Wollega University

School of Graduate Studies

Agricultural Economics
Agricultural Project Planning and
Analysis (AgEc 522)
By Admassu T (PhD Fellow)
and
Dereje F (MSc)
04/06/2023
 RELATIONSHIPS BETWEEN PROJECT
PLANNING AND NATIONAL PLANNING
• What is a project?
• Project is a scheme or part of a scheme for investing
scarce resources, which can be reasonably evaluate and
analyzed as an independent unit.
• Project refers to an investment activity in which scarce
resources are committed within a given time framework,
to create assets over an extended time in expectations of
benefits which exceeds the committed resources.
• A project is a complex set of economic activities in which
we commit scarce resources in expectation of benefits
that exceed the value of these resources.
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 RELATIONSHIPS BETWEEN PROJECT
PLANNING AND NATIONAL PLANNING
• From these definitions, it is clear that a project:
– has specific objective (private or public);
– involves set of activities (planning, financing,
implementing and evaluating);
– involves resource use;
– deals with future expectations (risk and uncertainty);
– involves comparing benefits and costs to occur in the
future; and
– has defined period of life;

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 RELATIONSHIPS BETWEEN PROJECT
PLANNING AND NATIONAL PLANNING
• Projects may be described in terms of:
– Project Boundary
– Project Types
– Project Scope
– Projects Input use
– Project Size
– Project Duration
– Project output
– Project Coverage
– Project Budget
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National planning, Program and Project
planning
• more dynamic and comprehensive definition
of a project, links development planning,
development programs, and project planning
together.
1. A project is an instrument of change. It is
coordinated series of actions resulting from a
policy decision to change resource combinations
and levels so as to contribute to the realization of
the country’s development objectives.

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National planning, Program and Project
planning…
2. A project is beneficiary - oriented (responds to people’s
needs).
 a project is undertaken, inter alia, for development
reasons, which may include:
– executing national objectives at the micro level,
– national increases in agricultural production,
– promoting exports,
– employment creation,
– utilizing non-utilized and under-utilized resources - full
employment, and pursuing agricultural diversification policies
(minimizing risk)

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 National planning, Program and Project planning…

  Development Goal (Objectives)

  Development Strategy

Development Plan

Economic sectors

Service Industry Agriculture

Large Scale Small Scale

Project A Project B Project C

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National planning, Program and Project
planning…
• Development goal (objectives)
 A statement of intention or aspiration of a government
to improve the living conditions of its people –
Example, Growth, Equity in income distribution,
 It is a comprehensive statement, which guides
development.
 It determines the environment or framework within
which development is expected to take place.
 Vision statement of a society as articulated by a
government

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National planning, Program and Project
planning…
• Development strategy
 A general method of achieving specific objectives,
 It describes the essential resources which will be
committed to achieve the objectives stated,
 It also explains how these resources will be organized, for
example, how the labor force can be utilized,
 It can take different forms such as import substitute, export
promotion, Agricultural Development Led Industrialization
(ADLI), etc.
 Setting priorities – which sub sector, should be provided
more attention in each sector?

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National planning, Program and Project
planning…
• Development plan
 Plans are designed as a means to accomplish development
strategies.
 The specific objective can be achieved through various means
(fiscal policies, monetary policy, and development projects).
 Project can, therefore, be seen as policy instruments through
which national and sub- national plans are translated in to
action.
 Identify priority areas and set a specific objective, which are
directly linked with the overall national goal (objective).
 The following table shows GTP of Ethiopia (2010-2015)

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National planning, Program and Project
planning…
• National plans and project plans
 It is within the national plans and the policy
statement of the government that all effects of
projects i.e. its requirements, costs and benefits can
be assessed properly.
 Project selection and formulation is meaningful only
when consistently placed within the broader
development plans and policy statement.
 The more elaborated the development plans, the
easier the work of project planning,
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National planning, Program and Project
planning…
• The development plans and policy statement have to specify
at least the following points:
1. The desired socio-economic pattern of development, and
2. Major objectives of development to be pursued, which
could be:
 Self-sustaining growth
 promotion of employment
 elimination of absolute poverty
 improvement in income distribution
 economic stability
 Independence in respects of critical materials, products etc.

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National planning, Program and Project
planning…
Programs and projects
Bases of comparisons Program Project
Scope/objectivities wide /diverse Narrower/limit
Location diffused /wide Specific
Lifetime Non-time bound Time bound
Resources Larger budget Limited budget

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 Why projects are undertaken

• Projects are very powerful and efficient means

to achieve development (growth),
 called ‘cutting edge’ of development.
• projects are mechanisms for improving
income distribution (as government policy
instrument).
• projects are mechanisms to solve immediate
problems.

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 Projects as policy instruments
• Projects are policy instruments through which national and
sectoral plans are translated into action.
Project as capital Expenditure decision
• Long-term effects.
 The scope of current manufacturing activities of a firm is governed
largely by capital expenditures in the past.
 Current capital expenditure decisions provide the framework for future
activities.
• Irreversibility.
 wrong capital investment decision can not be reversed without
incurring a substantial loss.
• Substantial outlay.
 Capital expenditures usually involve substantial outlays.

