projects
1. Pre-Identification
• It is an important prerequisite to the identification
of promising investment projects.
• It involves:
 surveying,
 reviewing,
 analysis of strategies and policies, data about natural
resources, and socio-economic variables.
• This stage is a synonym to opportunity study
under the UNIDO cycle,
• Unfortunately, this aspect of planning is either:
 totally ignored or

 inadequate resources are provided in most developing

countries.

• Reasons for disregarding this aspect in project planning:

1. The sheer/absolute ignorance:

 to identify ways of:
 carrying out surveys;
 inventorying of resources;
 collection, organization, and integrating data; and
 analyzing the information cost-effectively and generating useful information.
[Link] is regarded as an extensive task resulting in
excessive overhead costs.
• Moreover, funds for such activities often are
expended in tight schedules during end of budget
period.

3. It is tended to be assumed as time consuming

 Thus, people lack:
 the initiatives to start it

 as well as unable to foresee & measure its benefits.

 They often do not have the patience to wait for results.

• Nowadays, modern technology is

revolutionizing the survey methods and the

means for:
 carrying out synthesis and analysis,

 speeding up some processes,

 reducing the costs of surveys, and

 providing new ways of looking at things.

 2. Project Identification
• The key to success lays in getting into the right
business at the right time.
• The objective is to identify investment
opportunities, which are :
feasible and promising and
merit further examination and appraisal.
 Project identification
It is the first stage of project cycle which involves the screening of
project ideas.
This is the birthplace of the project .
The project identification process involves the following steps:-

Conduct SWOT Develop selection

analysis criteria data

Scan source of ideas Profile readily Screen ideas Vs

available data criteria

Acceptable
• Reject
• Rework
• Later
No Yes Yes
Further Study
• Reconsider

Figure 3.1 Project Identification Process

 3.2 Sources of Project Ideas:
Project ideas have so many sources.
In general, two levels where project ideas are born:
The macro level and the micro level.
1. Macro Sources and
2. Micro – Sources of Project Ideas
 Macro Sources of Project Ideas
• The ff. 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 b/c of:
 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;

 Governments are fully familiar with the development objectives,

priorities, and strategies.

 Specific Macro Sources Project Ideas :

 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.
 General surveys, resource potential surveys, regional
studies, master plan and statistical publications,
 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
 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.
• Specific Micro-Sources Project Ideas
 The identification of unsatisfied demand or needs;
 The existence of unused or underutilized natural
or human resources
 The need to remove shortages in essential materials,
services, or facilities that constrain development
efforts;
 The desire of local groups or organizations to enhance
their economic status and improve their welfare;
• etc
Techniques and Procedures to Generate Project Ideas from Micro
Sources:
 Analyze the performance of existing industries;
 Examine the inputs and outputs of various industries;
 Review imports and exports;
 Look at the suggestions of financial institutions and
development agencies;
 Investigate local materials and resources;
 Analyze economic and social trends;
 Study new technological developments;
 Draw clues from consumptions abroad;
 Explore the possibility of reviving sick units;
 Attend trade-fairs (trade promotions/bazaars); and so on.
 Project Idea Generation Process
[Link] & Review of Endowments and Facilities (Infrastructures):

• This is the activity of Surveying, reviewing, and

analyzing :
existing policies,
resource endowments like:
 Natural Resources:
 Human Resource:
 socio-economic variables like:
 Housing facilities & standards
 Utilities services;
 Health and nutrition services; and
 Income distribution.
2. Field Survey and Interview:
• This includes:
 asking people regarding what goods or services they
want,
 Obtaining information about their existing problems
through directly asking them
 Asking the public unit closest to the people at the grass-
root level about:
 their problems and needs i.e. what the community
needs/what the people need).
3. Observing and Analyzing Prevailing Situation:
• 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.
4. Participating in Deliberations, Discussions, and
Trainings:
• Participating in:
 various discussion forums
deliberations made in seminars, workshops, and
conferences (both local and international).
Meeting at d/t levels with in the organization;
Educational & training programs; and the like.

are believed to be important for generating useful

investment ideas
 5. Brainstorming:
• Brainstorming is an important means for
generating project ideas.
• In brainstorming sessions:
 a group of people suggests d/t ideas regarding
future activities very quickly before analyzing or
considering the source of the idea more carefully.
6. Exposures to Publications & Media:
• Reading various publications (scientific or
otherwise) and exposures to d/t 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).
 Approaches to Project Idea Generation

• Project ideas are said to be generated through:

Top – Down (Macro) Approach and

 Bottom – Up (Micro) Approach.

 a. Top – Down (Macro) Approach

It is an approach whereby:
 individuals at the micro level, or grass root level, are not
involved in the process of project idea generation.

