Bot in Asia

Asian Journal of Public Administration
ISSN: 0259-8272 (Print) (Online) Journal homepage: http://www.tandfonline.com/loi/rapa19
A Critical View of the Build-Operate-Transfer

Privatisation Process in Asia
Paul Handley
To cite this article: Paul Handley (1997) A Critical View of the Build-Operate-Transfer
Privatisation Process in Asia, Asian Journal of Public Administration, 19:2, 203-243, DOI:
10.1080/02598272.1997.10800340
To link to this article: http://dx.doi.org/10.1080/02598272.1997.10800340
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ASIAN JOURNAL OF PUBLIC ADMINISTRATION VOL 19, NO 2 (DECEMBER 1997) 203-243
A CRITICAL VIEW OF THE

BUILD-OPERATE-TRANSFER PRIVATISATION
PROCESS IN ASIA
PAUL HANDLEY
Since the late 1980s the "build-operate-transfer" concession, orBOT, has become
a popular option in Asiafor infrastru.ctu.ral privatisation. The experiences ofseveral
years suggest that BOT schemes are by nature too complex and fragile, and too
highly prone to politicisation, to enable governments in developing countries to
achieve the quick, efficient, and privately financed supply of infrastructure as
intended by this method of privatisation. Across Asia the number ofunqualified BOT
successes has been few. A much greater number of attempted projects has been
characterised by lengthy delays, chronic disputes, and.frequently,failure to ever get
underway. Even in the case of those which do proceed, the state often fails to attain
its principal goals.
Introduction
In the mid- 1980s, many Asian countries turned to the privatisation of

infrastructure to overcome problems which threatened to constrain
economic growth. The use of private sector management and capital
in transport, power, water and sewage, and telecommunications
services was seen as a way of obtaining and maintaining infrastructural
facilities more quickly and cheaply that traditional, state-led methods.
203
Various privatisation approaches such as corporatisation, public

flotations, straightforward sell-offs of state-ownedenterprises(SOEs),
and so on, became popular options in many countries in Southeast and
South Asia.
One important approach for building new infrastructural facilities
is the build-operate-transfer (BOT) concept. In a BOT project, private
investors - the "sponsors" - receive a concession to finance, build, and
operate a facility over a set period of time, in exchan ge for the right to
charge the users of the facility at a rate which makes the investment
commercially viable. At the end of the concession period the facility
is turned over to the state. The goals of the state in a BOT-style
privatisation are to obtain infrastructural facilities with greater effi-
ciency and speed, without the state taking on the adherent financial
responsibility. The BOT system requires a facility to pay for itself on
a commercial basis, through implementation of the "'user-pays" prin-
ciple. Private investors take on the long-term risks of financing,
developing, and managing an infrastructural facility based onpoten-
tial commercial rewards.
Governments in the Asian region have latched on to the BOT
concept as an important alternative for enhancing economic growth
and development, or at least as a quick fix for problems associated with
the demand for the establishment of infrastructural facilities. How-
ever, achieving the basic BOT goals has proven to be difficult, as
examples in Thailand, Malaysia, Indonesia, China, and South Asia
have demonstrated. The World Bank noted in a 1995 report, with
specific reference to Asia,
Despite much talk about private investment in infrastructure,

there is little action in most countries. Neither the governments
nor the private sector are satisfied with progress to date.1
In practice BOT projects have proven to be by nature highly

complex in design, finance, and management. Compared to traditional
methods of infrastructural development, they involve a large number
of interested participants - both from the private sector and the state -
with conflicting agenda. To make a project work, the government
must establish an environment conducive to risk-taking by private
204
Budd-Opcrate-Transfer Privatisation Process in Asia
sector sponsors and financiers, most of whom maintain views on what

constitutes acceptable risk and reward which are strikingly different
from those held by governments. Futhermore, governments often
proceed with BOT projects without a thorough understanding of the
concept. There are also problems of misplaced goals and the
politicisation of the project by vested interests (arising from anti-
privatisation ideology, the self-preservation behaviour by state enti-
ties, and so on). Empirical experience shows that in their effort to make
a project proceed governments frequently provide subsidies to inves-
tors and take on project risks themselves rather than simply creating
an environment conducive to private sector investments. In short,
governments tend to engage in activities which they seek to avoid in
the first place through the conception of the BOT mode of privatisa-
tion.
A particular complexity which differentiates BOT schemes from
other forms of privatisation relates to financing. BOTs usually involve
project-finance methods. This in turn entails difficult risk-manage-
ment techniques which are sorely inadequate in developing country
environments. The result is that increasingly, because commercial
banks are wary of such projects, the lion's share of financingis coming
from foreign governments through their export credit agencies and
foreign investment insurance corporations. This raises the unexplored
question of the relationship of the foreign government-owned export
credit agencies, which are investing in and lending to BOT projects,
to the recipient country governments which offer the BOT projects for
bidding and establish the environment for the investments. Is this a
new form of essentially government-to-government financing? Sec-
ondly, one has reason to suspect that the goals of the principal project
participants may be to sell equipment and services, rather than to
develop and manage infrastructure for the recipient countries in the
long run.
Beyond these problems, there is the question of lost opportunity.
Because of the foregoing difficulties, BOT projects are usually long in
gestation. This defeats the goal of the expeditious provision of
urgently needed services or facilities which justifies the use of BOT in
the first place. In many cases, projects never proceed to the physical
development stage. The result is a considerable loss of both time and
205
money, and an often significant diminution of the theoretical advan-

tage of the BOT concept.
More broadly, these issues raise a question as to whether infra-
structure can be truly and successfully privatised on a fully commer-
cial basis. The BOT process, in requiring the private sector to take
long-term risks for purely commercial gain, is in some respects
denying the non-commercial goals and benefits which traditionally
have driven governments to develop infrastructural facilities. The
apparent need for governments to continue providing subsidies and
accepting financial risk to induce private investment in BOT projects
suggests this element is still strongly present, and impinges on the
goals of privatisation. This is significant in the overall debates over
privatisation and the nature of public and private interests in
infrastructural development. While a substantial body of literature has
been produced on privatisation since the 1980s, little has been directed
towards the BOT method. Most attention has gone towards state asset
sell-offs, corporatisation of SOEs, and issues of regulation, with
BOTs being generally treated as an extension of this. However,
experience suggests that the BOT process is of a very different order
and requires more direct study and assessment.
There is adequate evidence in the world that some concessionised
infrastructural projects can work. However, the severe financial
problems of the world's largest BOT project, the Eurotunnel, demon-
strates the difficulty of implementing the concept even in a mature
environment, where investors and financial institutions are able to
absorb the problems. In Asia, the experience so far suggests that the
costs and difficulties of achieving the goals of BOT privatisation in a
developing country might very well outweigh the promised benefits.
One economist has relabelled the concept "build-operate-litigate."2
Cases of the successful use of BOT and the various measures of
success must be contrasted with the significant number of projects that
has never got off the ground as well as those which, once under way,
have become political and financial liabilities for the governments
concerned.
In the first part of this article, I shall describe the dynamics which
brought about the turn to BOT-type privatisation in the late 1980s in
Asia, and then portray the important components of a BOT project,
206
Build-Operate-Transfer Privatisation Process in Asia
drawing attention to its complexities and potential problems. In the

latter part, I shall give a number of examples from the region. The first
set of examples shows the particular circumstances and ingredients
which made a handful of BOT projects successful. The second and
larger set of examples demonstrates, by contrast, the greater frequency
and commonality of governments' inability to achieve their aims
through the BOT projects. The focus of my discussion will be on road,
power, mass transit, and port developments. Telecommunications are
deliberately avoided, because the fairly uniform success worldwide of
BOT projects in this area indicates significantly different dynamics at
work in that sector.3
Motivations for BOT Privatisation
Historically, infrastructural development in Asia has been initiated,

financed, and managed by the government. Criteria for determining
projects comprised various social, political, and economic develop-
ment goals; rarely was financial or commercial rate of return aprimary
consideration. Project finance and risks were directly undertaken by
the government, and an implementing state agency or enterprise
would contract out to the private sector (or another SOE) for supply
and construction. For these suppliers and builders, the principal risk
was simply the government's ability to pay. This was usually deter-
mined before the launch of a large infrastructural project.
The main sources of financing in this process were government tax
revenues and state-guaranteed borrowings, including both official
development loans and commercial financing.4 During the 1980s,
bilateral and multilateral development financing (mostly concessional)
rose sharply in importance for the building of infrastructure, compared
with publicly guaranteed commercial borrowings.5 Soft bilateral and
multilateral loans were less costly, and had longer maturities, for
borrowers. In addition, the lenders' deeper involvement in the devel-
opment stage was seen as enhancing the efficiency and quality of the
projects.
The best illustration of this is the relatively seamless development
of infrastructural projects under the aegis of the Japanese govern-
ment's Overseas Economic Cooperation Fund (OECF). The OECF
207
was the largest single source of foreign loans to many governments in

