economic feasibility study stages of the project. stages throughout the project (project cycle)....

Economic feasibility study Stages of the

project.Stages throughout the project (project

cycle).

Analysis & Evaluation Project Theortical & Practical. 1

Students will be able to:Discuss the economic feasibility studies Stages of the project:

Identifying the available investment opportunities.

How to prepare, and implement of pre-feasibility study.

How to prepare a detailed study of feasibility.

Evaluate, and decision-making to the Project implementation.

Implement of the project.Follow-up, and evaluate of the project.Analysis & Evaluation Project

Theortical & Practical. 2

Different stages of the project: is the follow-up time stages from the beginning, when the project is an idea of the owners,

until it becomes a productive project or provide services to the target of these

services, and these stages are:

1. Identifying the available investment opportunities.

2. Preparation, and implementation of pre-feasibility study.

3. Preparation a detailed study of feasibility. 4. Evaluate, and decision-making to the

project implementation. 5. Implementation of the project.

6. Follow-up, and evaluation of the project. The following is a review of the project

stages with a little detail:


The Government implements projects in various fields: industry, agriculture, tourism, trade, and these projects started as an idea. the question is how get ideas of project and

from where?.

In order to answer, there are sources for project ideas, these ideas require examined

the information, study the economic sectors, market studies of supply and

demand, as well as the study of economic resources of the country's from mineral or latent, and untapped wealth, and perhaps

to examine the State Revenue and the types of imported goods .. etc.. sources of

project ideas can be summarized in the following headings:


1. Analysis of economic imports lists in the country.

2. Analysis sources of raw materials, energy, and tourism resources.

3. Analysis the community needs of health, education, water, electricity, and roads

services etc. 4. Study the future demand for the types of

goods as a result of population increase, or income increased.

5. Study the existing industries, and the possibility of its diversification or

expansion. 6. Study manpower and skill levels.

These studies is enough to indicate the importance of studying the various sectors

of the national economy, and search for projects that could be a successful

investment opportunities.


A study of an expert on the environment, and the development of industrial projects in the Arab States, that provided to the Western Institute for Planning in Kuwait in 1982, as follows:


NSource rate

1Market research.28%

2The introduction of a commodity found in foreign markets.13%

3Import substitution.12%

4A common Idea from foreign partner or local agent.11%

5Visiting foreign fairs, and study publications to search for project ideas.

11%

6Take advantage of local services ,07%

7Previous experience of the investor in foreign countries .06%

8Other variety sources .12%

9Total100%.

It is Clear from the results of study, that the ideas of the industrial projects, could be divide in the Arab countries into two classes; "local sources", a number of items 1,&6, its total 35%, while the “external sources“, its total 65%, and this reflect the extent to which the learner can use the ideas of projects through knowing the lists of industrial goods in the industrialized countries, and studied in regard of the local market, and local available experience levels, and the possibility of establishing a successful local factories for production some goods.


a. Research department, and project’s identification industrial development,

bank of Jordan: Project ideas, and it is collected from

multiple sources including: imports Study.

Study the existing industries, and link between them to find the possibility of

complementary projects. Study the list of industries, and its

international classification. Suggestions of experts.


Procedure a preliminary study. Study ideas, that seem to be

successfully, by studying the local market, and export possibility, and

communication with the United Nations Industrial Development

Organization, as well as suppliers of machines, and ready factors to obtain

of technical information for those projects.

A pre-feasibility study. A detailed feasibility study.

promotion of the projects.


b. Saudi Dar for advisory services identify its projects in two ways:

Analytical Research Identify the investment opportunities according to

the different sources as: a list of imports, and exports.

Study the types of imported, and exported goods in neighboring countries, in addition to the lists of industries published in the important references.

Field research Surveying the business, industry, and finance men

opinions, about the industry, that they propose, and their country required, to provide success

opportunities, according to the market data, that classified the answers and documented the

following information for each project.


The type of production required to be manufactured.

Raw materials required. Raw materials available locally. Imports for the past five years.

local production (if any) of the last five years.

Productivity energy of local factories (if any).

Labor of the proposal factory, and the potential location for the proposed

factory.


The ideas are selected through workshops or seminars with business men, and then select the ideas, that

most likely to succeed, listed the ideas are arranged according the

following basis:

Appropriate industries at present time and deserves a feasibility study.

Industries that could be useful, but Unfavorable this time.

Industries that Unfavorable the country.


It follows the identification stage of the projects ideas, and exclusion the

Unpropitious ideas, and Retention a certain number of ideas, that seem to have more

chances of success.

