built operate transfer case studies in local construction sector in pakistan

BUILT OPERATE TRANSFER CASE STUDIES IN THE LOCAL CONTRUCTION SECTOR

BATCH 2012-2013

BY

MEESUM HUSSAIN ZAIDI

DEPARTMENT OF URBAN AND INFRASTRUCTURE ENGINEERING

NED UNIVERSITY OF ENGINEERING & TECHNOLOGY

BUILT OPERATE TRANSFER CASE STUDY IN LOCAL CONSTRUCTION SECTOR

ABSTRACT

This report is concerned with the built operate transfer case studies in local construction industries. The project was assigned to collect the information about the BOT Projects in Pakistan by literature review and visiting National highway authority involved in the BOT projects. In this regard projects of NHA, built on the BOT basis is selected as the concern study. The Built operate transfer term was not much popular in construction industries during past years but as the time passes people get to know about the BOT projects and its gearing up popularity. In the under developing countries people don’t have enough finances to execute infrastructure development projects, so the built operate transfer is a way to fulfill the goal of both the sponsor and the owner/client. In order to understand the topic better a number of slides were reviewed, books were read and interviews were carried out. This report highlights the trends BOT projects in Pakistan, practices by government to

adopt BOT projects, and other technical terms. The objective behind this study is to review the trends of BOT projects and bring into the knowledge of BOT projects in Pakistan.

TABLE OF CONTENTS

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CONTENT PAGE NO

TITLE PAGE 01

ACKNOWLEDGEMENT 02

ABSTRACT 03

TABLE OF CONTENTS 04

LIST OF FIGURES 05

LIST OF TABLES 05

1 INTRODUCTION 06

2 BUILT OPERATE TRANSFER APPROCH 07

2.1 DEFINITIONS 07

2.1.1 BUILD 07

2.1.2 OPERATE 07

2.1.3 TRANSFER 07

2.2 STRUCTURE OF BOT 07

2.2.1 GOVERMENTAL AGENCY 07

2.2.2 SPONSOR 07

2.2.3 CONSTRUCTION CONTRACTOR 08

2.2.4 OPERATION AND MAINTENANCE CONTRACTOR 08

2.2.5 FINANCE INSTITUTION 08

2.2.6 EQUITY INVESTOR 08

2.2.7 OTHER PARTIES 09

2.2.8 SCOPE OF BOT APPROACH 10

2.2.9 OBJECTIVE OF BOT APPROACH 11

2.2.10 METHODOLOGY OF BOT 11

2.3 BACKGROUND OF BOT 12

2.3.1 BACK GROUND AND HISTORY 12

3 METHODOLOGY 13

4 STUDY DESIGN 13

4.1 SURVEY QUESTIONNAIRE 14

4.2 DATA COLLECTION 14

4.3 DATA SOURCE 14

5 BOT PROJECTS IN PAKISTAN 15

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5.1 EXPRESSION OF INTEREST 15

5.2 RECENT BOT PROJECTS OFFERED IN PAKISTAN 15

5.3 CHALLENGES FACED DURING THE BOT PROJECT 17

5.4 BOT PROJECTS BY NHA 18

5.5 PROJECT STUDY 22

5.5.1 KARACHI-HYDERABAD MOTORWAY 22

5.5.2 LAHORE KARACHI MOTORWAY 22

6 CONCLUSIONS AND RECOMMENDATIONS 23

APPENDIX A

QUESTIONNAIRE

25

APPENDIX B

QUESTIONNAIRE

26

APPENDIX C

BAR DIAGRAM SHOWING BOT PROJECTS COMPLETION

29

APPENDIX D

END RESULTS OF PROJECT COMMENCEMENT IN PAKISTAN

30

APPENDIX E

SPSS AND EXCEL SHEETS

31

LIST OF FIGURES

FIGURE NO. TITLE PAGE NO.

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01 Typical organizational structure of BOT 09

02 Major political constraints for BOT projects 18

03 Major economical constraints for BOT projects 18

TABLE NO. TITLE PAGE NO.