Southeast Asia over the past two decades.6 OECF lent specifically in
yen at particularly attractive terms, even in comparison to World Bank
and other concessional lenders: typically OECF offered thirty-year
maturity, with a ten-year grace period, and at an interest rate of 2-3 per
cent. Although they were often extended in annual lump sums, OECF
loans were allocated to a specific list of projects predetermined by the
lender and the recipient government, usually based on project priority
and "readiness." The largest portion of OECF funds went to large
infrastructural projects.7
As a matter of policy Tokyo tied these loans to the use of Japanese
consultants and contractors for project design and construction (though
local firms were often employed as subordinate partners).8 This
method reduced project completion risk as it ensured that projects
would be completed on time, uniformly to relatively high Japanese
standards, and within budget. Such an arrangement ostensibly solved
the problems which frequently confronted large infrastructural projects
funded by other bilateral/multilateral concessional lenders, where
supervisory and accountability functions were not as strong and where
projects frequently degenerated into politicised contracting and rent-
seeking controversies. With project completion risk minimised, the
remaining issue was the recipient government's ability to repay the
loans. As in most cases the government was a developing country's
most credit-worthy borrower, this risk would have been assessed at the
outset of the process. Additionally, the process was driven by the
belief that infrastructural development was a key component leading
to overall economic development, and thus would ultimately enhance
the government's capacity to make repayments.
Under this format the commercial aspects of the operation of the
facility were of minimal consideration. User tariffs, if implemented,
were first based on the marginal cost-pricing system, usually focusing
on the short-run marginal costs: user levies were calculated on the
basis of the minimum that would sustain operating costs for such
components of the facility as fuels (in the case of power plants), labour,
and maintenance. Frequently the long-term costs of capital were
excluded from this arrangement, as they were absorbed by central
government budgets. The second important factor is whatever user
208
Budd-Operate-Transfer Privatisation Process in Asia
charges that were imposed had to be politically, economically, and

socially acceptable.9
By the mid-1980s, however, developing Asia was finding it
increasingly difficult financially to continue this method of
infrastructural development. A regional recession forced govern-
ments to adopt a more conservative stance in relation to foreign debt
and current budget imbalances. This led to an examination of other
options for financing and developing high-cost infrastructural provi-
sions, including reviewing the inefficiencies of the government's
dominant role in infrastructural development and management.10
This situation was compounded by the unexpected steep revalua-
tion of the Japanese yen. This had two important effects. The first was
that it ignited a mass move by Japanese industries to rebase production
facilities offshore, mostly to China and Southeast Asia. This was
followed by South Korean, Hong Kong, and Taiwanese industries,
which were also hit by currency appreciations, severe inflation, and a
tight labour market. This put pressure on developing Asia to improve
infrastructural facilities, as an adequate physical infrastructure was
seen by the East Asian investors as an important factor in their choice
of a location for their projects. Conversely, recipient countries also
came to link infrastructural development with their ability to attract
foreign investment and sustain economic growth.
The incoming investment stimulated strong economic growth,
especially in export industries, resulting in an acceleration in demand
for more infrastructural services and facilities. In most countries the
state sector was seen as neither financially nor managerially able to
meet the rise in demand. Even Thailand's respected power monopoly,
the Electricity Generating Authority of Thailand (EG AT), which had
a high capacity for self-financing and a respectable record in satisfying
demands, was seen to be incapable of keeping up on its own with
Thailand's 15 per cent per annum rise in electricity consumption. In
extreme cases, such as electric power generation and telecommunica-
tions services in the Philippines and Indonesia, the inability to meet
pent-up demand translated into lost opportunities as direct investors
went elsewhere.
The second effect of the climb of the Japanese yen was a sharp rise
in the cost of servicing yen-based debt, such as that from OECF
209
lending. Most of the Asian countries which had benefited greatly from
cheap OECF loans also tied their currencies to the American dollar.
Just at the time when developing Asia required greater (governmental)
resources to enhance economic expansion, their financing costs on old
debt shot up.11
In sum, the economic boom that started in 1987 had placed a huge
demand for the expansion and improvement of the physical and
economic infrastructure in Asia. Governments in the region recog-
nised this but were often unable to respond adequately. Average East
Asian investment in infrastructural development lose from 3.6 per
cent of the Gross Domestic Product in the 1970s to 4.6 per cent in the
1980s. The pace quickened with total investment rising 40 per cent in
a two-year period, from US$39.6 billion in 1990 to US$55.1 billion in
1992, Yet the latter figure still only constituted 4.7 per cent of the
Gross Domestic Product on average. In East Asia, the World Bank
projects, infrastructural investment over the period from 1995 to 2004
will need to reach at least 6.5 per cent of the Gross Domestic Product,
or US$130 billion in 2000 alone.12
In order to meet this demand, governments have turned to priva-
tisation. Where in the West the privatisation trend has at least been
partially rooted in ideological beliefs (for instance, that of Margaret
Thatcher's government in Britain), in Asia, generally speaking, it has
been chosen for more fundamental functional goals. These include:
the rapid and efficient satisfaction of demand for infrastructural
services, in order to sustain economic growth; the improvement in the
implementation and management of infrastructural development so as
to maximise the return on investment and reduce the fiscal pressures
on government; the restriction of the growth of the public bureaucracy
and the SOEs; the inculcation into the public ol the "user-pays"
principle, so that infrastructural facilities can become more self-
financing.
Common options for privatisation include the corporatisation of
S OEs; making already-corporatised SOEs public; and the sale or lease
of state infrastructural assets directly to the private sector for purposes
of operation and expansion. For new infrastructural projects, the BOT
method has been a favourite course of action. BOT has several
attractive features from the government's point of view. First, it is the
210
private sector sponsors of the project which bear the financial burden
of development. Second, the scheme is driven by commercial incen-
tives. Hence, the sponsors tend to undertake the quickest and most
efficient way of installing the infrastructural facilities and to manage
them better. Third, the scheme enables the government to achieve its
goals of infrastructural development without expanding the state
sector. And finally, taxes and/or royalties arising from the privatisa-
tion process, as well as the improvement in operating efficiency
generally, can help increase government's income from the develop-
ment of infrastructure.
Across Asia the BOT concept has become hugely popular, espe-
cially in capital-stricken countries. In China and the Philippines,
initial BOT projects proved to be good ways of dealing with emer-
gency situations. Thailand, Malaysia, and Indonesia, and in their wake
Pakistan, India, and others have also latched onto the concept. Even in
some of the region's least developed areas, such as China's Yunnan
province, Vietnam, Cambodia, Laos, and Myanmar, leaders spoke
avidly, if somewhat naively, of developing their infrastructure through
BOT projects.13 The character of this enthusiasm, however, was not to
see BOT development as part of a long-term process requiring
systemic changes, but instead as a one-off, quick-fix solution to
infrastructural bottlenecks. As for the long term, few governments
seem to accept the principle of private infrastructure.
These countries have been encouraged by multilateral organisa-
tions like the World Bank, the International Finance Corporation, the
Asian Development Bank, bilateral aid donors, and private sector
finance institutions, all of which from the late 1980s have begun to
make more capital available for private infrastructural development.
For example, the World Bank, the Export Import Bank of Japan, and
the governments of France, Italy, and the United States of America
joined together to form the Private Sector Energy Development Fund
to help finance private power BOT projects. Perhaps more impor-
tantly, bilateral aid donors have also increased their own support, both
loan- and equity-wise, through such state-backed export credit agen-
cies as the United States Export Import Bank and the KFW Bank of
Germany. This reflects national initiatives to export equipment and
services to rapidly growing economies in Asia, and the focus has been
211
on BOT programmes. Commercial banks too increased their own

funding available for lending to private infrastructural development,
and several privately managed Asian funds have been assembled to
seek investment opportunities in Asia, such as the US$1.1 billion AIG
Asian Infrastructural Fund, backed by the AIG Insurance Group and
the Government of Singapore Investment Corporation; and the US$ 1
billion Asia Infrastructural Fund, sponsored by the Peregrine Group,
the Soros Group, the Asian Development Bank, and the International
Finance Corporation.
The Structure of BOT Projects
BOT is not a new form, though codifying it as such is relatively recent

and can be attributed to Turgut Ozal of Turkey in the 1980s.
Concessionised infrastructural development was employed for projects
such as a 1782 water system in Paris and the Suez Canal which opened
in 1869.14 Since the early 1980s the concept has been applied to power
generation, telecommunications, sewage and water, bridges and toll
roads, and other facilities in the United States of America, England,
and Latin America. The Anglo-French channel tunnel, the Eurotunnel,
built in the early 1990s, became probably the largest ever BOT project.
This experience demonstrates the feasibility of the concept. But the
Eurotunnel project also reflects the complexity and dangers inherent
in the BOT approach: the project has been a financial disaster for
investors, sponsors, and bankers, requiring long and costly restructur-
ing. In Asia the concept has been present as well. In 1970 it was
proposed in Thailand for a new airport, with American sponsors, until
allegations of corruption led to the project's cancellation.15 More
importantly, private concessionised infrastructure lias long been in
place in Hong Kong: the private China Light and Power has been
providing electricity since early this century, and more recent success-
ful projects including the cross-harbour tunnels.
In principle a BOT concession provides a transfer of right to the
sponsor (the leading or principle investor) to invest, build, manage,
and maintain an infrastructural facility, as well as to levy user charges
on that facility, for the period of the concession. Concessions can be
granted for any period, with power-generating facilities often in the
212
Dudd-Operate-Transfer Privatisation Process in Asia
ten-to-twenty year range, toll roads in the twenty-to thirty-year range,

