training module on project development · 2017. 8. 30. · training module on project development...

Training Module on Project Development

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CLIMATE CHANGE COMMISSION

The Climate Change Commission, an independent and autonomous body that has the same status as that of a national government agency, is under the Office of the President of the Philippines. It is the lead policy-making body of the government which is tasked to coordinate, monitor, and evaluate programs and action plans of the government relating to climate change pursuant to the provisions of the Republic Act No. 9729 or the Climate Change Act as amended by Republic Act No. 10174 or the People’s Survival Fund.

GLOBAL GREEN GROWTH INSTITUTE

The Global Green Growth Institute (GGGI) is a new international organization committed to strong, inclusive green growth. GGGI assists developing and emerging countries with integrating their ambitions for strong economic performance and environmental sustainability with the goal of bringing about poverty reduction, job creation, social inclusion, and climate change mitigation and adaptation. Headquartered in Seoul, GGGI was established by treaty in June 2012 at the United Nations Rio+20 Conference by an initial group of eighteen nations who share the organization's vision. To date, there are a total of 24 Member Countries who joined the organization. GGGI has a diverse portfolio of programs in developing countries around the world. These in-country programs, together with global products and services, focus on delivering results through an integrated approach of evidence based green growth planning and implementation aligned to countries' development priorities. The organization also focuses on knowledge development and management activities which build a strong theoretical and empirical basis for green growth, while providing concrete options and guidance for policymakers; as well as building the conditions for public and private green infrastructure investments.


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PREFACE The Philippines is highly vulnerable to the impacts of climate change. As witnessed through the devastation from typhoons Yolanda (2013), Glenda (2014), and Lando (2015), millions of Filipinos were affected and communities incurred costly damages and forced to rebuild. In anticipation of stronger typhoons hitting the country, climate change adaptation and mitigation is vital to the development and preparedness of Local Government Units (LGUs) and the people they serve. The methodologies and tools offered in this publication are intended to raise national awareness and competence among national and local government institutions, civil society, private sector, and communities. This publication provides information outlining mechanisms on how to develop capacities of decision makers, local planners and trainers in integrating science-based assessments into policies, plans, and programs to make communities adaptive and resilient to climate risks. This module is one of the many references that the users may utilize in developing their respective development plans. The Climate Change Commission (CCC) is grateful to our partner, the Global Green Growth Institute (GGGI) – Philippines for providing the needed technical assistance in the development of this module together with the technical team composed of individuals from the Resources, Environment, and Economics Center for Studies, Inc. (REECS).


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Disclaimer

This paper is a joint output of the Climate Change Commission (CCC) of the Government of the Philippines and the Global Green Growth Institute (GGGI) – Philippines. Neither the two parties nor any of its employees, nor any of its contractors, subcontractors or their employees, makes any warranty, express or implied, or assumes any legal liability or responsibility for the accuracy, completeness, or any third party’s use or the results of such use of any information, apparatus, product, or process disclosed, or represents that its use would not infringe privately owned rights. Reference herein to any specific commercial product, process, or service by trade name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its endorsement, recommendation, or favoring by the CCC and GGGI – Philippines or their contractors or subcontractors. The views and opinions of authors expressed herein do not necessarily state or reflect those of the CCC and GGGI – Philippines. Past performance is no guarantee of future results.

Module on Project Development for Trainers [electronic resource] / Published by the Climate Change Commission – Manila and the Global Green Growth Institute – Seoul: 2016.

Includes bibliographical references

ISBN 978-621-95649-3-9: Not for Sale


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Contents

PREFACE .......................................................................................................................... iii

Disclaimer .......................................................................................................................... iv

List of Figures .................................................................................................................... vi

List of Tables ...................................................................................................................... vi

List of Acronyms ............................................................................................................... vii

Definition of Terms ........................................................................................................... viii

I. Introduction ................................................................................................................. 1

1.1. Overview of the Module for Trainers ....................................................................... 1

1.2. Objectives of the Module......................................................................................... 2

1.3. Brief Description ..................................................................................................... 2

1.4. Relevance of the Module for Trainers ..................................................................... 2

1.5. Summary of Topics ................................................................................................. 3

II. Module Content .......................................................................................................... 5

2.1. What are the Project Development Procedures? .................................................... 5

2.2. How is Project Development Undertaken? ............................................................ 12

2.3. Preparing the Project Proposal ............................................................................. 31

III. References ............................................................................................................... 34

IV. Additional Reading Materials .................................................................................... 35

V. Annexes .................................................................................................................... 36

Annex A: How to Access the People’s Survival Fund ...................................................... 36

Annex B: Implementation of the PSF ............................................................................... 37

Annex C: PSF Proposal Template ................................................................................... 38

Annex D: Tables from the NEDA Guidebook ................................................................... 43


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List of Figures

Figure 1. Local climate change action plan of Iloilo City ........................................................ 1

Figure 2. Classification of small and big projects ................................................................... 6

Figure 3. Problem tree analysis of the UNDP Wealth Creation Program ............................... 8

Figure 4. Degrees of price elasticity .................................................................................... 26

Figure 5. Price elasticity of supply ....................................................................................... 26

List of Tables

Table 1. Climate change impacts in some vulnerable sectors. .............................................. 7

Table 2. Seedlings of forest species planted in NGP sites in Dinagat Islands ....................... 9

Table 3. Comparison of the methods for identifying problems and projects. ........................ 10

Table 4. Characteristics of project outputs (goods and services based on NEDA Guidebook)

........................................................................................................................................... 10

Table 5. Characteristics of project outputs: example carbon sequestration through

forestation. .......................................................................................................................... 18

Table 6. Characterization of project goods and services. .................................................... 19

Table 7. Result framework for the project goal ................................................................... 21

Table 8. Result framework for the project outcomes ........................................................... 21

Table 9. Result framework for the project outputs ............................................................... 21

Table 10. Result framework for the project activities ........................................................... 22

Table 11. Result framework for project inputs ..................................................................... 23


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List of Acronyms

AIP Annual Investment Program CBA Cost-Benefit Analysis CCC Climate Change Commission CCDRA Climate Change and Disaster Risk Assessment CDP Comprehensive Development Plan CDRVA Climate and Disaster Risk Vulnerability Assessment CENRO Community Environment and Natural Resources Office CLUP Comprehensive Land Use Plan CORE Communities for Resilience DENR Department of Environment and Natural Resources EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return FIRR Financial Internal Rate of Return ENRA Environment and Natural Resource Assessment GGGI Global Green Growth Institute GHG Greenhouse Gas GIS Geographic Information Systems KII Key Informant Interview LCCAP Local Climate Change Action Plan LCEs Local Chief Executives LGUs Local Government Unit(s) MAO Municipal Administrative Office MENRO Municipal Environment and Natural Resources Officer MPDO Municipal Planning and Development Office NCCAP National Climate Change Action Plan NEDA National Economic Development Authority NRA Natural Resource Assessment NSCB National Statistical Coordination Board PED Project Evaluation and Development PLPEM Provincial/Local Planning on Expenditure Management PDP Philippine Development Plan PDPFP Provincial Development and Physical Framework Plan PDIP Provincial Development Investment Program PENRO Provincial Environment and Natural Resources Office PSF People’s Survival Fund RME Results Monitoring and Evaluation SMART Specific, Measurable, Achievable, Replicable, Timebound SUCs State Universities and Colleges TOC Theory of Change TWG Technical Working Group VRA Vulnerability and Risk Assessment


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Definition of Terms

Project Development –formulation of a series of activities that aims to solve a certain problem.

Goal – broad and long-range accomplishments toward which the project will contribute.1

Objective –intended impacts (or in some cases, outputs) contributing to physical, financial institutional, social, environmental, or other benefits to a society, community, or group of people via one or more independent interventions.2

People’s Survival Fund –a special fund in the national treasury that finances climate change adaptation programs and projects.

Cost-Benefit Analysis –a tool used to weigh the total expected cost against the total expected benefits of one or more actions. This is done to determine how well, or how poorly a planned action will turn out. 3

Theory of Change – “a way to describe the set of assumptions that explain both the mini-steps that lead to a long-term goal and the connections between these activities and the outcomes of an intervention or programme.”

Environmental Impact Assessment – the process by which the anticipated effects on the environment of a proposed development or project are measured. If the likely effects are unacceptable, design measures or other relevant mitigation measures can be taken to reduce or avoid those effects. 4

Vulnerability Assessment – Vulnerability to natural hazards is measured like hazard frequencies that reflect the predisposition of a system to extreme events at a certain instant of time. The measurement of vulnerability is found useful in the conception of disaster preparedness, and positioning regions or countries for aid support.5

Problem Tree Analysis –Problem tree analysis builds the context to the project by presenting the causes and effects of a certain problem identified by the primary stakeholders. It also provides the plans, goals, objectives, activities and outcomes, which are all necessary before conducting the project. By presenting these details, the tree analysis also serves as a guide in detecting the core problem along with the contributing factors.

