Project appraisal is a mandatory requirement of investors before deciding whether or not to make financial investment for that project, because it is one of the bases for investors to consider the effectiveness of the project. project and the ability to repay capital as well as profit from the project to be invested.
Investment project appraisal is the objective, scientific and comprehensive research and analysis of all economic and technical contents of the project, in relation to the natural environment, socio-economic environment. association to decide on investment and financing for the project. The basic difference of project appraisal compared to project formulation is that appraisal is a process of checking and evaluating the basic contents of the project independently, separate from the process of drafting a project judgment.
Project appraisal creates a solid basis for effective investment activities. The conclusions drawn from the appraisal process are the basis for the units, establishments and competent authorities of the State to make investment decisions, to allow investment or to finance the project.
The purpose of project appraisal:
- Evaluation of the projects rationality: The rationality is expressed in an aggregated manner (expressed in efficiency and feasibility) and expressed in each content and calculation method of the project.
- Evaluating the effectiveness of the project: the effectiveness of the project is considered in two aspects, the financial efficiency and the socio-economic efficiency of the project.
- Evaluation of project feasibility: This is a very important purpose in project appraisal. A rational and effective project needs to be feasible. Of course, rationality and efficiency are two important conditions for the project to be feasible. But the feasibility must also be considered with the content and broader scope of the project (considering the implementation plan, the projects legal environment...).
These three purposes are also common requirements for all investment projects. If a project wants to be invested or funded, it must meet the above requirements. However, the ultimate purpose of the project appraisal depends on the subject of the project appraisal:
- Domestic and foreign investors appraise feasible projects to make investment decisions.
- Financial institutions (banks, General Department of Investment and Development, etc.) appraise feasible projects for financing or lending.
- State macro-management agencies (Ministry of Planning and Investment, Ministries and ministerial-level agencies, Peoples Committees of provinces, cities...) appraise feasible projects to make decisions for projects investment license or investment license.
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