Projects are:
 identified at higher planning or macro level and
implemented at the decision of officials at the top.

It is based on the national plan and strategies.

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. Hence:
 It might encounter resistance from the people or
 implementation constraints might occur b/c:
people in the context might lack interest to cooperate
with.
Such projects have long-term orientations b/c:
 perhaps, it need not necessarily be compatible with
the existing reality in the locality.
Top-Down Approach
 b. 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.
• It 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
Bottom –Up Approach
 3. Screening Potentially Promising Ideas
• 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.
 3.3 Project Concepts and Profiles
• Once a project idea has been considered, the next stage
is to describe the idea so that it can be prioritized and
move on to the next stage in the process.
– This may involve the preparation of a project identification
report or project concept or profile.
• It should include answers to the following questions .
• Justification and Purpose
– What goal is the project contributing to?
– What is the purpose of the project, what does it intend to
achieve?
– What problem is the project addressing?
– What is the justification of the project?
– What demands, needs or opportunities is the project
addressing?
• Beneficiaries and Stakeholders Best regards,
– What will benefit from the project?
– Who has a share or s take in the project?
– How have project beneficiaries and other stakeholders
participated in the identification of the project?
– Which institutions are the targets of the project?
• Resource and Institutions
– What potential resources may be available for
implementing the project?
– Which organizations are to be involved in project planning
and implementations?
• Policies and Plans
– How does the project proposal fit into any sector or
regional plans?
– Does the project fit into current policies?
• Impacts
– What are the likely major positive and negative social
impacts of the project?
– What are the likely positive and negative environmental
impacts of the project?
• Support
– What is the level of political and administrative support
for the project?
– Does the project have the support of beneficiaries
and/or local communities?
• Risks
– What are the chances of the project achieving its
objective?
– What are the main risks associated with the project?
– What assumptions have been made, e.g., what support is
needed for others?
 3.4 Prioritization and Ranking
• During the preliminary screening, to eliminate ideas that
are not 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

• 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 over ambitious sales and profitability target.
 Project Rating Index
• The steps involved in determining the project rating
index are as follows:
 Identify factors relevant for project rating
 Assign weights to these factors ( the weights are
supposed to reflect their relative importance)
 Rate the project proposal on various factors, using a
suitable rating scale (Typically a 5-point scale or a 7-
point scale is used for this purpose.)
 For each factor, multiply the factor rating with the
factor weight to get the factor score
 Add all the factor scores to get the overall project rating
index
Project A
 Project, A
Factor FactorW V.G G A P VP Factory Score
eight 5 4 3 2 1

Input availability 0.25  0.50

Technical know-how 0.10  0.50
Reasonableness of cost 0.05  0.25
Adequacy of market 0.15  0.30
Complementary relationship with other 0.05  0.25
products
Stability 0.10  0.30
Dependence on firm’s strength 0.20  0.40
Consistency with governmental priorities 0.10  0.50
Rating Score 3.00
 Project, B
Factor Factor V.G G A P VP Factory Score
Weight 5 4 3 2 1

Input availability 0.25  0.75

Technical know-how 0.10  0.40

Reasonableness of cost 0.05  0.20
Adequacy of market 0.15  0.75
Complementary relationship with other products 0.05  0.20
Stability 0.10  0.40
Dependence on firm’s strength 0.20  1.00
Consistency with governmental priorities 0.10  0.30
Rating Score 4.00
 Project, B
Factor Factor V.G G A P VP Factory Score
Weight 5 4 3 2 1

Input availability 0.25  0.50

Technical know-how 0.10  0.40
Reasonableness of cost 0.05  0.20
Adequacy of market 0.15  0.45
Complementary relationship with other products 0.05  0.20
Stability 0.10  0.40
Dependence on firm’s strength 0.20  0.40
Consistency with governmental priorities 0.10  0.30
Rating Score 2.85
 Comparison of project

Project Project Rating Status

Project A 3.00 REJECTED

Project B 4.00 ACCEPTED

Project C 2.85 REJECTED

 Problems in Project Identification
1. 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,
 in the best interests of some groups, or

 may not get full-hearted acceptance from the

public.
2. 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.
3. Limited Data and Obstacles in Information
Flow and Accessibility:
Problems in data and information flow;
Constraint (bottlenecks) for accessing data;
Data may not be dependable (reliable) for
use; and so on.
4. Conflict of Interest b/n Local Beneficiary Groups
 some groups 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?
THANK YOU!!!