01 BOT projects in PAKISTAN 15

02 list of BOT projects in implementation stage 20

03 list of BOT projects in procurement stage 20

04 list of BOT projects in development stage 21

05 Description of Karachi- Hyderabad motorway 22

1. INTRODUCTION

BUILT-OPERATE-TRANSFER is the type of an agreement in which a private sector builds an infrastructure project operates it and transfers it to the owner governmental organization. The private sector operates project long enough to payback project debt and equity investment. The major stakeholders involve in the BOT project are owner, sponsor, contractor

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cum consultant. The contract period for BOT projects normally ranges from 20 to 30 years

depending upon the scale or nature of the infrastructure development.

In Pakistan and other developing countries BUILT OPERATE TRANSFER or BUILT OWN OPERATE TRASFER or PRIVATE SECTOR PARTICIPATION approach is innovative for the development of large scale infrastructure projects, as this approach enables investors to invest their money on large scale and get good concession for a long time during the operation of the facility. Built operate transfer is best choice for the development of infrastructure for both the government as well as privatized sponsors worldwide. The major stakeholders involve in the BOT project are owner, sponsor, contractor cum consultant. In Pakistan, more preference is normally given to the public private partnership, but BOT provide more feasibility for the infrastructure development. (3) Based on BOT approach different variations are involved in various countries;

BOO(build-own-operate) BLT(build-lease-transfer) BOOM(build-own-operate-maintain) BOOT(build-own-operate-transfer) BOOTT(build-own-operate-train-transfer) BTO(build-transfer-operate) DBFO(design-build-finance-operate) DBO(design-build-operate) DBOM(design-build-operate-maintain) DOT(design-operate-transfer) PPP(public private partnership)(4)

2. BUILT OPERATE TRANSFER APPROACH:

The BOT approach appears to be a useful possible alternative to the conventional financing and operation of infrastructure projects in developing countries.

2.1 DEFINITIONS:

2.1.1 BUILD:

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A private company (or consortium) agrees with a government/private owner to invest in an infrastructure project.

2.1.2 OPERATE: The private developer then owns, maintains and manages the facility for an agreed

concession period and recoups their investment through charges or tolls.

2.1.3 TRANSFER: After the concessionary period the company transfers ownership and operation of the

facility to the government/private owner or relevant state authority.(3)

2.2 STRUCTURAL MEMBERS OF BOT PROJECTS:

2.2.1 GOVERNMENT AGENCY:The most important initiator or participants of BOT projects are Government agency. They are usually termed as Primary Party. It is responsible to initiate, approve, monitor and control the projects.

2.2.2 SPONSOR:

It can be party of interested groups, mostly includes a construction groups, an operator, a financing institution or other various groups. It is the duty of sponsor to prepare proposal to construct, finance and operate the particular project.

2.2.3 CONSTRUCTION CONTRACTOR:

It may also be one of the sponsors. The risk of completing the project on time, within the budget and to specification is the responsibility of Construction contractor. Generally the infrastructure design is dictated by the experienced utility.

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2.2.4 OPERATION AND MAINTENANCE CONTRACTOR:

There is a proper contract between operator and sponsor for safe operation and timely maintenance of the facility. It may also inject equity into the project along with little risk in the form of expenditure.(1)

2.2.5 FINANCIAL INSTITUTION:

In a large project there is likely to be a group of banks providing the loans to the sponsor. As the financing of BOT structure project is a form of project finance, debt financiers will undertake a review of all core project documents to assess the allocation of risks and how that allocation impacts upon their credit approval.

2.2.6 EQUITY INVESTOR:

Investors or sponsor are often referred to as "equity investors" or the "equity providers". It is not unusual for equity investment to be approximately 20% of the cost of the project. Equity funds are, expensive as compared to the cost of debt. An equity investor may require a return of 18% to 20% in today's market to compensate it for assuming the major risks inherent in an infrastructure project.

