The UNIDO approach of project appraisal: The UNIDO approach was first anticipated in the guidelines for project evaluation, which provide a comprehensive framework for Social Cost Benefit Analysis (SCBA) in developing countries. The rigor and length of this work created a demand for a succinct and operational guide for project evaluation in practice. This approach is mainly based on the publication of UNIDO (United Nation Industrial Development Organization) named Guide to Practical Project Appraisal in 1978.
Project appraisal is made for both proposed and execute projects. It is the structured process of assessing the viability of a project or proposal. It involves calculating the feasibility of the project before committing resources to it. It often involves making an assessment between various options and this done by making use of any decision technique or economic evaluation method.
The UNIDO method of project appraisal involves five stages:
- Calculation of the financial profitability of the project measured at market prices.
- Obtaining the net benefit of the project measured in items of economic prices.
- Adjustment for the impact of the project on savings and investment.
- Adjustment for the impact of the project on income distribution.
- Adjustment for the impact of the project on merit goods and merit goods whose social values differ from their economic value.