Need/ Role/Importance/ Significance for Project Formulation:
In a developing economy, an entrepreneur has to face a number of problems while establishing a new project. However, these problems can be avoided to a large extent, by undertaking project formulation at the right time. The following are the problems;
- Selection of Appropriate Technology-
The first problem faced by entrepreneur is in the matter of selection of appropriate technology for his enterprise. Modern technology developed in the highly advanced countries may not be suitable for adoption in the developing countries, as the conditions prevailing differ from country to country.
- Absence of External Economies-
The second problem relates the absence or non-availability of external economies. A project has to depend on other industries for the supply of raw materials, power, tools, spare parts etc. or an ancillary enterprises which can provide technical , financial & managerial services or on a complex network of transport & communication facilities or on an intricate system of business practices.
- Dearth of Technically Qualified Personnel-
The third problem is the non-availability of technically qualified & appropriate personnel. Modern technology calls for a certain minimum supply of various skills that are generally lacking in developing countries.
- Resource Mobilization-
The fourth problem is resource mobilization. In the context of present day development of the magnitude & the size of the project, it would be very difficult for an entrepreneur to provide the entire development capital that a project may need.
- Knowledge about Government Regulations-
The government from time to time formulates its own policies regarding industry, import, export, taxation, price control etc. The entrepreneur must have a thorough knowledge about government regulations, policies & licensing procedures etc.
These problems make the entrepreneur to undergo a lot of harassment & disappointment. But a project formulation, at the right time minimizes the severity & the magnitude of the above problems.