1) The feasibility study examines the viability of establishing an investment zone at the Hatein site in Iraq. It will analyze the commercial, physical, legal, and operational aspects as well as private sector engagement options. 2) The Hatein site is 1,500 hectares located 50km south of Baghdad with existing infrastructure including buildings, electricity, water, and transportation connections that require rehabilitation. 3) A staged approach is proposed beginning with an initial 10 week review by two professionals to establish the basis for further feasibility studies and determine if the project should proceed.

1. Feasibility Studies for
Investment Zones in Iraq
29 April 2013
Cairo
Eugene Brennan
Head of International Consultancy Group
Shannon Development, Ireland.

2. Introduction
The Feasibility Study Process
Investment Zone Success
The Hatein Site
A Phased Approach
Advantages and Disadvantages

3. What is a Feasibility Study?
A Feasibility Study is an analysis of the viability of an idea:
y
It focuses on helping answer the essential question of
“should we proceed with the proposed project idea?”
y
All activities of the study are directed toward
helping answer this question.

4. Feasibility Study Goal
The Feasibility Study has one primary goal;
to demonstrate that the project is
economically viable if it is designed,
constructed and operated
in accordance with the concepts
set forth in the Study
Laird (2001)

5. Feasibility Study
yA
preliminary feasibility study
allows you to assess if a project idea
is really viable before it has even
reached the drawing board.
y During
the early stages of a project,
the feasibility study also serves to
test the project vision.

6. Feasibility Study Methodology
Evaluate Alternatives:
Set out specific scenarios
so that they can be studied in-depth
During this process, the number of possible
alternatives under consideration is usually
reduced
“It is like an exploratory journey …
you may take several paths before
you reach your destination”
If the initial analysis is negative,
it does not mean that the proposal
is without merit.

7. The Feasibility Study Process
Three phases in a Study process:
1. A Concept, or Scoping, Study
• To define potential of the project
• Eliminate options unlikely to be optimal
• Determine if further studies are justified

8. The Feasibility Study Process
Three phases in a Study process:
2. Pre-Feasibility
• Select preferred operating options from
those shortlisted in the Scoping Study
• Determine whether or not to commit to the
expenditure requirement and effort of a
subsequent full Feasibility Study
• If early findings show that the proposed idea
is not feasible, it will save time and money

9. The Feasibility Study Process
Three phases in a Study process:
3. Full Feasibility Study:
• Used to refine the optimal operating scenario
defined by the Pre-Feasibility Study
• Often used to Assist with 3rd party Financing
Attraction
• Provides the basis for the decision on
whether the project should be pursued…

10. Scoping Study
Prefeasibility Study
Feasibility Study
and Funding
Determine what
it COULD be
Determine what
it SHOULD be
Determine what
it WILL be
Develop
Concepts
Does
it
make
sense
?
Case B
Case C
Case D
Case E
Assess and rank
Alternatives
Case A
Investor
Review
Is it
the
best?
Detail
Is it
Viable
?

11. Public-Private Partnerships
Useful Risk-Sharing Instruments

12. Comparison of PPP Options
Options
Land
Development
Financing
On-Site
Development
Operation and
Maintenance
Regulation
Option A:
Government led
Model
Government
Agency
Government
Agency
Government
Agency
Government
Agency
Government
Agency
Option B:
Operating and
Managing
Outsourcing
Model
Government
Agency
Government
Agency
Government
Agency
Option C;
Concession PPP
Model (BOT)
Government
Agency
Government
Agency
And Private
Operator
Private
Operator
Private
Operator
Government
Agency
Option D:
Private
Ownership PPP
Model
Private
Operator
Private
Operator
Private
Operator
Private
Operator
Government
Agency
Private
Operator
Government
Agency

13. Special Economic Zones
Features of Success

14. What does Investment Zone Success Look Like?
Efficient business formation and licensing process;
Availability of a land-titling system and real property registration;
Simple customs administration in exporting parks and zones;
Availability of serviced land, facilities, and utilities;
A modern construction code;
Contemporary international arbitration/mediation mechanisms;
Adequate investor safeguards to protect private property rights
Clear legal, regulatory, and institutional structures regulating
industrial parks and general investment.

