Modeling the impact of government guarantees on toll charge, road quality and capacity for Build-Operate-Transfer (BOT) road projects

Feng, Zhuo; Zhang, Shui-Bo; Gao, Ying

doi:10.1016/j.tra.2015.05.006

Cited by 40 publications

(20 citation statements)

References 19 publications

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“…(Shi, Yin, & Guo, 2016). In addition, governments can arrange free allocation of land use right and grant franchise of the surrounding land and commerce, as well as concessional loans, loan interest subsidies and the give-up of dividends of the government-occupied shares (Feng et al, 2015;Marzouk & Ali, 2018). By nature, government subsidies aim to effectively reduce the construction and operation costs to mitigate the risks and further improve the economic profits to ensure the commercial feasibility of PPP projects (Almassi, McCabe, & Thompson, 2012).…”

Section: Government Subsidies In Ppp Projectsmentioning

confidence: 99%

“…Public-private partnership (PPP) arrangements have gained worldwide popularity in the provision of public services and products, such as plants, highways and tunnels (Song, Zhao, Jin, & Sun, 2018). Generally authorized by the governments, private investors recover their investment mainly through user payment (for instance, toll revenue) during the operation stage of these PPP projects (Feng, Zhang, & Gao, 2015). However, the infrastructure projects are fraught with risks (e.g., demand risk and force majeure risk etc.…”

Section: Introductionmentioning

confidence: 99%

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Government Subsidies in Public-Private Partnership Projects Based on Altruistic Theory

Wang

Gao

Hwang

et al. 2020

International Journal of Strategic Property Management

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Nowadays, the public-private partnership (PPP) scheme has been widely adopted in infrastructure projects around the world. In PPP projects, the governments participate as a principal and the investors play the role of an agent, and therefore their behaviours and incentive strategies can be explained and designed by the principal-agent theory. As “economic men” with limited rationality, both the governments and the investors have altruistic preferences during cooperation. This paper studies how project participants’ altruistic preferences affect government subsidies based on the principal-agent theory. To this end, a principal-agent model in the presence of altruism is developed. The results show that the amount of government compensation is related to the altruistic preferences, the expected revenue, costs and investors’ efforts. Contrary to intuition, the governments’ altruism actually undermines the investors’ enthusiasm in cooperation and the risk-sharing propensity, although it increases the utilities of both parties. Moreover, when selecting the investors, governments should examine their operating capacity carefully, which has a significant impact on the sustainable development of the projects and even PPP arrangements. The findings contribute new insights into the development of incentive mechanisms between governments and private investors from the perspective of the behavioural preferences.

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Section: Government Subsidies In Ppp Projectsmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Government Subsidies in Public-Private Partnership Projects Based on Altruistic Theory

Wang

Gao

Hwang

et al. 2020

International Journal of Strategic Property Management

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“…Power et al (2016) consider buyout, revenue sharing and minimum revenue guarantee as options in transportation public-private partnerships. ROA is also known to be a good instrument for valuing concessionaires in road toll projects (Ford et al 2002, Feng et al 2015, Buyukyoran and Gundes 2018.…”

Section: Price Uncertaintymentioning

confidence: 99%

Infrastructure maintenance and replacement optimization under multiple uncertainties and managerial flexibility

Boomen

Spaan

Shang

et al. 2019

Construction Management and Economics

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Infrastructure maintenance and replacement decisions are subject to uncertainties such as regular asset degradation, structural failure, and price uncertainty. In the engineering domain, Markov Decision Processes (MDPs) typically focus on uncertainties regarding asset degradation and structural failure. While the literature in the engineering domain stresses the importance of addressing price uncertainties, it does not substantiate the observations of such uncertainties through optimization modeling. By contrast, real option analyses (ROAs) that originate from the financial domain address price uncertainties but generally disregard asset degradation and structural failure. Accordingly, this piece of current research brings both domains closer together and proposes an optimization approach that incorporates the flexibility to choose between multiple successive intervention strategies, regular asset degradation, structural failure and multiple price uncertainties. A practical result of the current research is a realistic approach to optimization modeling in which state space reduction is achieved by combining prices into portfolios. The current research obtains transition probabilities from existing price data. This approach is demonstrated using a case study of a water authority in the Netherlands and confirms the premise that price fluctuations may influence short-term maintenance and replacement decisions. ARTICLE HISTORY

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“…In order to make BOO or BOT projects succeed, governments often guarantee a minimum level of operational revenue, or subsidies [23]. Such guarantees and assurances increase the incentive for private sectors to participate.…”

Section: Irrational Contracts and Inflexibility Of Adjustmentsmentioning

confidence: 99%

Remedial Measures for Erroneous Environmental Policies: Assessing Infrastructure Projects of Waste-to-Energy Incineration in Taiwan with a Case Study of the Taitung Incinerator

Liu

Lee

2016

Sustainability

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Taiwan, like many other countries, often incentivizes private investors to participate in the construction of infrastructures for environmental protection. The build-operate-transfer (BOT) or build-operate-own (BOO) model of financing public infrastructure was introduced to Taiwan in the 1990s. Among them, the construction of incinerators to treat the municipal solid waste using the BOT/BOO model was quite a success in the beginning. With the socio-technical change of lifestyle and waste generation, the amount of amount of trash dropped dramatically. The policy failed eventually, however, because the government over-estimated the trash quantity and refrained from inter-municipality cooperation to treat trash efficiently. This failure triggered a rash of intense debates and legal disputes. In the case of the Taitung incinerator, the 26th incinerator located in southeastern Taiwan, the arbitration resulted in the government making significant compensation payments to the private sector. The finished construction was consequently converted into a "mothballed and pensioned off" facility. This study applies in-depth interviews and literature review to discuss aspects contributing to the policy failure and proposes some possible remedial measures. Five aspects are summarized, namely, the administrative organization's rigid attitude, the irrationality of the BOT/BOO contracts, the loss of the spirit of BOO partnerships, the heavy financial burden on local government, and the abandonment of inter-municipality cooperation. The remedial measures for the policy failure are presented in the form of thorough policy evaluation, room for contract adjustments under the BOT/BOO model, encouragement of cross-boundary cooperation, and revision of the legal framework for implementing decentralization.

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Modeling the impact of government guarantees on toll charge, road quality and capacity for Build-Operate-Transfer (BOT) road projects

Cited by 40 publications

References 19 publications

Government Subsidies in Public-Private Partnership Projects Based on Altruistic Theory

Government Subsidies in Public-Private Partnership Projects Based on Altruistic Theory

Infrastructure maintenance and replacement optimization under multiple uncertainties and managerial flexibility

Remedial Measures for Erroneous Environmental Policies: Assessing Infrastructure Projects of Waste-to-Energy Incineration in Taiwan with a Case Study of the Taitung Incinerator

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