and the Eurotunnel, fifty-five years. This structure is not dissimilar to
the well-established "production-sharing contract concession" model
of the petroleum industry. In the latter case, an oil company sponsor
receives rights from a government to explore and develop hydrocar-
bon reserves, and then to reap the benefits of the free market sale of any
oil and gas discovered.16
There are several variations of the BOT format, and the most
significant difference among them lies in the issue of ownership of the
infrastructural facilities and equipment. The "build-own-operate-
transfer" (BOOT) scheme refers to an arrangement whereby the
sponsor possesses ownership of the facility during the operating
period of the concession, only at the end of which is ownership (as well
as operating and financial control) turned over to the state. On the other
hand, BTO (build-transfer-operate) refers to a concession where
ownership of the facility is transferred to the government upon
completion of construction and/or installation. For the remaining
period of the concession, the sponsor retains the right to operate the
facility and reap the financial rewards.
The difference can be important. In a BOOT programme, the
facility itself can be collateralised by lenders to the project, so that
even if the facility is immovable, they have a stronger ownership-
based claim to the revenues from it should project sponsors and
operators face financial difficulty. In a BTO project, risk increases
because the facility is not available as collateral. The project is
therefore more heavily dependent on the strength of the concession
contract in providing and guaranteeing access to project revenues as
well as the general stability of the operating environment. Experience
has shown that a BTO arrangement often represents the standing,
usually statutory claim by the state, or a state-owned enterprise, on
facility ownership rights, which can extend to or involve the operation
and use of the facility (such as control over staffing and handling of
tariff receipts). Such a claim represents implicit and explicit barriers
and resistance to the privatisation process, and frequently results in
political challenges to a BOT project.
Another version is the "build-own-operate" (BOO) programme.
In this the time limit on the concession is eliminated, providing private
213
sponsors the ownership and operation rights to the facility in perpetu-

ity. Yet other BOT variants include aspects of revenue-sharing with
the government; government-provided subsidies and support to en-
hance commercial viability; and the sponsors leasing or contracting
existing facilities, often with the responsibility to rehabilitate and
expand them.
The important identifying criterion of a BOT is that it is a project
that can be economically and operationally "ring-fenced." That is, it
can be isolated from related operations so that its revenue streams and
cost basis can be clearly identified and assessed. This is crucial not
only for determining the commercial viability of a project but also for
its successful launching and management.
Beyond this, from the standpoint of sponsors and investors, there
are several aspects which are essential to making a BOT project
successful. These include: a recognition by the government, in all its
parts, and the public generally of the legitimacy of private operation
of infrastructural facilities; a recognition of the usei-pays principle as
central to the success of a BOT project; a fair and attractive rate of
return for sponsors; the enforceability of the concession contract,
including a transparent regulatory environment and a suitably devel-
oped legal system that assures fair dispute resolution; and assurances
of payment in cases where the principal buyer of the project's service
or product is a state-owned-enterprise, as in independent electric-
power producer BOTs.
Secondary requirements to a project's success include exclusivity,
assured convertibility or repatriation of profits, availability of exit
paths for sponsors and investors, and clear avenues of conflict resolu-
tion.
Since the mid-1980s when Asian countries began to experiment
with the BOT concept, it has not been difficult for governments and
sponsors to enter into negotiations for a BOT concession based on
mutually agreed goals which satisfy both sides. On the other hand,
finalising a strongly-structured, bankable concession contract which
adheres to the same goals throughout the lifetime of the concession has
proven extremely difficult. Governments and private sponsors main-
tain different views on what constitutes risk and w hat is fair reward.
The number of project participants directly dependent upon the BOT
214
concession contract is usually large, and harmonising their interests

and assuaging their perceptions of risk is a very complex task. Thus
assembling a legally and financially viable contract which satisfies all
participants can be very time-consuming and politically contentious,
and it is at this point that many prospective BOT projects fall apart.
This complexity, illustrated by the matrix of mutually dependent
contractual agreements that must be harmonised, is in sharp contrast
to the simplicity of the traditional, fairly seamless process of govern-
ment-driven OECF funded-projects (see Figure 1).
In the BOT matrix, the project company is built upon the conces-
sion contract with the government. All other participants have con-
tractual agreements with the project company and these agreements
rely on the strength and enforceability of the concession contract. The
presence and agreement of each of the other participants is vital to
proceeding with theproject. To balance the interests of the participants
is particularly difficult, because often they pursue competing goals.
An alteration in any of the agreements or the operating environment
can affect the strength and viability of the project company, especially
if it negatively impacts on the project's cash flow, and can thus affect
every other agreement in the matrix.
The most vulnerable part of the matrix, and thus the hardest to
satisfy to complete a concession deal, is that involving the financiers.
Their role in taking essentially large private-sector risk gives the BOT
programme a dimension which more traditionally-financed
infrastructural projects do not involve. This is not a significant
ingredient in other methods of privatisation, and failure by govern-
ments to recognise this is, along with the user-pays challenge, one of
the most formidable barriers to successful BOT programme imple-
mentation.
BOT schemes are usually funded on a project finance basis. That
is, financing is based mainly or wholly on the assets and cash flows of
the project, with limited or no recourse to collateral external to the
project. The key aspects of project finance then are identifying and
managing all potential risks which would threaten access to assets and
cash flows. The techniques of risk management in project finance are
well developed. But they face particular challenge in a developing
country with a weak legal system, a shaky financial system (thus
215
TRADITIONAL INFRASTRUCTURAL PROJECT,

BILATERAL ODA (OECF MODEL)
J a p a n e s e Government:
Funding
OECF
Irrplementing Agency:
State-owned Enterprise
Turnkey Contractors
BOT INFRASTRUCTURE PROJECT MATRIX
Governmsnt
State-owned Enterprise
Operators Suppliers
^ \
Sponsors PROJECT COMPANY
r \
Investors
Insurers 1 /
/
Financiers (Offtake buyers)
(Fuel suppliers)
Figure 1 A Comparison of Traditional and BOT Infrastructural Projects
216
requiring substantial foreign capital for the project), a lack of policy

consensus on privatisation, and potential political instability. Satisfy-
ing the requirements of domestic financiers in a BOT programme can
be time-consuming; in the case where foreign capital participation is
high, a tougher examination of the project's potential and its risks, and
a more strenuous process of due diligence, are required. It involves, for
example, matching government's desires for private sponsors and
their bankers to accept a twenty-to-thirty-year risk on a BOT project
and commercial banks' willingness to provide finance on an eight-to-
twelve-year basis only.
There are numerous examples of this difficulty. It took more than
three years to complete the financing of Pakistan's US$ 1.8 billion Hub
Power BOT project. That followed nearly seven years of project
development. In Thailand, the inability to complete financing contrib-
uted to the collapse of the first Bangkok skytrain project in 1992, after
three years of project development and contract negotiations.17 In
Laos, the Nam Theun II hydroelectric dam developed by a French-
Australian consortium was still unable to complete its financing in late
1996, two years after the consortium won the contract for the project.
Beyond the problem of finance, Figure 1 only partially depicts the
complexities of structuring a BOT project. Various participants -
bankers, suppliers, contractors, and managers - have multiple roles in
the project, especially when they double as shareholders. This can
place participants at odds with one another, even to the extent of
undermining the goals of the privatisation arrangement. For instance,
it is common that principal sponsors are also suppliers of equipment
or services, like construction contracting, for the project. As such they
are often less than committed when compared to sponsors driven by
long-term income prospects. In the case of the Hong Kong construc-
tion firm Hopewell Holdings' pioneering Shajiao B power plant in
China, the primary interest appeared to be to recover capital costs as
the construction contractor to the project rather than to take a long-
term risk on the income from power sales. Likewise, an important
motivating factor for the American natural gas company Enron to
develop the Dabhol power plant project in Western India was to secure
a long-term sales outlet for natural gas which the company had
discovered in the Middle East. Frequently, power generation equip-
217
ment suppliers take significant equity in independent power produc-

ing BOT projects.
Project bankers can also have multiple roles and goals. Lead
bankers to a BOT project often have a great incentive to complete the
deal as advisers to the project. Because fees for project finance advice
and conclusion of the deal can easily run in tens of million of US
dollars, this role can be far more lucrative to the bank than the more
risk-laden long-term project loan. The desire to structure a strong deal
can therefore be modified by a greater motivation to simply complete
the deal.
A further complexity of interests can be seen by disaggregating the
sources of finance for projects. Both bankers and investors can
comprise various foreign and local commercial institutes, and, in-
creasingly, bilateral and multilateral institutions such as the Asian
Development Bank, the International Finance Corporation, Japan's
OECF, and various industrialised country export credit and related
insurance agencies have come to play a part in the financing process.
Each player maintains a different profile for its interests and a different
perception of the risks involved.
The project matrix is particularly sensitive to the impact of
political change, making the role of the government and its agents
crucial. By nature, whether in the public or private sector, big-ticket
infrastructural projects are highly political; BOT projects seem to be
even more so. They involve changing the pattern of infrastructural
consumption, especially in instituting user-pays principles. Anything
like this can create a contentious political issue that can evoke
ideological battles over privatisation and disputes over fair user rates
for infrastructural facilities.
Privatisation necessarily reduces or removes control over
infrastructural development and management from bureaucrats, state-
owned-enterprises, and other political players. State-owned-enter-
prises, which in many countries can be important centres of political
power, may in particular feel intensely threatened by privatisation, and
their resistance has been known to create political instability.18 For
instance, national unions in India instigated court challenges to, and
organised street protests against, the award of BOT concessions for
telecommunications development. In China, ministries with power
218
over electricity generation fought the development of BOT power

