Conduct Feasibility Studies
A government may wish to carry out feasibility studies to assess the suitability and viability of exploiting a particular resource or constructing, rehabilitating, or expanding a particular infrastructure at a given time and place. Feasibility studies are also crucial to obtain information about the resource that will help define the framework of the investment and define and quantify any risks associated with the investment to better inform the government in subsequent negotiations with the investor.
The types of feasibility studies include, but are not limited to:
- Geological surveys to better understand the location, grade and quantity of the resource (in the case of extractive industries);
- Hydrological studies to better understand the availability and renewability of water resources (i.e. the annual projected rainfall and recharge capacity of any underground aquifers) in the location of a proposed investment, the current and projected demands on those water resources and the impact of the proposed investment on those water resources;
- Microeconomic studies to map out the effect on the local economy of such an investment and the potential for economic linkages; and
- In the case of infrastructure, user demand and risk analyses to determine the demand for the infrastructure or associated public service that will be provided in relation to it and to identify and quantify the cost of potential risks in the construction, operation and maintenance of the infrastructure.
Equipped with such feasibility studies, a host government is better placed to make informed decisions as to the suitability of a large-scale investment from a budgetary, technical and geographical perspective.
Key Tools At This Stage
Stakeholder Engagement: Feasibility Studies and Project Planning, Investment Contracts for Farmland and Water: Ten Steps, Mining Contracts - How to Read and Understand Them, Oil Contracts - How to Read and Understand Them, The EPEC PPP Guide, Fiscal Analysis of Resource Industries (FARI), Open Fiscal Models