BOT project financing mode to promote the application of the discussion?

BOT is the abbreviation of English Build-Operate-Transfer (Build-Operate-Transfer), BOT as a new type of financing suitable for infrastructure construction, for the urgent development of China's infrastructure construction, has a special significance. Its theoretical research and practice, but also to be carried out in various regions of China for more in-depth research and discussion. In this paper, on the basis of reviewing the development and characteristics of BOT, we summarize the problems existing in the process of promoting BOT mode financing for infrastructure construction in China and put forward corresponding countermeasures.

1BOT financing mode characteristics

BOT as a mode of private financing for infrastructure construction, compared with other traditional modes have the following advantages:

(1) BOT project construction funds from foreign capital or private idle capital, can to a certain extent to make up for the government's lack of investment in infrastructure, reduce the pressure of infrastructure construction projects on national finance. Infrastructure construction projects on the national financial pressure and the burden of foreign debt, and broaden the direct use of foreign capital channels, is conducive to strengthening international links, accelerate infrastructure construction and international convergence. (2) BOT projects emphasize the important role of the government as an organizer and promoter in infrastructure construction. The government promotes the participation of domestic and foreign private capital in China's infrastructure investment through the formulation of effective policies and specific measures, forming a cooperation model between the government and commercial capital in which the risks are ***shared and the benefits are ***shared, and making the services of the infrastructure industry more efficient. (3) BOT financing breaks the absolute monopoly of the state in the field of infrastructure, introduces the market mechanism in the supply of public **** products, and plays the effect of rational allocation of resources. (4) The lenders of BOT projects, when deciding whether to lend, usually, mainly consider the income prospects of the project itself, rather than the credit capacity of the project company at that time. Therefore, BOT financing is not limited by the existing asset size of the project company and is more flexible than other financing methods. Bank loans under this method usually have no recourse, or even if there is limited recourse, it only applies to the assets and earnings of the project itself, the balance sheet of the body, and therefore, does not affect the ability of the project entity to borrow further from other parties. With the transformation of China's professional banks and the further improvement of the market economic system, BOT financing "off-balance sheet financing" advantages will gradually emerge. (5) In order to encourage investors to invest in infrastructure construction, the government generally provides administrative, legal and economic support for BOT projects, which reduces the risk of the project contractor. In addition, the foreign investors of the project will take out insurance with multinational insurance companies, and with this complex relationship of mutual guarantee, insurance and collateral, the project risk will be effectively dispersed. (6) Through BOT project bidding, the successful bidder becomes the project owner, and the contractor must generally bring capital to the contract. This is compared with the government direct investment, from two aspects to reduce the possibility of unfair competition: First, there is no vested interest can be maintained or distributed, the government provides only the owner of the investment in the franchise, the contractor's interests must be realized through the effective operation of the franchise period. Secondly, when the owner is a partner, it is difficult for the contractor to open a gap in the owner because the owner's goal is to maximize profits during the operating period.

2 Analysis of China's infrastructure construction using BOT project financing

2.1 China's rapid economic growth on the huge demand for infrastructure

With China's sustained, rapid and healthy economic development, there will be a large number of promising investment projects can attract domestic and foreign private forces to participate in the BOT project financing. International economists believe that, despite the relatively low profitability of infrastructure projects, but it has a stable and continuous users, it is closely related to the people's livelihood, relatively less affected by the cyclical changes in the economy, there will be no market weakness, at least in the future of China for a long time. At the same time, due to high population density, infrastructure utilization is also high, the average cost is lower than other countries or regions in Asia, and thus its attractiveness is greater. The current international contracting volume shrinkage, and China's transportation and other infrastructure as a project to encourage foreign investment, foreigners can enjoy a variety of preferential, therefore, the world today has trillions of liquid capital, China's rapid economic growth brought about by the huge demand for infrastructure, as well as infrastructure projects with a high rate of return on investment is still very attractive.

2.2 The size of China's private economy has made domestic BOT projects possible

To date, most of the projects in China that have used BOT project financing to raise funds have brought in foreign capital.BOT project financing activities are not limited to the participation of foreign capital, but are also open to participation by various domestic sectors. China's private sector is booming, creating conditions for attracting the domestic private economy to participate in infrastructure development. The scale of China's private economy has been quite considerable, and it has the ability to finance projects. in 1989, there were only 90,000 private enterprises and 1.85 million employees, but by 1997, the number of private enterprises had reached 800,000 and the number of employees had reached 47 million. in 1995, the industrial output value of the nation's individual private enterprises had reached 220 billion yuan, accounting for more than 15% of the total industrial output value of society as a whole. At the same time, the desire and action of private capital to enter the field of infrastructure has begun to take shape. China's private economy has developed rapidly on the strength of its internal mechanisms, and cannot be ignored in terms of its scale and speed of development, or in terms of its operating results and the amount of capital it possesses. Therefore, it is entirely possible for some domestic private enterprises to join together to participate in the development of infrastructure projects, which is also in line with the State's policy of vigorously developing the private economy and the State's industrial policy.

