PROJECT PLANNING AND MANAGEMENT

Despite the fact that, the log frame, project cycle and other proper project management
model PM and tools are well known, it is possible that project often go wrong, conflict
arises and expectation not met. Consequently, there is little ownership during and after
the project and sustainability is not achieved, discuss this argument.

OUTLINE

Introduction (project cycle, log frame, project management model and

background)

Definition of the key words (Honoratha)

Main body (accept and provide reasons)

Why projects go wrong (Ninde)

why conflict arises (reasons) (Malebetho)

why projects expectations are not met (Jungu)

reasons to why there is little ownership (Biubwa)

Why sustainability is not achieved (Kingo)

Recommendations

Conclusion

Reference

1.0 INTRODUCTION
The usual step in project preparation and analysis is to undertake a feasibility study that
will provide enough information for deciding whether to begin more advance planning.
The complexity of the project idea will determine how detailed the feasibility study will
be analyzed this includes determination of technical, economic, establishment of project
location, size and scope, determination of resource base, the investigation technical
specifications for project are made. But when project planning will not considered
feasibility study it is possible that projects often go wrong, conflict arises and
expectations not met. Consequently, to that little ownership during and after the project
and sustainability is not achieved.
This paper covers part one which include introduction part and definition of key
concepts, the second part will cover the main body, part three will cover recommendation
and conclusion, finally references.

1.1. DEFINITION OF CONCEPTS

Project cycle
A project cycle is illustrating the sequence of analytical stages through which it passes.
The natural sequence of most projects may be divided into Identification of the project
(conceptualization of project ideas), Appraisal stage (so known as project formulation
and design), Appraisal stage (also known as selection which involves negotiations and
loan/finance agreement leading on to implementation), Implementation and Evaluation
(evaluation of the project after completion would lead to the generation of ideas for new
projects) Baum (1978).

Project cycle is a system which follows the life of a project from the initial idea through
to its completion. It provides a structure to ensure that stakeholders are consulted, and
defines the key decisions, information requirements and responsibilities at each phase so
that informed decision can be made at the key phases in the life of a project. It draws on
evaluation to build the lesson of experience in to design of future programmes and
projects (European Commission, 1999).

Log frame
Log frame is a matrix in which a projects intervention logic, assumptions, objectively
verifiable indicators and sources of verification are presented (European Commission,
1999).

Log framework is a method of planning, managing and evaluating of a programmes or

project.

Log frame is a way of presenting contents of an intervention. The objectives, results,

activities and their causal relationships are systematically presented. Establishing a
logical framework is only possible after thorough analysis of available information
(Problems and opportunities). In addition to logic between objects (assumptions) that
influence the interventions foreseen results.

Project Management Model

Project Management Model is a tool used to describe the management activities, decision
making procedures and how different stakeholders are involved during the life-cycle of a
project.

Causes of Project Failure

Lack of link of organizations strategic priorities
Lack of clear links between the project and the organizations key strategic priorities,
including agreed measures of success. Lack of effective project team integration between
clients, the supplier team and the supply chain.

Poor Management

Project managers fail to implement fully their roles and responsibilities which resulted
into the project failure and peoples participation in development projects/programmes.
This is a problem whereby the managers are not able to demonstrate capability of the
requirements. If managers do not consider the consequences of what they are requiring,
they may actually steer the project into danger.

Stakeholders Conflict

Stakeholders conflict play many different roles on project failures. Often, stakeholders
have personal reasons for not being able to work together. Other projects fail because the
developers do not know who the "real" stakeholders.

No one made him aware of problems while it was being developed. Many projects fail
because the project leaders do not have absence of who will ultimately declare whether a
project is success or fail and then they collapse. The true stakeholders need to hear good
and not bad news.

Poor Cost and Schedule Estimation

This occurs when there is poor costing and schedule estimation of the project during the
plan, planners make budget but they under estimate costs to undertake activities and
ignoring some important aspects which letter on led to the failure of the project. Poor
arrangement of the activities in the project may lead to the contradiction and the failure of
the project.

Skills that Do Not Match with the Job

Project implementers need to have skills and experience in project implementation.

Furthermore, they perform poorly because they are not expert in projects implementation.
Projects dealing with high technology need implementers with solid technical skills. In
such projects, community must reside with people who understand the implications of
specific technical risks. For instance quick win projects lack technical person at local
level for maintenance and repair of machines.