Survey – a method of gathering information from a sample of individuals. This “sample” is usually just a fraction of the population being studied. Not only do surveys have a wide variety of purposes, these can also be conducted in many ways—including over the telephone, by mail, or in person. 6 For the purpose of the developing project plans for the CORE Initiative, the use of questionnaire and interviews are employed.

Results Framework –Results Framework is a planning template for a proposed project or action where goals, outcomes, outputs, activities, inputs, baseline/situation, and assumptions are determined through a backward iteration.

1 Yumi, Sema. Project Development 2007. 2 Ibid 3 Gabriela, Gilgor.Cost-Benefit Analysis- A Project Management Tool. n.d. 4 Environmental Protection Agency. Environmental Impact Assessment. n.d. 5 Ballesteros, Marife. 2012. Assessment of vulnerability to natural hazards at subnational level: provincial estimates of the Philippines 6 Scheuren, Fritz. What is a Survey? http://www.amstat.org/sections/srms/pamphlet.pdf. 2004


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I. Introduction

1.1. Overview of the Module for Trainers

Local Climate Change Action Plans (LCCAP) are anchored on the National Climate Change Action Plan (NCCAP), which outlines the country’s agenda for adaptation and mitigation for 2011 to 2028. Simply put, LCCAPs are key instruments that support the NCCAP in building the adaptive capacities of women and men in their communities, and in increasing the resilience of vulnerable sectors to climate change. These are also the main modalities through which programs and projects of the government are cascaded to grassroots level where local citizens can participate. In the development of LCCAPs, stakeholders are given spaces through interlocking activities. One particular process in the series of activities, which is the development of adaptation options and actions, requires an effective project proposal. Project proposals are detailed description of a series of activities aimed to solve a certain problem. In the context of the Communities for Resilience (CORE) Initiative, project proposals written by local planners must be hinged on the guidelines in accessing their primary financial resource—the People’s Survival Fund (PSF). To give a clear picture where project development stands, the Local Climate Change Action Planning Framework of the local government of Iloilo integrated with the project development cycles, is used as an illustration.

Figure 1. Local climate change action plan of Iloilo City 7

7Iloilo City Climate Change Technical Working Group. Local Climate Change Action Plan 2014-2028. http://iloilocity.gov.ph/images2013/LCCAPlan.pdf.2014.


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In order to write an effective project proposal and formulate projects, understanding the phases of project evaluation and development, methods of identifying projects, project development principles, concepts and procedures, as well as developing the proposal per se using the PSF template are important. Thus, the project development module for trainers intends to deliver an efficient training program for academic institutions that will guide local governments in strengthening their planning capabilities, monitoring, and evaluation through project development.

1.2. Objectives of the Module

The primary objective of the project development module for trainers is to roll out training programs on project development, specifically for the benefit of local planners and decision makers. In more specific terms, the module aims to:

Identify the roles and importance of Project Development in light of the CORE framework;

Discuss the cycles of Project Development;

Identify projects that will address climate change and disaster risks problems; and

Prepare a project proposal with the necessary basic contents.

1.3. Brief Description

This module is intended for the use of trainers from state universities and colleges (SUCs) identified by the Climate Change Commission (CCC) for the CORE Capacity Development Training of Trainers. Focusing on the processes and ways to prepare a project proposal, a step-by-step procedure with necessary examples are shown and discussed. Combinations of real world examples, flowcharts, and problem solving are also utilized to enhance the understandings of trainers on Project Development. It is important to note that the target users of this module must have an extensive knowledge on rural development planning and has done extension services through research and community outreach, apart from their expected competence on environment science, natural resource assessment, vulnerability assessment, and environment and natural resources accounting.

1.4. Relevance of the Module for Trainers

Developing project proposals relevant to climate change and disaster riskreduction plays an important role in mainstreaming CORE. Among these are:

Improved governance effectiveness in addressing the real problem with the right solution in a systematic manner;

Consolidation of a set of actions that need to be implemented collectively into a single official document;

Serve as a basis for all actions and resource requirements as one of the products of project development is a project proposal or a plan;


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Sourcing out funding from the government, such as the People’s Survival Fund which is specifically created for the use of local government units, and from other financial institutions; and

A good basis for project implementation, and project monitoring and evaluation.

As foundations of knowledge and skills, academic institutions are a crucial element in building the capacities of local government units. Since most of the program offerings of SUCs are aligned with national and regional development frameworks, academicians can be entrusted to train and pass on the essentials of the CORE components such as project development, to the local planners and decision makers. Moreover, they can also integrate the learnings from the training into the classroom experience, which will be helpful for college and university graduates seeking job opportunities in municipal and provincial offices.

1.5. Summary of Topics

The Module for Trainers is divided into four major topics on Project Development. A summary for each is provided below.

1. Phases of Project Evaluation and Development

This section covers the phases of Project Evaluation and Development using the NEDA-prescribed Project Cycle. It includes the following processes:

a. Pre-Investment, which identifies, prepares, appraises, and finances the project;

b. Investment requires detailed project design and implements the project; and

c. Post-Investment covers project operations and evaluation.

2. Methods of Identifying Problems and Projects

While the Project Evaluation and Development (PED) process requires knowing the project, the process on how to acquire knowledge is not comprehensively discussed. The section on methods of identifying project aims to fill this gap by presenting alternative methods of identifying projects. These methods are:

a. Analysis of the results of vulnerability assessments; b. Participatory problem tree analysis; c. Surveys of affected sectors; and d. Theory of Change.


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3. Project Evaluation and Development Principles, Concepts, and Procedures

Using the NEDA Guidelines, this section presents and discusses the basic principles, concepts, and procedures of PED. Understanding the principles and concepts are necessary to execute the procedures. The NEDA PED principles8 are:

a. Society will continue to function even without public investment; b. The objective of public investment is to effect positive change and

catalyze development; c. Resources available today are more valuable than the promised

benefits in the future; d. There are several ways to produce an output and even an outcome;

and e. Public investment will produce gainers and losers.

The concepts are:

a. Evaluation; b. Feasibility study; c. Pre-feasibility study; d. Project appraisal; e. Economic life; and f. Discount rate.

These concepts are discussed in the contents of the module.

Given the above principles and concepts, the project development procedures to be discussed in this section are divided into two: first, for basic project development, and the second, for comprehensive project development. Basic project development procedures are applicable only to small projects, while big projects undergo procedures for comprehensive project development. The size of a project is determined through its budgetary requirements.

4. Project Proposal Development

The NEDA proposal format is simplified in this module. While waiting for the finalization and approval of the PSF, the module explores and focuses on the NEDA project proposal format. Still, the PSF guidelines, guidelines,9 which is similar with that of NEDA in substance, is discussed and its templates appended in this module, should the participants intend to request funding from the PSF. The NEDA format requires the following components of the proposal:

a. Project title; b. Location/target population; c. Implementing agency; d. Executing agency; e. Start date; f. Duration;

8 NEDA. Guidelines on Provincial/Local Planning and Public Expenditures: Project Evaluation and Development, Vol.5., 2007 9At present, the PSF guidelines are being revised according to GGGI.


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g. Project cost; h. Current situation/problem and needs; i. Justification and benefits; j. Project objectives; k. Project description / main components; l. Project management and organization; m. Expected environmental impacts; n. Monitoring and evaluation; o. Budget; p. Cost recovery and sustainability; q. Terms of reference of the consultants; and r. Appendices.

The CCC-prescribed project proposal format for PSF funding has the following sections:

a. Basic information of the proponent; b. General information; c. Project background and rationale; d. Project goals and objectives; e. Project application effectiveness; f. Project implementation; g. Environmental impacts; h. Project sustainability plan; i. Project monitoring and evaluation; j. Information of the implementing partner; and k. Attachments

In the PSF format, each section is provided with a set of questions to be answered in the project proposal, whereas in the NEDA format, the contents of each section are described. The reason for this is that this training is intended to assist LGUs in the preparation of project proposals to be submitted to the CCC for the PSF funding. Details of how the project proposal is prepared are discussed in the module contents.

