Prepared by:
Mansour Abdullah Al-Harazi
Director General of the Statistics Office
at the General Investment Authority
The concept of feasibility studies:
A feasibility study is a set of studies and estimates that are carefully prepared to determine the feasibility of investing in a specific project and differentiating it from another project, in light of the expectations related to costs and benefits from the administrative, marketing, technical, financial, and economic aspects.
The importance and objectives of feasibility studies:
1. It shows the existence of investment opportunities worthy of further study and differentiation between available opportunities.
2. It is a guide for the investor that can be used during the stages of project implementation and can be referred to when needed.
3. Identify appropriate sources of funding for investment needs.
4. Focusing on the marketing study as the basis of the project.
5. Determining the technical style in terms of choosing the types of technologies used in the project.
Steps for analyzing opportunities:
1. Discovering investment opportunities, which may consist of adding a new commodity, provided that it meets a currently unserved need, there is a surplus of demand for this commodity in the market, in addition to its ability to compete.
2. Studying the industries currently available in the market and identifying the needs that are not being satisfied.
3. Studying the demographic data of the population in terms of their distribution, ages, and inclinations.
4. Studying local raw materials and resources and the extent of their utilization, and the possibility of using modern technology to produce goods from them, and using local skills instead of imports.
5. Exclude opportunities that are incompatible with government laws and restrictions or those that conflict with public policies.
6. Exclude opportunities that involve high costs or difficulty in financing or commercialization.
Types of feasibility studies:
1. Legal feasibility study:
Analyzes the various effects of investment laws and legislation on the project, including tax and customs incentives, government subsidies, possible legal forms of projects, government capital contribution, as well as regulatory laws such as banking and insurance laws, and the rights and duties of shareholders.
2. Environmental feasibility study:
It is concerned with studying the surrounding environment in terms of pollution levels, noise and others, and measuring the environmental impact of the project on public health and the natural and physical environment. This study includes soil characteristics, nature reserves, water quality, the impact of the project on plants and animals, the spread of diseases, and the level of population density.
3. Marketing feasibility study:
It includes the methods and estimates necessary to understand the market for the product or service that the project aims to produce. It aims to estimate the current and expected sales volume, and develop appropriate marketing policies regarding pricing, promotion, distribution, demand pattern, supply volume, and advertising.
4. Technical feasibility study:
covers the selection of the project site, determining the production capacity, appropriate size, production planning, type and methods of operation, as well as estimating the needs for machinery, raw materials, manpower, and operational costs. It also includes factors such as proximity to sources of raw materials, energy sources, availability of infrastructure, transportation, markets, water, investment incentives, and security stability.
5. Financial feasibility study:
This includes preparing financial tables showing the required investments, analyzing expenses, depreciation, manpower requirements, annual operating costs, annual income, capital structure, financial commitments, value-added analysis, balance sheet, cash flow, and analyzing the sensitivity of the project to delays in execution or delivery, cost increases, or price decreases.
6. Study of financing sources:
Refers to the variety of sources of funding for the investment project, which include: Owners or shareholders (cash or in-kind shares), lenders (capital borrowed from others), including bank loans, and bonds issued by the project. In all cases, the required returns and profits of the financiers must be taken into account.
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