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Chapter 4

The idea for an investment project rarely starts with the technology to be applied. Instead the investor normally takes as a starting point the availability of some resource or the identification of a good market opportunity. In the case of non-profit generating investments, the justification of the project almost always lies in the response to a social or community need.

However, once the market evaluation (or the utility of the benefits in the case of social or production support projects) has been adequately completed, it is necessary to consider the technology to be used.

The use of the word "technology" does not normally imply investment in advanced and costly equipment. To the contrary, most of the investments considered in this manual use only simple machinery. In fact, it is not uncommon in the case of agricultural projects, for the investment to be inferior to the need for working capital.

A. Reconfirmation of the Scale of the Project

In preparing the detailed project, the appliants, together assumptions about the scale of the investment. A first step, therefore, is to reconfirm and, if necessary, make adjustments in the scale of production proposed in the initial profile. This in turn, normally requires the results of the demand analysis discussed in Chapter 3. The analysis of the market (or the demand for projects without market for their products) should indicate whether the scale originally proposed is realistic, in terms of the demand and the prices.

The amount of resources that are available also may be relevant in establishing the scale of production. Although the applicants are usually conscious of the limits set by the availability of land, they frequently forget to take into consideration the equally important need for water - for example, in irrigation projects.

Another basic resource that is often taken for granted is the availability of labour. Although a project may be intended to benefit the entire community, it is often difficult to find the necessary manpower, especially if the need occurs precisely during harvest time. The migration of men to work in other zones of the country during part of the year may also significantly reduce the availability of manpower in certain months.

What other factors may determine the appropriate scale for the productive activity? The following are worth noting:

When determining the appropriate scale of investment, always bear in mind the possibility of carrying out the investment in phases; that is, starting small, with the intention of expanding in the future if all goes well. However, phasing of production is possible only if the required financial resources are available over a long period of time. If the applicants have only a single opportunity to access financing, then using a phased investment approach will not work.

B. Choosing the Production Technology

Although the scale of the investment is, without a doubt, a primordial consideration in the selection of the technology, other elements must also be considered, even in the simplest of projects. Among these are:

All of these factors should be considered as part of the technological evaluation. Frequently, neither the applicants nor those that help them will have the technological capacity to answer all of the questions that arise. At minimum, it is important to speak with several sales people to find out what technologies are available which might be appropriate for the needs of the project. Better yet, if the financial agency has access to non-reimbursable funds for technical assistance, would be to contract an independent specialist on the subject and work with that person. In this way you will be able to adequately consider the relationship between the market, the available resources and the production method.

C. Experience and Capacity of the Applicants

A frequently forgotten factor in the technological calculation is the relationship between the technology chosen and the experience and capability of the investors. If the technology demands a management level beyond the abilities of the group, it could cause grave problems in the quality of the product, or simply result in the failure of the entire process.


When speaking of the selection of technology, we are generally thinking of the technology that will be used in the operation of the investment (machinery, irrigation, etc.). But the investment process itself is also influenced by the technology selected, above all in the case of non-income generating investments, such as buildings, roads and watershed protection.

In such cases it is important to balance the needs and requirements of the different participants. From the point of view of efficiency, for example, it might be better to contract a specialized company with the latest machinery to build the bridge within a few days. However, to ensure adequate local contribution and ownership, it will often be better to use simpler technology, which although slower, will allow the local inhabitants to contribute their manual labour and develop a pride of ownership in the structure.

The technology may also influence maintenance needs. On the one hand, structures built with high technology might require less maintenance (such as an asphalt road) or work more efficiently (wells with electric or gasoline pumps instead of hand pumps). However, maintenance and repair might be beyond the capabilities of the community, and the sustainability of the project would suffer.

For example, if a group without prior experience in aquaculture plans to develop three hectares of ponds for the intensive production of tilapia, the proposal should be treated with extreme caution. Any form of aquaculture is subject to high risks from diseases and predators that can eliminate an entire population from one day to the next. When dealing with an intensive system, where the concentration may be up to ten times the normal population, the possibility of disaster is very high. In this case there are two broad alternatives:

a) Convince the investors to use a less demanding technology
b) Contract the services of a professional operations manager, with ample experience in intensive production

Even in the case of a simpler technology (for example semi-intensive production), if the participants have no prior experience, access to technical support should be included as part of the investment cost.

In general, it is unacceptable for the project to learn on a trial and error basis during the initial stages of implementation; buyers who receive a product of poor quality, or which does not comply with the demands of the market, simply will not come back again. Technical support can come in the form of training of project staff before start-up, and having technical experts on call to deal with problems that may arise.

No amount or type of training can prepare a person for all of the possible events of real life. If a group of milk producers wants to open its own processing plant, it should not expect that a month long training course can prepare them adequately for the operation. As a minimum they will need frequent visits from an advisor, and would do much better to contract a specialist in milk production, to guide them through the first four or six months of the project.

The following points should be seriously considered when choosing a technology

D. Maintenance and Repair

The need to consider the costs of repair and maintenance for the chosen technology is discussed in Chapter 6. Here we will consider the logistical side of the process. That is, when you select a technology you have to make sure that there exists a capacity to repair and maintain that equipment. This consideration applies not only to processing and manufacturing machinery, but also to vehicles and office equipment, especially "delicate" machinery such as copiers.

Among other factors for consideration are:

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