II. Module Content

2.1. What are the Project Development Procedures?

The procedure for project development is composed of two parts. These are: 1) procedure for basic project development; and 2) procedure for comprehensive project development. To determine when to apply the procedure for basic project development (Basic PD) and the procedure for comprehensive project development (Comprehensive PD), the answer is shown in a diagram in Figure 2. All project proposals for LGU funding are classified into Small and Big Projects. The projects are classified according to project costs and funding sources. If the project cost is greater than the 20% of the development fund of the province divided by the number of its municipalities, the project proposal is subjected to Comprehensive PD and classified as a “big” project.


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20% development fund Project cost >

Number of municipality

Figure 2. Classification of small and big projects 10

On the other hand, if it is less than the share of the municipality from the 20% development fund and that the funding source is LGU, the project is classified as Small covered only by Basic PD. All Big projects intended for external funding are subjected to procedures for Comprehensive PD. This includes the processes of pre-feasibility study and full-blown feasibility study. Basic Project Development consists of two stages: (1) Knowing the project; and (2) Understanding the project. These are based on the NEDA Guidebook.

2.1.1. Knowing the project

Problem and project identification Before knowing and understanding the project, there is a need to identify first the problems from which the project is formulated. If a project is incorrectly identified as a solution to a problem, the problem will not be solved. Therefore, it is important that the right problem and project are identified correctly to avoid wastage of important resources. This module provides alternative methods that can be used to identify problems and projects that LGUs can apply. These are:

10 NEDA. PLPEM Guidelines. Volume 5. http://www.neda.gov.ph/wp-content/uploads/2013/10/PLPEM-Guidelines-Vol5.pdf. 2013.


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a. Analyzing results of vulnerability risk assessment One of the outputs of vulnerability risk assessment11 is the vulnerability risk classes of affected sectors as impacted by climate change-related events or disasters. Usually, highly vulnerable sectors are the ones that should be addressed with climate change and disaster risk mitigation or adaptation projects. Based on observations in the Philippines, some of the vulnerable areas or sectors are shown in the table.

Table 1. Climate change impacts in some vulnerable sectors.

Some Climate

Change/Disaster Risk Indicator

Some Impacts Some Vulnerable Sectors

Extreme rainfall event/typhoon

Flood Areas with lowest elevation (residential areas, agricultural areas, coastal communities)

Landslides Sloping barren/grassland areas, agricultural areas, sloping newly reforested or young forest plantations

Storm surge Beach and mangrove areas in coastal communities

High temperature Drought Humans/communities, animals/wildlife, agricultural crops, water supply

Risk from volcanic eruption

Deposition of soil, lahar, and stone

debris,

Communities near volcanoes, all crops in agricultural lands near volcanoes

Risk from earthquake

Liquefaction Communities near fault lines, residential areas, etc.

In any vulnerability risk assessment report, the final output is a ranking of vulnerabilities of affected sectors. These could be human beings, communities, natural resources, socio-economic sectors, agricultural crops, plants and animals/wildlife to climate change events and disasters. From the report, decision makers and planners at the municipal level may identify and prioritize the problems that they would like to address with a project.

b. Participatory problem tree analysis

In doing the analysis,12 all the possible problems and causal factors are identified including its causes and effects. It is possible to detect other arising problems during this phase. This method is better undertaken through stakeholders’ participatory approach to have diverse views and perceptions what really is the right problem and is causal factors. Identifying the core problem is done by discussing all the problems according to the experience and perceptions of stakeholders. In order to have a guide and be led to it, each problem is linked to other causal factors and its effects. The real problem has the most number of links from the causes and effects, and this is classified as the “core problem,”

11 National Institute of Building Sciences. Threat/Vulnerability Assessments and Risk Analysis. Retrieved from Whole Building Design Guide.com.

12Retrieved from Problem Analysis.html


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which should be given solution by a project. An example of a Problem Tree Analysis is shown in Figure 313.

Figure 3. Problem tree analysis of the UNDP Wealth Creation Program14

c. Survey

The easiest method is through a survey. Survey is simply the gathering of information from a sample of individuals. This “sample” is usually just a fraction of the population being studied. An example of a survey is when individuals are asked who or which sectors suffered the most during past years’ climate change events. Not only do surveys have a wide variety of purposes, these can also be conducted in many ways— including over the telephone, by mail, or in person.15 For the purpose of developing project plans for the CORE Initiative, the use of questionnaire and interviews are employed. An example of a summary survey result that may be used in the identification of a climate change disaster risk reduction project is the seedlings of forest species planted in National Greening Program (NGP) sites. The question is which of the forest species’ seedlings planted in NGP areas that survived in Dinagat Islands intended for carbon sink to cool the environment in the long-term survived. The answers of the

13Balangue. UNDP Wealth Creation Program. 2015 14 Balangue. UNDP Wealth Creation Program. 2015 15Scheuren, Fritz. What is a Survey. http://www.amstat.org/sections/srms/pamphlet.pdf. 2004


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respondents during the surveys in one of the barangays are shown in the following table.

Table 2. Seedlings of forest species planted in NGP sites in Dinagat Islands16

Seedlings of Forest

Species Planted in NGP Sites in Dinagat Islands

Frequency of Mortality of Seedlings

% Seedling Mortality

Vulnerability Class of Species

Sagimsim (S. brevistylum) 7542 54

Very high

Nato (P. luzoniense) 5124 37

High

Mangkono (X. verdugonianus)

1063 8

Moderate

Bahai (O. calavensis) 148 1

Low

Sili-sili (R. tuberosa) 115 1

Low

d. Theory of Change

Theory of Change (TOC) is a system of identifying problems and projects based on a results framework. The result framework contains the past and present state or situation where problems that led to the present state are determined through a backward iteration. The iteration process could also be used in a forward path to determine the future state assuming a trending effect of the past problems. Just like in the Problem Tree Analysis, the problems identified through the TOC is best dissected through a multi-sectoral participatory approach. TOC is a complete planning tool. It is presented here as a method of identifying problems and projects in support of project development. It could also be used as a project development tools.

When to use the methods? The methods are compared to give an idea on when to use each of these depending on the objective and situation of the user. All methods have its respective capacities useful for identifying problems and projects with the information in Table 3. The user can now select which method he/she can adopt for a particular case.

16Balangue, Impact Assessment: Environmental Component of the National Greening Project of the DENR. PIDS Study Report.

2015.


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Table 3. Comparison of the methods for identifying problems and projects.

Criteria for Selection

Vulnerability

Risk Assessment

Problem Tree Analysis

Survey Theory of Change

Funding/ Budget Requirement

Highest Lowest Moderate Between lowest and moderate

Types of information generated

Science-based

Literature, Perception and

Experience

Perception, Observation, and

Experience; Science-based, if instrumentations

are used

Literature, Perception, and

Experience

Size of area coverage

Largest Undefined area, could be used in any size of area

Moderate Undefined, could be used in any

size of area

Expertise required

Interdisciplinary high level

in the science fields

Local governance, Sociology,

commoners

Minimum BS level in the social and

physical sciences, and commoners

Quite high level in the social and other science

fields

Applicability

Where area-based risks

due to climate change are

present

Where commodity/sectoral-based risks due to climate

change are present

Where commodity/sectoral-based risks due to climate change

are present

Where multiple commodity/sectoral-based risks due to climate change

are present

Ease of application

Complicated Easy Easy Moderate to Complicated

2.1.2. Characterizing the project

This is the process of knowing what the project is all about in its entirety, particularly the goods and services it will provide. The characteristics of project outputs can be classified whether the good is private, public, or mixed. The characteristics of goods or services are summarized in Table 4.

Table 4. Characteristics of project outputs (goods and services based on NEDA Guidebook)

Project Output

Characteristics Example

Private good Can be consumed by those who can pay it.

Food products (rice, fruits, lumber, livestock), herbal medicine, purified water

Cannot be consumed by others without paying for it.

Divisible, meaning it can be consumed in fraction.

It is measurable.

It is limited.


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Project Output

Characteristics Example

Public good Consumption can be enjoyed by everybody.

Buffer mangrove forest (protection from storm surge), dikes for flood reduction, Forest for carbon sequestration and water recharge

It is not divisible.

Collection of fees is not possible

Mixed good It is measurable. Forest for lumber and NTFP, water recharge, carbon sink, NKP production, ecotourism

Consumption can be limited to those who pay for it.

Furthermore, the goods must be characterized whether such is tradable or non-tradable, exportable and importable, and restrictions for the exportation and importation of such good exist. Also determine whether charging a user’s fee is possible and that other pricing considerations can be used to value the outputs in private good. For public goods, it is not possible to charge a user’s fee, or it’s administratively infeasible. Projects that have foreign exchange implications will have to be considered in the economic analysis. 2.1.3. Understanding the details of the project

This section is guided by the answers to the following questions:

a. What is the rationale of the project?