Corruption

Project failure caused by corruption because project coordinators and implementers

misuse fund allocated for project which in turn led to the failure of project. This situation
is viewed as a direct result of underperformance, even though corruption is often a
significant factor in the failure of most projects. Moreover, failed projects often have
goals and objectives that were inherently unattainable, due to corrupt staff.
Lack of commitment

Project coordinators and implementers both lack commitment on the implementation of

different projects at different levels . Even worse, some project implementers often do not
participate effectively because they are lazy they are selfish and they won't meet the
desired goals. Even though effective commitment saves an enormous amount of time in
the long run, many coordinators and implementers believe it to be unnecessary.

Communication Breakdowns

The link between the project coordinators and implementers is very crucial to ensure
good communication for the project success because they agreed on the progress,
changes and amendments to take place on the implementation of the particular project,
contrary when they fail to link their communication it can lead to the failure of the project
undertaken. For instance HESAWA water projects in lake zone proved failure due to
poor communication of project implementers and coordinators.

Late Failure Warning Signals

Does the following scenario sound familiar? A schedule and budget are determined by
edict by people you were afraid to say no to and it is politically unwise either to say or
show the estimate is far from achievable. All your early milestones involve diagrams,
designs, and other documents that do not involve working code. These and other project
milestones then go by more or less on schedule at least as far as upper management can
tell and testing starts more or less on time. Not until the project is a few weeks from
deadline does anyone dare inform the "edict makers" that at the current defect detection
rate, the project will not be completed even close to its deadline.

Lack of ownership

Inadequate local ownership of projects, with negative implications for sustainability of

benefits.

Donors dependence

The huge number of different development projects, funded by different donors each with
their own management and reporting arrangements, has resulted in large and wasteful
transaction costs for the recipients of development assistance.

Poor management

The establishment of separate management, financing and monitoring/reporting

arrangements has often undermined local capacity and accountability rather than
fostering it.
Misuse of project fund

The project approach has encouraged a narrow view of how funds are being used,
without adequate appreciation of the fungibility issue/.

Why Projects are not sustainable

The policy emphasizes the roles of government and the private sector and cooperation
between the two, but little is said about peoples participation. This omission has led to
an entrenchment of thinking and actual resistance to the participation of local people in
forest management. This is due not only to the perceived authority of the state, but to the
attitude, trust and commitment, and knowledge and skill of forest officials, and to the
lack of incentives for local participation.

Wrong use of state authority: Government agencies see themselves as enforcers of laws
rather than managers. A project manager who has witnessed this firsthand identifies what
is wrong with their approach: We can manage project resources but the first thing we
have to do is manage people. Those who are hungry will become more so if they cannot
have access and use resources to meet their needs. He adds that the government uses
strict rules and regulations to manage projects, but rules is for criminals. Instead, the
government should use diplomacy to build the structures and mechanisms needed to
accommodate the different interests and needs placed on projects. Ironically, those who
are most to blame (concession companies and wealthy, influential national and local
businessmen) rarely have to worry about such things. After allowing the exploitation of
local resources, government agencies usually leave an area without proper rehabilitation.
When problems are pointed out, state officials often put the blame on local people.

Overcoming this problem requires a balance of authority within government agencies and
between the state and the people. Devolution of project management rights and authority
to local communities is strongly recommended. At the local level, community
organization must be strengthened and promoted in forms such as the village board
committee, community committee, sub-district council, and sub-district administration
organization. The roles and responsibilities of all actors must be clarified and
communities should be allowed to participate in decision making as well as investigate
the operation of government officials (Center for Social Development Study 1996).

Centralized management decision-making: Project Management plans are often decided

by a few high-level officials on national level committees such as the National Project
Policy Committee. The objectives and policy set by these committees do not correlate
with the problems and needs of local communities. In fact, the political appointees on
these committees often have little understanding of local realities.

This can be overcome through a decentralization process in which the authority of central
departments is transferred to local organizations at various levels. It is also necessary for
representatives of the people and NGOs to be appointed to national level committees to
balance members from the governmental sector.

Attitude toward rural people and perceptions of project use: Some government officials
have negative attitudes toward local people, particularly poor people who depend on
projects. They often assume that these are the people most likely to destroy projects,
because they see project use as project destruction and do not understand local project
management. Government programs usually tell communities what to do rather than try
to understand how the project is used and how that use can be improved to support the
objectives and needs of both parties. This constraint can be lessened by having local
officials attend social activities in the communities (RECOFTC 1994). This would allow
government officials to understand local peoples perceptions and their relationship with
the project.

