The High Cost of “Feasible” on Paper
In emerging markets, a feasibility study often functions less as an objective evaluation and more as a bureaucratic formality—a necessary step to secure funding rather than a genuine test of viability . The result is a familiar pattern: projects approved with glowing benefit-cost ratios (BCRs) and optimistic timelines that, once exposed to ground realities, collapse into cost overruns, operational failures, and stranded investments.
Consider the evidence. In Bangladesh alone, seven mega-projects drained an additional $7 billion from state coffers due to cost escalations and time overruns, far exceeding initial estimates . The UK’s HS2 rail project, initially estimated at £50 billion, saw costs balloon beyond £106 billion before being significantly scaled back . These are not isolated cases of poor execution—they are symptoms of a deeper analytical failure embedded in the feasibility study process itself.
The common thread? Optimism bias: the systematic human tendency to overestimate benefits, underestimate costs and timelines, and discount risks that do not align with preferred outcomes .
For business leaders, investors, and government decision-makers evaluating entry into emerging markets, the question is not whether optimism bias exists—it does. The question is how to build a feasibility framework that resists it.
How Optimism Bias Distorts Feasibility Studies
Optimism bias in feasibility studies is rarely crude. It manifests through subtle, defensible assumptions that, in aggregate, transform marginal or unviable projects into compelling investment cases .
The Key Distortion Mechanisms
Inflated Demand Projections
Projections are often built on optimistic growth multipliers or utilisation rates without adequate sensitivity testing. The assumption that “market growth will continue” or “adoption will follow the curve” substitutes for hard evidence .
Understated Costs
Land acquisition costs exclude full resettlement and litigation expenses. Construction timelines are squeezed to flatter BCRs. Operational costs are discounted with minimal risk adjustment. In Bangladesh’s Karnaphuli tunnel project, cost overruns reached 27%—a figure that was entirely predictable had the feasibility study applied realistic risk contingencies .
Front-Loaded Benefits
Revenue streams are projected to materialise early, while risk factors receive minimal weighting. This creates favourable NPV and IRR metrics that bear little resemblance to actual cash flow trajectories.
Uniform Discount Rate Fallacy
In public sector appraisals, a standard discount rate (e.g., 12%) is often applied uniformly across all project types. This systematically undervalues socially transformative projects (which warrant lower discount rates) while falsely validating mega-infrastructure projects that should be held to higher standards of commercial rigour .
The tragedy is that these distortions are not necessarily malicious. In many cases, they emerge from structural incentives: project sponsors seeking approval, consultants rewarded for delivering “positive” findings, and decision-makers facing pressure to launch initiatives . When the approving authority funds the feasibility study, the outcome is inherently biased toward approval—what practitioners call “manufactured justification” rather than objective evaluation .
Why Emerging Markets Are Particularly Vulnerable
Emerging markets introduce specific conditions that amplify optimism bias:
Institutional Voids: Weak regulatory frameworks, limited property protections, and underdeveloped dispute resolution mechanisms create risks that are often overlooked or underweighted in feasibility assessments .
Political and Bureaucratic Pressure: The demand side of the equation—ministries and agencies seeking project approval—applies implicit pressure to produce viable findings. Consultants who challenge assumptions risk being labelled “uncooperative” and excluded from future opportunities .
Data Scarcity: Reliable historical data is often limited, making it easier to substitute optimistic assumptions for empirical evidence.
Cultural and Administrative Distance: Firms entering markets with significant cultural or administrative differences face hidden integration costs that standard feasibility models fail to capture .
Building a Feasibility Framework That Resists Bias
A truly robust feasibility study for emerging market entry moves beyond spreadsheet validation. It builds in mechanisms to counter optimism bias at every stage.
1. Replace Single-Point Estimates with Scenario-Based Modelling
The most dangerous assumption in any feasibility study is that the future will follow a single trajectory. Instead, build three scenarios:
- Base Case: Your working hypothesis
- Upside Case: Optimistic but plausible
- Downside Case: Realistic adversity—including cost overruns, slower adoption, regulatory delays, and currency volatility
The viability test should not be whether the Base Case is positive—it should be whether the Downside Case remains viable or, at minimum, survivable.
