Introduction
An infrastructure project structured under the Build-Operate-
Transfer (BOT) arrangement can be a risky proposition. To
alleviate the concern of the private sector and attract longterm
investors’ participation in financing the project, host
governments often grant various forms of support. However,
as has been reported widely, some governments do not
explicitly account for the contingent liabilities and
implications associated with these support packages (Mody
and Patro, 1995). Despite their prevalence, the cost of these
financial incentives to governments and their value to private
recipients are not well understood (Mason and Baldwin,
1988).
The importance of balancing risk and value has been
highlighted in Cheah (2004). Governmental support such as
subsidies and guarantees would add direct value to the
transaction. Besides, value can also be created by structuring
operating options and flexibilities during the course of design
and execution of a project. Without proper evaluation of
these elements, the matching of risk and value cannot proceed
in a guided manner.

Authors:

Liu Jicai (PG04083059@ntu.edu.sg)
Cheah Yuen Jen Charles (cyjcheah@ntu.edu.sg)

Download the Full Text Here