It is a study, or a preliminary report, that represents the public outline of all aspects of

the project, or the proposed projects, which through it can reach to take a decision, to

refrain the project or move to a more detailed study. As a result of this study the

project is refrain, or move to the detailed study.


The project at this stage is under a quick study of the following

aspects:1.Preliminary study to analysis the

demand, and it's market study. 2.A preliminary study to production

programs, and available energy. 3.A preliminary study to the inputs of

raw materials. 4.Preliminary study to the appropriate

locations. 5.Labor.

6.Analysis business profitability. Analysis & Evaluation Project


After examining these aspects of the project, it could be taken one of the

resolutions, or the following alternatives:

1. The collected information show, that the project is favorable for implementation. 2. The proposed project is good financial

feasibility at the light of pre-feasibility study.

3. There are technical aspects need more deeper, and detailed studied, and this requires a longer time, and it is more

expensive.

Here it must be emphasized, that the pre-feasibility study covered most aspects, that

are essentially subject of the detailed feasibility study, and the difference between

the two phases is the degree of detail, the time allotted, and costs.


After study the technical and financial data, of the project, which obtained in the pre-

feasibility study stage, and take the decision to prepare detailed feasibility study.

Are subsequent studies to the preliminary feasibility studies, but it is more detailed, accurate, and comprehensive of it, it is a

detailed report, covering all aspects of the proposed project on, which the senior

management can take its decision, either completely refrain the project, or move to

implementation phase. The preliminary feasibility and detailed studies are

comprehensive and continuous, and just one study can not to be enough to

substitute other study means, not offsetting. As a result of this study either refrain the project, or start it’s the implementation.


At this stage of the project cycle, several studies are prepared

together constitute the detailed feasibility study and include:

1.Marketing feasibility study for the project.

2.Technical, and engineering feasibility study.

3.Financial study for proposed project. 4.Organizational, and management

study of the proposed project. 5.Economic, and Social Study.

6.Environmental studies or its impact on the environment.


It should be noted, that all previous studies are complementary studies,

to each other, and not alternative. And applicable to large projects, and State projects, but small, and private

projects integrate some of these studies and only examine the

technical, engineering aspects, and another study includes all other parts,

such as financial, marketing, economic, and social aspects .. Etc..

A summary of what was contained in each study, and it’s

the following objectives. Analysis & Evaluation Project


The most important success elements of the productivity project is the demand existence for the products of project, so the marketing

study is considering the market situation, how to satisfy demand at the moment time,

and the potential increase demand in the future, at any ratio, and share the project from the possible increase, and study the

marketing aspects of products such as: wholesale price , retail prices .. etc, and

study recommends the price at which the proposed project products can be sold.

State projects are projects to provide services such as: education, health and road

projects, transportation services, such as airports and ports, so the studies focus on marketing studies, to satisfy the expected

demand, and to meet the increasing demand for services.


In general, market analysis includes the following aspects:

1. Brief description, to the market good, its presentation: Is regional market, or at the

whole country level, or also a market for export.

2. Specific description to the proposed product, existing products, and supply, or

current production capacity. 3. A time series of demand for similar

products to the proposed product to include the amount &quantity, of current,

and the past demand. 4. Estimates the expected demand for

several come years. 5. Estimate the production capacity of the

project.


After examining the capacity proposed project assessment from the reality of marketing studies, Technical and engineering feasibility study are occurred, it's which limited its task to examine all technical and engineering aspects related to the proposed project, which can be relied upon in reaching an investment decision, either to refrain the project, or move to the implementation phase.


A technical study Include, choose the type of machines, production methods, the project location, and areas required for buildings, and engineering details to arrange the project, and it’s needs of services such as: water, energy, and roads, perhaps this stage covering all work and construction must be carried out, if the project is implemented, and it is an important stage of the project, because it included the fixed costs of project, and all the assets, that should be implemented, and operation, and maintenance project costs, starting from raw material, through labor costs, and other operating costs.


In general, this study covers the following:

1. Description the product including the physical, and Quantitative aspects, if

there is, and how to use them.2. Description the production process in

accordance with flow charts, to justify the choice of used technology

or proposed. 3. Determine the size of the factory, and the expected size of production

for the coming years. 4. select the number of machines, with

preparation, it’s specifications, and sources of supply.


5. Determine the factory location, and evaluation this location from aspects

of its closeness to raw materials, and the market.

6. Factory design, and estimate the cost of lands preparation, buildings

construction, and assess the availability of services, and benefits,

that the project needs such as: electricity, water, and roads .. Etc..

