Neither the government nor the private sector understands how to carry out joint infrastructure construction projects properly, an official said yesterday.
This lack of understanding is viewed as the main obstacle to promoting build-operate-transfer (BOT), build-transfer-operate (BTO), or operate-transfer (OT) construction projects in Taiwan.
"We have to admit that even the government officials responsible for undertaking the projects have a hard time figuring out the procedures," Public Construction Commission Chairman Kuo Yao-chi (郭瑤琪) told a seminar yesterday. The seminar was about methods for improving cooperation between the public and private sectors on public infrastructure projects.
The government began encouraging private participation in public construction in 1994, and passed the Statute for the Encouragement of Private Sector Participation in Public Infrastructure Projects (促進民間參與公共建設法) in 2000.
For the first nine months this year, the private sector's participation in public-construction projects totaled NT$57.3 billion, far exceeding the NT$630 million for the entirety of last year, Kuo said. The figure is projected to reach NT$90 billion by the end of the year and NT$120.9 billion next year, she said.
But not all public-construction projects, especially transportation projects, can be accomplished with the BOT model. The proposed high-speed rail link between Taipei and the CKS International Airport was scrapped in April after six years of government planning. The government launched the bidding process for the project in 1997, but two contractors, Evertransit International Co (
"I think first, Taiwan should develop clear policy guidelines and implementation rules to reassure the private sector," Roger de Montfort, a partner at Pricewater-houseCoopers said at the seminar. The UK-based Pricewaterhouse-Coopers provides consulting services on public private partnership (PPP) projects, similar to BOT projects in Taiwan. The UK started using PPP projects to develop its infrastructure in the early 1990s.
While not every PPP project was completely successful in the UK, the overall evaluation of the model indicates it is more efficient than traditional government procurement methods, Montfort said.
About 73 percent of traditionally procured projects run over budget, while only 20 percent of PPP projects do, Montfort said. Also, compared to the 70 percent of traditional state projects that are completed late, only 12 percent of PPP construction projects fail to meet their deadlines, he added.
Another expert praised PPP as a way to save money.
"People always complain about the London Underground, which is no longer a modern and satisfying service fit for use," said Arthur McInnis, consultant of Clifford Chance, a US-based PPP specialist firm. "We found out that improving the system through PPP can save 17 percent on costs."
In comparison, Taiwan's north-south high-speed railway BOT project, which has been described as a money pit, has hardly been a shining example of efficiency.
The high-speed railway was contracted out to Taiwan High-Speed Railway Corp (台灣高鐵) in 1997.
The company claimed that the government would not need to spend a penny on the project before it won the bid. However, the company gradually found it impossible to pay for the huge construction project alone, and asked the government for help in getting loans, as well as inviting direct government investment.
As a result, the government-guaranteed funds and capital devoted to the project eventually amounted to NT$288 billion, or 80 percent of the budget.
"This particular case, as well as other BOT disputes, has shattered private companies' interest in participating in public construction projects," James Ku (古嘉諄), senior partner of Formosan Brothers Attorney-at-Law (寰瀛法律事務所) said. "The government should first build confidence among private investors by setting a good example."
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