projects. In Thailand, the state power monopoly successfully delayed
privatisation for six years, despite having entered into government-
forced negotiations with prospective independent BOT power pro-
ducers.
In addition to popular and bureaucratic resistance to BOT pro-
grammes, the money involved in large infrastructural projects often
makes them ostentible targets of economic competition between
politically powerful private sector participants, bureaucrats, and poli-
ticians. One Hong Kong-based international power company repre-
sentative said in 1995, "In virtually every country in the region, private
power has been leaped upon as a means of enrichment."19 The
competition for benefits in infrastructural development can affect the
stance of political actors and leaders, and push them to move in
directions with possibly adverse consequences for a project. In the
case of wholesale changes of government - as occurred in the Dabhol
power plant case in 1995 - privatisation policy reversals, in response
to popular, bureaucratic, and political or rent-seeker sentiments, can
be real threats to projects.20
The ability of these interests to damage and destabilise a project,
or prevent it from even getting started, is particularly pronounced and
common when a country's very first BOT project is a large one. A
large project (and projects valued at more than US$1 billion are
increasingly common) creates an overly weighty test of the commer-
cial, political, and legal environment: the higher the cost, the more
risks there are, and the more participants are involved in sharing the
risk. Creating a consensus to supporting the BOT goals is especially
difficult. Given the amount of capital involved, every interest, chal-
lenge, and risk becomes magnified.
Successful BOT Projects
The complexity described in the foregoing section places the onus on

project sponsors and governments to focus on their basic goals -
obtaining infrastructure which is privately financed and with greater
efficiency - and attempt to build a project structure that adequately
mitigates the risks of not attaining those goals. Several BOT projects
demonstrate the success of this.
219
China's Shajiao B Power Plant Project
Located in the Hong Kong border area of China's Guangdong

province, the US$550 million, 700 megawatt Shajiao B project was
developing Asia's first large independent power producer (IPP) pro-
gramme. In 1984 the local government of the fast-growing area,
realising it urgently needed better power generation capacity, ac-
cepted a proposal by Hong Kong construction firm Hopewell Hold-
ings to develop a plant on a BOT basis.21
Risks were high because the BOT structure was very new to Asia
and China had no policy on foreign investment into infrastructural
development, which was controlled by the country's state-owned
enterprises. The project proceeded on the basis of Hopewell founder
and chief executive Gordon Wu's good relations with government
officials and state enterprises in both Beijing and Guangdong. In
addition, the government shouldered a significant portion of the risk,
while offering disproportional rewards to Hopewell. A government-
owned investment unit became a significant equity partner, and
another state-owned entity guaranteed power purchase payments and
foreign exchange risks. Meanwhile Hopewell, which was the major
contractor to the project as well, arranged that it (as equity partner)
would be paid a large cash bonus and preferential share of tariff
receipts (compared to other investors) for beating the construction
deadline. This amounted to more than US$50 million.22 These pay-
ments ensured that, for Hopewell, Shajiao B would make an estimated
25-30 per cent return on equity, thus reducing its capital exposure very
quickly. In essence, China's acceptance of a very high level of
profitability and very early payback for the sponsors, in return for the
latter's commitment to provide new power capacity rapidly, made the
project work.
Philippine's Private Power Project
Faced with extensive power blackouts which made investors bypass

the country, and bound by severe financial difficulties, the govern-
ment of the Philippines found in the late 1980s that it would be easier
to focus on the basic essentials that would attract private investment
220
into BOT power generation plants. As a result, the country has had the
most successful independent power producing BOT programme in the
region. In 1987 the government declared policy support for private
power BOT projects and ended the monopoly of the National Power
Corporation, Napocor. This created a strong legal base for BOOT
projects (as opposed to BTO) and increased confidence among inves-
tors. The government's ability to take these steps demonstrated the
high degree of consensus in the public and private sectors in the
country over the basic need to obtain more power, whatever the costs.
From there, success was based on making the procurement of new
generating capacity, through private investment, virtually the sole aim
of the BOT programme. Regarding pricing of the power, the govern-
ment simply required that it be reasonable, so that it would be cheaper
than the costs of industrial consumers supplying their own. This then
allowed negotiations to concentrate on what the sponsors and their
financiers would require in terms of benefits to follow through with
their investment. Recognising the perceived high-risk environment of
the Philippines which might discourage investors, Manila was com-
mitted to guaranteeing Napocor's payments as purchaser of the power,
and also guaranteeing against foreign exchange risk. Only later, when
the environment for BOT projects was proven to be stable, did the
government begin to address the issue of competitive pricing on top of
supply. At the beginning, the larger projects were also conducted on
a negotiated basis. But by 1994, Manila was able to regularise the
process by holding competitive bids for new plants.
Yet another important aspect of the programme was the benefits
of starting with small BOT projects. As in the case of China, Hopewell
was the first foreign company to venture into this area in the Philip-
pines. But in southern China, Hopewell already had well-developed
political and business relations with the local government through
engagement in previous projects. This encouraged the company to
proceed with the large Shajiao plant. A newcomer into the Philippines,
the company was more cautious, first negotiating in 1988 a concession
for a 210 megawatt plant, Navotas. While that was under develop-
ment, in 1990 Hopewell and other sponsors also installed several small
barge-mounted power generating plants to sell power to Napocor. All
this helped to prepare the political and commercial environment for
221
later, larger projects. The Navotas contract became, in late 1990, the
partial basis for the country's progressive BOT law.
Thailand's Second Stage Expressway (SSE) Project
Although most often cited as an example of the dangers of BOT

projects, Bangkok Expressway Company Ltd. (BECL)'s SSE project
started and ended reasonably successfully. While the substantial
problems in the process (described below) cannot be ignored, the
elements of success are indisputable.
The SSE is a US$1.1 billion, thirty-two kilometre inner-city toll
road. The thirty-year BOT concession was awarded to a Japanese
construction company, Kumagai Gumi, in 1988, in a detailed conces-
sion contract with the state agency, the Expressway and Rapid Transit
Agency of Thailand (ETA), that explicitly declared the principles of
the sponsor undertaking the costs of building the road in exchange for
earning revenues on predetermined user tariffs. With a bidding proc-
ess set on clear goals and an apparent general support for the BOT
approach, it took only twelve months for the final concession contract
to be concluded. Financing was successfully arranged within another
year.
In 1993, BECL completed the main portion of the road on
schedule, and when the SSE opened, income flows from users more
than validated the projections made at the beginning: the road was
profitable and self-funding. The company proved that the private
sector could far outperform ETA in construction time and costs,
without recourse to government financing or equity. In 1995 BECL
was successfully floated on the stock exchange of Thailand.
Thailand's Power Projects
In 1995 Thailand's EGAT issued a call for bids for independent power
producers to develop a series of BOT electricity generation projects.
The aim of the programme was to acquire generation capacity of three
to five thousand megawatts spread over several separate plant conces-
sions, under different sponsors or investors. The terms of reference
were seen by several bidders to be among the most progressive and
222
well-focused in the region. The call attracted more than thirty propos-
als. With the advice of a team of independent experts, and on the basis
of a clear and transparent point system, the bids were to be weighed
and evaluated. Given that Thailand's energy supplies were adequate,
but that over the long-term there was a perceived need for greater
efficiency and less reliance on government investment and manage-
ment, the focus of the tender was on getting reliable power supplies at
the best possible price. Beyond that, plant locations, design, and fuel
were left to the bidders, though in assigning point values, the govern-
ment indicated clear if not absolute preferences.
The result was the large number of bids, offering competitively
low power sales prices which surprised and pleased both those
conducting the process and the bidders themselves.23 The terms of
reference were announced in early 1995, and by the end of 1996
bidders were close to finalising concession negotiations and preparing
for financing. The process could have gone faster, according to those
weighing the bids, had there not been so many attractive and competi-
tive proposals. The results suggested that Thailand could achieve a
fairly quick and efficient way of creating new power capacity - at not
just one but several plants - at internationally competitive sales prices.
Such success was rooted in the long process of consensus-building
among participants and the government at large, and strengthened by
the openness of the terms and the decision-making process. This
helped protect the programme from inevitable challenge by vested
political and business interests: on two occasions attempts by very
senior politicians and their business cronies to hijack the process were
shrugged off.24
However, the process was not flawless. An important consensus
problem which cropped up suggests just how hard it is to establish a
strong BOT programme. For environmental reasons the government
had expressed a preference for natural-gas-fuelled plants, without
ruling out coal or oil. (Gas plants simply earned slightly higher points
in the fuel category). However, Thailand's monopoly gas distributor,
the state-owned Petroleum Authority of Thailand, neither had firm gas
reserves or gas acquisition plans, nor standard sales contracts to be
able to commit supplies to the bidders. This left gas-plant bidders in
a situation wherein they were unable to certify their fuel supply source
223
with the bid committee. This in turn made them uncompetitive. The
consequence was that non-gas plants came to lead the field.25
Unsuccessful BOT Projects
The successful projects described above appear to demonstrate the

ease of achieving desired results, principally by keeping a focus on the
BOT programme's core goals. However, a greater number of projects
have failed to achieve their goals. In those cases, one can discern the
recurrent patterns of undue delay in project completion, of govern-
ments absorbing project risks and expenses, and of projects being
aborted altogether. Generally, the problems which can be identified
fall into four broader categories: a lack of consensus within the
government and society over privatisation in general or a project in
particular; the inability of governments to remain focused on their
basic goals in privatisation; the tendency for governments to enter into
agreements with sponsors without detailed study or a transparent,
competitive bidding process; and the willingness of governments to
absorb costs and risks which should be assumed by private sector
sponsors.
These problems are by no means mutually exclusive. Some of the
examples discussed below illustrate the presence of more than one of
these problems. In the case of one, the Indonesian Paiton project, all
four problems can be detected.
Lack of consensus within the recipient government andsociety leads

to lengthy delays in project launch and implementation, leaving the
BOT projects structurally weak and unduly risky
1. Pakistan's Hub Power Project
Initiated in 1985, Hub is a US$1.8 billion, 1,300 megawatt oil-fired

