CHAPTER 2

ADMAS UNIVERSITY PROJECT

IDENTIFICATION
Lecturer: Zakeria Eid Ismail
MSc of Economics

Lecture: Zakeria Eid

 INTRODUCTION
• 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.
• 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.
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 Definition
• Project Identification is the process of searching for and
subsequently finding potential projects that could feasibly
generate benefits in excess of costs accruing to the society
and contributing towards the attainment of specified
development objectives.
• Project identification is made in rather general terms with
broader scope at the first glance and then, the idea will be
progressively developed.
• Project identification is a process in the initiating phase of
project life cycle for identifying a need, problem, or
opportunity.
• Once identified, a project is initially documented objectively
defining what was identified.
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 Who Identify Projects?
•The following groups may identify projects:
✔ Small producers organizations/producers’ unions
✔ Large scale individual private sector producers
✔ Private sector companies (local/multinational)
✔ Government ministries, authorities, agencies, and commissions
✔ Development banks, local as well as foreign, and international
development agencies
✔ Other aid agencies and self aid associations
✔ Local governments; state, regional, and sub-regional authorities
✔ Local political & pressure groups such as oppositional parties
✔ NGO’s: Local or international
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 PRE-IDENTIFICATION
•“Pre-identification” is an important prelude to protect
identification.
•The pre-identification stage involves surveying, reviewing,
inventorying, and 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, which is very important phase in project planning.
•Project identification is the process identification should be an
integral part of the micro-planning exercise, with Sectorial
information and strategies being
Lecture:the
Zakeriamain
Eid sources of project ideas.
5
 PROJECT IDENTIFICATION
• The search for promising project ideas is the first step
towards establishing a successful venture.
• The objective is to identify investment opportunities, which
are prima facie feasible and promising and merit further
examination and appraisal.
• In practice, however, projects do not always derive from
national and sectoral plans. Instead, they may originate from
several sources.
• Irrespective of their origin, project ideas, in general, should
aim at overcoming constraints on the national development
efforts, be it material, human, or institutional constraint, or
at meeting unsatisfied needs, and demand for goods and
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services.
 SOURCES OF PROJECT IDEAS
• In general, one can distinguish two levels
where project ideas are born:
– Macro-level
– Micro-level.

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 Macro Source of Project Ideas
•Among the various institutions, and sources:
∙ Central or Regional Government
∙ Bilateral and Multilateral Agreement
∙ International Development Agencies.

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 Macro Source of Project Ideas
•Specifically, project ideas emerge from the following macro sources:
✔ National policies, strategies, and priorities as may be enunciated(or articulated) by
government from time to time
✔ National, Sectorial, sub-Sectorial, or regional plans and strategies supplemented by special
studies, sometimes called opportunity studies,
✔ General surveys, resource potential surveys, regional studies, master plan, and statistical
publications, which indicate directly or indirectly investment opportunities
✔ Government decisions to correct social and regional inequalities or to satisfy basic needs of
the people through development projects.
✔ Unusual events such as droughts, floods, earthquakes, hostilities, etc
✔ Government decisions to create project-implementing capacity in such areas as construction,
etc.
✔ At the macro-level, project ideas can also originate from multilateral or bilateral agreements,
development agencies, and as a result of regional or international agreements in which the
country participate Lecture: Zakeria Eid 9
 Micro Source of Project Ideas
At the micro-level, many institutions/entities could generate
project ideas, among which the following are the main ones:
▪ Private and Public Enterprise
▪ Local groups or Organizations
▪ Consumer groups and Associations
▪ Financial Institutions/ Credit Associations
▪ Cooperatives, Farmers’ Unions, etc
▪ New technology Suppliers.

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 STEPS IN PROJECT IDENTIFICATION:
Step 1: Generation of project ideas.
Step 2: Screening project ideas: giving priorities based
on resources, compatibility to objectives, potential to
enhance competitiveness, and value adding in the
society.
Step 3: Identification of candidate projects passing the
screening criteria
Step 4: Propose for pre-feasibility/ feasibility studies

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Project Identification & Screening

Mortality of new ideas 12

 Project Idea Generation Process
1. Survey & Review of Endowments and Facilities (infrastructure)
2. Field survey and interview
3. Observing and analysis of prevailing situation
4. Deliberations, discussions, and trainings
5. Brainstorming
6. Exposure to publication & media
7. Informal discussions and meetings

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 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.

•At this stage, the screening criteria are vague and rough, that become specific and
refined as project planning advances.

•During the preliminary screening to eliminate ideas, which prima facie are not
promising, it is required to look into the aspects such as:

❖ Compatibility with the promoter

❖ Consistency with government priorities
❖ Availability of inputs
❖ Adequacy of market
❖ Reasonableness of costs
❖ Acceptability of risk level
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 Screening Potentially Promising Ideas
•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;
∙ Assume over-ambitious sales and profitability.

