The Planning of Industrial Investment Programs: A Methodology

Abstract

This report introduces a new series of research publications, the planning of investment programs, by outlining a systematic approach of sectorwide investment analysis, placing special emphasis on complications arising in the presence of economies of scale. Although the methodology is offered as a powerful aid to project identification, the authors also provide a candid assessment of its limitations. Readers unfamiliar with mathematical programming techniques will find this book a helpful grounding in linear and mixed-integer programming, facilitating understanding of subsequent books in the series. Ongoing research at the World Bank has studied the importance for investment analysis of interdependence among economic activities, with reference to particular industrial sectors. Two main conclusions emerged. First, in the presence of significant economies of scale, interdependence is important enough to warrant explicit recognition in the investment analysis phase. Second, computer technology now permits a far more comprehensive and systematic analysis of sectorwide investment problems than was ever possible before, enabling the analyst to examine many variants of a given project or groups of interdependent projects. In this methodological introduction, the authors develop a planning model and suggest guidelines for its use, which includes the ability to make decisions about size, location, time-phasing, technology, and product mix to be made within its framework.

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