Trust and Commitment: There is very little trust among the major stakeholders in the
debate over who should manage the project and how it should be managed. Past
experience clearly shows the failure of government led project management strategies,
yet there is little commitment to change. On the contrary, the project department has been
quite strategic in trying to win over public opinion by creating more national and local
projects and demonstrating effectiveness through high profile arrests. However, strong
project protection and crime suppression measures create negative feelings among local
people toward the officers.

The way out of this constraint is for the government to review related policies, programs,
and commitments with the people. Long term commitments and agreements should be
encouraged at the local level so that new initiatives can be implemented in cooperation
with local people and all stakeholders.

Knowledge and Skills: Governmental officials do not sufficiently understand new

concepts, strategies, and participatory methods of project management, water projects,
and joint/collaborative project management. They see community projecty and
community based project management as a way to control local people, not as a means to
support improved project management. They also lack skills in facilitation, community
organization, and the social sciences which would help them work effectively with
communities. In short, project officers are not properly trained.

Participatory learning processes which engage government officials and local people
working together must be encouraged. It is necessary to train both parties to understand
new concepts, participatory approaches, and techniques. Further, government
representatives posted to the districts, such as District Project Officers and extension
officers, must be given support, encouragement, and flexibility to perform their new roles
in promoting peoples participation and project sustainability.

Incentives: There are currently very few incentives for people to participate in project
management. Most government participatory projects, devised with little local input,
are more about meeting government targets and objectives than about obtaining actual
local participation. The project management is therefore very strict, and even subsistence
activities are prohibited in invested areas. In the case of domestication of project in local
areas, people are afraid that if their fields become invested, the government might take
them over as project areas and put them under central control. Clearly, the government
must transport make benefits, including moral support, flow to all participants in project
management.
Legal and Administrative Policy: At present, project laws and regulations are hostile to
peoples participation, especially in government proclaimed protected areas which
prohibit all use. Though there are thousands of communities managing and protecting
their local projects, their activities are deemed illegal. Further, current laws and
regulations prioritize the private sector, while poor upcountry people are seen as enemies
of the project. At recent Senate hearings on the Community Project Bill, these
contradictions were raised, but instead of amending the harsh laws, the gospel was
upheld. Local reality and decades-old laws are still in conflict.

These seven issues are not new, but have been long discussed. Most governments have
not taken them into serious consideration, however, especially during the ten years before
the economic crisis. In fact, government departments concerned with project management
still enjoy large budgets and thus have no reason to consult with local people. They are
accountable to no one.

Conclusions and Recommendations

Promoting peoples participation in forest management requires concerted efforts on the

part of government, NGOs, academic institutions, and the people themselves. In the short
term, the state should create incentives to allow local people to benefit from its programs.
Enforcement should give way to cautious flexibility so that new concepts, participatory
approaches, methods, and techniques can be encouraged.

An important first step would be to engage local participation in collecting and analyzing
information that would lead to forest management options suitable to local needs, while
fostering a collaborative spirit between local people, NGOs, and government staff. In
fact, participatory action research is a highly recommended practical tool to build
researchers working experience with local communities that can lead to wider
participation.

Community projects as seen in other countries is not just project management, but a
means to wider change and empowerment at the local level. Community project
management provides basic needs, generates income, and strengthens local capacities to
manage their projects and the environment. It contributes to the development of human
resources by raising awareness and peoples right, attitudes, knowledge, and skills through
participatory learning. Eventually it will help to balance decision-making between the
central government and local communities.

Factors for the project failure of sustainability

Failed government projects occur with alarming frequency. In some respects, these
failures share much in common with botched private sector initiatives. For example,
failures in both environments are primarily a function of poor management rather than
bad technology. Still, there are important differences between government and business
projects, particularly in areas related to procurement, needs definition, project oversight,
and accountability.

