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Build,Operate,Own,Transfer (BOOT)INTRODUCTIONThe 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 BOOTPROJECTS1)COUNTRY Economic stability Project will to carry out the project Stock and capital markets Legislative or judicial process

2) PROJECT3)CLIENTCASE STUDY!!!

CASE STUDY!!!

INTRODUCTION In 1977, the Malaysian Ministry of Works receivedofficial instructions to draw plans of an expressway fromthe Malaysia-Thailand 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 THEPROJECTMalaysia ConcessionGovernment UEM Agreement Loan Loan PLUS Construction Payment in Contract Cash and Share in PLUS Subcontractor

Advantagea) 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.disadvantagea) 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.