The interaction between project finance of a large-scale construction project and macroeconomic indicators and policies

This thesis describes research undertaken to investigate the possibility of modelling the interaction between project finance of a large scale construction project (LSCP) and macro economic indicators and policies. In particular, it concentrates on the use of system theory and LSCPs in Egypt. Both soft system and hard system methodologies are used for models development. Soft systems methodology was used to investigate the interactions between macroeconomic indicators and policies and the project finance of a LSCP as an investment. It was also used to identify the interactions and cash flows between owner and contractor involved in a LSCP and other participants that represent their obligations and sources of finances. Hard system methodology was used to convert qualitative linkages between elements to quantitative linkages. The models were validated against information obtained from the interviews and published reports abut the performances of the Egyptian economy. The models have been proved to be able to simulate cash flows between owner and contractor involved in a LSCP and other participant that represent their sources of finance and obligations. The results of model simulation provide strategic information for a decision maker considering investment in a LSCP to understand the effects of the economic indicator performance on their project. The effects of macroeconomic indicators performance on an owner or a contractor involved in a LSCP could be summarised in two main headings: cash flows delays and cost changes. However these effects depend on many factors such as sources of finance, contractual agreements, percentage of foreign and local components, and percentage of foreign currencies in cash flows. A proposal is made to use the models as the basis for a decision support system to assist decision-makers in firms and government considering project finance in a LSCP.