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When preparing the feasibility study, the following guidelines must be followed. These requirements are essential for evaluating the project. Delay in processing an application can be expected if there is a lack of adequate information. It is stressed that the Fund requires only information which a prudent investor must have before coming to reasoned investment decision. If you are in doubt as to whether certain information is required in your particular circumstances, contact the Fund for guidance. 
 

1)  REQUIRED MARKET INFORMATION
2)   REQUIRED TECHNICAL INFORMATION
3)  REQUIRED FINANCIAL INFORMATION
4)  ADDITIONAL REQUIRED INFORMATION                                                                                             

Required Market Information

 
Note that all information required in this section should be applied to each targeted market separately whether local, GCC or international (export).

 
1. Product
 
A full, clear description of product or products including size (or sizes), packaging as sold to customer and packing for wholesale distribution (if applicable), brand/trade name and uses, plus a brief description of the raw materials. If more than one product is to be sold, details of the product mix planned (including any changes in mix foreseen during the project life). State the proposed production program, year by year (for the first 5 years).

Samples, catalogues and/or photographs of the product(s), if available, shoed be provided. Detail the standards and specifications applicable in the target market(s) and state to which standard the product(s) will be made.

 
2. Supply
 
Details of current sources of supply of the proposed products to the Saudi market (and other markets, if exports intended) i.e., companies both manufacturing in Saudi Arabia and exporting countries. Capacity of supplying companies, their product range and estimated market share. Names, addresses, telephone, and fax numbers of local manufacturers and agents/distributors. Relevant information from the MCI licensed projects list should be included.
 
The objective is to paint the fullest possible picture of the current supply of products. Sources of information should be stated.

  
3. Demand
 
Demand in any one year is generally assumed to be summation of sales from local supply plus imports less exports (or re-exports). Where possible for historical demand, supporting evidence from recognized sources, e.g., Foreign Trade Statistics and OECD Export Statistics, should be included. State the sales history of the sponsor and/or the foreign partner (if there is one). Sales in the Kingdom and other markets are to be covered if exports are envisaged. If other methodologies are used to establish demand, these should be fully explained.
 
The history of demand over the previous five years, where possible broken down by the major regions of the Kingdom should be provided. Should sales be planned only in part of the Kingdom, then these particular areas should be covered together with the national picture. If there are different market and/or customer segments for the product e.g., retail and catering institutions. The percentage market breakdown should be included. Where relevant, similar data on export markets is required.
 
The future market size over the period covered by the feasibility study should be estimated, including market segmentation. The methods and assumptions underlying these estimates are to be explained (often more than one methodology can be justified in establishing future demand). The fund usually evaluate projects based on total GCC demand.

 
4. Marketing Strategy
  
A brief statement of the sponsors rationale for the project including definition of target markets, perceived strengths, and principal competitive advantages. What is the sponsors experience in this business or any related activities? (You can benefit from a separate document on Guidelines for Marketing Plans).
 
5. Pricing

Prevailing market prices per product/package in the Kingdom (and other markets where appropriate) and by main regions/cities if relevant. Ex-plant prices for locally manufactured and CIF prices for imports. Where applicable, retail and wholesale prices should also be provided.
 
State the sponsor proposed prices and pricing strategy should be described with details of distributor, wholesaler and retailer prices as well as margin structure plus sponsors historical prices if already selling in the targeted market.

 
6. Projected Sales & Market Share 
 
In the light of the estimated market size, show the projected annual sales volumes until the project reaches its full, installed achievable capacity or licensed capacity. Also slow the projects estimated market share on a year by year (segmented, if applicable, by product and/or product group; units and value, customer/market segment and region). Where have sales already been made? What market shares have been achieved? And What were the sales volume and value for the past three years (for each product)?
 
7. Competition
   
What is the internal/external competition to the project, e.g., competitive brands, their price range & market share? How will competition affect the ability of the project to achieve the estimated market share? What are the strengths and weaknesses of individual competitors?

8. Distribution
 
How will the product(s) from the factory reach the ultimate consumer?
What distribution channels are proposed? How do these compare with those used by competitors?
What transportation methods, storage facilities and warehousing will be used? What is the cost, and how pays it?
 
9. Marketing Organization
 
Structure of marketing and sales department including staff numbers, qualifications, nationalities, experience and job descriptions (Including CVs of management if already recruited).
 
10. Sales Promotion/Marketing Support
  
Detailed plans for advertising and other sales promotion activities both to the trade channels and consumer/end-users. Planned budgets and percentage of these to estimated, broken down by type of media to be used. Rationale for the proposed plans and projected expenditure. Information to be provided on plans/budget for the company product launch.
 
11. Marketing Agreements
 
Copies should be provided of any marketing agreements (including Agency, Representation, Trade Mark, Distribution etc., agreements) which may exists or in draft whether these be with local companies or foreign partners. Indicate the marketing input from such partners.

