Research On Concession Period Of BOT Project Financing

The relative deficiency of infrastructure projects establishment has been the obstacle for many countries to develop their economy. The financing requirement of infrastructure projects establishment is so much that most countries can not afford this, if it only depends on government investment. But BOT project financing can resolve this problem.Concession period is one of most important content of BOT concession contract. How to determine a proper concession period is a key of protecting the interests of both the government concerned and private investors. It also demarcates the benefits, authorities, and responsibilities between the government and private investors. Given short concession period, the project company will select lower construction cost and maintenance cost for the sake of reducing the total cost and gaining profit. So it will influence construction quality and lifecycle. Thus the maintenance cost will be high and operation period be shortened, income of government be reduced after the project is transferred to the government. By prolonging concession period, government may stimulate project company to increase the investment of building and operating the project so as to improve the quality and technique level of the project. But too long concession period will reduce the income of government. So there is the problem of how to determine the concession period so as to maximize the avail of the government.Under the whole determining framework of BOT concession period, the main economic parameters as total cost ,products or service price, rate of return on investment, level of avoiding, way of transfer is comprehensively and systematically analyzed in this thesis. Not only the special factors affecting each economic parameter but also the mutual limitation among and optimization of economic parameters are put into consideration under the condition of the overall targets of concession period determining.It is the new field of the researching concession period thatintroducing the means of game theory. The thesis sets up a model of game theory based on analyzing the main economic parameters of affecting BOT concession period. By this model, we can determine proper concession period to protect the interests of both the government concerned and project company.