2.2.7 OTHER PARTIES:

Other parties such as insurers, equipment suppliers, fuel suppliers and engineering and design consultants will also be involved. Most of the parties will also involve their lawyers and financial/tax advisers. (3)

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FIGURE 1: typical BOT organizational structure.

2.2.8 SCOPE OF BOT APPROACH

Built operate transfer is today’s fast developing approach for the construction which fulfill the interest of public and private sector and also give benefits to the government. BOT Approach has its vast scope in the Following sectors of construction.

Local Governmental services- It includes water supply and sanitation, solid waste management, low cost housing schemes, education/health care and skill development facilities.

Irrigation Projects- Includes power generation projects. Transportation systems- Includes rail, seaport, airport, highways, roads. Urban mass transit system- Includes BRT system, Intra and intercity rail system. Social infrastructure- Includes educational, cultural and health infrastructure.

Industrial projects- Includes industrial parks, special economical zones. 2.2.9 OBJECTIVES OF THE BOT APPROACH

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CONCESSIONAIRRE

HOST GOVERNMENTPRIVATE OWNER

CONTRACTOROPERATION AND MANAGEMENT

CONTRACTOR

SPONSORS/ INVESTORAND

LENDERS


The main objective of this research is to analyze the trend and scope of BOT projects in Pakistan and highlighting the importance of BOT projects for infrastructure development. The build operate and transfer (BOT) approach to develop infrastructure projects and facilities of public interest such as bridges, airports, power plants, detention facilities, parking facilities etc it is an alternative for a country that lacks the appropriate funds to undertake on its own projects of this scale it is also the goal of our study to perform case study of projects that are on the basis of BOT.

2.2.10 METHODOLOGY OF BOT PROJECTS:

Built operate transfer methodology includes several steps with the involvement of many peoples in the projects. For built operate transfer projects first the owner or the client publish Expression of interest (EOI) in the newspaper or on website. Private sector who invest money on the project, in response to that show their interest in the project, concession period is then decided between the parties and the project is executed and operate by the private sector for the decided concession period and then the project is transfer to the owner or client (i-e Government normally).The above methodology can be explained by the following example:

Example # 1: (NHA PROJECT)

Built: Suppose NHA is interested in the maintenance of National Highway. For this purposeCDGK is selected, on the terms that it will collect Tolls for a period of 10 years (Concession Period) from the time of operation of the road.

Operate: The 1-2% of the collected toll will be given to NHA under the name of Royalty duringthe concession period by CDGK.

Transfer: After the concession period the facility will be handed over to NHA in operatingCondition. The projects on the basis of Public-Private Partnership (BOT) generate two types ofprofit, i.e. direct profit & Indirect profit.

Direct Profit: In the example above, royalty is considered as direct profit.Indirect Profit: The high mobility service and saving of fuel is considered as indirect profit. (8)

2.3 BACKGROUND OF BOT PROJECTS:

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2.3.1 BACKGROUND AND HISTORY:

The first private development officially done under the name of “Built operate transfer” was by the prime minister of Thailand OZAL to give a new approach for infrastructure development (Beuker,1988).however the built operate transfer approach was early used for the project of Suez canal in 1834. This was the revenue producing canal realized by Europeans so they initiated it with the support of Egyptian financial support, and had a concession to design, execute and operate assigned to the Egyptian ruler Pasha Muhammad Ali (levy, 1996)

In the mid 1980s, many under developing countries turned to privatization of infrastructure to overcome problems which threatened to limit economic growth and development. Getting private sector management and capital into transport, power, water and sewage, and telecommunications services, was seen as a solution for obtaining and maintaining infrastructure more quickly and more cheaply than traditional, nationalized methods.

According to Otta, and Hartley, this reflected concepts of ‘public choice’ thinking on public administration, by which considerations are given to the private sector to be possibly the most efficient supplier of facilities or services. The major objectives in a BOT projects is to obtain infrastructure facilities with a greater effectiveness and stability, without the government undertaking financial responsibility of the project. On the basis of that, governments in the region hold on to the BOT concept as an important option in privatization that would help to enhance economic growth and development.