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 Project Identification
Steps to the Analysis Phase
• Project identification involves several analysis.
• There are four steps to the Analysis Phase:
1. Stakeholder Analysis
2. Problem Analysis (image of reality)
3. Analysis of Objectives (image of an improved
situation in the future)
4. Analysis of Strategies (comparison of different
options to address a given situation.

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 Stakeholder Analysis
It is a process:
– To identify the people involved in and affected by the project
(stakeholders)
– To determine the opinion of the stakeholders and
– To facilitate their contribution to the project activities at all stages of
the project cycle.
❖ Stakeholders: - are people affected by the impact of an activity & people
who can influence the impact of an activity
• Stakeholders are:
❖ individuals or groups with a direct, significant and specific stake or
interest in a given territory or set of natural resources and, thus, in a
proposed project.
❖ People affected by the project
❖ People who can influence the impact of an activity
• Participation or stakeholder analysis seeks to identify the major interest
groups involved (all those affected by or involved) in the project. 17
• The project manager
Key players
• Is responsible for achieving project objectives.
• Manages the project:
– Planning, organizing, leading, controlling (monitoring progress)
– Sharing success, accepts all blame!
• Sponsor– the person or group that provides the financial resources, in cash
or kind, for the project
– Project Initiator
• Customer/user/client– the person or organization that will use the project/s
product.
• Performing organization—the enterprise whose employees are most
directly involved in doing the work of the project.
• Project team members– the group that is performing the work of the
project
• Project management team– the members of the project team who are
directly involved in project management activities
• Potential opponents: Groups which may oppose or obstruct a project.
• Supplier-- Provides resources 18
 Stakeholder Analysis
• It is a four-step process
1. Identify key stakeholders
2. Assess stakeholder interests and the potential impact of the
project on these interests (expectations, benefits, willingness
to mobilize resources, interests)
3. Assess the stakeholder influence and importance (power,
control of strategic resources)
4. Outline stakeholder participation strategy

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 Stakeholder Analysis
• Why stakeholder analysis:
– To identify stakeholders’ interests in, importance to, and
influence over the operation
– To identify local institutions and processes upon which to
build
– To provide a foundation and strategy for participation
– To develop a strategic view of the human and
institutional situation, and the relationship between the
different stakeholders and the objectives identified.
– provides a useful starting point for problem analysis.
– It involves the identification of all stakeholder groups
likely to be affected (either positively or negatively) 20
Identifying stakeholders

Core issue

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 Problem Analysis
• What is the problem to be addressed?
• What as the event or series of events that was a catalyst for
action?
• Is it a problem or crisis that demands immediate attention?
• Is the problem one of national security, economic
development, diplomacy?
• What interests are at stake for the actor (e.g. state)overall?

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 Problem Analysis
• State the problem meaningfully:
• Determine the magnitude and extent of the problem
• Continually re-define the problem in light of what is
possible
• Question the accepted thinking about the problem
• Question initial formulations of the problem
• Say it with data
• Clear definitions allow people to communicate with one
another
• Measures are important for clarification (e.g., how many
people are living in poverty)
• Often have different ways to measure problems
• Quantification 23
 Problem Analysis
• Politics of problem definition
– Based on perspectives
• What will change in the future?
– Projections and forecasting
• Think about causes
– Must ask why the problem came about
– Answers may help determine how to resolve problem
• Often problems have multiple causes; conflict over which one to
addressTo establish the hierarchy of problems in the light of the
cause and effect relationships to find the focal problem
• Identification of priority problem
• Problem analysis
– Problem tree
– Solution tree
• Linking the solution tree to Log frame (we will discuss this under
Planning)
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 Problem Analysis
• Steps in problem analysis:
1. Agree on the main problem
2. Identify the causes of the main problem by asking
‘But why?’
3. Identify the effects of the main problem by asking
‘So what?’ until we can go no further.
4. Copy the complete tree on a paper
• Establishing a hierarchy of problems in a problem
tree helps to form a base for the objectives.
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 ProblemTree
Relationships Causes and Effects

EFFECTS

CAUSES

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 Objective Analysis
It’s a process to

– determine the objectives parallel to the problems

by stating the problems in positive terms and
– form an objective tree (solution tree) in the light
of ends and means relationships.

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From Problem to Objective/solution

Problem Objective

High rate of child deaths To reduce the rate of child deaths

To reduce the rate of

High rate of infectious diseases
İnfectious disease

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 Objective Tree
▪Technique to describe the future situation that will be achieved by
solving the problems
▪Turning negative conditions into positive in a certain time
.
Overall Objective ENDS

Project
objectives

Outputs MEANS

Activities

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30
 OBJECTIVE TREE ANALYSIS: QUIZ
Impacts

Long Term
consequences

Immediate
consequence
s

Central Problem <<STATE THE CLIMATE AND DEVELOPMENT PROBLEM HERE>>

Secondary
causes

Immediate
causes

Root 31
Causes
 Strategy Analysis
•The final stage of the analysis phase involves the selection of
the strategy(ies) which will be used to achieve the desired
objectives.