Required Technical Information   

  
1. The Product

1) What is the product and what is it used for?
2) A technical description for each product accompanied with sketches, photographs of each type; sizes or samples if possible.
3) If not manufactured entirety, what parts are to be bought ready made?
4) Are the products complete finished and ready to use when leaving the factory, or is further work needed outside the factory (e.g., erection, assembly into a complete unit)?
5) Are there any Saudi or international standards that the product must comply to? What are their details? These specifications should describe raw materials used, the final product and should specify testing and quality control methods.
6) Specify number of units in a package and specify wrapping cartons, boxes, pallets etc
7) Are the products entirely new or similar to existing products in the market? Are they capable of being modified if required?

2. The Process

1) A description of each operation in the process from raw material to finished product. This should specify the function of each piece of equipment needed (e.g., press to form curved metal shapes; steam boiler for heating or drying or curing; tanks for storage, pumps and pipe lines).
2)  A flow diagram showing the route of each piece of raw material through its various processes.
3) A scaled and dimensioned layout of equipment and machines within the factory showing storage areas for raw materials, work in progress, finished products, maintenance workshop, laboratory etc.
4) This plan of the layout should show the number of men at each piece of equipment during a production shift. This staffing distribution should be in line with the numbers of workers of different degrees of skill provided subsequently in the list of workers and salary requirements.
5) Special equipment for waste treatment must be described (incinerators for burning; liquid effluent treatment plants; air filtration).
6) Specific internal factory environment controls vital to the process must be explained. For example, processing of paper and textiles requires strict atmospheric control. Processing of food requires hygienic safeguards; toxic chemicals require safety procedures for workers and the general public; highly inflammable materials require special concentration on fire protection. The cost of providing these safeguards will ultimately appear in either building or equipment costs.
7) Explain the measures taken to treat the factory waste whether gas, liquid or solid in order to make it meet the specifications set out by relevant Government Authorities such as the Presidency of Meteorology and Environment , Royal Commission of Jubail and Yanbu and the Industrial Cities Offices.

3. Installed Capacity 

1) Indicate the installed capacity of the machinery as contracted with supplier. Show detailed calculations of this capacity and the basis on which it was built (e.g. for the production of 1,000 small units of product (A) and 100 large units of product (A) a year). The capacity of each piece of machinery should be specified.
2)  The proposed hours per day and days per year must be provided in relation to these quantities. The build-up to installed capacity in terms of years must be projected from the start of commercial production of the factory.

4. Machinery & Equipment 

1) A complete detailed list of machinery and equipment must be provided.
2)  Each item must be itemized by manufacturer, type, model, weight and whether or not it is being obtain through a third party. Descriptive pamphlets are required.
3) Each item must be priced CIF nearest port, either by direct invoice if already purchased or by pro-forma invoice. Additional sums for local carriage and erection should be shown. Lump sums for turnkey projects will not be accepted.
4) Where a final choice of item has still to be made, information about the various alternatives should be given.
5) Special equipment for fire fighting, air conditioning, water treatment, safety precautions, standby generators, laboratory equipment etc., can be itemized under the general heading here unless already covered under building estimates.
6) Internal factory cranes, pallet trucks, mobile cranes; gantry cranes, monorails and other fixed lifting structures should be itemized under the heading above.
7) Adequate spare parts for at least the first year of operation must be made included.
8) Three competitive quotations for the machinery and equipment are required. Detailed information and technical specifications must be included. Catalogs for machinery must also be included. Of the three quotations, that selected quotation must be identified and reasons for the selection must be explained.

5. Buildings 

1) A location plan of the site in the appropriate city or industrial area.
2) A site plan showing the site boundaries, adjacent roads and the position and size of all buildings on the site. Proposed supporting buildings, internal roads and parking spaces must be shown.
3) A site plan showing the positions of connection points to main utilities (sewage, water, power).
4) Drawings of buildings giving plan areas, elevations and cross sections. These drawings should clearly indicate the methods and materials of construction of the buildings, floors and foundations.
5) A brief specification of the main features of the buildings is required.
6) A drawing showing all loss and fire prevention equipment and safety measures to guarantee the safety of the project and its workers from the danger of fire or any other dangers that the project may face.
7) Quotations for civil works and buildings must be obtained (at least three offers of a detailed specification or a bill of quantities). Lump sum offers are not acceptable.
8) In case the building and civil works quotation does not include land preparation costs, separate quotations must be provided to include, for example, the following;
- Site clearing
- Excavation
- Infilling
- Any other special work related to land preparation.

6. Transportation
 
A list must be prepared of all the required transport vehicles including distribution and delivery trucks, employee cars, staff buses, fork lifts, etc., An explanation of the need for such vehicles must be provided bearing in mind that the required vehicles must be in line with the qualities of products expected to be distributed in the initial years of operation and the areas of the products will be distribution in. The Fund has some limitations on certain types of vehicles financing.
  