The experience in Thailand, Malaysia, Indonesia, China and South Asia, in the period 1985-1996, suggested that attaining the goals of privatization via the BOT method is extremely difficult, with many projects failing to achieve the ends intended. With specific reference to the Asia BOT experience, the World Bank reports suggested about private investment in infrastructure that there is little action in most countries. Neither the governments nor the private sector are satisfied with progress to date. This experience must raise questions as to the nature of BOT projects in their implementation, and suggests much more caution is in order over the adoption of this approach.

In the treatment of BOT both analytical and theoretical, the BOT projects are considered same as the other modes of privatization, but given more detailed inspection for BOT. This is the cause of the popularity of BOT projects in developing countries governments, as it is suggest that BOT might be easy to undertake as find a buyer for likely profits. Infrastructure BOT concessions have several distinct differences that make them particularly typical in design, management and finance.

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In addition, due to ‘natural monopolies’ characterized by limited competition in 1980s, as suggested by Hartley and Parker, without competition such arrangements offer no clear advantages to the traditional state-run monopoly in attempting to achieve the goals of privatization. Infrastructure monopolies require significant regulation to balance public and private interests. Regulation of monopolies like utilities is well-studied. But the process of turning them into private-sector operations, and at the same time developing regulatory mechanisms, to the satisfaction of all parties involved, is hardly addressed by privatization advocates beyond simple recommendations to do so. Without these mechanisms, however, political risks in a project are much higher. (5)

Experience in Asian countries, results in understanding that the Governments in the developing countries might not be able to understood the complexities of BOT project. As a result of which, with a high frequency in Asia during the early 90’s period, BOT failed in obtaining the targeted goals of privatization.

There are the numbers of the projects that over-involved in political controversy, Legal battles, strict rules and regulations, strict policies, and unending political debates, a large number of BOT project never proceed to the completion stage although many of the project reached to the commencement stage but afterwards left incomplete due certain political reasons. Projects that were the demand of the time became tremendously long in development, defeating the goals of more efficient expedition of the project. Many of the project which did proceed had complex contractual and policy issues left to resolve behind after the project was built. There was high number of disputes between the Government and the project sponsors in Asia led on economist to change the label of the concept as ‘Built-Operate-Litigate’. (6)

3.METHODOLOGY OF RESEARCH :

The methodology includes literature review, conduction of interviews and surveys with organizations and professionals involved in BOT projects, review of research papers, reports and articles related to BOT approach, trend of BOT projects in Pakistan, economy and risk related issues in commencement of BOT projects.(3)

In order to find out the applicability of Built operate transfer approach in local construction industry a questionnaire consisting of several question was prepared. Questionnaire include some basic questions about BOT. secondly there were the questions about the role of the different stakeholders in the BOT project, what are the risk related to the BOT project and all other necessary things that we must need to know for our study. Strategy was to visit several companies involve in BOT project, for this literature review was performed to understand structure of projects, audience was targeted and officials from NHA were interviewed related to recent BOT projects in National Highway Authority.

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4 STUDY DESIGN

4.1 SURVEY QUESTIONNAIRE

For the survey, a questionnaire was prepared having a set of questions, all the questions were related to trend of built operate transfer project cases in Pakistan, and what is the role of government in the implementation of the project.

Questionnaire was prepared including the role, power, duties and rights of the government and private sector in the BOT project. Who are the major stake holders of the project, During the implementation of BOT project, what are the risks faced by the major stakeholders of the project, Current BOT Projects, For the BOT project there was a question about how the contract is awarded, As in many of built operate transfer cases government does not have any share so it was asked about the government share in the project, how the project is published , how many of the projects are commenced and completed and how many of the projects are left incomplete. In many BOT projects, Firstly the project is selected by investor and moved to the planning stage but later on converted into the normal item rate contract from built operate transfer contract. As in the BOT projects concession period is long so questions related to concession period were also included in questionnaire. Invitation to bidders was discussed and how it is published, it was also asked in the questionnaire to discuss the role of governmental agencies for the monitoring of BOT projects at different stages of development from initial stage to the implementation of the project, view of government for BOT project, Difficulties faced by government during the launching of the BOT project, interest shown by government towards the BOT projects, risks faced by sponsors, Reason behind the interest of sponsor, and finally cost of the BOT projects.