7. Assess the needs of labor power, and divided into type of required skills,

and the needed administrative staff. 8. Estimate the fixed costs, operating,

and maintenance costs. Analysis & Evaluation Project


In governmental projects, which aimed construction of roads, ports, and lands reclamation, studies must include a detailed of business, buildings, and the needs of other services, and assess the expected costs. Because the large projects implementation would take more than a year, so the cost must include the Precautions the height in expected prices, and include the total cost of the project.


The financial study aims to compile the project financial figures, and values in terms

of the following: 1. Capital costs of the project.

2. Operating, and maintenance costs for several years.

3. Income estimate of the project for several years.

4. Quantitative sales assessment of the project for economic life of the project years.

5. Develop a financing plan of the project, and determine the structure of the capital.

6. Estimate the expected profitability of the project according to different criteria.


This phase of the feasibility study based on the results of previous phases, where it is marketing studies, technical studies, and must be consistent with it completely. For example, the productive capacity of the project determined the expected production, according to machines that have been selected, and raw materials needed .. etc.


Many private projects required organizational study, determined the organizational structure of the project. And divided into departments, including Production, distribution, marketing department, and the department of personnel, and financial management section .. Etc.. These sections require different technical staff, it must be determined in advance, aspects covered by this study are:


1. Determine and characterize the main departments of the project.

2. Identification, and characterization of the main functions, and the number required to fill them.

3. Put policies of individuals. 4. Put management systems, and

working methods. 5. Recommend the appropriate legal

form for project, whether it is a public, or partnership company, or

other?.Analysis & Evaluation Project


In public sector projects the study, should include the related of project with the ministry, or the existing public organization, also develop, and determine the staff needed to implement it, and create a plan to train the staff needed to work, and in absence of a government body oversees, and manages the work project, it must recommend the development or a motion of such body.


Projects undertaken by the public sector, aims to serve the society, and provision of public services, or goods

considered by society, as general services, such as: electricity, water,

roads, ports, airports, and reclamation land agricultural.

Therefore, any project should to study the economic aspects of the project's benefits and to identify public users, and the importance of the project in

achieving the desired social justice, or exploitation the natural resources of

the country.


The most important economic aspects included in the study are:

1. The project Impact on social justice, or income distribution, and its impact on social

groups, with low-income in community. 2. The project role in satisfying the basic needs

of the majority population. 3. The project Impact to create new jobs, and

alleviate unemployment. 4. The project role in provide foreign exchange,

and balance the payments assistance. We will study the social aspects subject of

the projects in detail in unit 10.


Environment is one of the main axes in the national economy, so it must

assess the impact of the new project, if it has bad impact as: pollution of

water or air. Or has positive effects on the beauty nature, and wildlife in

particular.

Must not be sacrificed freshwater lakes, or fish farming, or current river, and use it for the toxic waste dumps,

and chemical weapons.


After completion of detailed feasibility study, for the project, the evaluation is occurred from different aspects: marketing, technical, financial and economic, but who is parties in the evaluation process of the project for any purpose??. There are several parties in the evaluation process the project, namely: ◦ The planning system. ◦ Owner of the private sector. ◦ International, or local Points.


The planning system in the state usually assess and review the project feasibility studies and, if verification its feasibility, the government begins to promote the project, to ensure its financing, through it's role as investment plans, the Government invites the funding agencies to a public seminars, to discuss the investment plan, and when the financing agencies, choose one project to contribute its financing, so included it in its investment plans, and then carrying out the project.

The project evaluation process aims, to ensure the technical, financial, and

economic results of the feasibility study,.


It aims to review the critical paths, in terms availability of raw materials

necessary to feed the project,

Markets, and the amount of demand, and optimal size of the factory, in

case where it is industrially productive.

Review the project's profitability in light of the worst, and the most

optimistic.

Take the necessary precautions in case of objection the project

inappropriate conditions.Analysis & Evaluation Project


The implementation phase of the project is the most delicate phase, and the most expensive, and at this stage must be contract with the contractors on the project, and to purchase machines, equipment, and buildings construction, and facilities services for the project.


After the completion of the project implementation, operating and

production phases begins, and the project paths operational trials may

take from six months to a year.

After this period would be appropriate to evaluate the performance of the

project by comparison the forecasts contained in the feasibility study on

production and income.


Compared the actual costs, with costs which were estimated during the

feasibility study stage.

These indicators before, and after the implementation, have benefits in

terms of knowledge the differences causes to improve the performance

projects in the future.


economic feasibility study stages of the project. stages throughout the project (project cycle)....

Documents

project project cycle

project stages

ideas of project

project implementation

productive project

sources of project ideas

analysis of economic

detailed study of feasibility