The concession, or build-own-operate-transfer
(BOOT), is a type of procurement strategy utilising
project finance to fund infrastructure projects.
Although the term BOOT is relatively new, privatised
infrastructure projects have been around for several
In a BOOT project, a project company, normally a
special project vehicle (SPV), is given a concession
to build and operate a facility that would otherwise
be built by the public sector. The facility might be a
power station, toll road, airport, bridge, tunnel, water
supply and sewerage
system, railway, communication or manufacturing
The following are some of the reasons why host governments adopt the BOOT
project procurement strategy (UNIDO, 1996):
The use of private sector financing provides new sources of capital and
reduces public and direct spending.
The development of projects that would otherwise have to wait, and
compete for, scarce sovereign resources is accelerated.
The use of private sector capital, initiative and know-how reduces
project construction costs, shortens schedules and improves operating
Project risk and burden that would otherwise have to be borne by the
public sector is allocated to the private sector.
The involvement of private sector and experienced commercial
lenders ensures an in-depth review as an additional sign of project
In 1977, the Malaysian Ministry of Works received
official instructions to draw plans of an expressway from
the Malaysia-Thailand border (Bukit Kayu hitam) to the
In 1980, the Malaysian Highway Authority was
established to monitor all the work progress of the first
The 30-year concession contract was awarded in
1998 to the United Engineers (Malaysia) Berhad, who
then formed another project company called Project
Lebuhraya Utara Selatan Berhad (PLUS) to
design, construct, finance and operate the expressway.
Construction Payment in
Contract Cash and
Share in PLUS
a) BOOT projects offer the possibility of realising a project that would otherwise
not be built.
b) The willingness of equity investors and lenders to accept the risk indicates
that the project is commercially viable.
c) A BOOT project will help in a government’s policy of infrastructure
d) The efficiency of the promoter and its economic interest in the
design, construction and operation of the project will produce significant
cost efficiencies to the principal when the concession period ends.
a) Commercial lenders and export credit guarantee agencies will be
constrained by the same country risks.
b) There will be no credibility if the government provides too much support to
c) A BOOT strategy is a highly complicated structure that requires detailed
planning, time and money throughout the concession period. The
promoter must have the commitment and interest to maintain the project.
The process of privatization and liberalization in Malaysia has been
motivated more by economic pragmatism than ideological
considerations. Mostly importantly, Malaysia embarked on a process of
restructuring the relationship between the public sector and the private
sector as a response to unsustainable domestic and external conditions.
The poor performance of public enterprises and the high levels of
budgetary deficits acted in concert with a reversal of the buoyant prices
for Malaysian exports to usher in an era of change.