What is the goal of the project?

Can the outcome contribute to achieving the goal?

Can the outputs contribute to meeting the expected outcome?

Can the activities mobilize the inputs (financial, human, technical and material resources) needed to result in the output;

What are the critical and essential assumptions? (caution: too many assumptions are not good to the project because these may lead to project failure)

Are the success indicators measurable and verifiable?

What is the strategy to be used to measure the project accomplishment?

b. Relevance of the project

Is the project in line with the Provincial Development and Physical Framework Plan (PDPFP) in terms of goals and objectives?

c. Results framework

Can the project activities lead to the desired outputs, outcomes, and impacts?

Is it necessary to improve the interactions among the input to output, to outcome to impact through changing the activities or through other projects?


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d. Project outcome trending

Is the project necessary to result to the outcome, or the outcome can still be realized even without the project?

Why should government finance and implement the project?

2.2. How is Project Development Undertaken?

The above section of this module presented the “what” aspect of Project Development. Now that what need to be done are already known, the next concern is how to conduct these. In every “how” aspect, the “why” is provided. Thus, this section focuses on the how aspect of Project Development.

2.2.1. Why is knowing and characterizing the project important?

This section is important to show to local planners the processes that are exercised to know and characterize a project as the first steps in project development. The characteristics of the project are necessary in the identification of goods and services that can be expected from the project.

1. Identifying the problem and its causal factors

a. Analyzing results of vulnerability risk assessment (VRA)

reports

The first step is to get hold of a municipality’s climate change or disaster risk reduction (DRR) vulnerability assessment report. If such report does not exist, the municipality should first conduct its vulnerability assessment as affected by climate change and disaster risk. This module is recommends to have the topics in the Vulnerability Assessment Course reviewed in this training to give local planners an idea on what the VA report looks like. Assuming that such VA report is available at the municipal LGU level, the next step is to identify which portions or sectors of the municipality are highly vulnerable. This will give an idea of the nature and type of a project, and where it should be implemented. This section is better understood with an example. Example: A VA report of Municipality A indicates that all low lying areas where residents estimated at 5000 households will be affected by a 30-day flood as a result of an extreme rainfall event that might occur in the future. The question is what municipal LGU should be doing to address this problem, assuming that it decided to. Three of the potential projects that may be considered:

Relocation of the 5000 households to a higher ground where they cannot be reached by the potential maximum flood level

Declogging of waterways

Building of dikes


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The next thing to do is to trim down which of the three should be pursued for a full-blown PD. The municipal LGU may consider which of the three potential projects would have the least cost if implemented, and within its internal revenue allotment (IRA). This process identifies the right project to pursue. Once decided, a full-blown project development is conducted.

b. Problem tree analysis

This is a participatory method of identifying projects. It is conducted using the following steps:

1. Conduct a stakeholders’ consultation by inviting barangay leaders,

preferably the barangay council on environment and DRR.

2. Before the consultation, prepare a guide questionnaire that will lead the municipal LGU to identify the problems and the causes why such occur.

3. Conduct a participative discussion to identify the barangays’

problems related to climate change or DRR based on participants’ experiences during the past years.

4. Ask the participants why the problems occurred. This will lead to

causal factors that contributed to the problems.

5. Assuming that the problems and causal factors are already known, the problem tree is drawn and analyzed. In drawing the problem tree, the inter-relationships of the factors should be reflected by drawing an arrow from one factor affecting another until a link reaches the problem. Usually, causal factors start at the bottom and maybe classified into social, economic, institutional, technological, biophysical, and environmental factors. The real problem is usually at the topmost level of the problem tree analysis.

Going back to the problem tree analysis example shown in Figure 3, this example can be classified as a climate change adaptation project in biodiversity areas of the country. The factors identified by stakeholders are in the colored boxes. Also, its inter-relationships are reflected by arrows. Based on the inter-linkages of the causal factors, a Problem Tree is drawn shown on the above diagram. Assuming that the problem is going to be addressed with a project, the causal factors will have to be addressed too. Solving the causal factors will lead to solving the very problem which is the deterioration of the biodiversity pool.

6. Conduct a community mapping of the areas that are affected. This

identifies the areas where the project will be implemented.

7. Once the problem is finally accepted by municipal leaders, barangay leaders, and other stakeholders, then a full-blown PD can be conducted.


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c. Survey

There are several forms of survey. One is a social survey where people are interviewed of their observations and experiences on climate change and DRR that affected their lives. The other one is physical survey, where physical objects that were actually affected by any indicators of climate change and DRR, are assessed. Social survey has three options:

a. Key-informant interview (KII); b. Focus group discussion (FGD); and c. Full blown survey.

KII requires few respondents and may be conducted where the informants are located. The number of respondents in a FGD is a little more than the respondents in a KII. In a FGD, respondents should also be well-informed of the effects or impacts of climate change and DRR. The only difference between FGD and KII is that in the former, respondents are convened in one place where it is held. One advantage of FGD over KII is that issues or problems may be rightly identified through the exchanges of ideas and observations among the respondents. In both KII and FGD, a guide instrument containing questions that would lead to the identification of objects, areas or sectors affected with any of the climate change and DRR indicators are prepared and tested in a dry run interview with respondents from any of the barangays before actual key-informant survey or FGD is conducted. Full-blown survey needs more number of respondents usually determined through a statistical method. A questionnaire or interview instrument is drafted and fine-tuned after a pre-test/dry run interview before the conduct of actual survey. The method to be selected depends on:

a. Objectives of the project; b. Available budget for the surveys; and c. Available time.

The steps to follow in KII, FGD, or actual survey are:

1. Identify the respondents according to the objectives of the project

and methodology of the survey.

2. Draft an interview guide or a survey instrument based on the objectives and requirements of the project.

3. Train the enumerators or interviewers on the conduct of the

interview.

4. Pre-test the interview guide or survey instruments.

5. Adjust the interview guide or questionnaires by culling out those questions that are irrelevant and add more relevant ones.


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6. Conduct the KII, FGD, or actual survey.

7. Process and interpret the survey data.

d. Theory of Change (TOC)

TOC is more of a complete methodology from project identification, to project development. This section presents it as a method only for identifying problem and projects. Participants in the TOC exercise are professional people and other stakeholders in the municipality who have direct experience and related educational background to climate change and DRR. A resource person may also be invited to present a situationer about the subject matter. Also, a facilitator is necessary to sort out questions and answers that are directly relevant. Similar to an FGD, invitees are convened in a place for exchanges of observations and ideas related to the situationer as presented by the resource person. Based on the present situation, stakeholders will discuss how the present situation materialized by moving backward from the present, to the past condition. Whatever the problem identified will be assessed whether it will still continue in the future. If it does, that would be the problem to be addressed with a project. During the discussion, the intervening contributing problems and factors to the ultimate problem are also identified. The procedures to follow to identify the ultimate problem, contributing problems, and causal factors are:

1. Invite a resource person to present a paper on the municipality’s present status on the effects and impacts of climate change and DRR, preferably identifying the climate change and disaster risk-related problems and contributing factors. Usually, those in the municipality’s CCC and DRR office, and Provincial Environment and Natural Resource Office (PENRO)/ Community Environment and Natural Resources (CENRO)/ regional Department of Environment and Natural Resources (DENR) have experts that can present a situationer report on climate change and DRR in the municipality.

2. If there are no available resource persons, an expert on climate change and DRR may be contracted by the mayor to assess the effects and impacts of climate change and DRR in the municipality. The expert’s report will serve as an eye opener on the situation of the municipality relative to climate change and disaster risk. This report is presented to stakeholders who will identify the problems and causal factors that can be addressed.

3. Plan and convene a stakeholders’ consultation, preferably in a place

conducive for active discussion about the subject matter. Invitees should be those knowledgeable on the subject matter so as not to


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waste the opportunity to dissect and uncover the real problem and its contributing factors.

4. Although this is optional, about 2-3 discussants may be invited to

critique the situationer report. If possible, discussants may come from other sectors that are sensitive to climate change and disaster risk.

5. Also, invite a facilitator to direct and moderate the discussions so as

to stay within the objectives of the consultation, and a documenter to document the Q&A during the open forum, as well as during the discussions.

6. Present the paper regarding the situation of the municipality relative

to climate change and DRR, and reactions of the discussants on the situationer report. If not directly pointed in the situationer report and discussants’ reactions, insights on the problems and issues related to climate change and DRR, including alternative potential solutions or remedial measures, can be deduced through further discussions by stakeholders.

