Module

PROJECT APPRAISAL
Lecturer: Phạm Thu Vân – Faculty of Investment
M: 0942578139
E : vanpthu@neu.edu.vn
 Course grading

 Attendance: 10%
 Middle-term test: 20%
 Presentation (Group work): 20%
 End-term test: 50%
Textbooks

1. Tiffin, R. (2014). Practical techniques for effective project

investment appraisal. Hawksmere plc
2. Rogers, M. and Duffy, A. (2012) Engineering Project Appraisal,
2nd Edition, Wiley-Blackwell.
 References

1. Law 61/2020/QH14 on Investment

2. Law 39/2019/QH14 on Public Investment
3. Law No. 50/2014/QH13 on the construction
4. Law No. 21/2017/QH14 dated November 14, 2017 on planning
5. Circular 34/2020/TT-BTC fees and charges in construction and
collection submission thereof
6. Decree No. 15/2021/ND-CP detailing on management of construction
investment projects
7. ...
 SYLLABUS

1 OVERVIEW OF DEVELOPMENTAL INVESTMENT AND INVESTMENT PROJECT

2 OVERVIEW OF PROJECT APPRAISAL

ORGANIZING PROJECT ASSESSMENT

3
4 PROJECT’S INVESTOR APPRAISAL

5 LEGAL APPRAISAL AND MARKET APPRAISAL

6 TECHNICAL APPRAISAL AND HRM APPRAISAL

7 FINANCIAL APPRAISAL

8 SOCIO-ECONOMIC APPRAISAL
 CHAPTER 1
OVERVIEW OF DEVELOPMENTAL INVESTMENT
AND INVESTMENT PROJECTS

1. Developmental investment

1.1. The concept of developmental investment

1.2. Characteristics of developmental investment

2. Investment projects

2.1. What is the project?

2.2. Project classification

2.3. Characteristics of the project

2.4. Project cycle

 WHAT IS INVESTMENT?

 the act of putting money or effort into something to make

a profit or achieve a result
 the act of putting money into
a business to buy new stock, machines, etc., or
a sum of money that is invested in a business in this way
 the act of buying shares, bonds, property, etc. in order to make
a profit
(Cambridge dictionary)
 WHAT IS INVESTMENT?

Investment is the process of using resources in the

present to carry out activity/activities in order to
THE
CONCEPT obtain results, to achieve certain goals in the
future.
 INVESTMENT CLASSIFICATION

1. Debt-based investments can be further broken down into

two sub-categories – public and non-public (private)
investments.
2. Equity investments can also be categorized as public and
non-public investments. The latter is commonly known
as Private Equity, which is considered a high risk, high reward
investment. In fact, equity investments are generally seen as
riskier than debt investments, with the advantage of potentially
generating higher returns.

3. Hybrid investments (convertible securities, mezzanine

capital, preferred shares)
 INVESTMENT CLASSIFICATION

1. Current Investments – Current Investments are

investments which by their nature are readily realizable and
are intended to be held for less than a year from the date when
such investment is done.
2. Long-Term Investments – Long-term investments are
investments other than the current investments, even though
they might be freely marketable.
 INVESTMENT CLASSIFICATION

1. Public investment: means the Government’s program and

project on socio-economic infrastructural construction and socio-
economic development

2. Private investment: non-public investment

INVESTMENT CLASSIFICATION

DIRECT INVESTMENT

INDIRECT INVESTMENT
 INVESTMENT CLASSIFICATION

1. Direct investment means a form of investment whereby the

investor invests its invested capital and participates in the
management of the investment activity.
2. Indirect investment means a form of investment through the
purchase of shares, share certificates, other valuable papers or a
securities investment fund and through other intermediary
financial institutions and whereby the investor does not participate
directly in the management of the investment activity.

(Law on investment 2020)

 DIRECT INVESTMENT

TRANSFERRING In order to change owner account, does

not get any gain in products or services
INVESTMENT

In order to maintain and create new

DEVELOPMENTAL
capacity in production, business, services
INVESTMENT
and daily life of society
DEVELOPMENTAL INVESTMENT

We define developmental
investing as that which
provides investors with
both commercial returns
and tangible social and
developmental impact. In
South Africa, the primary
development focus is
around the provision of
basic services and
infrastructure
development.
 CHARACTERISTIC OF DEVELOPMENTAL INVESTMENT

Resources mobilized for infrastructure investment are large and stagnate

during the investment implementation process

Pắc Pó -> Cà Mau: 3167 km

14b/km
44.168b VND
 CHARACTERISTIC OF DEVELOPMENTAL INVESTMENT

The return on investment usually take place over a long period of time.

Hồ Chí Minh Trail Dung Quat oil-extracting

factory
Meeting 6/QH11
-Resolution 07/1997/QH10
- Phase 1: 2004-2007
- 1998 - 2010
- Phase 2: 2007-2010

- Phase 3: 2010 - 2020

 CHARACTERISTIC OF DEVELOPMENTAL INVESTMENT

Risk: Risk may relate to loss of capital, delay in repayment of capital,

nonpayment of interest, or variability of returns.
- The risk of an investment is determined by the investment’s maturity
period, repayment capacity, nature of return commitment, and so on.
- The longer the maturity period, greater is the risk
- The lower the payment capacity, higher is the risk
- Risk also varies with nature of the return commitment. Ownership
commitment such as investment in equity shares carry a higher risk
compared to lender commitments such as investments in debentures and
bonds
- Higher the risk, higher is the expected return
 ROLE OF DEVELOPMENTAL INVESTMENT

Macro
economics
Sửa chữa, thay mới, cải thiện công nghệ sản
Impact xuất...
Promote Enhance Impact on
economic economic scientific and aggregate
growth structure technological supply and
aggregate
capacity
demand of
the economy
 ROLE OF DEVELOPMENTAL INVESTMENT

Creating infrastructure, new products, new services

Micro
economics
Repair, replace, improve production technology...