4.2 DATA COLLECTION

After the preparation of questionnaire, it was next target to decide meeting with the targeted audience. First was visit was conducted on March 3, 2015. Permission letter for visit was prepared by university to concern authority. Unfortunately the first meeting wasn’t take place due to some certain reason. Second meeting on March 5, 2015, was held at our university which was unfortunately not happened. Then we were asked to send our questionnaire to the NHA via email on March 6, 2015. After two days we got the reply from the respondent of the NHA. Secondly after the data collection from NHA, We decided to visit Frontier works Organization, for that we contacted to them, but as result we got no response from their side. Data collection also took place electronically using different research paper.

4.3 DATA SOURCES

Questionnaire was targeted to the government official authorities, who are the stakeholders of the BOT projects. National highway authority and the Frontier works organization were

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the targeted audience. The respondents were asked to the questions referencing to the specific BOT projects in that they were personally involved in.NHA responded to our questions but Frontier works organization did not give any response, our targeted data source was also the research paper and also we look over the current projects going on in Pakistan whose basis are BOT. In NHA our major concern was with Mr. Imran Ahmed of south zone Karachi, who is currently working on Lahore-Karachi motorway.

5 BOT PROJECTS IN PAKISTAN

5.1 EXPRESSION OF INTEREST

Expression of interest (EOI) is an invitation, which is published by Owner or client in order for the execution of the project.

5.2 RECENT BOT PROJECTS OFFERED IN PAKISTAN

Projects that are built on BOT basis have complexity in their nature, in their contact. It becomes unbearable sometimes for all the stakeholders of the project because of its long period of implementation and then concession period. There are many BOT project that offered by different governmental authorities during the past years but only few of them are commenced and completed and there are also few of the projects that commenced initially but during prequalification stage they converted into normal item rate contract. Following are the Projects that are offered and their results.

Table-1 Recent BOT projects Offered in Pakistan

Sr Name of the projects

Employer Agency Sponsor Remarks

1 Faisalabad –LahoreMotorwayProject (M-3)

National HighwayAuthority, Governmentof Pakistan

Husnain Cotex Pvt.Limited

Commenced, But Later onBOT Contract converted intonormal item rate contract

2 Liquid CargoTerminal at PortQasim

Communication andWorks Department,Government of Sindh

- Not commenced

3 Electromagnetic City District - Not commenced

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Train Project inKarachi

Government

4 Light RailTransit Systemin Lahore andRawalpindi

Government of Punjab - Not commenced

5 PublicSwimimingPolls/SportsEntertainmentAreas

Parks and HorticultureAuthority, Governmentof Punjab

- Not commenced

6 LahoreSheikhupuraFaisalabad DualCarriageway

Communication andWorks Department,Government of Punjab

Frontier WorksOrganization(FWO)

Commenced and Completed

7 Naran SaifulMalook CableCar Project

Communication andWorks Department,Government of NWFP.

- Not commenced

8 Grain Terminalat Port Qasim

Communication andWorks Department,Government of Sindh.

- Not commenced

9 Construction ofFive Star Hotelat Lahore

Pakistan Railway,Government ofPakistan

- Not commenced

10 Construction ofIslamabadInternationalAirport,Islamabad

Civil AviationAuthority, Governmentof Pakistan

- Not commenced

11 Neelum JhelumHydal PowerProject

Water and PowerDevelopmentAuthority, Governmentof Pakistan


Stage of Pre-qualification

12 Lakpass TunnelProject NearQuetta

National HighwayAuthority, Governmentof Pakistan


Commenced and NearCompletion.

