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Practice briefing : Is BOT the best financing model to procure infrastructure projects? A case study of the Hong Kong-Shuhai-Macau Bridge

Cheung, Esther & Chan, Albert (2009) Practice briefing : Is BOT the best financing model to procure infrastructure projects? A case study of the Hong Kong-Shuhai-Macau Bridge. Journal of Property Investment and Finance, 27(3), pp. 290-302.

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    Abstract

    Abstract: Purpose – Several major infrastructure projects in the Hong Kong Special Administrative Region (HKSAR) have been delivered by the build-operate-transfer (BOT) model since the 1960s. Although the benefits of using BOT have been reported abundantly in the contemporary literature, some BOT projects were less successful than the others. This paper aims to find out why this is so and to explore whether BOT is the best financing model to procure major infrastructure projects.

    Design/methodology/approach – The benefits of BOT will first be reviewed. Some completed BOT projects in Hong Kong will be examined to ascertain how far the perceived benefits of BOT have been materialized in these projects. A highly profiled project, the Hong Kong-Zhuhai-Macau Bridge, which has long been promoted by the governments of the People's Republic of China, Macau Special Administrative Region and the HKSAR that BOT is the preferred financing model, but suddenly reverted back to the traditional financing model to be funded primarily by the three governments with public money instead, will be studied to explore the true value of the BOT financial model.

    Findings – Six main reasons for this radical change are derived from the analysis: shorter take-off time for the project; difference in legal systems causing difficulties in drafting BOT agreements; more government control on tolls; private sector uninterested due to unattractive economic package; avoid allegation of collusion between business and the governments; and a comfortable financial reserve possessed by the host governments.

    Originality/value – The findings from this paper are believed to provide a better understanding to the real benefits of BOT and the governments' main decision criteria in delivering major infrastructure projects.

    Impact and interest:

    4 citations in Scopus
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    ID Code: 29782
    Item Type: Journal Article
    Keywords: Financing, Financial Modelling, Procurement, Hong Kong
    DOI: 10.1108/14635780910951984
    ISSN: 1463-578X
    Subjects: Australian and New Zealand Standard Research Classification > ENGINEERING (090000) > CIVIL ENGINEERING (090500) > Infrastructure Engineering and Asset Management (090505)
    Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > BANKING FINANCE AND INVESTMENT (150200)
    Divisions: Past > QUT Faculties & Divisions > Faculty of Built Environment and Engineering
    Past > Schools > School of Urban Development
    Copyright Owner: Copyright Emerald Group Publishing Limited
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    Deposited On: 25 Aug 2011 09:14
    Last Modified: 25 Aug 2011 09:16

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