power generation project that was initiated on the basis of strong
encouragement by the World Bank. It was Pakistan's first BOT
project. Given the country's chronic political instability, weak fi-
nances, and inadequate legal system, the environment was not exactly
conducive to such a large project. A series of conflicts, indicating a
224
lack of consensus on the project's goals, and how they could be

achieved, meant a delay of nine years before the concession and its
financing could be arranged and construction start. The first of the four
power generation units only began operation in mid-1996.26
2. Thailand's Mass Transit System Project
In 1986 the Thai cabinet undertook to develop a Bangkok urban mass

transit system under the BOT concept. The result of unresolved
competition between bureaucrats and politicians was that by 1992
three separate, competing systems had been awarded on a BOT basis,
each with its own bureaucratic and political backers, and each reduc-
ing the commercial viability of the other.27 Because of this, the first,
awarded in 1988, dropped out in 1991, and the government moved to
find a new sponsor. Meanwhile, the lack of detailed plans and
contracts on the other two systems, and sustained opposition from
supporters of competing systems, made them very difficult to finance.
By mid-1996, when all three systems were supposed to have been
operating - and when traffic congestion had become a serious eco-
nomic problem - the two projects which survived were each less than
20 per cent completed and were still facing financing difficulties. One
of the projects (Hopewell's) was looking for a buyer. Meanwhile, the
government had moved ahead with a new plan for the first link of a
subway that would be paid for by the government under traditional
terms, partially financed by the OECF.
3. India's Telecommunications and Power Project
In 1991, India's federal government in Delhi established a policy to

implement BOT programmes in the power and telecommunications
sectors, among others. In 1992 the first "fast track" power projects
were awarded in principle. However, the projects were slowed down
immensely by resistance from state-owned enterprises and the state
governments, at the level of which projects would be awarded and
supervised. In 1995, for instance, telecommunications workers in
several states lodged court challenges to BOT privatisation in that
sector. Also in 1995, a change in government in the Maharashtra state
225
led to the internationally publicised freezing of the US$920 million

first-stage 695 megawatt Dabhol BOT power plant which was already
under construction. In mid-1996, contract conflicts and court chal-
lenges continued to delay the plant. Similar bureaucratic and state-
owned enterprise resistance, among other problems, delayed the
construction of a US$ 1.1 billion power plant sponsored by Cogentrix
Energy Inc. and China Light and Power in Mangalore.28
4. China's Power Project
In contrast to India, China's provinces initiated private power BOT

projects with foreign sponsors in the early 1990s, in the wake of the
success of the Hopewell Shajiao B project. After scores of projects
went into negotiations around the country, Beijing registered its
disagreement with the fundamentals of the BOT process, in part by
announcing a cap on the level of profits that could be reaped from
privatised projects. This halted the whole BOT process because
Beijing retained approval powers on foreign investment projects
worth more than US$30 million. The central government's objections
reflected in part disagreements over whether the state or private sector
should control power production; and in the case of the latter, which
ministry (industry or electric power) should govern the BOT power
scheme.
5. Thailand's Power Project
The success of Thailand's power BOT programme is noted above.

However, nearly a decade had elapsed from the time the government
first proposed private BOT power projects to the time when the
progressive 1995 programme could be devised. The policy was
strongly resisted by the state power monopoly, the EGAT. Although
officials from the EGAT entered into negotiations with potential
sponsors between 1989 and 1994, including companies from Canada,
France, and Australia, they failed to conclude any agreements. The
potential sponsors believed that the EGAT had deliberately set forth
unacceptable terms.29 Unlike China, Pakistan, or Indonesia, Thailand
was fortunate that the EGAT was itself able to, barely, keep up with
226
rising power demand on a fairly high self-financing basis, so that the

ten years of delay in the implementation of the BOT policy did not
have significantly adverse affects on the country.
6. Indonesia's Power Project
Lack of consensus has not prevented Indonesian BOT power genera-

tion projects from going ahead. It has however left a looming struc-
tural problem which renders them unstable. The sole buyer and
distributor of power generated by private power producers is the state
power agency, Perusahaan Listrik Negara (PLN). PLN, according to
various sources, was opposed to the BOT process and was only
permitted a peripheral role in negotiations that brought about several
small gas-fired plants (related to oil company natural gas develop-
ments) and the P.T. Paiton Energy Co., the first large BOT project.
The problem is not only attitudinal, but also structural. PLN is not
able on a financially independent basis to expand its power generation
capacity or extend its very weak distribution networks. The new
private power projects only exacerbate the problem. PLN would be
forced to buy power from Paiton at a rate of 5-10 per cent higher than
its own power rates for consumers, when the plant is completed in
1998. In effect, this means that the government, through PLN, would
be subsidising Paiton, thus negating the primary objective of the BOT
process. Meanwhile, the power PLN receives from the private gas-
fired plants on a take-or-pay basis cannot all be sold because of
bottlenecks in the distribution network.30
The result of such a situation is that, on April 21, 1995, when
Paiton was to sign its financing package with its banks, PLN unilater-
ally announced the cancellation of their power purchase agreement
with the concession company. The move would have effectively
nullified the entire deal, had senior government officials not inter-
vened to overrule PLN's action. According to a Jakarta-based power
industry source who had been involved in the project, the act demon-
strated the extremely fragile nature of the Paiton project.31
7. Malaysia's Power Project
In Malaysia power generation BOT projects were also built upon a

227
weak industrial structure. In 1992 the government handed out a

number of concessions to separate sponsors, and the state power
monopoly, Tenaga Negara Bhd., had to sign power purchase agree-
ments with all. This accelerated the development of power generation
capacity. But, at the government's order, Tenaga had to pay the private
producers plant-gate prices that were roughly the same as Tenaga's
own sales price to the public, less delivery costs. It meant that
profitable Tenaga was delivering the private power io consumers for
free, and paying the private concessionaires more for the power than
Tenaga's own production costs.32 This became a more significant
problem when national power capacity far outran supply in 1995, due
to expansion by both the private producers and Tenaga. With the
oversupply of power, and its commitment to buy the power of the
independent producers, Tenaga had to take less power from its own
plants. This would effectively further encroach on its own profitability
and create potentially serious conflicts.
Inability to establish or adhere to clear, fundamental BOT goals

leads to lengthy delays in launching a project or programme, less
competitive and more costly services, or missed goals altogether
1. China's Power Project
As noted above, in 1994 China forced dozens of BOT power project

negotiations to a halt by declaring that the rate of return on investment
for independent power producers should be limited to 12 per cent. This
was partly in reaction to reports that China's BOT pioneer Hopewell
Holdings made 25-30 per cent return on its Shajiao B project. China
ostensibly based the 12 per cent figure on its own avoided costs, that
is, the estimated costs for the state to invest and build its own plants.
These estimates would have been highly questionable; few countries
are able to accurately measure avoided cost, particularly centrally-
planned economies such as China.33 Moreover, the 12 per cent figure
hardly took into account the high-risk environment of China. Western
power company officials based in Hong Kong have remarked that,
even in the United States, 16 per cent is considered a fair return. In
China, one argued, the minimum rate of return should be at least 23 per
228
Build-Operate-Transfer Privatisation Process m Asia
cent. In focusing on the return, rather than simply obtaining expanded

and reliable power capacity at the lowest possible price, the Chinese
government made it more difficult for strong and successful projects
to be put in place.
The Paiton project, as mentioned above, carried a very high sales price
for the power produced at the outset (at US 8.6 cents per kilowatt-
hour). The country's second and third BOT projects were awarded at
lower prices, but still much higher than the rate of 5.6 cents per
kilowatt-hour that Thailand received in its competitive bidding proc-
ess. The difference reflects the Indonesian government's inability to
remain focused on obtaining the cheapest and most efficient supply of
power for the country. It had in fact been distracted by many other
issues. For instance, Paiton was required to build various infrastructural
facilities extraneous to the plant's functioning; to use specific contrac-
tors; and to purchase equipment from certain designated companies.
These requirements prevented the sponsor from pursuing the most
efficient development of the plant, thereby forcing it to increase
capital costs by, according to one power sector analyst, at least
US$200 million. This made concession and financing negotiations
more difficult.34 The result was that, to make the project commercially
viable on a BOT basis, the power prices had to be set at an
uncompetitively high level.
3. Thailand's Second Stage Expressway Project
The SSE was a successful BOT project. However, it was nearly

destroyed by a loss of focus on the commercial user-pays principle.
During the construction of the project, the government had an under-
taking to steadily increase the 10 baht (US$0.40) toll on the existing
First Stage Expressway (FSE) in increments, so that when the com-
bined FSE-SSE opened in 1993, the system tolls could be set at the
contracted 30 baht without bringing about a politically risky shock to
users. The 30 baht would be shared on a 66 and 33 per cent basis
between operating company BECL and the concession-granting
agency, the ETA.
229
In the event, the government did not implement the staged toll
increase plan. By the time the system was to start operation in March
1993, the cabinet decided that a sharp increase in the tolls was
unreasonable and could be politically inexpedient. Only a 20 baht toll
was therefore agreed upon. Such a rate would reduce the scheduled
income of both the BECL and the ETA, thus compromising both
organisation's financial viability. (ETA would have lost its ability to
cover its current costs, much less long-term debt and land acquisition
burdens). BECL's bankers reacted by freezing financial disburse-
ments, and the ETA demonstrated that it no longer supported govern-
ment policy or the BECL concession. Thus the unwillingness of the
government to follow through on the user-pays principle caused the
original consensus surrounding the project to break down.
Several months of negotiations were unable to rebuild the consen-
sus, because, according to BECL officials and its bankers, the Thais
could not focus on the fundamentals needed to make the project work.
The BOT matrix could not be restored. Eventually the road was
opened by force by the government (ironically, at the 30 baht toll rate)
and principal sponsor Kumagai Gumi sold its shares to a group of Thai
banks and investors in 1994. The new investors accepted the deal but
only as long as the government abided by the original contract. The
project's subsequent cash flow demonstrated that it had a strong
commercial viability as originally expected.35
4. Indonesia's Toll Road Project
In Indonesia several urban BOT toll roads have been constructed in