13 Lahore BusTerminal atThokar NiazBaig

City Districtgovernment of Punjab

- Not commenced

14 Lahore Kasur Communication and - Not commenced

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DualCarriageway

Works Department,Government of Punjab

5.3 CHALLENGES FACED DURING THE BOT PROJECTS:

The key factor for the successful implementation of the BOT projects is the depth study of all the aspects related to the environmental, social, economical, political, legal and financial feasibility of the project. For such reasons, the depth analysis of the project feasibility decisions needs a unique method to include the qualitative decision factors that have the strong impact on the project. In Pakistan, the nature of the BOT contracts may be complicated due to its long-term contractual limitations and the involvement of many parties, furthermore legal, economical and technical framework need to be developed on big scale for the successful execution and implementation of the project.(5)

There are the number of uncomfortable natures of constraints and risk faced by the stakeholders of the project during the project execution in Pakistan. In many of the projects that stated above the constraints and risks become much severe that project did not complete after the commencement. The planning of the BOT project is very complex because it has very complex financial and organizational structure, which is also influenced by the socio-economic environment in the country. During the past years, there is a huge trend of private sector involvement in development of public projects through BOT, which brings a redistribution of risks among the participants of the projects. Corruption, Delay in approval, Change in law, expropriation, reliability and credit worthiness of entities are the major political risk faced by the construction industry. Different construction designs have different risk control strategies for completion of the project, engineering and project capital firms. Banks or insurance companies are the source for the cost of the project.

The BOT project is normally taken by as a group or joint venture construction. Three major challenges faced by the sponsors are the estimation of cost of project, Generation of revenues during the concession period, and the selection of fruitful financing strategy.

The major problems faced by the stakeholders in Pakistan include political, economical, ecological, social, environmental and social influences. During the last 20 years, the economical and political scenario of Pakistan has been under remarkable transition. The economical and political problems of Pakistan remained as the most hurdles in formulation of BOT. Figures given below represents the political and economical constraints faced by the stakeholders of the BOT project with respect to relative impact factor based on the attributed weights obtained from the internet and research paper and interviews.

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Kidnapping

Legal Aspects

Law and order Enforcement

Suicide attacks

Terrorism

Foreign Policies

Tension at Borders

Political Instablity

0 1 2 3 4 5 6

EffectivenessCritical

Figure-2 Major Political constraints in BOT projects in Pakistan

Economic equivalance

Alternate energy source

High duties and taxes

Local company share's in JV's

Debit capital

High interest rates

In Balance supply and demand

Inflation

High Oil prices

Devalution of pakistani rupees

0 1 2 3 4 5 6

EffectivenessCritical

Figure-3 Major economical constraints in BOT projects in Pakistan

5.4 BOT PROJECTS BY NHA:

National highway authority is governmental agency, which involve in several BOT projects. Many mega infrastructure projects that are on the basis of BOT, including motorways which improve communication across the country, are successfully implemented and are under the concession period. The awarding of the project is on the basis of financial capability, as well as technical supports through joint venture. The project is not awarded on cost basis; it is awarded on the basis of numbers of years operated. NHA uses the following formula for the concession period given below:

Numbers of years of operation under their control=Total Cost/Total revenue for the years initially expected.

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There are a number of projects on which NHA is working. NHA divides the projects in three Categories.

Implementation stage Procurement stage Development stage

List of the BOT projects of NHA are given below on the basis of the above three categories.

A.IMPLEMENTATION STAGE

S.no

Project Length (km)

Project cost (Rs in Mil)

Project Details Status

1 Service Areas - 10 Nos. (M-2)

- 1,125 Establishment of Ten (10) Service Areasunder a 15 Years Concession Period - ONBOT BASIS

Concessionaire: M/s DaewooCorporation, Korea,Operational since 1999

2 Lakpass Tunnel (N-25) 0.18 679 180 m Tunnel is operational under a 25years' Concession - ON BOT BASIS.

Concessionaire: M/s IBEXConstruction Co., Pakistan,Operational since 2008.

