Risk Management Research On PPP Financing Model In Urban Rail Transit Project

With the development of our urbanization process and the increasing demand forpublic transportation, urban rail transit projects which include subway, light rail, tram,maglev train and other transport tools have developing rapidly in big cities. Urban railtransit could greatly contribute to economic development and facilitate people’s livesbecause of its characteristics such as large traffic volume, convenient transport,accurate time and less pollution, etc. But the government’s investment and borrowingcan’t meet the need of its development because it also has disadvantages oflarge-scale investment, poor profitability and large sunk cost. With the application anddevelopment of PPP financing model in the infrastructure field, the PPP model hasbecome an important solution for the shortage of funds in rail transit projects.However, due to its complex structure, various participants and large potential risk,we should make comprehensive and systematic risk management research on it inorder to ensure its successful use and its promoting role in urban rail transit project.Firstly, this paper obtains urban rail transit project’s economic characteristics bystudying the public goods theory and project distinction theory, then analyzes theinternal and external conditions required by PPP financing model in urban rail transitproject. This paper puts forward the PPP financing model’s application condition anddevelopment proposal for urban rail transit project in terms of its development status.Meanwhile, the article defines risk management and explains the general process ofrisk management.Secondly, this paper makes a comprehensive and systematic identification ofrisks which may exist in PPP financing project and establishes the risk hierarchicalstructure figure based on the risk checklist method and analytic hierarchy process(AHP method) in urban rail transit. On this basis, it conducts in-depth research on therelationship between level risks in the risk hierarchical structure figure by using ISMmethod, and builds the risk hierarchical structure model in urban rail transit PPPfinancing project, then it draws corresponding valuable conclusion for the PPPparticipants as it provides intuitive and imaginative reference to recognize risks.Then, based on the risk identification of PPP financing project in the urban railtransit, this paper uses the AHP method to determine the risk indexes’ weight througha questionnaire survey, the weight can be used as a judgment on the size of various risk factors in PPP financing project. After this, the article assesses and sorts riskfactors for the major participants including private sector, government sector, lendinginstitution, insurance company in PPP project by using the improved TOPSIS methodwhich combines the AHP method with the TOPSIS analysis. After this it obtainscorresponding conclusion and provides a new perspective for the four participantsmentioned above.Risk identification and assessment is the prerequisite and foundation of thesuccess of PPP financing project in the urban rail transit, while the risk sharing andtreatment is the core and security. Through analyzing risk sharing principle andprocess in PPP financing project, this paper introduces incomplete informationdynamic game theory into the bargaining process, takes account that the participantsdon’t know other’s costs or benefits in risk sharing process. The analysis process hasreference value for the PPP project participants in game negotiation process. After thisthe paper proposes the general risk sharing measures based on the identified riskfactors and risk sharing results in the PPP project.Finally, this paper takes the Qingdao urban rail transit phase III project whichwill be constructed in the future as an example, and carries out a systematic analysisand research on the whole risk management process including financing, constructionand operation through integrating composite research methods with the specificproject practice in this PPP finance project. The realistic conclusion obtained abovenot only theoretically makes useful exploration and supplement for the riskmanagement research in PPP financing project, but also provides reference to treatrisks rationally and manage risks effectively for the PPP participants involved inQingdao urban rail transit project. Meanwhile this paper has important theoreticalsignificance and practical value for the application and implementation of PPP modelin urban rail transit field.