Build,Operate,Own,Transfer

(BOOT)

INTRODUCTION
The concession, or build-own-operate-transfer(BOOT), is a type
of procurement strategy utilising project finance to fund
infrastructure projects. Although the term BOOT is relatively new,
privatized infrastructure projects have been around for several
centuries.
In a BOOT project, a project company, normally a special project
vehicle (SPV), is given a concession to build and operate a
facility that would otherwise be built by the public sector. The
facility might be a power station, toll road, airport, bridge,
tunnel, water supply and sewerage system, railway,
communication or manufacturing plant.

STRUCTURE OF BOOTPROJECTS

 The following are some of the reasons why host governments

adopt the BOT project procurement strategy (UNIDO, 1996):
The use of private sector financing provides new sources of
capital and reduces public and direct spending.
The development of projects that would otherwise have to wait,
and compete for, scarce sovereign resources is accelerated.
The use of private sector capital, initiative and know-how
reduces project construction costs, shortens schedules and
improves operating efficiency.
Project risk and burden that would otherwise have to be borne
by the public sector is allocated to the private sector.
The involvement of private sector and experienced commercial
lenders ensures an in-depth review as an additional sign of project
feasibility.

CONDITIONS FOR SUCCESSFUL

IMPLEMENTATION OF BOOTPROJECTS
1)COUNTRY
Economic stability
Project will to carry out the project
Stock and capital markets
Legislative or judicial process
2) PROJECT
3)CLIENT

CASE STUDY!!!

CASE STUDY!!!
INTRODUCTION
In 1977, the Malaysian Ministry of Works receivedofficial
instructions to draw plans of an expressway fromthe MalaysiaThailand border (Bukit Kayu hitam) to the Johor Causeway.
In 1980, the Malaysian Highway Authority was established to
monitor all the work progress of the first national expressway.
The 30-year concession contract was awarded in1998 to the
United Engineers (Malaysia) Berhad, whothen formed another
project company called Project Lebuhraya Utara Selatan Berhad
(PLUS) to design, construct, finance and operate the

BOOT STRUCTURE OF THEPROJECT

Malaysia ConcessionGovernment UEM Agreement Loan
Loan PLUS Construction Payment in Contract Cash and
Share in PLUS Subcontractor

Advantage
a) BOOT projects offer the possibility of realising a
project that would otherwise not be built.
b) The willingness of equity investors and lenders to
accept the risk indicates that the project is
commercially viable.
c) A BOOT project will help in a governments policy of
infrastructure privatisation.
d) The efficiency of the promoter and its economic
interest in the design, construction and operation of the
project will produce significant cost efficiencies to the
principal when the concession period ends.

disadvantage
a) Commercial lenders and export credit guarantee
agencies will be constrained by the same country risks.
b) There will be no credibility if the government
provides too much support to the promoter.
c) A BOOT strategy is a highly complicated structure
that requires detailed planning, time and money
throughout the concession period. The promoter must
have the commitment and interest to maintain the
project.

 The process of privatization and liberalization in

Malaysia has beenmotivated more by economic
pragmatism than ideologicalconsiderations. Mostly
importantly, Malaysia embarked on a process
ofrestructuring the relationship between the public
sector and the privatesector as a response to
unsustainable domestic and external conditions.The
poor performance of public enterprises and the high
levels ofbudgetary deficits acted in concert with a
reversal of the buoyant pricesfor Malaysian exports to
usher in an era of change.