3 Two Main-Service Areas atRiver Indus (M-1)

- 689 Establishment of Two Main-Service Areas atM-1, Concession signed for 15 Years - ONBOT BASIS

Concessionaire: M/s Petrosin,Singapore - UnderConstruction

4 Two Mini-Service Areas atRiver Haro (M-1)

- 260 Establishment of Two Main Service Areas atM-1 - ON BOT BASIS

Concessionaire: M/s Petrosin,Singapore - Financial Close Stage

5 Overlay and Modernization ofLahore-Islamabad Motorway(M2)

357 46,007 Overlay and application of Total Solution /Intelligent Transportation System (ITS) on357 km long existing 6-lane Motorway - ON

Concessionaire: M/s MORE,Pakistan - Under Construction

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BOT BASIS

6 Habibabad Bridge (N-5) 2 831 Construction of new 4-lane RailwayOverhead Bridge on N-5 with 2 Km approachroads - ON BOT BASIS

Concessionaire: M/s HOME,Pakistan - Under Construction

7 Karachi-Hyderabad Motorway(M-9)

136 44,251 Conversion of existing 4-lane Highway into 6-lane Motorway - ON BOT BAS

Concessionaire : M/s SCORE Pakistan - Financial Close Stage

Table-2 List Of BOT projects Implementation Stage)

B.PROCUREMENT STAGE

S. no

Project Length (km)



1 Multan - Muzaffargarh - D.G.Khan (N-70)

80 6,979 Conversion of existing 2-lane highway into 4-Lane divided facility including Bridge atGhazi Ghat

Evaluation Stage

2 Tarnol - Taxila (N-5) 20 6,162 Improvement/widening of existing N-5segment of 20 Kms length to provide a fasttrack facility of international standard. Scopeof work also includes a flyover at Tarnolrailway crossing - 6-Lane Facility.

Concession Negotiationstage

3 Pindi Bhattian-FaisalabadMotorway (M-3) & Faisalabad Gojra Section M-4

111 10,000 Conversion of existing 4-Lane into a 6-LaneMotorway plus overlay on existing 4-lanes(Land and 6-lane structures are alreadyavailable)

Las Date for PQ Submission -16-04-2015

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4 Nowshera –Peshawar (N-5)

43 10,000 Conversion of existing 4-lane dividedHighway into 6-lane divided Expressway onBOT basis

PQ Stage

Table-3 List of BOT projects (Procurement)

C.DEVELOPMENT STAGE

S. no

Project Length (km)



1 Tarnol-Fateh Jang (N80) 32 8,000 Conversion of existing 2- lane carriagewayinto a 4-lane, divided Highway

Project Preparation Stage

2 Sialkot – Lahore Motorway

110 55,000 Construction of 6-lane motorway,connecting industrial city Sialkot withLahore.


3 Hyderabad – Sukkur Motorway(KLM)

296 186,490 Construction of new 6-Lane, access control Motorway


4 Two Service Areas at RiverKabul on M-1

- 700 Construction of Two Service Areas at RiverKabul on Islamabad - Peshawar Motorway (M-1)


5 Two Service Areas on M-4

- 700 Construction of Two Service Areas onFaisalabad - Gojra Section of M-4


Table-4 List of BOT projects (Development stage)

5.5 PROJECT STUDY

5.5.1 KARACHI HYDERABAD MOTORWAY (M-9)

The construction of the Karachi-Hyderabad Motorway (M-9) was decided and awarded to the Malaysian company M/s BINAPURI, on the basis of BOT with the concessionaire Period of 28 years. Existing 4-lane Karachi-Hyderabad Super highway will be upgraded into 6-lane

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Motorway. NHA had Advertised EOI for everyone for the construction of the motorway. Several companies Including NLC,BINAPURI (Malaysia), EOBI,SAMBO,CRBC (China) and one Turkish Construction company submitted their proposals for construction. After detailed financial and technical evaluation, the proposal of M/s BINAPURI was accepted. (7)Karachi-Hyderabad Motorway will be constructed on BOT basis, on a total cost of Rs.24.93 Billion. 136 Km long Motorway will be Completed in almost three years. (7)The estimated time for the completion of the project is Oct 2017 (7).An overview of the Karachi Hyderabad Motorway is given below.