2. Apply Evidence-Based Optimism Bias Adjustments
The UK Government’s Green Book provides a practical framework for adjusting cost estimates to account for optimism bias . For capital expenditure on civil engineering works, adjustments of up to 41% may be appropriate. For standard buildings, the recommended adjustment ranges from 2% to 24%.
The key insight: These adjustments are not pessimistic—they are empirically calibrated corrections for systematic human error. When HS2 applied the maximum adjustments, they still proved insufficient, suggesting that even these benchmarks may be conservative in complex projects .
3. Use Reference-Class Forecasting
Prospect theory and behavioural economics demonstrate that the most effective debiasing technique is reference-class forecasting: comparing your project against the historical performance of similar projects .
When evaluating an infrastructure investment in an emerging market, ask: What was the average cost overrun for similar projects in this country over the last decade? What was the average timeline overrun? What proportion achieved projected revenue targets?
These historical benchmarks provide an anchor that counters the tendency to view your project as uniquely well-executed.
4. Separate the Study from the Sponsor
The single most significant structural flaw in many feasibility processes is that the entity seeking funding pays for and controls the study . This creates an inherent conflict of interest.
Best practice demands independent, third-party feasibility assessments conducted by organisations with no stake in the outcome. If your firm is evaluating a market entry, commission an external feasibility study—and actively incentivise the consulting firm to identify risks, not just validate assumptions.
5. Build a Structured Market Assessment Framework
Moving beyond financial metrics, a comprehensive feasibility study for emerging market entry must evaluate five critical dimensions—what we at GRMC EdgeSphere call the 5 Cs of Market Assessment :
| Dimension | Key Questions |
|---|---|
| Company | Do we have the operational runway, capital, and cultural adaptability to sustain entry? |
| Competition | Who dominates market share? Where are the underserved white spaces? |
| Customers | Who holds purchasing power? What drives their decisions? What are their adoption barriers? |
| Consumers | Who are the end users? How do their preferences differ from customer expectations? |
| Context | What are the macroeconomic, regulatory, and socio-cultural headwinds or tailwinds? |
In a recent assessment for an investor evaluating entry into Egypt’s private school sector, applying the 5 Cs framework revealed critical insight: while parents (Customers) valued curriculum quality, students (Consumers) exerted increasing influence over school selection at the high school level, directly affecting retention. Contextual analysis of inflation reshaped the entire pricing model .
Actionable Recommendations for Decision-Makers
For CEOs and Investors
- Commission independent feasibility studies from reputable third-party firms—and require them to present a “Red Team” risk assessment alongside the base case.
- Adopt reference-class forecasting as a non-negotiable element of your investment governance process.
- Stress-test assumptions with post-project reviews. The most valuable data for improving future feasibility studies comes from honest evaluation of past failures.
For Government Agencies and Development Organisations
- Build independence into feasibility processes. Separate the entity that commissions the study from the entity that approves funding.
- Mandate scenario-based analysis that includes realistic downside cases, not just optimistic projections.
- Establish accountability mechanisms. When projects fail dramatically against feasibility projections, the assumptions and decision-makers behind the study should be subject to review.
For Consultants and Project Managers
- Present risks as prominently as opportunities. Clients who penalise honest risk assessment are clients worth losing.
- Use structured debiasing techniques in your analytical process—reference-class forecasting, external benchmarks, and multi-scenario modelling.
- Document assumptions explicitly and make sensitivity analysis a central deliverable, not a footnote.
Conclusion: Feasibility as a Decision Tool, Not a Justification Tool
A feasibility study is not a bureaucratic formality. It is the cornerstone of investment decisions that commit billions of dollars and incur obligations to future generations . When optimism bias transforms feasibility assessment into manufactured justification, the consequences are not merely financial—they include stranded communities, environmental damage, and eroded public trust .
For firms and governments entering emerging markets, the stakes are particularly high. The complexity, data scarcity, and institutional voids characteristic of these markets demand a feasibility framework that is systematically resistant to optimism.
At GRMC EdgeSphere, we believe that the purpose of a feasibility study is not to prove a project viable—it is to determine whether it genuinely is. That distinction, simple as it sounds, separates successful market entries from costly missteps.
