Social aspects

We have mentioned the need for analysts to consider the social patterns and practices of the clientele a project will serve. More and more frequently, project analysts are also expected to examine carefully the broader social implications of proposed investments. We have noted proposals to include weights for income distribution in the formal analytical framework so that projects benefiting lower-income groups will be favored. In the analytical system outlined in this book, such weights are not incorporated, so it is all the more important in the project design that explicit attention be paid to income distribution.

Other social considerations should also be carefully considered to determine if a proposed project is as responsive to national objectives as it can be. There is a question about creating employment opportunities that is closely linked to, though not quite the same as, the question of income distribution. For social reasons, many governments want to emphasize growth in particular regions and want projects that can be implemented in these regions. The project analyst will want to consider carefully the adverse effects a project may have on particular groups in particular regions. In the past, the introduction of high-yielding seed varieties and fertilizers, coupled with the easy availability of tractors, has led to displacement of tenant farmers and has forced them into the ranks of the urban unemployed. Can the project be designed to minimize such effects, or be accompanied by policy changes that will? Changes in technology or cropping patterns may change the kind of work done by men and women. In some areas the introduction of mechanical equipment or of cash crops has deprived women of work they needed to support their children. Will a proposed project have such an adverse effect on the income of working women and their families?

There are also considerations concerning the quality of life that should be a part of any project design. A rural development project may well include provisions for improved rural health services, for better domestic water supplies, or for increased educational opportunities for rural children. Project analysts will want to consider the contribution of alternative projects or other designs of essentially the same project in furthering these objectives.

Those designing or reviewing projects will also want to consider the issue of adverse environmental impact. Irrigation development may reduce fish catches or increase the incidence of schistosomiasis in regions where this snail-transmitted disease is endemic, and waste from industrial plants may pollute water. Project sites may be selected with an eye to preserving notable scenic attractions or to preserving unique wildlife habitats. It is far better to ensure preservation of the environment by appropriate project design than to incur the expense of retrofitting technology or reclaiming land after an environmentally unsound project has been implemented. 

Commercial aspects

The commercial aspects of a project include the arrangements for marketing the output produced by the project and the arrangements for the supply of inputs needed to build and operate the project.

On the output side, careful analysis of the proposed market for the project's production is essential to ensure that there will be an effective demand at a remunerative price. Where will the products be sold? Is the market large enough to absorb the new production without affecting the price? If the price is likely to be affected, by how much? Will the project still be financially viable at the new price? What share of the total market will the proposed project supply? Are there suitable facilities for handling the new production? Perhaps provision should be included in the project for processing, or maybe a separate marketing project for processing and distribution is in order (Austin 1981). Is the product for domestic consumption or for export? Does the proposed project produce the grade or quality that the market demands? What financing arrangements will be necessary to market the output, and what special provisions need to be made in the project to finance marketing? Since the product must be sold at market prices, a judgment about future government price supports or subsidies may be in order.

On the input side, appropriate arrangements must be made for farmers to secure the supplies of fertilizers, pesticides, and high-yielding seeds they need to adopt new technology or cropping patterns. Do market channels for inputs exist, and do they have enough capacity to supply new inputs on time? What about financing for the suppliers of inputs and credit for the farmers to purchase these supplies? Should new channels be established by the project or should special arrangements be made to provide marketing channels for new inputs?

Commercial aspects.of a project also include arrangements for the procurement of equipment and supplies. Are the procurement procedures such that undue delays can be avoided? Are there procedures for competitive bidding to ensure fair prices? Who will draw up the specifications for procurement?

Finally, there are the two aspects of project analysis that are the primary concerns of this book, the financial and the economic.