7. If the climate change and DRR-related problems and issues are

complex and multi-sectoral in nature, and have an ultimate problem, contributing problems, and causal factors that are difficult to pin-point, it is necessary to split the stakeholders into groups according to sectors they belong or interested to participate in. A more in-depth discussion is more effective in extracting and uncovering the problems and issues of a particular sector, facilitated through this approach.

8. After sectoral discussions of the problems and issues related to

climate change and DRR, a plenary session is necessary to establish the inter-relationships of the problems and issues among sectors, and to formulate the whole and ultimate problem, as well as its causal factors. Given the real and ultimate problem, alternative projects that seek to address these may be recommended, evaluated, and weighed to select the best one according to the perception of stakeholders. Once the right project is agreed upon by stakeholders after a thorough evaluation of the alternatives, this should be pursued with a full-blown PD following the NEDA Guidebook.

9. The documenter should prepare a proceeding of all the discussions.

2. Initial selection of alternative projects

Why is the initial selection of alternative projects necessary?

While there are several projects that can lead to the same outputs, there is only one best project that needs to be subjected to project development, funded, and implemented.

Once the real and ultimate problem and its causal factors or contributing problems are known, potential projects can now be identified. How? A


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simple answer is that the collective actions of a solution to the problem make up a project. However, for a given problem in climate change and DRR, there are several possible actions that can be applied. Thus, several alternative projects are possible. Unfortunately, only one among these will be selected. In this case, the planner should be able to select the best project to be submitted for a full-blown PD. A simple selection process may be used by asking stakeholders their priorities and weights of the alternative projects according to importance and high chance of achieving the objectives.

a. Knowing the project

1. How to identify project outputs (goods and services) In climate change and DRR projects, identifying project outputs is somewhat complicated because of the bundles of goods and services produced in most CCA/DRR projects.

Example problem and solution: Assume that in Municipality A, the

real problem is the increasing temperature and high frequency of drought. The solution to this problem in the long-run is the establishment of carbon sink. Thus, the project identified is the forestation of the degraded area to increase its carbon sequestration in Municipality A. Forest absorb carbon thus resulting to a cool environment. At the same time, it will also increase wood biomass, provide soil nutrients, increase water yield, and also a preventive measure to disasters caused by landslides, and attract wildlife.

The method useful for identifying project goods or services is through Cause-Effect Analysis. A “Cause” could be an action, object, or factor that brings a change or response to an action, object, or factor known as the “Effect”. A “Cause” happens first before the “Effect.” The Municipal Planning and Development Office (MPDO), Municipal Environment and Natural Resources Officer (MENRO), Municipal Administrative Office (MAO) in the municipal LGU are capable to do such analysis. If not, the municipal LGU can seek assistance from SUCs and DENR.

2. How to characterize project outputs (goods and services) Why is there a need to characterize project outputs? The basic idea why project outputs are characterized is for valuation purposes so that the project can be evaluated financially and economically. Remember, money invested should be recovered.

3. Characterization of the project whether private good, public good, or

mixed good. Once project outputs are identified, these are characterized according to types of good or service, as shown in Table 5. The MPDO, MENRO, MAO may be asked to rate the products.


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The steps to follow are:

1. Tabulation of the characteristics of the product.

The products of the carbon sequestration project are tabulated. The products are classified into physical goods and environmental services. The nature of the products under these classes is further classified.

2. Evaluate the goods/services according to its characteristics

whether true (yes) or not (no).

a. Conclude whether the project produces mixed goods and services or not.

Table 5. Characteristics of project outputs: example carbon sequestration through forestation.

Project Outputs (Goods and Services)

Project Output

Characteristics Physical Goods

Environmental Services

Wood NTFP17 Water Soil Nutrients

Low Temp.

Wildlife

Private good

Can be consumed by those who can pay it.

Yes

Yes

Yes

No

No

Yes

Cannot be consumed by others without paying for it.

Yes Yes Yes No No Yes

Divisible, meaning it can be consumed in fraction.

Yes Yes Yes No No No

It is measurable. Yes Yes Yes Yes Yes Yes

It is limited.

Public good

Consumption can be enjoyed by everybody.

No No Yes Yes Yes Yes

It is not divisible. No No No No No No

Collection of fees is not possible

No No No No No No

Mixed good

It is measurable Yes Yes Yes Yes Yes Yes

Consumption can be limited.

Yes Yes Yes No No No

17NTFP- non-timber forest products include rattan, bamboo, nipa, vines, sap, exudate.


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4. Characterize the products whether tradable/non-tradable, exportable/non-exportable, charging user’s fees is possible, and pricing/valuation method can be used. Why? To determine whether the project can recoup its investment by marketing its products locally and internationally. Thus having high potential for making it financial and economical viability makes the project worthy of implementation. The steps to follow are:

1. Using Table 6,ask the MENRO, MAO, and MPDO to rate the

products and services according to its characteristics.

Table 6. Characterization of project goods and services.

Project Outputs (Goods and Services)

Characteristics

Physical Goods Environmental Services

Wood NTFP18 Water Soil

Nutrients

Low Temp. Wildlife

Tradable

Yes

Yes

Yes

No

No

Yes

Non-tradable

No

No

No

Yes

Yes

No

Exportable Yes

Yes

No

No

No

Yes

Non-exportable No No No Yes Yes No

User’s fee can be charged

Yes

Yes

Yes

No

No

Yes

Pricing/valuation method

Net price19

Net price

Net price

Net price,

replacement method

Net price, replacement

method

Travel cost

method

2. Evaluate which of the projects’ goods and services are tradable

in both foreign and local markets. The more tradable goods and services, the better because this means that investment can easily be recovered.

3. Similarly, the more exportable goods the project can offer, the better for it. This means that the financial benefit is increased and cost recovery period will be short-term rather than under long-term, under normal conditions.

4. The availability of pricing/valuation methods for each of the goods and services is necessary for a balanced valuation of the financial and economic costs, and benefit of the project.

5. Goods and services, if extracted, are subject to user’s fee collection. This would mean additional revenue for the government.

18 NTFP- non-timber forest products include rattan, bamboo, vines, sap, exudate. 19Net price = market price – cost + transaction cost


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3. Understanding the project To provide a rationale of the project, all the guide questions to understand the project based on the NEDA Guidebook, can be answered by formulating the results framework of the project.

The step to follow is:

1. Define the goal of the project. The goal depends on what is the ultimate problem. In the example above, The goal is to sustainably manage the established forest to increase carbon sequestration thereby reducing temperature increases and drought frequency. The project is to reforest degraded areas in order to establish carbon sink and manage this sustainably. In preparing the results framework, the goals, outcomes, outputs, activities, and inputs are interconnected. The indicators are important in measuring the levels of achievement of the goals, outcomes, and outputs through the activities and inputs. It is necessary that the indicatorsare Specific- must be precise, accurate, and clearly defined; Measurable- can be measured explicitly over time; Achievable- should be possible to attain and is flexible to changes; Replicable- measurements can be identical when conducted by other people using the same method; and Time-bound- should provide measurements over a given time limit, wherein changes are expected to occur, and is appropriate to the project’s goals and objectives. The following are guide questions in drafting the results framework:

What is the goal of the project?

Can the outcome contribute to achieving the goal?

Can the outputs contribute to meeting the expected outcome?

Can the activities mobilize the inputs (financial, human, technical, and material resources) needed to result in the output;

What are the critical and essential assumptions? (Caution: too many assumptions are not good to the project because these may lead to project failure)

Are the success indicators measurable and verifiable?

What is the strategy to be used to measure the project’s accomplishment? Can the project activities lead to the desired outputs, outcomes, and impacts?

Is it necessary to improve the interactions among the input to output, to outcome to impact through changing the activities or through other projects?

Is the project necessary to result to the outcome or the outcome can still be realized even without the project?

Why should government finance and implement the project?


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The steps to follow are:

1. Using backward iteration from goals down to inputs, set the result framework as shown in Table 7. Start first by doing the result framework for the goal and its indicators.

Table 7. Result framework for the project goal

Results

Indicators

Goal: Manage established forest to increase carbon sequestration, thereby reducing temperature increases and drought frequency.

Increased forested areas

Increased forest biomass

Increased carbon sequestration

Reduced temperature from its current level

Zero drought

2. Next is to set the result framework of the outcome and its

indicators, as shown in Table 8. Guides are the goal framework.

Table 8. Result framework for the project outcomes

Results

Indicators

Outcomes: Capacity of Municipality A to establish and manage forest for carbon sequestration developed and strengthened.

Total reforestation target achieved

Zero illegal forest activities

Effective management and protection of carbon sink

Increased revenue Sales from thinning, water, carbon, NTFP

Increased employment Number of uplanders employed

Increased upland household income

3. Set the result framework for the project outputs (Table 9). Guides

are the outcome result framework. Table 9. Result framework for the project outputs

Results

Indicators

Outputs: Trained and productive forestry manpower from the barangays of Municipality A.