15. But is this enough?
Indicators on a
Indicators on a
country’s laws,
country’s laws,
regulations, access to
regulations, access to
industrial land and
industrial land and
dispute arbitration
dispute arbitration
are helpful.
are helpful.
They are essential
They are essential
conditions that need
conditions that need
to be accompanied by
to be accompanied by
other competitive
other competitive
advantages in order
advantages in order
to achieve sustainable
to achieve sustainable
development
development

16. Special Economic Zones
Additional Requirements

17. Other Elements in SEZ Success.
y
y
y
y
y
y
Participation of Local Governments – Establishment of
‘one stop shop’ facilities.
Economic size of the host country – domestic market
and proximity to foreign markets
Natural Resource Availability
Potential for Innovation
Skilled and Educated Workforce
The Quality and Flexibility of the SEZ

18. Feasibility Study Outcomes
Outline the Various Scenarios Examined
and the Implications, Strengths and
Weaknesses of each
Project Leaders should Test and
Challenge the Underlying Assumptions.
One Alternative may Not be
Immediately Obvious as the Best Scenario

19. Feasibility Study Outcomes
y
Making the decision to proceed is not always simple
y
As investigation of alternatives advances,
neither a positive nor negative outcome may emerge
y
Major obstacles may emerge,
making a positive recommendation difficult
y
But, weaknesses can be overcome
y
The Study will help us to understand
the trade-off between risks and rewards

20. Feasibility Study Outcomes
It is Not the Purpose
of the Feasibility Study
to Decide Whether or Not
to Proceed with a Project.

21. Go/No-Go Decision
One of the most critical decisions in
Business Development
The Point of No Return
Once the decision is taken,
it is difficult to turn back
The Feasibility Study will be an important
information source in making this decision

22. Why undertake a Feasibility Study?
Conducting a feasibility study
is a good business practice.
It is an opportunity to
examine all of the issues and
assessing the probability of
business success.

23. Why undertake a Feasibility Study?
10 Reasons
1.
Gives focus to the project
2.
Examines and narrows business alternatives
3.
Identifies new opportunities through the
investigative process.
4.
Identifies reasons not to proceed.
5.
Enhances the probability of success by
addressing risk factors and mitigating factors
that could affect the project.

24. Why undertake a Feasibility Study?
10 Reasons
6.
Provides quality information for
decision making.
7.
Provides documentation that the business
venture was thoroughly investigated.
8.
Helps in securing funding from lending
institutions and other monetary sources.
9.
Helps to attract equity investment.
10. Helps
to inspire confidence.

25. Feasibility Study
y
The objective of the proposed feasibility study for Hatein in Iraq is
to establish the basis for a world-class investment location, based
on good international practice principles and reflecting Iraqi
priorities and conditions.
y
Feasibility Study Rationale should ask and answer the following
key questions:
• Do Iraq’s Strengths
Outweigh its Weaknesses?
• Does the Opportunity
Offset any Possible Risks?

26. Profile of the
Hatein Site

27. The Hatein Site
Site Characteristics:
y
Location:
• In Babel Governorate, 50 Km south of Baghdad Governorate
y
Physical Area:
• 15m sq metres (1,500 hectares or 3,700 acres) enclosed by a
concrete wall
y
Nearest Port
• Basra (500 Km)
y
Road Connections:
• To Baghdad-Hilla Main Road: 1.5 Km
• To Interstate Highway: 6.5 Km

28. The Hatein Site
Site Characteristics (Cont’d):
y
Railway:
• Baghdad – Basra Main line – only rail bed
remains
• Approximately 2 Kms of track required to
connect the zone to the main line
y
Existing Buildings:
• Site contains 115 manufacturing and
administration buildings – none are
serviceable

29. The Hatein Site
Site Characteristics (Cont’d):
y
Electricity:
• Primary supply from National Grid – connection must be
restored
• Transformer close to site with 100 Mw capacity
• Site internal grid damaged. Current supply capacity is 63 MVA,
extendable to 100 MVA
• Substantial investment required
• Gas supply?
y
Water Network
• Supply from 3 pumping stations; 2 on Euphrates;
1 on Iskanderiya River – all belong to Babel Governate
• Excess Capacity
• Damaged network on site

30. The Hatein Site
Site Characteristics (Cont’d):
y
Sewage and Drainage:
• No major issues – system generally intact
y
Telecommunications:
• Regional Internet and Telecommunications
networks (Fibre Optic) are good
• Connection to site from Telecom hub required

31. The Hatein Site
Site Characteristics (Cont’d):
y Residential
• Hatein company residential complex
convenient to site in town of Iskanderiya
• A 43-acre site available for residential
development located 5 Kms south of the site