Philip Virgo, Secretary General of EURIM, a UK political advisory body, has written a
lucid and insightful article describing the dynamics that cause government projects to
tank. Here are Philips six reasons that government projects are not sustainable:

1. Analysis of business needs, missing or wrong: failure to undertake a proper

needs analysis. Failure to consult those in the front line of delivery, or in receipt
of services, is endemic among those planning new policy initiatives or changes to
existing systems.
2. Needs change before implementation: the churn of ministers and political
priorities is significantly faster than that of technology. It has been suggested that
suppliers commonly bid low on the original specification to get the opportunity to
make profits on the subsequent changes.
3. Over-ambition: about what is achievable in practice, given the people, time and
budgets available.
4. Delay: particularly in agreeing priorities between conflicting objectives, leading
to delay in planning and procurement.
5. Lack of top customer management involvement: and lack of high-level skills,
training or experience in planning, procurement or implementation. This lack of
training and experience on the part of the customer causes and compounds the
previous four problems.
6. Supplier project or team management: usually because the B team is trying to
salvage an already doomed system, after the A team has moved on to the next
bid.

Government projects have so many problems, according to Philip, because

accountability structures separate project requirements and goals from the real needs of
end user constituencies. As he says, shifting political priorities, with neither consultation
with the users nor consideration of the practicality of the consequent ministerial
demands for change cause these projects to flame out.
If the root of government project failure lies deep in the structure and relationship
between political masters and humble project servants, then spectacular public sector
meltdowns are here to stay.

Poor participation, participation is a means of improving the quality of plans

and increasing the chances that plans will be successfully implemented. It
makes plans to be relevant to local needs and conditions and more likely to
have popular support. Unfortunately, in many projects, there is poor
participation in the sense that people do not involved since the first stage of
project. For example, if the people do not involved since at the beginning stage
of the project it is obviously that they will not feel themselves as part and
parcel of the concerned project (they will not have the sense of belonging).

Problem identification/need assessment. Development projects should add

value to the communities but this thing will not be achieved if the community
itself is not considered during the problem identification stage. This is because
it is the community which knows what their problems are at the particular time.
For example, you may think the reason of low income for Changarawe farmers
is fertilizer but once when you consult them and make need assessment, you
will find that the reasons are poor market accessibility and others alike.

Lack of commitment. People themselves are not fully committed in

achieving project objectives as well as making sustainability of the concerned
project. They might do so through little involvement of the community
surrounded. In doing so, they might choose only few members from the
community development committee and cooperate with them in fulfilling their
own interests and not communitys interests. For example a project coordinator
with few committee members might use the projects fund to fulfill their own
interests instead of developing the project, together they deceived projects
donors, and sometimes when donors need a progress report they might cook
the data and even forge pictures to show that the project is continue. But once
donors visit in the field they will understand/realize the truth and sometimes
cut off their support, hence the projects remain stagnant or are not sustainable.

External interest. Some projects experienced little ownership and sometimes

sustainability is not achieved because the overall project objective is not among
the current interests of the community. For example the overall project
objective is to put in place a health centre, while the communitys interests
which is appeared first in their scale of preference is to have a market place or
secondary school. As results community felt that to have a health center is an
external interest and not their own interest.

Recommendation

Awareness, it is better to prepare people or community today if you want their effective
involvement in the future. This means for community to have a sense of belonging of a
certain project, prior education should be imparted to them in advance. In doing so,
automatically community will accept the project as it is for their benefits and fortunately
they will be fully responsible with it. For example because of training election which
given in advance to people or community, hence they knows the importance of election
and participate effectively.

For projects not to go wrong, for minimizing conflicts which raised once the
project launched and for achieving projects expectation effective participation is
highly recommended. An effective participation should be started since problem
identification by doing need assessment due to fact that it is the community
members who know what their real problem is, and not planners who stay in their
offices and come up with their so called blind ideas of community problems.

Based on participation, the use of Participatory Rural Appraisal is also high

encouraged due to fact that it will gives community members freedom of
expressing their views about the development projects and removing the sense of
little ownership during and after the project has been launched and also brings
about project sustainability.

Effective rules and regulations should be taken together with hard punishment for
those who confirmed before the law that they are not committed and not
responsible for certain development project which leave particular community
lag-behind and remained with hardship of life while opportunity for the
community to minimize hardship of life was thrown away by few people.

Conflict
A relationship between two or more interdependent parties in which at least one of the
parties perceives the relationship to be negative or detects and pursues opposing interests
and needs. Both parties are convinced that they are in the right. Conflict is an essential
ingredient of social change. What is important is that conflicts should be solved in a
peaceful and constructive manner. - In these Guidelines we use a narrower definition of
the term conflict referring to a situation where there is a potential for violence to occur
between groups or where violence has already occurred. These are the conflicts with
which development cooperation is increasingly preoccupied.