Every household in degraded uplands allocated to reforestation areas.

Increased employment and income of households

Excellent nurseries producing annually high carbon yield species supporting reforestation requirements.

All species raised are fast growing and with high carbon yield .

Planned extent of carbon sink totally planted with very high forest quality.

Areas totally planted with desired high carbon yield forest species.

Good health condition of established carbon forest.


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Results

Indicators

Mortality of planted seedlings insignificant.

Wood and NTFP biomass buildup Forest growth rate in wood volume and biomass increased.

Water yield sustained all year round. Water supply uninterrupted in established water supply infrastructures.

Reduced temperature Temperature gradient of forested and nonforested areas increased.

Improved soil nutrients Increase in humus yield

Increased level of NPK

Wildlife influx Number of wildlife species

Wood thinning, TFP, water, wildlife harvest and sales.

Increase in revenue

4. Set the result framework for the project activities. Guides are the output framework. The result is shown in Table 10.

Table 10. Result framework for the project activities

Results Indicators

Activities Outputs:

Conduct of training and IEC on forest establishment, protection, and management for barangay leaders and heads of households.

Trained and productive forestry manpower from the barangays of Municipality A


Engagement of households as forestry workers

Increased employment and income of households

Collection of seeds, wildlings of fast growing and high carbon yield species for propagation in household nurseries, seedling production in the nurseries all year round.


All species raised are fast growing and with high carbon yield

Seedling transport to planting sites and planting, protection, and maintenance.





Intercropping of NTFP, thinning, fertilization. Assisted Natural Regeneration (ANR), EP

Wood and NTFP biomass build up

Forest growth rate in wood volume and biomass increased.

Soil conservation measures installation

Water yield sustained all year round

Water supply uninterrupted in established water supply infrastructures.


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Results Indicators

Activities Outputs:

Planting of broad leaf species.

Reduced temperature Temperature gradient of forested and nonforested areas increased.

Planting of species with high NPK yield.

Improved soil nutrients Inceased humus yield


Planting of species with fruits which are food for wildlife species.


5. Set the result framework for Project Inputs. Guides are the activity framework. Results are shown in Table 11.

Table 11. Result framework for project inputs

Results

Indicators Inputs Activities Outputs:

Trainer, training materials, venue, training funds

Conduct of training and IEC on forest establishment, protection, and management for the barangay leaders and heads of households.

Trained and productive forestry manpower from the barangays of Municipality A.


Funds for wages Engagement of households as forestry workers.

Increased employment and income of households.

Seed /wildling collector, land for nurseries, nursery workers, funds

Collection of seeds, wildlings of fast growing and high carbon yield species for propagation in household nurseries, seedling production in the nurseries all year round.


All species raised are fast growing and with high carbon yield.

Hauling vehicle, forest road, digging materials, fertilizer, firefighting tools

Seedling transport to planting sites and planting, protection, and maintenance





NTFP seedlings, fertilizer, tools, carbon seedlings

Intercropping of NTFP, thinning, fertilization, ANR, EP

Wood and NTFP biomass buildup

Forest growth rate in wood volume and biomass increased.


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Results

Indicators Inputs Activities Outputs:

Creeper species, deep-rooted species

Soil conservation measures installation

Water yield sustained all year round.

Water supply uninterrupted in established water supply infrastructure.

Seedlings, planters, fertilizers, funds

Planting of broad leaf species

Reduced temperature

Temperature gradient of forest and nonforested areas increased.

seedlings, planters, fertilizers, funds

Planting of species with high NPK yield.

Improved soil nutrients

Increased humus yield


seedlings, planters, fertilizers, funds

Planting of species with fruits that are food for wildlife species.


Once the results framework is completed, one has a full understanding of what the project is all about. The project’s justification can be based from the impact (goal) and outcomes of the project, the project inputs, activities, while outputs are used to calculate its financial and economic viability, which will serve as inputs to the conduct of a comprehensive PD.

At this stage, before a project is subjected for comprehensive PD. Only big projects and those submitted for external funding undergo comprehensive PD.

2.2.2. Steps of Comprehensive Project Development

Comprehensive PD consists of two major activities. These are:

a. Analyzing the project thoroughly; and b. Judging the project fairly

1. Analyzing the project thoroughly Why? This section determines the usefulness of the project whether it can recover investments through high demands for its products of goods and services. It also determines the physical resources and technology that indicate whether the project is implementable. A thorough analysis of the project can only be performed if there is already a feasibility study. The following should be evaluated:

1. Conduct of feasibility study. This includes the following:


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a. Determine the demand for the project’s products (goods and services), because this gives an idea on the quantity of products to be produced.

b. Determine the present supply level of the same goods and services that are going to be produced in the project, as well as from substitute products.

c. The higher the supply gap, the better. This means that the project will have a higher demand for its goods and services. Thus, higher chances of having higher sales.

d. The market price for the products produced in the project is dictated by the interactions of demand and supply.

e. The higher the demand for the project’s products means higher chances of recovery of investment in the project.

f. Compute the demand elasticity (demand sensitivity due to changes in economic variables).

g. Compute the supply elasticity (supply sensitivity due to changes in economic variables).

Formula for price elasticity of demand:

Formula for price elasticity of supply:

P𝐫𝐢𝐜𝐞 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐝𝐞𝐦𝐚𝐧𝐝 = % 𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝒒𝒖𝒂𝒍𝒊𝒕𝒚 𝒅𝒆𝒎𝒂𝒏𝒅𝒆𝒅

% 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐩𝐫𝐢𝐜𝐞

% change in quantity demanded = Q1- Q2/ (Q1 + Q2)/2*100 % change in price = P1 – P2 (P1 + P2)/2*100

𝐏𝐫𝐢𝐜𝐞 𝐞𝐥𝐚𝐬𝐭𝐢𝐜𝐢𝐭𝐲 𝐨𝐟 𝐬𝐮𝐩𝐩𝐥𝐲 = % 𝒄𝒉𝒂𝒏𝒈𝒆 𝒊𝒏 𝒒𝒖𝒂𝒏𝒕𝒊𝒕𝒚 𝒐𝒇 𝒔𝒖𝒑𝒑𝒍𝒚

% 𝐜𝐡𝐚𝐧𝐠𝐞 𝐢𝐧 𝐩𝐫𝐢𝐜𝐞

% change in quantity of supply = Q1- Q2/ (Q1 + Q2)/2*100 % change in price = P1 – P2 (P1 + P2)/2*100


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Figure 4. Degrees of price elasticity

Figure 5. Price elasticity of supply20

20Image obtained from www.economicsonline.co.uk./Competitive_markets/Price_elasticity_of_supply.html

http://www.economicsonline.co.uk./Competitive_markets/Price_elasticity_of_supply.html


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2. Technical feasibility. This is one of the components of a feasibility study. The technical feasibility requires the following requirements to be available in the project site:

a. Land where the project will be undertaken. In the example above,

the availability of degraded areas of forestland can be used as a project site for carbon sequestration.

b. Manpower ( managerial, supervisors, skilled workers, and non-skilled workers)

c. Equipment (vehicles, machines, tools, instruments) d. Systems and procedures ( operational manuals for each of the units

in the project) e. Technology for reforestation f. Infrastructures

3. Financial and Economic Estimations

a. Total cost investment (capital, operation cost, and maintenance

cost) b. Potential revenue (streams of revenue from the sales of project

goods and services) c. Financial Internal Rate of Return (FIRR).21 The FIRR is obtained by

equating the present value of investment costs (as cash outflows) and the present value of net incomes (as cash inflows).

This is shown by the following equation:

Income Statement as Basis of Cash Flow Analysis The FIRR represents the level of financial return on the investment and therefore, the investor’s main concern centers around expected cash inflows. In identifying and projecting cash flows from an income generating project, say, Project X, an Income Statement (Profit and Loss Statement) with some qualification is commonly employed.

21 Martin, Ray. Internal Rate of Return Revisited. Japan International Cooperation Agency. 1997.

∑ All Cash Inflows/(1+i)^y = ∑ All Cash Outflow/(1+i)^y

Where: ∑ is summation

Cash inflow – all income derived during the investment period. Income may be realized at any year y.

Cash outflow – all expenses incurred during the investment period. It may be spent any year y.

i – the financial internal rate of return or interest rate. This results to the equality of cash inflow and cash outflow.

y - the year the cash inflows and cash outflows was incurred.


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d. Economic Internal Rate of Return (EIRR)- Benefits and Cost

The formula of EIRR is:

The components of benefits and costs are indicated in the following matrix.