32. Terms of Reference
Feasibility Study – Pilot Investment Zone - Hatein
y
y
Legal Framework as set out in the 2006 Investment Law
and subsequent Investment Zone Regulation
Feasibility Study to address:
• Commercial Considerations
• Physical aspects
y
The Study should also explore how to engage the
Private Sector in managing Investment Zone:
• As the key investor
• As member of a PPP

33. Feasibility Study
Main Elements

34. Main Elements
Many Feasibility Studies are based on TELOS:
yT
– Technology and System Feasibility
y E – Economic Feasibility
y L – Legal Feasibility
y O – Operational Feasibility
y S – Schedule Feasibility

35. Project Implementation
Project Team

36. Implementation of studies
The project team :
y A feasibility study should be conducted by a team of experts.
y Team members should be selected to cover:
•
•
•
•
•
•
•
•
y
Industrial economics (preferably covered by the team leader)
Marketing (dealt with by a market analyst or marketing expert)
Civil engineering
Environmental Assessment
Process engineering and technology (covered by a specialist in the related industry)
Mechanical and industrial engineering
Industrial Management,
Industrial financing and accounting (including fiscal aspects)
The team should be assisted by short-term experts such as land
surveyors, soil experts, laboratory technicians and sociologists, as
required.

37. Team Leader
y
y
y
y
The team leader's responsibility, besides his or her role as a
specialist, is to plan ,organize, direct and supervise all activities of
the team until the study is finalised.
Ideally, the project promoters should actively participate in the
preparation of the study.
In many cases the project is initiated by the promoter,who
frequently has also made earlier studies and can therefore be
considered a major source of information on the background and
history of the project.
During the preparation of the study many decisions (for
example, on marketing and production programmes and the
selection of alternatives) are to be taken by the promoters.

38. Development Criteria
Industrial Parks

39. Criteria in the Provision of Industrial Property
y
Economic Development Criteria
• Industrial property is provided as an incentive to
attract investors
y
y
Commercial Criteria
• The development of industrial
property is undertaken on a
commercial basis (for profit)
Clarity of Purpose is Essential

40. International Investor
Requirements

41. An Investor’s Point of View
What Investors Need

42. How to Introduce the Private Sector
Gradual process:
y
y
y
y
y
Outsourcing and contracting
Service Provision
Management contracts with performance fees
Concessions
Build-Operate-transfer
The Ultimate Objective:
y Attract Zone Users
The Ultimate Winning quality:
y Flexibility!

43. How to Evaluate a
Feasibility Study

44. Evaluation of Investment
of
Projects
Commercial Profitability
National Profitability

45. National Considerations
y
y
An investment project undertaken by a country should
contribute to the National Income.
‘Net Value Added’ is often used as a measure. It has two
important elements:
• Salaries and Wages
• Social Surplus
y
y
More salaries and wages mean higher employment,
higher income per person employed, or both
Higher wage bills mean higher purchasing power of the
population and higher National Welfare

46. Evaluation of Investment Projects
National Profitability
y
y
y
While Commercial Profitability assessment is
important, so too is the contribution made to the
welfare of the society.
National Profitability analysis considers the project’s
contribution to national economic and non-economic
development objectives.
Important National Considerations include:
•
•
•
•
•
Employment
International competitiveness
Distribution and Logistics
Future development of Industry sectors
Foreign exchange Earnings

47. Full Detailed Feasibility Studies
Can be Expensive

48. Is it possible to take a staged approach?
Advantages:
yLower Initial Cost Outlay
yEvidence of a Process Underway
yOpportunity to Refine and Distil developing issues
yDecision Points at the End of Each Stage
rather than One Final Outcome
yMaster Plan as an Output to create Early Interest

49. Is it possible to take a staged approach?
Disadvantages:
yMay take Longer to Arrive at Ultimate Decision
yInitial Project Champions may Change or Lose
interest
yThere may be Time Gap Delays between Stages
yInvestors May Delay Commitment pending
Full Information
yOther
……?

50. Scoping Study
Prefeasibility Study
Feasibility Study
and Funding
Determine what
it COULD be
Determine what
it SHOULD be
Determine what
it WILL be
Develop
Concepts
Does
it
make
sense
?
Case B
Case C
Case D
Case E
Assess and rank
Alternatives
Case A
Investor
Review
Is it
the
best?
Detail
Is it
Viable
?

51. Initial Review
Consider an Initial Review
y10 weeks – 6 in Iraq
y2 Professionals Engineer + Economist
yEstimated cost

52. Feasibility Studies for
Investment Zones in Iraq
End of Presentation
Eugene Brennan
Head of International Consultancy Group
Shannon Development, Ireland.
Email: EBrennan1@eircom.net