Crisis prevention
Activities set out over the long term to reduce structural tensions and/or to prevent the
outbreak or repetition of violence (also: conflict prevention)

Conflict management
Short- and medium-term activities directed at the peaceful resolution of material
conflicts and relationship-based conflicts between the various parties concerned; can take
place at any stage of a conflict.
Peace
Negative peace no open use of force but the continued existence of structural
Violence. Positive peace encompasses human security and structural stability.

Human security
This includes protection not only against violence but also against other threats to
peoples physical wellbeing and livelihoods such as environmental destruction, disease
and economic crises.

Impact
The actual consequences of an intervention whether intentional or unintentional for
the life of the target groups and others involved, over and above the direct project.

Conflict analysis can assist the project team in dealing with the following types of
questions:
What is the risk of conflict and violence in the project region? What negative effects on
the project activities can be anticipated? How can these be reduced?
What risks do the project activities hold in terms of potential exacerbation of the
conflict? How can these be avoided (risk appraisal)3?
Where are there possible starting points for constructive conflict management and/or
peace-building? How can these be integrated into the project?
Taken as a whole, therefore, it is a matter of systematically taking account of the conflict
in project planning and project management. As a means to this end, the Guidelines aim
to provide practical suggestions which the project team can integrate into its own
discussions and decision-making processes.
Conflict analysis can also be used for other purposes, although these will not be
examined in any depth here:
Early warning: This is the systematic observation of a latent conflict in order to predict
the likelihood of violent escalation. Early-warning systems require a level of resources
and a degree of methodological competence which are beyond the means of an individual
project. There are already early-warning systems in place in many countries, however 4;
projects should use information from them for their work.
Conflict management: Mediation processes usually begin with jointly conducted conflict
analysis. This is based on the assumption that the parties to the conflict will find it easier
to arrive at rational ways of resolving the conflict if they recognize the true causes of
the conflict and their common interests. Conflict analysis of this nature must be
moderated by an experienced mediator.

Methodological approach and analytical instruments

As with other commonly used PRA procedures, in this case too it is advisable to work
through the questions from a number of angles and with a range of methods. Attention
should be paid to certain specific problems in the context of conflicts:
1. Sensitive issue: The survey team should be aware that the subject of conflict is always
highly sensitive. Most people do not want outsiders to find out about the internal conflicts
in their village etc.; instead they want to be seen from their best side. Also, many do
not see conflict as something that belongs in the scope of tasks to be handled by
development organizations. In an acute conflict, on the other hand, it may be the case that
the people do not want to pass on any information out of fear of local rulers. In most
instances, therefore, the conflict should only be mentioned after a certain relationship of
trust has been established with the inhabitants of the village or town. For this reason it is
advisable to adopt a very open approach at the outset and allow the participants to set
their own priorities. If no information about the conflict emerges, targeted and sensitive
questions can then be posed.
2. Conflicts during consultation: The open and inclusive nature of PRA invites the
participants to express opinions which are not shared by everyone. The fact that PRA
focuses on visualisation means that these may be publicly recorded and thus
legitimised. In tense situations this practice brings with it the risk that conflicts enter
the public domain in cases where the community has previously tried to resolve them by
more indirect means. On the other hand, adhering to the principle of consensus can also
put minorities at a disadvantage. So as not to worsen conflicts yet further, the survey
team should therefore be very sensitive to the atmosphere during the surveys and if
necessary even break off the exercise. In such cases individual interviews with a
relatively wide circle of participants are a more suitable means of understanding local
Conflicts.
3. Selection of target groups: One of the aims of PRA is often to identify and define
target groups for the projects work (the poorest of the poor, female heads of household
etc.). In conflict situations it should be considered whether differentiation along these
lines makes sense, and if so to what extent. It may well be more appropriate to place the
emphasis on measures which promote cooperation and are in the interests of everyone.
The table below lists a selection of analytical tools for examining the most important
causes and consequences of conflicts at the local level and the strategies, capacities and
resources available to the population. For a detailed description of these tools, refer to the
relevant PRA manuals (cf. Pretty et al. 1995, Schnhuth/Kievelitz 1994)
Indicators of Impending Conflict
Body language
Lack of clear goals
Increasing lack of respect
No discussion of progress
Failure to meet key deadlines consistently
Lack of candor on issues
Withholding bad news