Benefits

Costs

Savings: Normal and Generated Capital

Time Savings Environmental damages

Direct Sales of Goods Taxes not included (income tax, VAT, EVAT)

Avoided Costs Labor counterparts to development (Social Cost)

Environmental Services (provisioning, regulating, cultural)

Transaction’s and Operations 'Cost

The following serve as guide questions in the analysis of the project:

a. How is the marketability of the project output?

This will be answered by a market study (demand and supply analysis), or through a feasibility study. A supply gap means that the project is necessary to meet the gap. Describe the market situation and assess the future market of the project.

b. How responsive is the demand to the price of the good? If the price

is increased, is there a corresponding increase in demand?

The demand is elastic. If no increase in demand, it is inelastic.

∑B/(i+I)^y = ∑C/ (1+i)^y

Where: ∑ is summation

B –all revenue/income/benefit realized in year y

C – all costs incurred in year y

y – the year when the benefits were realized and the costs were

incurred

i – the economic internal rate of return. This results to the equality

of benefit and cost


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How responsive is the supply to the price of the good? (Elasticity of supply). If the price is increased, is there a corresponding increase in supply?

If yes, the supply is elastic. If not, the supply is inelastic.

c. For a pre-FS, we only need to know if demand (or supply) is price

elastic (responsive) or inelastic (nonresponsive).

d. Is the project technically feasible? Are there sufficient number of manpower that have the expertise to implement the project? Are there technologies available in the municipality that can be used?

e. How much is the project cost? Is it cost effective? Can we sustain

project operations? f. How much is the potential benefit from the project? Who and how

many will benefit from the project? (poor, rich).

g. If user’s fees can be charged, how much should this be including the administrative cost to collect it? What is the projected number of users? If user’s fees will not be charged, what would be the number of project users?

h. Can the LGU pay for the project out of its budget for operations and

maintenance if the project cannot pay for itself? How much would the LGU be willing to subsidize the project?

2. Judging the project fairly

Why? This section is important to strengthen the decision whether to implement the project or not by examining the impact of real world economic changes to potential economic features of the project. It also weighs whether the project is still feasible to implement when risks are considered. When the project stands despite the impacts of economic changes and occurrence of risks, the project is worth funding and implementing.

This requires the following analyses: Cost-benefit analysis of the project to estimate the societal cost and benefit from the project.

The criterion to be used is the NPV of the project. The formula of the NPV is:

Net Present Value - if it is a positive number, the project is worth implementing; if it is a negative number, it is not advisable to implement the project.

NPV = ∑B/(i+I)^y - ∑C/ (1+i)^y

Where: NPV - the net present value of the benefit

Other symbols are defined in the EIRR formula above


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Internal rate of return (%) = is the interest rate where NPV is zero. This gives the cost of money, which is the interest rate. This rate should be higher than interest rates available in banks for investment.

Benefit-cost ratio = B/C, if the ratio is 1, the project is break even; if it is greater than 1, the project is financially/economically viable; and if less than 1, the project is not worth implementing because it will just be a waste of money.

a. Sensitivity analysis

This determines the sensitivity of the NPV if the benefit or the cost, or both is changed. If the price of goods is changed, how much is the effect to the NPV? On the other hand, if the cost is increased, how much is the effect to the NPV? If price is reduced and cost is increased, how much is the effect to the NPV? A sample table of sensitivity analysis (Table 10) from the NEDA Guidebook can be found in Annex D of this module.

b. Risk analysis

Climate change and DRR projects are vulnerable to risks that make it necessary to examine its effect on the financial and economic analyses. Risk analysis refers to the study of the effects of underlying uncertainty of a given course of action to the project’s economic feasibility. Financially or economically, it determines the effects of probable risks on the NPV if it occurs during the implementation of the project, thus affecting the expected benefit from the project. The key is to be able to input the calculations of the risks’ probability of occurrence along the project’s pathway implementation. The steps to follow are:

1. Identify the types of risks along the implementation pathway. 2. Estimate the probabilities of its occurrences. 3. Estimate the impact or effect of its occurrences. 4. Recalculate the yield, cost, and revenue during times risks are

expected after applying the probabilities of its occurrences. 5. Recalculate the NPV for a given probability of occurrence of the

risks. The following questions serve as bases for judging the project fairly:

a. How much is the true cost (economic cost) and benefit (economic benefit) to society? Exclude/correct distortion (taxes, subsidies, transport, and handling cost).

b. How much is the scarcity of goods and services in relation to other goods and services?

c. How much is the net present value of the project? d. If the economic condition changes, how much is the effect to the

cost, revenue, and to the net present value of the project?


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2.3. Preparing the Project Proposal

After going through the processes of knowing, understanding, analyzing, and judging the project, the next step is to write the project proposal. Funding institutions have its respective format for project proposals. The NEDA format is recommended pending the finalization of the PSF format. The PSF format is presented in the Annex. The NEDA format is presented in the following section:

1. Project Title

The title should characterize the project. In coming up with a title, it is better to be comprehensive rather than fancy (or catchy), but with serious attempts to be simple and brief.

2. Location/ Target Population Briefly describe the community and target population that the project intends to serve. You will have the opportunity to describe in detail the intended beneficiaries in the main body of the proposal.

3. Implementing Agency This refers to the agency responsible for carrying out the activities of the project.

4. Executing Agency This refers to the agency responsible for the financial management and any necessary coordination for the project.

5. Start Date Expected starting date.

6. Duration Expected total duration of the project in months and years.

7. Project Cost 7.1. External Financing Requirement – proposed budget for external funding. 7.2. Domestic Financing Requirement – proposed budget for financing by

LGU. 7.3. Total Project Cost – sum of all funds required, whether for external or

internal financing.

8. Current Situation (Problems and Needs) Refer to Table 222 of the NEDA Guidebook. Describe the “without project” scenario, particularly the problems and needs identified. All tables from the NEDA Guidelines mentioned in this module can be found in Annex D.

22 NEDA. Guidelines on Provincial/Local Planning and Expenditure Management: Project Evaluation and Development Vol. 5. 2007, pg. 39-42


32

9. Justification and Benefits Refer to Table 2 of the NEDA Guidebook. Describe the “with project” scenario. Justify the project in terms of the following: 9.1. Forecast excess demand for the project’s output that the project will fill

in (Table 3).23 9.2. Technical feasibility and cost-effectiveness of the project over other

alternatives considered (Table 4).24 9.3. Economic viability of the project (Table 9).25 9.4. Economic viability of the project given reasonable departures in existing

conditions (Table 10).26 Remember to indicate the assumptions used and the basis for these assumptions.

10. Project Objectives

Refer to Table 1. 27 What are the goals of the sector under which the project is

being proposed? What are the general and specific objectives of the project?

11. Project Description/Main Components Refer to Table 1. Describe the project. You may also refer to the output and impact pathways that you have developed for the project (Technical Appendix).

12. Project Management and Organization Describe the expertise of the implementing and executing agencies. If a pilot project has been implemented along similar lines, it is better to mention this to demonstrate experience in implementation.

13. Expected Environmental Impacts Describe the expected negative and positive impacts of the project. For the expected negative impacts, indicate the risk-mitigating measures that will be implemented. Refer to this Module’s part 2-C, 4.1.3-g. As much as possible, funding for these risk-mitigating measures has to be sourced internally. Often, you only need to institute regulatory mechanisms.

14. Monitoring and Evaluation Describe the plans for monitoring and evaluation of the project’s accomplishment. If monitoring forms have already been developed, include this in the appendix.

15. Budget Using Table 5 as input, list down the financial requirements of the project, including the operational costs for the first year after completion of the project. This is broken down by proposed funding source – foreign, and domestic; LGU and other sources.

23 Ibid. pg. 46 24 Ibid. pg. 48 25 Ibid. pg. 69 26 Ibid. pg. 74 27 Ibid. pg. 33


33

16. Cost Recovery and Sustainability Describe how you intend to sustain the operations of the project. Focus on the following: 16.1. Priority being given by the province to the project (see Table 8 of Volume

328 on Investment Programming and Revenue Generation for sample project scoring table).

16.2. Arrangements for cost recovery (Table 5). 16.3. Commitment of the provincial LGU to implement projects that will

enhance the impact of the project.

17. Terms of Reference for Consultants to Be Hired Under the Project If the project requires the services of highly specialized experts, indicate this in the proposal. At the very least, there is the assurance that the project is taken care of by an expert in the field. The Terms of Reference of these experts need to be included in the proposal.

