The Theory, Practice & Extension Of Bot

Build-operate-transfer (generally known as "BOT"), an investment form of infrastructure facilities and primary industry, has been used worldwide since its emergence. A general framework of BOT policy is made out according to the practice, which include the definition of BOT, the bidding procedure, the legal framework and risk allocation, etc.The discussion of Sydney harbor tunnel and the Eurotunnel project in the aspects of project approval, project finance construction and the problems involved, show the practical operation of BOT in the developed countries. An appropriate and stable political, economic and legal environment forms the basic foundation of a successful BOT project. A smooth financial structure together with the practical and financial viability guaranteed the final accomplished of a BOT project. Different from the developed countries and regions, the purpose of the developing countries pursuing construction of infrastructure in the manner of BOT is to attract foreign investment. The legal and administrative frameworks are not well competent for a successful BOT project. Infrastructure project with foreign participation were often characterized by prolonged negotiation concerning appropriate rate of return, allocation of risks- all set against a background of legal uncertainty concerning security arrangement, government guarantee and foreign exchange availability. The discrepancies often leaded to the failure of foreign invested infrastructure projects in the developing countries.For the purpose of actively directing foreign investment towards the infrastructure facilities and primary industries, which have been the bottleneck of the national economic development, China have tried out several foreign-invested infrastructure projects in the form of BOT since 1980s. The smooth operation of the pilot BOT projects, the power station projects at Shajiao B, Laibon B and Changsha helped to forming a deeper understanding of BOT. Experience has been gradually achieved through these expriments. The contracts prepared for the Laibin and Changsha pilot projects have made substantial progress towards resolving areas of concern for rates of return, government guarantee, international financing and relocation of risks.In addition to the project experience, finding a way to avoid and reduce the risks inherent in a project can help the smooth spread of the investment form of BOT.In an infrastructure project the construction and development risks are substantial and the scope for cost overruns and completion delay is considerable. In order to avoid the construction risks, China could develop infrastructure in the investment form of Transfer-operate-transfer (TOT) instead of BOT. The government could not only obtain a large sum of money through the transfer of the existing infrastructure facilities, but also help the introduction of expertise. TOT provides an alternative form to attract foreign investment.A BOT project, like other foreign investment, requires a stable political and economic environment. Foreign sponsors and lenders usually worry that the legal and economic framework in the developing countries may not sufficiently developed to support BOT construction program. So they bid a higher price for the project, which includes government guarantee and higher rate of return. The introduction of domestic sponsors to the medium- or small- infrastructure projects could avoid many problems concerning international BOT and provide a possible substitution. The domestic BOT have advantage over the international BOT in the aspect of risk allocation, foreign exchange, etc.Theoretically, multilateral investment guarantee agency (MIGA) could protect the sponsors from political risks. The marriage of MIGA and BOT could promote the development and spread of the investment form of BOT.BOT could play a practical role in the Great Development of Western China. Except some large infrastructure projects vital to national security or economy, most projects, that be financially and economically sound, could...