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Project Planning, Implementation and Monitoring

• The key questions of planning and management of a project

includes:
– What do we have? (Where are we?)
 Situation Analysis and Problem Definition
– What do we want? (Where do we want to go?)
 Setting Goals and Objectives (SMART!)
– How do we use what we have to get what we want? (How do we get
there?)
 Generating Structures and Strategies
– What will happen when we do? (What happens as we do?)
 Monitoring the Implementation
 The answer to these questions and how the answers are organized
determines how detail the project planning is done.

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 Why project analysis?

• The macroeconomic plans and sectoral programs on which

project planning is based, are drafted based on assumptions
and forecasts, which may not necessarily reflect the reality.
• Project formation, implementation and evaluation require
concrete (realistic) information for the project
implementation involve substantial resource commitment;
 most of the decisions are irreversible and projects have long
term effect.
 project analysis involves assessment of the benefit and costs
of a project and reduces them to a common yardstick
(benchmark / standard).

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 CHAPTER 2: THE PROJECT LIFE CYCLE

• Definition: refers to the various stages through which

a project passes from time of its inceptions up to its
implementation and realization of the objectives.
• There are many models which differ in their
prospective, emphasis and level of detail.
• But, there are main features of project cycles which
are common for all models.
 information gathering
 analyzing the information
 decision making

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 1. The Baum Cycle (World Bank 1970)

Identification

Preparation
Evaluation

Implementation

Appraisal

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 1. The Baum Cycle…

• It is traditional project cycle emphasis top down

approaches to development project planning.
 Community participation in project idea generation,
alternative identifications, project implementation,
controlling as well as utilization was marginalized.
 Individuals were considered as mere recipients of
orders and benefits,
 The projects were facing implementation problems,
and could not be sustained, if ever implemented as
planned.
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 2. New Project Cycle
• During 1994 the World Bank changed its approach
from top down planning to bottom up, which emphasis
on the need of beneficiary participation in project
planning.
• But, what level of beneficiary participation is required?
• According to the new project cycle (World Bank 1994),
project cycles have four phases:
Listening to the stakeholders
Piloting the project
Demonstrating
Mainstreaming the project

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 3. UNIDO Approach
1. Pre –investment phase
The major activities are:
• Identification of investment opportunities ( opportunity studies )
• Analysis of project alternatives and preliminary project selection
• Project preparation (pre feasibility and feasibility studies).
• Project appraisal and investment decision (appraisal report)
2. Investment phase
The major activities are:
• Negotiation and contracting
• Engineering design
• Construction
• Reproduction marketing
• Training
• Commissioning and start up
3. Operational phase
The major activities are:
• Replacement and rehabilitation
• Expansion and innovation

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 3. UNIDO Approach…
• The diagrams are oversimplified, in reality, the cycles and the
stages are not discrete but continuous and iterative.
• There is a possibility of referring back and modify previous works
done in the planning stage if we encounter with unforeseen
problems during implementation stages.
• The delineation of activity from other is not clear cut/discrete line
there are several activities undertaken in more than one phase
and the transfer is very slow and gradual.
• The output of the first cycle can be considered as input of the next
cycle and help as feedback to consider the former one.
• All phases of the project cycle lend themselves important
consultancy from different disciplines and expertise.

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 1. The pre –investment phase
• Identification of project idea and opportunity studies
 finding project which could contribute towards achieving
specific development objectives.
 Project ideas may originate from various sources with the aim
of:
 National and sectoral plans (main source?)
 Overcoming the constraints to the national development efforts,
and/or
 Meeting unsatisfied needs and demands for goods and services.
 Identification of such opportunities requires imagination, sensitivity
to environmental changes, and realistic assessment of what the firm
can do.

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 The pre –investment phase…
• Sources of project ideas
 Depending on the level of details, project
ideas can be categorized as;
• Macro Level
• Micro Level

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 Macro Level

• National policies, strategies and priorities as pronounced by government

• National, sectoral, sub-sectoral and regional plans and strategies as supplemented by
special opportunity studies with objective of translating the plans and strategies in to
actions.
• General survey, resource potential survey regional studies, master plans, and
statistical publications which directly or indirectly indicate investment opportunities.
• Publications of Minister of Trade and Industry, etc
• Constraints on the development processes due to shortage of critical materials
infrastructures, or facilities.
• Government decisions to correct social and economical imbalances or inequalities.
• External threats which necessitates projects aiming at achieving self-sufficiency in
some critical materials such as fuel, energy, transportation etc.
• Unusual events such as drought, floods, earth quakes and other natural calamities
and events.
• Government decision to create project implementation capacity of some areas
• Agreements between bilateral or multilateral development agencies, etc.

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 Micro level project ideas
• Some possible sources at this level include:
– Identification of unsatisfied needs and demands.
– Perception of unused or underutilized resources and initiation to
make use of them.
– Initiatives of private or public enterprise in response for
incentives provided by a government.
– The necessity to supplement or expand the already undertaken
projects.
– The desires of local group to enhance their economic status and
living standards (social welfares).
– Foreign firms initiatives for incentives provided by a government.

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 Preliminary screening

• It is a process of eliminating project ideas (least

desirable projects) with a minimum cost without
devoting more time and money.
• The essences of preliminary screening:
 Project ideas could be too many in number to
make detail study of all
 Resources to make the feasibility study are limited
i.e. only few projects could be implemented
simultaneously due to resource limitations
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 Preliminary screening…

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