7. Furniture & Office Equipment
   
A list must be drawn up of office furniture and equipment required including office furniture, computers, telephone system, canteen equipment and furniture, typewriters, copying machines, etc.
 
8. Labor 

1) In addition to the layout plan showing factory operatives? work stations (Section 2d), a complete list of all persons employed by the company is required. This must give job titles basic monthly salaries and all additional expenses for social security, [staff travel] travel, accommodation, bonuses etc.
2) The source of the factory labor force should be specified (expatriate, local).
3) Procedures for training people must be described and a plan for recruiting Saudis must be provided.

9. Raw Materials  

1) A list of each different type of raw and packing material must be provided. This list should show the sources or alternative sources of purchase with both current unit cost prices and those expected in the first year of start up. Three raw and packaging material quotations must be provided.
2)  The list must include both raw materials for manufacture and items bought in as finished goods (pumps, brackets, hinges, locks, cartons, etc.,).
3) A detail calculation of raw and packaging materials for each single unit of the product must be provided. The Calculations must show the quantities required for every raw material and its cost.
4) The annual consumption of these materials related to licensed output must be provided.
5) A reasonable allowance for wastage in processing should be made and the amount specified.
6) A description of the pattern of buying should deal with bulk purchases of imported items to overcome delivery delays or to foresee price fluctuations with corresponding estimate of stock holding.

10. Utilities 

1) Requirements for water must be provided its source, type, quantity and its cost.
2)  The agreement should clearly state front fees agreed and annual fees based upon sales, output, profits, or other relevant measures.
3) Fuel quantities required for manufacturing and operation (for example, steam boilers, electricity generators, vehicles, etc.) must be provided.

11. Licensing Agreement 

1) A copy of any technical or licensing agreement between the sponsor and another company is required.
2)  The list must include both raw materials for manufacture and items bought in as finished goods (pumps, brackets, hinges, locks, cartons, etc.,).
3) The agreement should clearly define the extent of participation by the licensor in technical management, technical services for installation, commissioning and maintenance, drawings and know-how with details of proposed changes to these.

12. Pre-Operating Expenses 

1) Payments to architects, consulting engineers and designers, legal expenses and other professional services required to plan the enterprise are to be stated. Fees for feasibility studies must also be provided.
2)  Estimates of all other costs leading up to plant operation should be included, such as salaries, visits abroad for purchase of equipment, raw materials used for trial runs, etc.

Required Financial Information

1) Summary of the total project cost.
2)  Sources of funding of the project cost.
3) Financial indicators such as financial ratios; break even analysis, internal rate of return, value added, etc.
4) The annual consumption of these materials related to licensed output must be provided.
5) In preparing financial projections, you should bear in mind that the Fund: 

- Will not allow dividends (or withdrawals) to be paid before the first year of the Fund's loan repayment and then the lesser of 25% of paid up capital or SIDF loan maturities for the year.
-Will require owner's capital to represent no less than 25% of the project's cost and frequently more. 
- To reduce financial burdens on the project, SIDF Capital will usually permit Commercial bank finance to be drawn down after the borrower has invested all his equity and after fund finance, and to start repaying the loan earlier than the Fund's loan.  
- Requires projections to be prepared on a current cost basis don't include any element of inflation in costs in future years.  
- Requires the assumptions on profit and loss account and balance sheet items to be clearly spelled out. 
- The project should to be viable on its own merit, (i.e., no reliance on government subsidy or tariff protection).  
- Accounting method(s) and percentages for calculating the depreciation, maintenance and amortization must be clearly stated.  
- Any other costs required to run the operation must be clearly stated.

Other Required Information  


1) In the beginning of the feasibility study give a general description of the project, its main elements and targets. For expansion projects, provide a clear description of the relationship between the existing project and the expansion especially in terms of the buildings, machinery, products and production capacity. In brief this general description is a summary of the details and findings of the feasibility study's marketing, technical and financial aspects.
2) The owner(s) experience in the field of this project or any other related fields. This should cover the time the business started fields. This should cover the time the business started, types of business, its distribution network, its location and size.
3) A clear description of the organization structure (attach a diagram showing this structure).
4) A clear description for each executive and senior technical position must be provided. In case any position is filled, the CVs must be provided.
5) A plan for recruiting Saudis to the project for technical, marketing, financial or administration positions must be provided. This plan should cover the time required to fill these positions with Saudis and the training required to improve the level of the local manpower. If there are positions that cannot be occupied by Saudis in the near future then it must be indicated and the reason for not occupying it with Saudis must be clearly stated.
6) A detailed time schedule for implementing the project from the start of the implementation to the commercial production must be provided.

© Saudi Industrial Development Fund. All rights reserved 2013.
Last Update : 17/10/2010 G | 09/11/1431 H