Research On Decision Model For Concession Period Of Infrastructure BOT Project

Infrastructure is the foundation of a country’s economical development; itsconstruction has the appropriate advance. However, infrastructure investmentdimensions is large, needs a large amount of funds, and the finance fund of governmentis limited, so it is difficult to meet the demand of a large number of infrastructureconstruction capital. In order to better balance the gap between the large scale ofinfrastructure investment and the limit of government finance fund, China benign to trythe commercialized financing means, developed a new investment and financing systemand introduce the foreign capital and the private capital into the field of infrastructureconstruction. BOT is one kind of effective financing ways, it has caused the closeattention of all countries when appeared, and put it into practice.The core of BOT project is the franchise agreement, and the concession period isthe core of the franchise agreement, it not only divides the time limit of government andthe private investor respective rights, obligations and responsibilities, but also it is thekey to successful negotiation. The length of the concession period affects the both sides’respective interests directly. If the concession period is too short, the project companymay ignore the construction quality or increase the price of product and service in orderto recover the investment cost of project and obtain certain business profits as soon aspossible in the concession period. This is not only influence the efficiency of the project,but also increase the burden of consumers. If the concession period is too long, for thegovernment, the right of control and ownership would be delayed, which would damagethe interests of government. So the scientific and reasonable concession period isparticularly important.Based on the detailed analysis about the main factors which influence theconcession period, this paper summarize and put forward the time, economy, society,three main parameters which influence the build of the decision model. From the privateinvestor and government, based on the different point of view，using the relevant theoryof net present value, consider the social benefits which brought by the infrastructureinto the decision-making model, at the same time, take the tax which paid by the projectcompany in the operation stage as the cash flow of government, making it morecomprehensive, reasonable and response to the project’s actual operation. It is not only maximize the economic benefits, but also maximize the social benefits, and offer areasonable, feasible method to government and the private sector.