18. Appendices 18.1. Tables of Commodity-Specific Conversion Factors (CSCF) for major

inputs and outputs of the project. 18.2. Analysis of Net Economic Benefits. 18.3. Sensitivity Analysis. 18.4. Other supplemental studies. By now, you will have understood what was said earlier about project development being facilitated greatly by how PED is conducted. After all, the best convincing factor you can present to prospective funders is your own conviction that the project is indeed a worthwhile undertaking.

28 NEDA PLPEM Guidelines Volume 3. Investment Programming and Revenue Generation. http://www.neda.gov.ph/wp-content/uploads/2013/10/PLPEM-Guidelines-Vol3.pdf


Training Module on Project Development | 34

III. References Balangue, Tonie. Impact Assessment of the National Greening Program- Biological Component. Philippine Institute for Development Studies: 2015. Balangue, Tonie. UNDP Wealth Creation Program. Manila: 2015. Ballesteros, Marife. Assessment of vulnerability to natural hazards at subnational level: provincial estimates of the Philippines. Philippine Institute for Development Studies: 2012. Retrieved from http://dirp4.pids.gov.ph/ris/pn/pidspn1214.pdf Climate Change Commission and the Global Green Growth Institute. Demonstration of the Ecotown Framework in San Vicente Palawan. Seoul: 2014. Climate Change Commission. Proponent’s Handbook: A Guide on How to Access the People’s Survival Fund. Climate Change Commission- Manila: 2015. Retrieved from http://psf.climate.gov.ph/wp-content/uploads/2015/11/PSF-Handbook-Revision-FINAL.pdf Gilgor. Gabriela. . Cost-Benefit Analysis- A Project Management Tool. n.d.Retrieved from http://www.upm.ro/proiecte/EEE/Conferences/papers/S233.pdf. Iloilo City Technical Working Group. Local Climate Change Action Plan 2014-2028. Iloilo: 2013: http://iloilocity.gov.ph/images2013/LCCAPlan.pdf. Martin, Ray. Internal Rate of Return Revisited. Japan International Cooperation Agency. 1997. https://www.jica.go.jp/jica-ri/IFIC_and_JBICI-Studies/jica-ri/.../wp05_e.pdf National Economic Development Authority and Asian Development Bank. Project Evaluation and Development: Provincial Local Planning and Expenditures Management Guidelines Volume 5. Asian Development Bank: 2007.Retrieved from http://www.neda.gov.ph/wp-content/uploads/2013/10/PLPEM-Guidelines-Vol5.pdf National Economic and Development Authority and Asian Development Bank. Investment Programming and Revenue Generation. Retrieved from http://www.neda.gov.ph/wp-content/uploads/2013/10/PLPEM-Guidelines-Vol3.pdf Scheuren, Fritz. What is a Survey. American Statistical Association: 2004. Retrieved from http://www.amstat.org/sections/srms/pamphlet.pdf Sera, Yumi and Susan Beaudry. Project Development. The World Bank: 2007. Retrieved from http://siteresources.worldbank.org/INTBELARUS/Resources/Project_Development.pdf

http://dirp4.pids.gov.ph/ris/pn/pidspn1214.pdf

http://psf.climate.gov.ph/wp-content/uploads/2015/11/PSF-Handbook-Revision-FINAL.pdf

http://www.upm.ro/proiecte/EEE/Conferences/papers/S233.pdf

http://iloilocity.gov.ph/images2013/LCCAPlan.pdf

https://www.jica.go.jp/jica-ri/IFIC_and_JBICI-Studies/jica-ri/.../wp05_e.pdf

http://www.neda.gov.ph/wp-content/uploads/2013/10/PLPEM-Guidelines-Vol5.pdf




http://www.amstat.org/sections/srms/pamphlet.pdf



IV. Additional Reading Materials

The following are recommended literature in developing a project proposal:

1. Sample Project Proposals

ADB - UNESCO - IHE Project Proposals

Enabling Activities for the Preparation of Sri Lanka’s Second National Communication to the UNFCC- Sample Request for Proposals under Japanese ODA Loans

Project Proposal Template: United Nations Voluntary Fund on Disability 2. Theory of Change

Theory of Change Approach to Climate Change Adaptation Programming

ESPA Theory of Change

Examples of Theories of Change 3. Cost-Benefit Analysis

The Theory of Cost- Benefit Analysis

Cost- Benefit Analysis 4. Project Implementation, Monitoring, & Evaluation

The Basics of Project Implementation: A GUIDE FOR PROJECT MANAGER



V. Annexes In 2012, Section 18 of the Climate Change Act was amended to establish the People’s Survival Fund (PSF) through RA 10174. PSF is a special fund in the National Treasury that provides funding to local and community organizations to implement climate change adaptation projects. The government has allotted at least P1 billion and it may be augmented by endowments, grants, contributions, and other donations. Annexes from A to C are dedicated to the rudiments and guidelines of the PSF, which LGUs may use to apply for the Fund. Other than the PSF, samples of a Project Log Frame, Situational Profile, Estimates of Demand and Supply of Project Outputs, Alternative Methods for Providing the Desired Output, and Sensitivity Analysis are attached as Annex D. These tables from the NEDA Guidelines on Project Evaluation and Development can help the target users of this module in writing project proposals.

Annex A: How to Access the People’s Survival Fund

(Image obtained from http://psf.climate.gov.ph/projects-and-programmes/)

http://psf.climate.gov.ph/projects-and-programmes/


37

Annex B: Implementation of the PSF

(Image obtained from http://psf.climate.gov.ph/projects-and-programmes/)

http://psf.climate.gov.ph/projects-and-programmes/



Annex C: PSF Proposal Template29

29 PSF template can also be accessed at http://psf.climate.gov.ph/wp-content/uploads/2015/10/Project%20Proposal%20Template.pdf

http://psf.climate.gov.ph/wp-content/uploads/2015/10/Project%20Proposal%20Template.pdf

http://psf.climate.gov.ph/wp-content/uploads/2015/10/Project%20Proposal%20Template.pdf


39


40


41


42


43

Annex D: Tables from the NEDA Guidebook Table 1: Sample of a project log frame.

Narrative Summary Objectively Verifiable Indicators

Means of Verification

Assumptions

Goal

To promote food security

Mean and variance of domestic supply of rice

BAS records

To reduce poverty among rice farmers

Poverty incidence among rice farmers

FIES and APIS

Purpose

To increase and reduce volatility in the domestic production of rice

Volume of rice produced per year is increased by 1.8 times

Special evaluation survey

Adequate supply of farm inputs; available capital to purchase farm inputs; proper farm management

Number of harvest is at least 2 per year


Reduced variance in rice production per year


Adequate postharvest and storage facilities

To increase and reduce volatility in the income stream of rice farmers

Income of farmers from rice is increased 1.8 times


Aggressive marketing strategy

Reduced variance in annual income of rice farmers from rice


Savings mobilization schemes for farmers

Outputs

Irrigation service area covering 100 hectares of rice plains

Construction of Communal Irrigation System (CIS) with service area of 100 hectares

Project accomplishment reports

Proper O&M and watershed management

Activities

Disbursement of PhP10 million

Funds disbursement rate Project accomplishment reports

Right-of-way (ROW) secured on time Engineering support % Accomplishment

Administrative support


44

Table 2: Situational profile (for current situation and justification of benefits).


45


46


47


48


49

Table 3: Estimates of demand and supply of project outputs.

With Project Without Project

Current Demand

Current Supply

Level

Price

Elasticity

Forecast demand

Forecast supply

Supply from Project

Supply from other Sources

Level

Price

Elasticity

Assumptions and Sources of Data:

Table 4: Alternative methods for providing the desired output.

Project Output

Option Fixed Capital Requirement

Production Technique

Supply O & M

Cost

Economic Life

Land Location Level Quality


50

Table 5: Analysis of the net economic benefits of the project

Cost Investment Benefits

Year

Financial Prices

Economic Prices

Economic Prices

Incremental

Benefit

Benefit

less cost

Discounted B- C

Construction

O & M

Construction

O & M

With projec

ts

W/o Projec

ts

H= G- F I=H-(D+E)

J=I/(1+r)^A

A B C D E F G H I J

NPV

Sum of all J

Eco Table 6: Sensitivity analysis.

Increase in Net Present Value Resulting from

Increase in Cost

Decrease in

Benefits

Increase in Cost +

Decrease in Benefits

Increase in Cost

Decrease in

Benefits

Increase in Cost + Decrease

in Benefits

Financial Prices Economic Prices

10% NPV (B,C +10%)

NPV (B- 10%,C)

NPV (B- 10%, C +10%)

20%

30%

40%

50%

60%

70%

80%

90%

100%


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