Jakarta and in 1995 the government undertook to offer nineteen
segments of proposed toll roads across Java as BOT projects. But the
government has avoided redressing two core issues which have made
the deals and the environment commercially unattractive.
The principal barrier to success is the government's inability to
affirm the user-pays basis of the concessions. By law the setting and
increasing of tolls is a prerogative of the Indonesian President, and the
government has taken the stance that while increases can be promised
in principle, they cannot be contractually guaranteed. This has not
been a problem for the private Jakarta toll roads, which have been built
230
by companies owned and managed by the children of President

Suharto. For the most part, their frequent requests for toll increases
have been granted, though in 1995 a request was met with very rare
public attack in the Indonesian parliament, resulting in a lengthy delay
before the increase was finally granted. This incident serves to
underline the political nature of the detemination of toll rates.
The issue was the main reason why the British company Trafalgar
House spent six years (from 1988 to 1994) trying to negotiate a
concession contract for a rural Java toll road. In the end Trafalgar
accepted the Record of the President's support for existing conces-
sions, and was able to finance their project. However, the six years
spent on negotiating the project were much more than it would have
taken to build the road.
The second issue challenging the government's ability to create
commercially viable concessions is that, for the cross-Java highway
sections, the government insists that land acquisition be pre-funded by
the sponsors, and that the land will remain in state hands.36 Because
land acquisition is a lengthy and unpredictable process, potential
investors in Jakarta consider this requirement as putting project
expenses and risks at an unacceptable level.
5. India's Power Project
Already four years into the negotiation process in 1996, the US$1.1
billion, 1,000 megawatt Cogentrix power project in Mangalore was
being delayed not only by bureaucratic infighting and public resist-
ance, but also by constant attempts on the part of the government to
renegotiate the price and other specifications. After setting specifica-
tions and pricing, and obtaining the sponsors' agreement, the govern-
ment would then alter its position and make the requirements tougher.
It was alternatively willing and unwilling to provide a crucial payment
guarantee on power sale.37 The problems reflected a lack of consensus
within the government on the principal goal of the BOT project which
was simply to obtain privately financed power generation capacity at
a reasonable price. Continued negotiations indicated a new focus on
the appropriate level of profitability for the concession-holders. This
represented a deviation from the original purpose of the use of the BOT
concept in power supply.
231
Lack of transparency, competitive bidding, or detailed planning in

awarding concessions leads to untenable projects, lengthy conflicts,
and missed goals
1. Malaysia's North-South Highway Project
One of Malaysia's first BOT privatisation programmes, the 1,000

kilometre, North-South Highway (the operating company is known as
PLUS or the Projek Lebuhraya Utara Selatan) is widely lauded as a
success. What should be pointed out, however, is that although the
road was indeed completed, the government ended up absorbing much
of the financial costs. The BOT sponsor was to take over and complete
the road, nearly half of which had already been built by a state-owned
enterprise at a cost of three billion ringgit. Despite an open tender for
the project in 1985, it was awarded to the third-runner among the
bidders, a company attached to the ruling political party.38 The two
superior bidders had proposed better terms for the overall cost for
completion, requirements for government financing, required toll
rate, and concession period, demonstrating the original terms of
reference did focus on the fundamental goals of the BOT process.
The outcome was a legal challenge which delayed final contract
signing for more than two years, until March 1988. (In that period the
state itself could have made substantial progress in completing the
road). Financing PLUS took more time because international bankers
found it too risky as a limited-recourse BOT company. As a result the
government provided a 1,650 million ringgit subsidised loan, nearly
half of the projected costs. In the event, the road was completed in
1993, at a cost of more than 6,000 million ringgit for the section built
by PLUS, which was far above projection.39 In the process the
government had found it necessary to continue its intervention in the
form of support and subsidy for PLUS, including unscheduled toll
increases to help the project's cash flow.
2. Hopewell's Projects in Thailand, Pakistan, and Indonesia
Hong Kong's Hopewell was successful in its first power projects in
232
Budd-Opcraie-Transfer Privatisation Process in Asia
China and the Philippines. However, its deals on power projects in

Pakistan and Indonesia and its US$3 billion mass transit project in
Bangkok failed to materialise. Essentially, Hopewell's Gordon Wu
had agreed to take on projects with the top levels of the leadership in
these countries on a personal-relationship basis. Prior to these agree-
ments, project details were not determined and consensus in the
government was not established. Additionally, Hopewell proposed
very large projects in countries with which the company was not
familiar. These countries also had no real experience with BOT
projects. This rendered the projects risky, and left the governments
without a firm commitment by Hopewell to proceed. As a result, in
Thailand, Hopewell's 1990 concession for a US$3 billion mass-transit
project was by 1996 (the planned opening date) less than 10 per cent
complete, lacking in financing, and available for purchase. Hopewell
had started with an incomplete design (including routing) and faced
competing projects, an uncooperative government agency (the State
Railways of Thailand), and political and commercial opposition.
In Pakistan and Indonesia the power projects which Hopewell
proposed between 1993 and 1996 had also failed to proceed. In 1994
the company was awarded a BOT concession in Indonesia for the
Tanjung Jati power plant which by 1996 was threatened with cancel-
lation due to lack of progress.
3. India's Dabhol Power Plant Project
The secretive, non-competitive bidding process on the basis of which

Enron Development Corporation concluded this huge first BOT
project left it vulnerable to attack in what was originally a highly
politicised environment. Estimated plant costs were in fact far higher
per unit of capacity than other comparable plants. When the Maharashtra
state government which awarded the concession was replaced in
elections by another political faction in early 1995, the project was
frozen on grounds that it was uncompetitive and over-priced. This
resulted in at least eighteen months of delay and a higher overall
project cost, whereas a more open process of awarding the concession,
or competitive bidding, could have at least mitigated these difficulties.
233
Indonesia's private power project was launched on the basis of private,

secretive negotiations in 1988. The result was a number of false starts
as the first companies involved in negotiations were replaced by new
ones for commercial and political reasons. For the Paiton project, the
original sponsors were replaced twice before the government was able
in 1992 to negotiate seriously with Mission Energy Corporation,
Paiton's principal sponsor. Similar problems arose in the case of the
Tanjung Jati and other proposed power plants. The Paiton experience
was not only a matter of an extremely long gestation period but also
that of a high power price contracted. The broaderresult was that there
was a seven-year delay to the process of establishing a sorely needed
power plant.
5. Thailand's Don Muang Tollway Project
Don Muang Tollway was a 20 kilometre BOT tollroad connecting

inner Bangkok with its main airport. It was awarded in 1988 to a
consortium of well-known Thai businesses on a hurried, negotiated
basis. It was opposed by significant sectors of the bureaucracy, and
plans for its connection with other major road arteries in Bangkok
were unresolved when the concession was granted.40 Financial and
traffic projections undertaken by the sponsors were highly flawed, and
the sponsors' own capital base was weak. Financing was only com-
pleted two years after the concession was awarded, and only when the
government ordered the state-owned Krung Thai Bank to become the
core lender. Krung Thai' s management argued that the project was not
viable. In the event, construction delays and rising costs left the road
more than two years behind schedule. It was also constructed at a cost
which was about 50 per cent above the estimate when it partially
opened in late 1995. Connections with other roads had become a
serious political problem, and original traffic projections proved over-
optimistic by a factor of two. As a result of these considerations, the
tollway's sponsors could hold little hope for capital recovery. In early
1996, banks froze further disbursements. The sponsors then de-
manded that the government intervene to save the project (and their
234
DuUd-Operate-Transfer Privatisation Process in Asia
equity). In response to this, the government ordered in mid-1996

another state bank to refinance the road with subsidised loans.
6. Indonesia's Jakarta Toll Road Project
As mentioned above, these toll roads were developed successfully by

companies controlled by children of the President. Financing was
provided mainly by subsidised state banks, and as the roads pro-
ceeded, toll increases were provided by the President at the request of
the companies; in 1995-96, tolls on the inner-city road were increased
three times. This evoked popular resentment against the concessions
and the toll-setting mechanism, making these matters politically
charged.
High risk environment leads to governments absorbing most risks

