BOT is essentially a method of infrastructure investment, construction and operation. It is based on an agreement between the government and private institutions. The government issues a concession to the private institution, allowing it to raise funds within a certain period of time. Funds are used to build a certain infrastructure and manage and operate the facility and its corresponding products and services.
The government can impose restrictions on the quantity and price of public products or services provided by the agency, but it ensures that private capital has the opportunity to make profits. Risks throughout the process are shared between government and private entities.
When the concession period ends, the private institution will hand over the facility to the government department as agreed, and it will be operated and managed by the government designated department. Therefore, the word BOT is more appropriately translated as infrastructure concession.
BOT Characteristics
Contemporary capitalist countries have introduced strong state intervention on the basis of market economy. At the same time, economics has also affirmed the role of the visible hand in theory, and the market economy has gradually evolved into a mixed economy that combines market and planning. BOT has exactly the characteristics of a mixed economy that combines market mechanisms and government intervention.
On the one hand, BOT can keep the market mechanism functioning. Most of the economic activities of BOT projects are conducted in the market. The government's practice of identifying project companies through bidding itself also contains a competition mechanism. As a reliable market entity, private institutions are the actors in the BOT model and have complete property rights to the construction projects during the concession period. In this way, the behavior of the private institution undertaking the BOT project during the implementation of the BOT project is completely consistent with the economic man assumption.
Baidu Encyclopedia-BOT mode