Risk Management for Build-Operate-Transfer Infrastructure Projects in China

摘要

The growth of the infrastructure sector in China has been relatively slow compared with the industrial and manufacturing sectors. The energy shortage, an inadequate transportation network, and an insufficient water supply system have caused a bottleneck in the country's economic growth. The Build-Operate-Transfer (BOT) scheme is now becoming one of the prevailing ways for infrastructure development in China to meet the needs of China's future economic growth and development. There are tremendous opportunities for foreign investors. However, undertaking infrastructure business in China involves many risks and problems that are due mainly to differences in legal systems, market conditions and culture. It is crucial for foreign investors to identify and manage the critical risks associated with investments in China's BOT infrastructure projects. Based on the survey, the following critical risks, in descending order of criticality, are identified: delay in approval, change in law, cost overrun, dispatch constraint, land acquisition and compensation, enforceability of contracts, construction schedule, financial closing, tariff adjustment, and environmental risk. The measures for mitigating each of these risks are also discussed. Finally a risk management framework for China's BOT infrastructure projects is developed.