BUILD-OPERATE-TRANSFERT
THE TAIWANESE CASE
BUILD-OPERATE-TRANSFERT THE
TAIWANESE CASE
Siew calls for standard BOT rules on major public construction
Publish Date:06/26/1998
Byline:Frank Chang
ROC Premier Vincent Siew has instructed the government to establish concrete game rules for build-operate-transfer projects so that construction of these major public works can run smoother.
The premier gave the order June 18 after hearing a briefing on proposed BOT projects by Liao Ching-lung, director-general of the Taiwan High Speed Rail Bureau. The meeting looked at the planned rapid-transit rail link between Taipei City and Chiang Kai-shek International Airport and the high-speed railway between Taipei and the southern city of Kaohsiung.
Over the past year and a half, the BOT model has been promoted by the government as the best route to take for big-ticket infrastructure projects in Taiwan. The concept gives the private sector the opportunity to help build and operate these public works. In the early stages, this represents profit potential for the private firms and reduced outlays for the government. Under this design, the systems are transferred wholly to the government after a designated period of operation. However, disputes have flared repeatedly since the BOT concept was unveiled in October 1996 as a formula for the north-south high-speed railway.
Most of the problems have stemmed from the lack of standard guidelines for BOT projects. The intense competition of late among bidders for the lucrative airport-link contract has once again riveted attention on the fact that there are rough spots in the BOT model. Companies that submitted the losing bids have complained that the bidding process was unfair. Transportation and Communications Minister Lin Fong-cheng responded to this by stressing that he feels the bid selection was transparent and properly handled. However, he did make note of these complaints at the briefing with Siew. Lin acknowledged that a lack of clear-cut regulations on loan ceilings and land use has led to complications on BOT projects. However, he said these drawbacks stem from the BOT concept being new in Taiwan and not from unfair bid practices. He denied allegations that the bidding process for the airport link was intentionally made vague so as to give advantages to preferred companies.
Liu Yuh-san, vice chairman of the Council for Economic Planning and Development, was also of the opinion that the current BOT formula is a fair one. He pointed out that the Ministry of Transportation and Communications had set up committees to handle the bid screening and contract letting for both the airport link and the high-speed railway. Moreover, in both cases matters were conducted in accordance with procedures stated in the government's Statute for Encouragement of Private Participation in Transportation and Infrastructure Projects, he added. At the meeting, Siew nevertheless called on relevant authorities to perfect the BOT model by learning from the snags experienced thus far on the high-speed railway and airport link projects. The drafting of standard selection criteria would ensure fairness on future BOT constructions, he stressed.
In his directive, the premier made the CEPD responsible for drawing up these clear-cut implementation measures. Also, he suspended additional BOT projects until after the council's guidelines are drafted and approved.
Siew listed several "musts" for the guidelines.
Before authorities invite bids, loan conditions and government responsibility must be stated. Also, it must be made clear that the government is not responsible for full guarantees in the event of project failure.
And to further minimize risk, BOT bidders must demonstrate that they have sufficient technical expertise and capital backing. Siew's instructions won applause from many investors, who believe sound game rules will ensure a level playing field for all companies interested in joining BOT constructions. Besides ensuring fairness, concrete guidelines will help contract bidders save time and money by avoiding unnecessary steps, they said. CEPD Chairman Chiang Pin-kung said the council will consult with the Ministry of Transportation and Communications during the task of perfecting the BOT regulations. The suggestions of the bidding companies will be considered as well, he added. Moreover, the council will produce a BOT manual detailing the procedures that must be strictly followed. The reference book will be presented to the Executive Yuan for distribution to government agencies involved in the BOT process.
Chiang made special mention of the fact that bid incentives will be thoroughly reviewed during the fine-tuning of the BOT guidelines. He pointed in particular to the high-speed railway, which will run a 340-kilometer course along Taiwan's western coast. As a means of attracting private sector bids, investors in the project were granted the right to decide how areas surrounding the route's various stations should be developed. The choices were recreational zones, residential communities, industrial parks and commercial complexes, among other kinds of development schemes. The CEPD chairman said consideration should be given to whether contracts must stipulate the limits of such developments. Also, a determination will be made as to the best system for guaranteeing uniformity and transparency in bid selections. Majority vote, secret ballot and general consensus systems will be evaluated. State Ministers Yang Shih-chien and Chao Shou-po suggested at the meeting that inviting respected presidents of universities to join the bid selection committees would further ensure the integrity of the process. State Minister Shirley Kuo suggested at the meeting that Taiwan learn from Japan's experiences in using the BOT model for public constructions.
Updated september, 26, 1999.