Understanding conflict
Conflict occurs when two or more parties believe their interests to be incompatible,
express hostile attitudes, or take actions that damage the others ability to pursue its
interest. Violence is often used interchangeably with conflict, but violence is only one
means among many that parties choose to address a given conflict. Non-violent conflict is
essential to social change and development at both the personal and group level, and a
necessary component of human interaction. Conflict becomes violent when parties no
longer seek to attain their goals peacefully, but instead resort to violence in one form or
another. When violence erupts, it signifies a profound breakdown in social relationships
that is likely to have long-term and far-reaching destructive effects. Conflict is also
sometimes erroneously confused with macro-political violence between two warring
parties (as with a civil war between a national government and a non-state actor this is
armed or civil). Violent conflict, of concern to investors, can also occur at more
localised levels, and at the same time always has the potential to escalate. Conflict is a
dynamic process with complex causes, and may take differing forms and runs through
various stages of escalation and de-escalation.
Since the end of the Cold War, civil conflict has been a persistent feature of the
international political landscape. While the demise of the Soviet Union brought with it a
rise in expectations of a new, peaceful world, such hopes were short-lived: the global,
annual number of armed conflicts rose sharply in the early 1990s, from 56 in 1990 to 68
in 1992. Between 1990 and 1999 there were 118 armed conflicts, 100 of which were
largely, primarily or exclusively internal conflicts (Smith 2004: 112). While some of the
conflicts that erupted in the early 1990s have ostensibly
.
2 Conflict Risk in Project Finance: exploring options for better management of conflict
risk
been ended with peace agreements, the incidence of intrastate violent conflict overall
has continued to increase (UNDP 2005: 12). This can in part be explained by the fact that
half of all countries coming out of violent conflict revert to war within five years: peace
agreements do not necessarily alter the factors that led to conflict in the first place (Smith
2004).
Todays landscape of persistent violent conflict throughout much of the developing world
is complicated by the security threat posed by terrorism. Al Qaedas attacks in the United
States in 2001 brought terrorism to the forefront of political leaders agendas throughout
the world, leading to US-led military campaigns in Afghanistan and Iraq as well as
increasingly strong legislative measures to support the war on terror.
While an emphasis on hard security over human security is now once again apparent in
the international system as a result of these developments, it is also accepted that
terrorism may be symptomatic of a wide range of social, economic and political stresses
experienced in different parts of the world. Globalisation has not brought a balanced
increase in access to economic, political and social opportunities in all countries. The UN
Secretary-Generals annual report for 2005, In Larger Freedom argues that we live in an
age when the lethal interaction of poverty and violent conflict poses grave threats not just
to the immediate victims but also to the collective security of the international
community. Endemic poverty, inequality and high unemployment, combined with
political disenfranchisement, poor governance, growing competition over access to land
and natural resources, and an insufficient access to justice, along with other factors, are
known correlates of violent conflict and terrorism alike. Taking account of root causes
and conducting meaningful analysis of conflict dynamics on the part of all actors engaged
in either development-oriented or private sector activities in developing countries
becomes all the more pertinent in todays world.

Why project finance and conflict?

While there are a number of aspects of the activities of the financial services industry as a
whole which may be linked to incidences of violent conflict (see box 3, below), this
paper focuses on the linkages between project finance and conflict because it seems
timely and realistic to do so; because doing so builds on current Alert work with
extractive industries; and for the reasons that relate to the characteristics of project
finance itself which are set out below. At the same time,