while private sector sponsors and financiers still retain the right to
rewards
1. Pakistan's Hub Power Project
Because of the lengthy delays and high risks inherent in the environ-
ment, the Pakistan government ended up absorbing much of the
project risk of the Hub Power BOT programme. The government took
on a US$582 million loan from the World Bank to support the project.
In addition it had to take significant equity participation and to
guarantee fuel supply and power off-take agreements, as well as
provide protection against foreign exchange risk. In an indirect way,
the government was also liable for the foreign government agency
(and World Bank)'s financial commitments to the project, which
together constituted 70 per cent of total project cost, some of which
passed through the Pakistan government. Total private sector invest-
ment, then, was very limited.
2. Indonesia's Paiton Project
The risks and high costs of the Paiton power BOT project were mainly
undertaken by foreign government institutions, as commercial banks
235
and private sponsors clearly considered the risk too high. Of the
US$1.9 billion financing package, US$900 million was supplied by
the Export-Import Bank of Japan. A further USS540 million was
supplied by the US Export-Import Bank, and another US$200 million
from the United States government's Overseas Private Investment
Corporation. Commercial banks, on the other hand, supplied only
US$274 million. Loan insurance was also provided by foreign govern-
ment institutions. The heavy foreign government involvement implies
that the onus is on the Indonesian government to make the project
work.
The sponsors have taken only short-term equity risks on the
project. According to project sources, the main shareholder, the
Mission Energy of the United States of America, w< mid recover much
of its equity in project management fees, including a sizable bullet
payment at the commissioning of the plant. A second major share-
holder, the supplier of the power plant itself, is financed by United
States Exim Bank credits, leaving it with little risk on the sales of
equipment. (Presumably profits on the equipment will cover a sub-
stantial portion of its equity exposure). The third main shareholder, the
key Indonesian partner (a relative of the President) is the principal fuel
supplier to Paiton. This company's 15 per cent equity was pre-
financed by a state bank which will itself only be repaid out of Paiton' s
profits. Upon the commissioning of the plant, the company expects to
further reduce sponsors' risk by floating the company on the stock
exchange. The implications are that first, by the time the plant is
operating, principal sponsors will have reduced their equity exposure
to almost nothing, and second, the principal holders of risk will be
foreign and local government financial institutions, which will, in case
of default, be forced to confront the Indonesian government to redress
their losses.
3. China's Shajiao B Project
The success of the Shajiao B project is undermined by the lack of a

long-term commitment to the project by the sponsor, Hopewell. Upon
the completion of project construction, Hopewell received a bonus of
US$50 million from the concession company, in addition to its
236
Burfd-Operate-Transfer Privatisation Process in Asia
substantial construction fees. Hopewell also gained preferred access

to power sales receipts in the first year or more. These contributed to
Hopewell's (not necessarily the concession company's) 30 per cent or
more return on investment in the project, and Hopewell was able to
further cover its exposure by floating a subsidiary holding of its
investment in Shajiao B on the Hong Kong stock market.
It is fair to say this rapid reduction of Hopewell's exposure is a
reaction to the high-risk environment of the project. However, the
securing of the sponsors' long-term financial commitment to the
project can also be seen as a challenge for the government. Indeed, in
1995-1996 Hopewell was reported to be willing to consider the sale of
the Shajiao B project along with its other power projects, suggesting
it never intended to be a long-term participant in the power generation
industry in China.
4. India's Dabhol Project
Like Paiton, the Dabhol project was mainly financed not by commer-
cial banks or the equity of the principal sponsor, but by government
financial institutions. Of the US$920 million required for the develop-
ment of the project at the first stage, US$398 million was supplied by
two American government institutions, and then another US$295
million by Indian banks, mainly government-controlled banks led by
the Industrial Bank of India. Commercial bank financing amounted to
US$150 million, indicating the commercial banks' perception of risk.
When the project became entrapped in controversy, the American
government's pressure on Delhi implied that the Indian government
was expected to assume some kind of financial responsibility.
5. Malaysia's Bakun Dam Project
Bakun Dam is a US$5-6 billion, 2,400 megawatt hydroelectric power

BOT project in Sarawak state, Eastern Malaysia. It was awarded on a
negotiated basis in 1994 to the Ekran Bhd. group, a large timber
exporter. Highly controversial for social and environmental reasons,
and with its energy efficiency and commercial feasibility subject to
question, the project shows signs of high risk. This is reflected in
237
Ekran's own approach. According to press reports in mid-1996,

financing of the project will be mainly covered by foreign government
export credit agencies and government insurers, and by Malaysian
government-controlled financial institutions. Aside from Ekran's
one-third share, equity will also be taken up mainly by Malaysian
government-controlled institutions. Funding for construction before
completion will be based heavily on the cash flow from harvesting
80,000 hectares of forest where the reservoir will be, for an estimated
US$500 million to US$1 billion in potential income. The project is
also to be floated on the Malaysian stock exchange early in the
construction period.
Ekran itself has named its subsidiary and related companies as the
main subcontractors of the project. Meanwhile it demanded a US$400
million "project management" fee for itself, which has been defended
by the Prime Minister.41 The implication is that, by the time the dam
begins to produce power, the main sponsors will ha\ e recovered all of
their costs and more, without any exposure to risks associated with the
operation of the power facility. Those who are exposed - presumably
banks and minority investors - will be forced to look t o the government
to ensure a fair return.
Conclusion
Privatisation of infrastructural development and management is clearly

desirable and necessary in many situations. The BOT structure has
proven viable. Developing an understanding of the goals of privatisa-
tion and of the BOT approach is clearly an important part of the process
of negotiating a country's first BOT projects. As Thailand's power
sector demonstrates, a healthy understanding of and consensus on the
concept can ultimately be established, with positive long-term effects.
However, the difficulties of making especially large projects work
in countries with developed economies, policies, and legal structures
- and the Eurotunnel is a suitable example - suggest that the introduc-
tion of a BOT form of privatisation into a country which has not had
experience in handling large-scale projects, which has a very high-risk
environment, and which urgently needs infrastructural facilities, is not
necessarily the ideal solution.
238
The difficulties confronting many BOT projects are generic,

rather than country or project-specific. They also span a broad range
of political systems. The notoriety which Thailand has received for its
highway and mass transit project management is as exaggerated as is
the reputation of Malaysia's success. Among the ostensible successes,
one has to take note of Indonesia's award of the lion's share of
infrastructural BOT programmes to companies with direct links to the
President's family, the leading role that state-owned banks have in
financing these companies, and the other grant of government sup-
ports as needed.42 Likewise, in Malaysia where BOT privatisation has
been hailed as the most successful, one must consider the award of
concessions through non-transparent, uncompetitive means to politi-
cally-favoured firms, and the state-directed, non-commercial financ-
ing of these projects.43 In both countries questions need to be raised as
to the success of achieving the basic goals of privatisation.
The principal issue is the lengthy and costly delays in developing
what is often urgently needed infrastructure. If the lack of infrastructural
facilities does indeed inhibit investment and retard economic develop-
ment, then these delays, and their costs, must be taken into account in
judging whether the BOT approach is preferable to other methods of
financing and building a country's infrastructure.
A second issue is that it is not always clear who is absorbing the
risks, and who is reaping the rewards in many of these projects. Some
projects appear to have been used to place rewards in the hands of the
private sector while the state simply alters the nature of its own risk-
absorption. The emergence of export credit agencies as both lenders
and equity investors in private infrastructural projects is also an
important and unstudied trend. Is this still government-to-government
risk, in the same way that bilateral soft loans for infrastructural
development in the past was?
The foregoing list is by no means a definitive list of Asia's BOT
projects. The discussion should not be construed as suggesting that
there are not other successful projects in the region,44 nor is it meant
to demonstrate that traditional methods of infrastructural develop-
ment and management are superior. The examples are intended to
show that, in the difficult environment of most developing countries,
the challenges of creating a successful BOT infrastructural project
239
might easily outweigh the benefits which this form of privatisation

promises. In addition, because of their reliance on long-term, commer-
cially-based financing arrangements, BOT privatisation schemes are
substantially different from other, more successful forms of privatisa-
tion such as corporatisation and asset sales. As such they necessarily
involve greater risks and often untenable responsibilities for recipient
governments.
NOTES
1. World Bank, Infrastructure Development in East Asia and the Pacific (Wash-
ington DC: World-Bank, 1995), p.l.
2. Jim Rohwer, Asia Rising (Singapore: Butterworth-Heinemann Asia, 1995).
3. Studies have shown that telecommunications projects have much higher rates
of return, based on lower sunk capital costs and the ability to charge consumers high
unit prices. See World Bank, World Development Report 1994: Infrastructure for
Development (New York: Oxford University Press, 1994).
4. Worldwide, 90 per cent of these financing arrangements are carried out or
intermediated by the government, See ibid., p.89.
5. Ibid.
6. Alan Rix, Japan's Aid Program (Canberra: Australian Government Publishing
Services, 1987); and Nigel Holloway, ed., Japan in Asia (Hong Kong: Review
Publishing Co., 1992).
7. At the end of 1994, the outstanding balance of OECF loans worldwide was
8,026 billion yen. Of that 78 per cent was to Asian countries. The top five OECF
borrowers are Asian (Indonesia, China, Philippines, India, and Thailand, respec-
tively). Worldwide, over half of OECF loans were allocated to electric power and
gas, transportation, and telecommunications. Excluding OECF commodity loans,
the share of project loans to those categories of infrastructure was 66 per cent. In Asia
the level was close to 70 per cent.
8. OECF officially ended the tied aspect of projects in the late 1980s, but the
practice effectively continues even today. See Rix, Japan's Aid Program; and
Holloway, Japan on Asia.
9. However, some government-developed infrastructural facilities are often able
to produce a strong commercial return. Besides telecommunications systems,
electricity generation can also, as the case of Thailand demonstrates, meet all criteria
and remain self-financing and profitable. See Phisit Pakkasem, "Privatization in
Developing Countries: The Experience of Thailand," paper presented at the ADB
Conference on Privatisation Policies, Manila, 1985.
240
liudd-Operate-Transfer Privatisation Process in Asia
Conference on Privatisation Policies, Manila, 1985

