Chapter 3

Identification of project idea and opportunity studies

Definition: Project identification refers to finding project which could contribute
towards achieving specific development objectives. In the case of development projects,
national and sub national plans serve as a frame of reference.

In principle project identification is supposed to be an integral part of the macro

economic planning exercise with sectorial information and strategies as the main sources of
project ideas.

The search for promising project ideas is the first step towards establishing a successful venture.

In practice, however, projects do not always stem from national and sectorial plans. Project
ideas may originate from various sources with the aim of:

I. Overcoming the constraints to the national development efforts, and/or

II. 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.

Sources of project ideas

It is hardly possible to make exhaustive list of sources from which project ideas can emanates.
Much depends on personal experiences and imagination of those entrusted with the task
of initiating development projects.

Classification of project ideas

1. Depending on the level of details, project ideas can be categorized as;

A. Macro Level
B. Micro Level
A. Macro level project ideas

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Include possible sources of project ideas at national and sectorial levels. It is more of
general idea. Such sources include: National policies, strategies and priorities as
pronounced by government

National, sectorial, sub-sectorial 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 economic imbalances or
inequalities.

External threats which necessitate 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.

B. Micro level project ideas

Project ideas which emanates from community level, woreda level and individual levels.
Such project ideas are more of specific. 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.

2. Systematic and unsystematic sources

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 A. Systematic – this includes all project ideas which are part of the formal planning
process.

Such sources include:

• Policy review and development plans

• Sectoral strategies and sub sectoral programs

• Surveys by local governments and regional organizations

• Reviews of past projects

Such project ideas are very predictable, and expected.

B. Unsystematic – these categories of project idea sources are outside the formal
planning mechanisms .It may come from some powerful individuals, visionary person.
Usually, such sources are unpredictable and may come to light at any time. Such project
ideas may emanate from:
1. Resource based- existence of unutilized resources available in the country or in
the organization
2. Demand based –based on unsatisfied need for certain goods and services.
3. Need based sources
4. Opportunity studies; it enables us to know what types of investment is possible in
the region, or particular area. It can be general or specific

a. general opportunity studies includes:

Geological structure (example, Soil type, exploitable minerals, and other natural resources
...)

Climate variables (example, Solar energy temperature variations, precipitation e.t.c )

- Land use patterns

- Human resources and socio –economic data (ex. Population and population trends by sex,
age etc., migration patterns, health and nutrition, housing).

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b. Specific opportunities studies

- More common than a general opportunities study

- May be defined as the transformation of a project idea into a broad investment

proposition.

- As the objective is to stimulate investor responses, a specific project opportunity

study must include certain basic information; the mere listing of products that may have
potential for domestic manufacture is not sufficient. While such a list – derived from general
economic indicators such as past imports, growing consumer demand or from one of the general
opportunity studies relating to are sectors or resources – can serve as a starting point.

It is necessary to be selective as to the products so identified and second, to in corporate

data relating to each product so that a potential investor, either domestic or foreign, can consider
whether the possibilities are attractive enough to proceed to the next stage of project preparation.

Such data can be supplemented with information on basic policies and procedures that
may be relevant to the production of the particular product.

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