Feasibility study from an economic perspective

Feasibility study from an economic perspective

Have you ever heard of the feasibility study? Have you ever done a feasibility study? Do you want to know how the feasibility study works? Do you have a lot of questions about the feasibility study?

First, despite the multiplicity of concepts, the feasibility study can be defined as: those studies that relate to investment opportunities in their various stages, from the idea of reaching the final decision by accepting the idea as economically justified, or rejected as economically unjustified.

Based on this definition, it can be concluded that the feasibility study includes all studies (legal, marketing, financial and economic) that enable the provision of a certain amount of data and information that will assist the The investment decision in making its decision to achieve its objectives, and here the feasibility study includes a broad concept, in which profitability is achieved at the individual level (commercial profitability, or maximizing return possible for available resources) or profitability at the national level.

Jack Welch says "the topic of economic feasibility study and project evaluation is one of the modern economic and administrative branches that are indispensable to any public, private or joint venture".

Second: The importance of the feasibility study can be summarized in the following points:

1- Identify the relative preference of investment opportunities available from the point of view of economic development, and to help economic policy to develop appropriate policies and incentives to encourage the sector your to implement those opportunities.

2- The feasibility study contributes to the optimal allocation of economic resources at the national level.

3- It is a practical way to help venture capitalists make the right decision.

4- A practical means of persuading funding centres and bodies (local, regional, international) to provide the right means of financing and on the appropriate terms.

5- A practical and scientific means of evaluating the proposed projects under consideration in accordance with objective financial and economic criteria as far away from personal and random assessments as possible.

6- A practical way to help the investment decision maker to differentiate between the investment opportunities available to maximize the investor's goal.

7- A practical and scientific means that helps the decision-maker to correct and modify production and operating plans in accordance with changing and emergency circumstances.

Whether this project is already in place, or just an idea, the importance of this study is to seek scientific evidence, quantitatively on the quality or validity of the proposed project, or The decision to be made.

This undoubtedly requires a team of diverse disciplines, a high degree of scientific knowledge and scientific experience, and the composition of the team depends on the nature and size of the project.

Third: The feasibility study aims to rationalize the investment decision that the economic project should be based on the ‎reliability of economic and technical validity, in other words these studies are concerned with the feasibility of establishing the project The proposal before implementing it in a practical way, the rational investment decision must be preceded by studies showing the existence of a sufficient market in which the production of the project is managed, the possibility of the development of this market, as well as the availability of raw materials, The labor force, the infrastructure needed, as well as adequate and timely funding.

Most importantly, this project will eventually achieve a return commensurate with the nature of the project and the degree of risk involved from an individual point of view, but from a national point of view it requires an estimate. The extent to which the project contributes to achieving all the basic goals of development (economic and non-economic), all of which requires the preparation of reports and studies, both for the owners of capital, or for the public authorities, and these reports They may be simplified as in the case of small and regular projects, and may be in volumes as in the case of large and larger projects, these studies are usually carried out by specialists in the different branches they deal with Study, which varies from project to another project depending on its nature and size.

Finally, the past years have shown that not carrying out a feasibility study before the establishment of new projects or making decisions to replace and renew or expand existing projects, whether ignorantly or deliberately It is a fatal mistake that leads to waste of resources, misuse, and loss of multiple funds that could have been spent on feasibility studies.