10. Ng Chec Yuen and Robert Wagner, "Privatization and Deregulation in Asean,"
Asean Economic Bulletin, March 1989, and Ng Chee Yuen and Toh Kin Woon,
"Privatization in the Asian-Pacific Region," Asian-Pacific Economic Literature,
November 1992.
1 1. Holloway, Japan in Asia
12. The US$130 billion figure is the lower case, the World Bank's "baseline
scenario" suggests at least US$150 billion for 2000. Both are "indicative" invest-
ment requirements, not likely to be achieved, especially if economic growth is
unexpectedly slow. Frequently in an economic slowdown, the first thing sacrificed
by governments is infrastructural spending. See World Bank, World Development
Report, 1994.
13 The author's own interviews in 1993 with officials such as Laos' Deputy Prime
Minister at the time, Khampoui Keoboulapha, and Yunnan's Provincial Secretary-
General, Wu Guangfan, revealed such enthusiasm
14 C. Walker and A J. Smith, eds , Privatized Infrastructure The Build Operate
Transfer Approach (London- Thomas Telford Publications. 1995), and Charles
Schcll, cd., Project and Infrastructure Finance in Asia (Hong Kong Asia Law and
Practice, 1995).
15. Far Eastern Economic Review (FEER), October 22, 1973.
16. There arc two important differences, however. Oil exploration is extremely
risky, and most developing countries readily recognise they cannot afford the
resources required; and there are existing global pricing standards for hydrocarbons,
whereas user-pricing can vary extensively for infrastructure
17. The project was contested by Canada's Lavalin group and a consortium led by
the Leighton Engineering group
18. R.S. Milne, "Privatization in the ASEAN States. Who Gets What, Why, and
With What Effect?" Pacific Affairs (Spring 1992)
19. Paul Handley, "Hard Truths about Asian Infrastructure," Institutional Investor
(November 1995).
20. Discussion of the political nature of infrastructural development and privatisa-
tion can be found in R.S. Milne, "The Politics of Privatisation in the ASEAN States,"
Asean Economic Bulletin, (March 1991); Milne, "Privatisation in the ASEAN
States: Who Gets What, Why, and With What Effect?" Handley, "Hard Truths about
Asian Infrastructure"; Asian Law and Practice, Project and Infrastructure Finance
in Asia (Hong Kong: Asia Law and Practice, 1995); and Edmund Terence Gomez,
UMNO's Corporate Investments (Kuala Lumpur: Forum Enterprise, 1990).
21. Hopcwell later transferred its power units into a subsidiary, Consolidated
Electric Power Asia Ltd (CEPA).
22. The early completion bonus was designed as an important core benefit for the
sponsor, rather than simply an additional incentive the target was based on how long
it normally took Chinese state-owned enterprises to build a similar plant, rather than
more professional Hopewell, making it easily achievable. Hopewell beat the target
by more than six months
23. Interview with National Energy Policy Office head, Dr Piyasawat Amranand,
241
24. In July 1995 the cabinet moved to replace EGAT's entire board, except for one
person, with new persons including business cronies of cabinet members. Public
reaction and a threatened strike by EGAT staff forced a reversal of the decision.
Later, in early 1996, the Prime Minister asked the committee reviewing the bids to
meet with losing bidder the TPI Group, which made an unsuccessful argument to be
included in the winners' short list.
25. Yet the process forced PTT to begin to address its shortcomings, and the gas
power plant bidders were to be favoured in a scheduled second round of bids.
26. Confidential interview with a senior adviser to the project, August 1995.
27. These were the "Skytrain," negotiated by the Expressway and Rapid Transit
Authority of Thailand with Canada's Lavalin group from 1987 to 1991, after which
the concession was cancelled; the Hopewell's combined road/rail/mass transit
project awarded by the Ministry of Transport and Communications and the State
Railways of Thailand in 1990, which was less than 10 per cent completed in 1996
(when it was to be up and running); and the "Tanayong" or BTSC concession for an
elevated light rail awarded by the Bangkok Metropolitan Area government in 1992,
but which was by mid-1996 only on the verge of securing financing, and less than
20 per cent completed.
28. Asian Wall Street Journal (AWSJ), September 20, 1996.
29. Based on interviews with government officials, and power sector representa-
tives, between 1988 and mid-94 in Thailand. The EGAT told potential sponsors that
it would not make long-term commitments to buying the power they generated; that
it required control of the fuel supplies (including pricing) to the power plant; and that
other conditions, considered unacceptable by the industry, were to be met.
30. A well-placed energy sector source in Indonesia in August 1995 said the PLN
was paying US$80 million a year to the independent producers for power it could
not sell onwards, because of its poor distribution network.
31. Confidential interview with power industry figure, Jakarta, August 1995.
32. Christine Hill, "A Dam Too Far," Institutional Investor (December 1995).
33. For instance, according to Thai energy planner Piyasawat Amranand, the
relatively advanced and progressive Thai power agency EGAT could not estimate
accurately its own avoided costs as a means of analysing and comparing bids by
private companies for independent power producer concessions licenses in 1995.
(Given the prevalence of rent extraction in state-driven projects, few slate-owned
enterprises would be willing to provide an accurate estimate of their costs, because
it would only indicate inefficiencies and corruption).
34. Comparing the costs of differing power plants is of course not a precise
measurement, but energy industry executives note that competitive costs for plants
in 1995 were roughly US$1 million per megawatt of capacity. The Managalore,
India BOT project of Cogentrix is roughly 1,000 megawatt for US$1.1 billion.
Paiton is almost double the unit cost, at US$2.5 billion for 1,230 megawatt.
35. This account is based upon numerous interviews by the author with principals
in the case; see Paul Handley, "Thailand Case Study: The Second Stage Express-
way" in Schell, Project and Infrastructure Finance in Asia.
242
way" in Schell, Project and Infrastructure Finance in Asia.

36. As such the land would not be available for commercial use by the concession-
holder, which might enhance the project's commerciahty.
37. FEER, September 26, 1996.
38. Gomez, UMNOs Corporate Investments.
39. Hoon Lim Siong, "The Great Construction Rush," Asian Money (September
1995).
40. For instance, the project assumed a link into the BECL-ETA Expressway,
though neither of those parties had agreed
41. AWSJ, September 30, 1996.
42. Projects fitting this description include several telecommunications conces-
sions, the Jakarta mass transit system, and two port concessions.
43. Other such projects include a new causeway between Singapore and Johore
Bahru; other toll roads; Kuala Lumpur area mass transit; the private power
producers; and the large water pnvatistion Indah Water Konsortium.
44. There are a number of small, successful toll roads and power plants in China,
for instance; and many larger projects which are fashioned as private sector, foreign-
invested infrastructural concessions, but which in practice are joint ventures
between foreign capital and companies and authorities owned by the state which
retain control over the infrastructure.
Paul Hundley reported for Far Eastern Economic Review from Jakarta, Hong Kong, and
Bangkok between 1985-93 From 1994 until the present, he has been a regional correspond-
ent for Institutional Investor, based in Bangkok. This paper was written with the support of
a research fellowship from the Asia Research Centre, Murdoch University, during 1996. The
author would like to thank Richard Robison and Garry Rodan of the Asia Research Centre
for their advice and support, and Guy Altree and John Palumbo of Delta Associates for their
critical comments.
243

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Asian Journal of Public Administration

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A Critical View of the Build-Operate-Transfer

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A CRITICAL VIEW OF THE

In the mid- 1980s, many Asian countries turned to the privatisation of

Various privatisation approaches such as corporatisation, public

Despite much talk about private investment in infrastructure,

In practice BOT projects have proven to be by nature highly

sector sponsors and financiers, most of whom maintain views on what

money, and an often significant diminution of the theoretical advan-

drawing attention to its complexities and potential problems. In the

Motivations for BOT Privatisation

Historically, infrastructural development in Asia has been initiated,

was the largest single source of foreign loans to many governments in

charges that were imposed had to be politically, economically, and

on BOT programmes. Commercial banks too increased their own

The Structure of BOT Projects

BOT is not a new form, though codifying it as such is relatively recent

ten-to-twenty year range, toll roads in the twenty-to thirty-year range,

sponsors the ownership and operation rights to the facility in perpetu-

concession contract is usually large, and harmonising their interests

TRADITIONAL INFRASTRUCTURAL PROJECT,

BOT INFRASTRUCTURE PROJECT MATRIX

Figure 1 A Comparison of Traditional and BOT Infrastructural Projects

requiring substantial foreign capital for the project), a lack of policy

ment suppliers take significant equity in independent power produc-

over electricity generation fought the development of BOT power

Successful BOT Projects

The complexity described in the foregoing section places the onus on

China's Shajiao B Power Plant Project

Located in the Hong Kong border area of China's Guangdong

Philippine's Private Power Project

Faced with extensive power blackouts which made investors bypass

Thailand's Second Stage Expressway (SSE) Project

Although most often cited as an example of the dangers of BOT

Thailand's Power Projects

Unsuccessful BOT Projects

The successful projects described above appear to demonstrate the

Lack of consensus within the recipient government andsociety leads

1. Pakistan's Hub Power Project

Initiated in 1985, Hub is a US$1.8 billion, 1,300 megawatt oil-fired

lack of consensus on the project's goals, and how they could be

2. Thailand's Mass Transit System Project

In 1986 the Thai cabinet undertook to develop a Bangkok urban mass

3. India's Telecommunications and Power Project

In 1991, India's federal government in Delhi established a policy to

led to the internationally publicised freezing of the US$920 million

4. China's Power Project

In contrast to India, China's provinces initiated private power BOT

5. Thailand's Power Project

The success of Thailand's power BOT programme is noted above.

rising power demand on a fairly high self-financing basis, so that the

6. Indonesia's Power Project

Lack of consensus has not prevented Indonesian BOT power genera-

7. Malaysia's Power Project

In Malaysia power generation BOT projects were also built upon a

weak industrial structure. In 1992 the government handed out a

Inability to establish or adhere to clear, fundamental BOT goals