• Establish a sophisticated telecommunications system to make optimum use of the
worldwide information superhighway
18.12 Applicability of BOT in Mauritius
18.12.1 Basic Financial Principle
The main costs of an investment will be:
• planning costs
• costs of capital goods
• cost of financing investment
• running costs of the investment
A basic financial principle to which the private sector firmly adheres is profitability. Unless the financial viability of the project over its entire life can be clearly
demonstrated, equity investors and other long-term investors will be unwilling to
provide the amount of funding required at competitive interest rates. The integrity of
the cost of construction must be sound and the revenue stream must be realistically
calculated.
If a project is well structured, international banks will provide funding for
15 years and beyond. Commercial banks are a more flexible source of funds, but
they generally require early repayment and may not be the most appropriate for use
on these long-term projects.
18.12.2 Welfare Economics
As noted in Chap. 2, the four main economic roles of government are:
1. The allocative role: the government pursues that allocation of resources which
maximises efficiency. This is generally referred to as allocative efficiency or the
“first best” allocation of resources. The government has to deal with the market
distortions caused by monopoly power and other forms of market failure.
2. The distributive role: the government balances efficiency with equity in the
allocation of resources by using taxation, social security and the distribution of
public sector services to influence the distribution of income.
3. The regulatory role: the government legislates and enforces laws of contract,
consumer protection, justice and so on, in order that the market economy may
function.
4. The stabilisation role: whereas the allocative, distributive and regulatory roles
are microeconomic in nature, the stabilisation role is macroeconomic in using
530
18 Infrastructure Markets and the Private Sector
worldwide information superhighway
18.12 Applicability of BOT in Mauritius
18.12.1 Basic Financial Principle
The main costs of an investment will be:
• planning costs
• costs of capital goods
• cost of financing investment
• running costs of the investment
A basic financial principle to which the private sector firmly adheres is profitability. Unless the financial viability of the project over its entire life can be clearly
demonstrated, equity investors and other long-term investors will be unwilling to
provide the amount of funding required at competitive interest rates. The integrity of
the cost of construction must be sound and the revenue stream must be realistically
calculated.
If a project is well structured, international banks will provide funding for
15 years and beyond. Commercial banks are a more flexible source of funds, but
they generally require early repayment and may not be the most appropriate for use
on these long-term projects.
18.12.2 Welfare Economics
As noted in Chap. 2, the four main economic roles of government are:
1. The allocative role: the government pursues that allocation of resources which
maximises efficiency. This is generally referred to as allocative efficiency or the
“first best” allocation of resources. The government has to deal with the market
distortions caused by monopoly power and other forms of market failure.
2. The distributive role: the government balances efficiency with equity in the
allocation of resources by using taxation, social security and the distribution of
public sector services to influence the distribution of income.
3. The regulatory role: the government legislates and enforces laws of contract,
consumer protection, justice and so on, in order that the market economy may
function.
4. The stabilisation role: whereas the allocative, distributive and regulatory roles
are microeconomic in nature, the stabilisation role is macroeconomic in using
530
18 Infrastructure Markets and the Private Sector