Expand production, purchase new equipment..

 THẨM ĐỊNH DỰ ÁN ĐẦU TƯ

WHAT IS INVESTMENT PROJECTS

An investment project is a detailed proposal of an expenditure of

liquid resources, with the objective of taking actions that will lead
to future profits.
- An investment project is made before the investment itself.
- An investment implies an expenditure of resources, but it
doesn’t necessarily mean that those resources are our own
resources: a lot of investments are carried out by
borrowing money.
- Investment project VS Operation
 KEY ELEMENTS TO DEFINE A PROJECT

1.A single definable purpose, end-item or result. This is usually

specified in terms of cost, schedule and performance requirements.
2.Every project is unique. It requires the doing of something
different, something that was not done previously. Even in what are
often called “routine” projects such as home construction, the
variables such as terrain, access, zoning laws, labour market,
public services and local utilities make each project different. A
project is a one-time, once-off activity, never to be repeated exactly
the same way again.
 KEY ELEMENTS TO DEFINE A PROJECT

3. Projects are temporary activities. A project is an ad hoc

organization of staff, material, equipment and facilities that is put
together to accomplish a goal. This goal is within a specific time-frame.
Once the goal is achieved, the organization created for it is disbanded or
sometimes it is reconstituted to begin work on a new goal (project).
4. Projects cut across organizational lines. Projects always cut across
the regular organizational lines and structures within a firm. They do this
because the project needs to draw from the skills and the talents of
multiple professions and departments within the firm and sometimes
even from other organizations. The complexity of advanced technology
often leads to additional project difficulties, as they create task
interdependencies that may introduce new and unique problems.
 KEY ELEMENTS TO DEFINE A PROJECT

5. Projects involve unfamiliarity. Because a project differs from what was

previously done, it also involves unfamiliarity. And oft time a project also
encompasses new technology and, for the organization/firm undertaking the
project, these bring into play significant elements of uncertainty and risk.
6. The organization usually has something at stake when undertaking a
project. The unique project “activity” may call for special scrutiny or effort
because failure would jeopardize the organization/firm or its goals.
7. A project is the process of working to achieve a goal. During the process,
projects pass through several distinct phases, which form and are called the
project life cycle. The tasks, people, organizations, and other resources will
change as the project moves from one phase to the next. The organizational
structure and the resource expenditures build with each succeeding phase;
peak; and then decline as the project nears completion.
 PROJECT CLASSIFICATION

1. Public project: includes funds derived from the State

budget, government bonds, local government bonds, official
development assistance (briefly called ODA), overseas
concessional loans, government credits for investment and
development purposes, retained revenues of the state budget
that have not been recorded in the state budget balance and
other loans secured by the local budget for public investment
purposes.
2. Private project: when the capital comes from private
investors or private companies.
 PROJECT CLASSIFICATION

Group 5 Group 4 Group 3 Group 2 Group 1

10.000 billion National important project

Group A project 2.300 billion

1.500 billion
1000 billion
800 billion
120 billion
Group B project 80 billion
60 billion
45 billion

Group C project

(Law on Public Investment 2019)

 PROJECT CLASSIFICATION

Construction projects Non-construction

projects

new construction, renovation, asset procurement; receipt of

upgradation and expansion of the disposition of land use right;
existing investment and purchase, repair and
construction projects, upgradation of equipment and
including the procurement of machinery; and other projects
assets, devices and equipment that are not subject to
regulations specified at
construction projects
(Law on Public Investment 2019)
 PROJECT CLASSIFICATION

- According to the kind of good or services it will provide:

Goods
•Industrial
•Agricultural
•Forestry
•Fishing
Services
•Transport
•Commerce
•Communications
•Finance
•Health
 PROJECT CLASSIFICATION

According to the city According to economic region

❖ Ha Noi
❖ Ho Chi Minh
❖ Da Nang
❖ ……..
PROJECT CYCLE
PROJECT LIFE CYCLE PHASES

1a. Conception phase

1b. Definition phase
Initiation phase or selection of a phase
2. Planning and organizing
3. Implementation
4. Project clean-up phase/Closure phase
 Ways to create new product
development through brainstorming
Kodak – informal sessions – engineer and designer with customer’s
problems and needs
- Allow time off: scouting time – for technical people to putter in
their own, pet projects
- Survey your customers
- Use iterative models: customers group discussing problems –
technical people in another room listening and solving
- Set up an idea vault
- Interaction between technical people and supplier – through visits
 During brainstorming activity:
management has to be:
 Receptive
 Vision for future growth
 Keep long term objectives in mind
 Swot
Perform preliminary project analysis to assess whether a project
proposal is worthwhile or not
Documents like: project/product documents (characteristics of project),
feasibility document (constrains), project concept document (what,
how, why – is to be done), project charter (it formally communicates
the initiation of the project, scope, authority, KSF)
 Ex: reduce vehicular pollution in your city
1.
2.
3.
….
N
Criteria for screening ideas
Effectiveness to achieve objectives
Cost of proposal
Ease of implementation
Time needed
Project implementation

 Organization of project team and allocation of work

 Monitoring – cost, value and time
 Effective control action to minimize time and cost overruns
 Updating of project schedules (time and cost)
 Provisioning of financial and other resources needed in the
project
 Coordination
 Awarding of contracts – vendors, sub contractor
 Procure and erecting of equipment and services.
Project completion and review

 Disbanding project team

 Handing over
 Accounting and report writing
 Learning for experience
 What else???