given the industry-wide links that can be drawn between financial services and violent
conflict that are discussed in box 3, over time a more comprehensive inquiry and
reflection on the part of industry leaders into minimizing activities that can exacerbate,
facilitate or otherwise support the prosecution of violent conflict is likely to climb
advocacy agendas.
First, it is apparent that since the 1980s there has been increased interest in project
finance, particularly in emerging market countries in Latin America and Asia: project
finance is now commonly used to fund investments in developing countries. In these
higher-risk economies, project finance is attractive as it can increase the availability of
finance, and tends to reduce the overall risk for major project participants. Indeed, project
financing is more likely to be used where there is high political risk in the host country
(for example, in countries where institutions and law enforcement are weak), often
through project finance syndicates which will act to discourage default on loans (Hainz
and Kleimeier 2004: 4). Often these syndicates will include international lending
organisations such as IFC, EBRD or export credit agencies which offer political influence
to deter host governments from making decisions that will adversely affect the project.
Private financiers that may not otherwise invest in certain developing countries may in
fact consider being involved in projects located in such markets where such syndicates
are involved. For example, a financier that may normally limit its exposure in Peru might
consider financing the Camisea gas development project, which is based in Peru but
whose risks are mitigated by project finance loan arrangements. The sharing of risk by
numerous parties to a project finance deal lowers the exposure to risk of an individual
financier. Developing country governments can also find project finance deals appealing,
in that they facilitate the entry of big foreign investors (Esty 2004: 48). This can provide
opportunities for avoiding more public debt whilst at the same time delivering large-scale
development projects (Valahu 2005: 27-30).4
Second, project finance is a widely used method for financing large infrastructure
projects and certain types of natural resource extraction activities: power plants, oil and
gas pipelines and hydroelectric dams, for example. These activities are often linked to
violent conflict at local and national levels due to their strategic significance; their large
environmental, social and revenue footprint; and the need to protect such assets with
security forces (International Alert 2005; Bannon and Collier 2003; Switzer 2001). Large
projects may require resettlement, alienate communities from their land, or otherwise
affect socio-cultural groups whose needs are not addressed by the government or the
project. In addition, natural resource extraction projects can in and of themselves be
associated with the phenomenon known as the resource curse, which describes the
structural link that has been demonstrated to exist between dependence on natural
resources and underdevelopment or conflict (Lynn Carl 1997; Ross 1999 and 2003).
Thus, project finance often occurs in the context of developing countries and
socially/environmentally sensitive large projects. In addition, project financiers are
particularly exposed to conflict risk due to the non-recourse/limited recourse nature of the
financing structure (meaning that loans and bonds are repaid based on the revenues
generated by the project itself: creditors do not have recourse to the project sponsors if
the project is not successful or if difficulties in debt repayment are encountered). Hence,
project financiers need to be especially concerned about managing their exposure to
conflict-related credit risks. Business interruptions can lead to project downtime; legal
injunctions can lead to expensive delays; and larger compensation packages can create
cost-overruns. All these developments, which are explored in this paper, can directly
affect a projects ability to repay debt in a timely manner.
At the same time, project finance is very specific to a particular activity, which draws a
clear line of responsibility connecting financiers with the social impacts caused by a
particular project. For example, a bank that arranges a project loan for a controversial
dam can run the risk of being held publicly accountable for capitalizing that project and
for the conflict that might ensue as a
result.5 This contrasts, for example, with the practice of an investment bank that
underwrites a general obligation bond for a dam construction company. While some
businesses and their financiers operate to a high-risk/ high-reward model of doing
business, it is not therefore in the business interest of a large project finance agency,
whether public or private, to invite such exposure.
Public sector lenders such as IFC have the added consideration of operating consistently
with the wider international objectives and mandate of their institution. They are
especially likely to come under criticism where projects get caught up in conflict
dynamics precisely because these trends are seen to undermine the development, poverty
reduction and global security concerns of many tax-payers, reflected in government
policy.6 The IFC-supported Marlin gold project in Guatemala is an illustration of the need
for public sector lenders to ensure conflict risk is properly assessed and mitigated in order
to fulfill institutional mandates and goals of promoting sustainable private

Pearmsak Makarabhirom is Program Officer at the Community Forestry Country Support

Program, Regional Community Forestry Training Center for Asia and the Pacific
(RECOFTC), Kasetsart University, P.O. Box 1111, Bangkok 10903, Thailand.

Tel: 9405700 ext 1228; email: ftcpsm@nontri.ku.ac.th

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Despite the fact that, the log frame, project cycle and other proper project management
model PM and tools are well known, it is possible that project often go wrong, conflict
arises and expectation not met. Consequently, there is little ownership during and after
the project and sustainability is not achieved, discuss this argument.
OUTLINE

Introduction (project cycle, log frame, project management model and

background)

Definition of the key words (Honoratha)

Main body (accept and provide reasons)

Why projects go wrong (Ninde)

why conflict arises (reasons) (Malebetho)

why projects expectations are not met (Jungu)

reasons to why there is little ownership (Biubwa)

Why sustainability is not achieved (Kingo)

Recommendations

Conclusion

Reference