•Strategy analysis involves deciding what objectives will be

included IN the project, and what objectives will remain
OUT, and what the project purpose and overall objectives will
be.

•In addition to examining the logic, strategy analysis also

looks at the feasibility of different interventions. 32
 Selecting the activity strategy

• Make an assessment of the feasibility of the different

alternatives
• Select one of the alternatives as the activity strategy.
• If agreement cannot be reached, then: introduce additional
criteria alter the most promising option by including or
subtracting elements from the objectives tree

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 Criteria of Choosing a Project Selection Model
⚫ The following criteria are used when choosing a project selection model.
a) Realism: the model should reflect the reality of the firm’s decision
situation. The firm’s limitations on facilities, capital, personnel, technical
and market risks, performance, cost, etc should be taken into account.
b) Capability: the model should be sophisticated enough to deal with the
relevant factors, multiple time periods, internal and external situations,
(interest rates, etc).
c) Flexibility: the model should give valid results within the range of
conditions that the firm might experience. It should be easy to modify in
response to changes in the firm’s environment (e.g., new technological
advancements, new laws)
d) Ease of use: the model should be reasonably convenient, not take a long
time to execute and be easy to use and understand.
e) Cost: data gathering and modeling costs should be low relative to the cost
of the project
f) Easy computerization: it should be easy and convenient to gather and
store the information in a computer database, and to manipulate data in the
model through the use of a widely available, standard computer package
such as Excel. 34
 Project Identification & Screening
• Needs identification is the initial phase of the project life cycle.
⚫ A project can be conceived on the basis of:
⚫ Needs – to make available to all people in an area minimum amount of
certain basic material requirements or services.
⚫ A needs assessment survey establishes the urgency for intervention;
⚫ Market demand –domestic or overseas;
⚫ Resource availability – opportunity to make profitable use of available
resource.
⚫ Technology – to make use of available technology
⚫ Natural calamity – hedging against the adverse effects of natural events
as drought or floods; and
⚫ Political consideration.

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 Top-Down Approach
• Projects are identified based on demands from beyond the
community.
• This may include directives from:
– international conventions (such as Kyoto
Protocol/climate change)
– international institutions or NGOs that have determined
particular priorities and thus projects
– national policy makers identifying projects that pertain to
party manifestos and/or national Formulations.

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Advantages of Top-Down Approach
• It may be a rapid response to disasters like floods, war outbreak because
there is limited time and chance to consult the beneficiaries.
• It can be effective in providing important services like education, health,
water, roads etc.
• It can contribute to wider national or international objectives and goals
– and therefore potentially be part of a wider benefit
(as in the case of trans-boundary resources, such as climate, water or
others)
Limitations of Top-Down Approach
• Does not help in modifying strongly established ideas and beliefs of people.
• Assumes external individuals know better than the beneficiaries of the
service.
• Communities have little say in Planning process rendering approach devoid
of human resource development.
• Community develops dependency syndrome on outside assistance and does
not exploit their own potential.
• The development workers (change agents) become stumbling blocks to
people-led development
– tendency to impose their own biases, etc. on people.
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 Bottom-Up Approach
• In this approach community/beneficiaries are encouraged to
identify and Formulation the projects themselves with or without
outsiders.
• Advantages of Bottom-Up Approach
– Interveners accomplish more with limited resources since
people tend to safeguard what they have provided for
themselves.
– Develops people’s capacity to identify problems and needs
and to seek possible solutions to them.
– Provides opportunities of educating people.
– Helps people to work as a team and develop a “WE” attitude
- makes project progressive and sustainable.
– Resources are effectively managed; dependence reduces,
there is increased equity, initiative, accountability, financial
and economic discipline. 38
 Limitations of Bottom-Up Approach
• Not always effective for projects that require urgency to
implement
• Time-consuming and requires patience and tolerance.
• People sometimes dislike approach because they do not want
to take responsibility for action.
• The agency using this approach is never in control and
cannot guarantee the results it would want.
• The priorities of communities may not fit with national or
international priorities that seek to have a broader impact

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 PROBLEMS IN PROJECT
IDENTIFICATION
Ambiguity about the development objectives of the country
Priority issues in the existing development objectives
Limited information and data and obstacles in data/information
flow and accessibility
Conflict of interest between local beneficiary group: (i.e. some
groups may bear the cost and others may get the benefit)

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 Quiz
• Describe the key problem identified and its
causes and effects.
• Delineate how these problems affect the target
group.
• Explain how addressing the causes will lead to
the eradication of the key problem.
• Describe project stakeholders two or three
members
• Describe the key objective identified in the
proposal
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THE END
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