2.3BOT project financing in China has been successful experience

BOT project financing in China's large-scale infrastructure project financing has been a pilot successful experience. 1983 Guangdong Shajiao B power plant project financing arrangements is China's first successful example of the use of BOT mode of infrastructure financing. This project had a large impact on the international scene. After that, Guangxi Laibin B Power Plant in 1995, as an experimental project of the State Planning Commission [2], was considered as the first BOT project in China to be competitively tendered in an international formal way, which established a good model for future BOT projects. Successful cases of domestic private capital participation in infrastructure construction in BOT mode, there is also the Quanzhou Prickly Bridge project, the successful construction of the project in practice for the guidance of the domestic private economy to invest in infrastructure construction out of a feasible way.

3 At present, China's implementation of the BOT financing model of the problems

From the current situation, the understanding of the BOT project and practical experience appear to be insufficient, there are problems are: people's understanding of the problem, the law and the investment environment is not sound problem, the problem of the management system, the problem of the pricing system, and the problem of foreign exchange and so on.

3.1 People's understanding of the problem

BOT is in the process of economic transformation of China is a new thing, the understanding of it needs to be familiar with a familiarization, understanding, exploration, improve the process. People's ideological concepts are not adapted to the following aspects: (1) there are still doubts about the use of BOT in China's infrastructure construction, some people are worried that the use of BOT will lead to the loss of state control over infrastructure projects, and there are also people who worry that the infrastructure to the private sector to invest in the construction and operation of the project will bring about a number of sensitive social issues such as project costs to the people whether they can afford it, and so on. (2) Insufficient understanding of the complexity of project financing, some people are not familiar with its specific content and the essentials of the operational specifications, that the negotiations are both time-consuming and laborious, but also to give the project a certain amount of guarantees and policy concessions, rather than the traditional loans or grants to save the trouble, and therefore have little interest in BOT. (3) Since most of the infrastructure in the past was constructed by financial allocation or state loan, the use fee of the facilities was very low or even not charged, and the people have been used to using many infrastructures free of charge, whereas the projects prepared by BOT to recover the investment for the project company and earn certain profit must charge a certain use fee, which the people may not be able to accept, so they may not be able to accept it. The understanding of this issue is also a major obstacle affecting the healthy development of BOT financing in China.

3.2 Inadequate legal and investment environment

Since the reform and opening up, China has formulated and promulgated more than 200 laws and regulations related to foreign investment, and established a certain investment environment in line with international practice. However, so far, the laws and regulations promulgated in China still have a certain distance from the international practice in many specific issues, such as in the Guarantee Law of the People's Republic of China*** and the State of China, which stipulates that the governmental departments are not allowed to provide any form of guarantee for the projects, and in the BOT, which is a special way of financing, it is generally required that the host country's government or institutions give certain guarantees and the necessary policy support for the financing of the projects. Moreover, the legal background in economic litigation is not yet mature enough due to the lack of enforcement power and experience of the judiciary in law. Also, due to certain bureaucracy and multi-headed management of the Chinese government and various institutional departments, the efficiency is low, and even the relevant regulations of the competent authorities for project approvals are often not connected or in conflict with each other, resulting in further increase in construction costs due to the slow process of approvals and other work in the implementation of the project, which also affects to a certain extent the motivation and confidence of foreigners in investing in China.

3.3 Management System Issues

In the BOT project the government needs to change the past construction project is completely responsible for its own, the allocation of funds, the risk of the situation and the pressure of the environment, and the project will be the construction of the concession to the private sector is responsible for, which does not mean that the government can be left unattended. On the contrary, project finance is mostly used for infrastructure projects that involve the people's livelihood and require the Government to play a macro-control and management role more than other general projects. At present, there are some sections of highway constructed or operated by the private sector, due to the lack of government macro-management, resulting in the setting of toll booths is very unreasonable phenomenon is common.

3.4 Problems of price system

Since BOT projects are self-financing, self-construction, self-management, self-repayment of a kind of construction operation and management, therefore, the pricing of its products and services is often higher than that in the planned economy mode, but because infrastructure projects are generally monopolistic in nature, the level of its price directly affects the whole national economy whether it is able to Healthy and normal operation, therefore, on the one hand, the need for the government to reasonably control the profits of the project company, limit the price of the project products, on the other hand, precisely because of the national economy and people's livelihood of the infrastructure project fees and charges of the heavier component of administrative intervention, making it difficult to predict the future rate of return on investment in the project, and thus also lead to foreign investors do not dare to invest in the BOT project with confidence and boldness.

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