Participating in build-operate-transfer (BOT) projects organized by the government has become a new investment trend for private firms, according to real estate services provider Jones Lang LaSalle Taiwan.
Last year, the private sector signed 155 contracts for BOT projects, with a total investment value of NT$62.8 billion (US$2 billion), marking an all-time high since the Statute for Promoting Private Participation in Public Construction (促進民間參與公共建設法) was passed in 2000, said Wu Nai-tzu (吳奈恣), the firm's national director of strategic consulting, at a press briefing.
Breaking the investment down by category, transportation construction projects ranked first with NT$18.7 billion invested, accounting for more than 30 percent, followed by sightseeing facilities at NT$13.2 billion, Wu said, citing statistics provided by the Public Construction Commission.
The government plans to invite bids for BOT projects worth at least NT$100 billion this year. The Ministry of Transportation and Communications will offer development projects worth NT$57.6 billion, and the Ministry of the Interior will offering projects valued at NT$22.7 billion.
"The BOT trend will become even more marked this year as contracts for major projects -- a sports dome in Taoyuan, the Taipei Sports Dome, and the capital's MRT circular line system -- are expected to be inked," Wu said.
But compared with Hong Kong, where 70 percent of development projects are administered under the BOT business model, Taiwan still offers huge potential to expand considering the low BOT ratio, said Tony Chao (趙正義), managing director of Jones Lang LaSalle.
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"Promoting BOT participation can spur construction firms to diversify their operations and offer them more channels to raise capital, which can reduce risks," Chao said.
Construction firms such as Kindom Group (冠德企業) and Rich Development (力麒建設), which used to focus on residential developments, have shifted part of their operations to bid for BOT projects as they bring higher returns.
As BOT investors only need to rent land, rather than purchasing plots, development costs are greatly lowered. Furthermore, tax exemptions are offered as incentives, encouraging private firms to partner with the government via transparent bidding mechanisms.
This year, several big BOT projects Jones Lang LaSalle has consulted on are expected to be completed. These include a business operational center in Taoyuan's Chiang Kai-shek International Airport, exhibition halls in Taipei's Nangang District and a Hakka cultural park in Pingtung County.
"By implementing the BOT model, the public can obtain high-quality public construction services, the government can save a sizable amount on construction expenditures, and private contractors can develop their creativity and efficiency to obtain profits," Chao said.