M-9 Project Brief

Title Conversion of the existing 4-lane Karachi Hyderabad superhighway into a 6-lane Motorway (M-9) On BOT Basis (136 Km length)

Client National highway authority, Pakistan

Concessionaire Bina Puri Pakistan (Pvt.) Ltd.

Date of signing concession agreement 16th January 2012

Capital expenditure USD.203 Million (Rs.18.62 Billion)

Concession period 28 Years

Expected financial close July, 2012

Expected date of commencement One Month after financial close

Construction Period 30 months (Sectional Completion will be achieved in 12 months)

Table-5 Short Description of Karachi-Hyderabad Motorway

5.5.2 KARACHI LAHORE MOTORWAY

The construction of the Sukkur-Multan section of Karachi-Lahore Motorway, the sindh Province will be brought into the national mainstream. A/c to an official of NHA, the cost of the Sukkar-Multan section is estimated at Rs.200 billion where the total estimated cost of the Karachi-Lahore motorway is about Rs.700 billion. The total length of the sukkur-Multan section is about 375 km, of which 260 km will fall in Punjab and 115 km in the province sindh. The project has been designed keeping in view the guidelines set by the environmental protection Act 2014 and will be completed in 36 months. According to the officials, safety issues have been dealt with thoroughly while designing the project and people will face least trouble during the construction work. (7)

6.CONCLUSION AND RECOMMENDATIONS:

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This paper attempted to review most relevant literature related to BOT projects and the trend of recent BOT projects in Pakistan. The main objective was to bring into knowledge the trend of BOT projects in Pakistan and risk involved in BOT projects. The research revealed that there is a great potential in Pakistan to introduce more BOT projects in the sector of power, infrastructure, irrigation, communication and housing. Launching of more BOT projects will help government in attaining his goals in infrastructure sector which were not been able to completed due to financial issues in the country. The following recommendations can be extracted from the research;

There should be more emphasize upon spreading information related to BOT projects through presentations and literature in Pakistan as this term is still new in Pakistan.

The stakeholders of successful BOT projects should share their success experience with others as an inspiration.

Measurable steps should be taken to reduce risks involved in commencement of BOT projects.

Government should take substantial steps to provide such an environment in the country so that foreign companies show greater interest towards BOT projects in Pakistan.

Certain necessary steps and watch over committees should be formed to watch BOT projects during their commencement, procurement and concession period so that most of the BOT projects end up with good result.

The ways to mitigate risk and challenges during BOT projects should be established. The success of BOT projects mainly depends upon political and economical

constraints. The benefits earned from local BOT projects should be highlighted in public to gain

the attention of private sector. The risks involved in BOT projects have decreased the interest of private sector

towards BOT projects in Pakistan.

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REFERENCES:

1. http://www.investopedia.com/terms/b/botcontract.asp

2. https://ideas.repec.org/p/wbk/wbrwps/498.html

3. The trend of built operate and transfer projects in Pakistan by Misbah jamil, Ammad hasan and mudassir sattar (http://civil.neduet.edu.pk/ICCIDC-I/Conference%20Proceedings/Papers/010.pdf)

4. http://www.paas.com.pk/images/volume/pdf/368183792-03.pdf

5. BOT contracts: applicability in Pakistan by S.mubin and ghazanfar

(http://www.uet.edu.pk/research/researchinfo/journal/volume3/5.pdf)

6.Rohwer, J.; Asia Rising, Butterworth-Heinemann

Singapore, (1995) 212-215

7. Contract of construction of Karachi-hyderabad Motorway M-9 to Malaysian company- National highway authority- Syed Muhammad Ali Gardezi

(http://www.nha.gov.pk/)

8. Detailed study of BOT(built-operate-transfer) contracts-Nespak

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http://www.nha.gov.pk/

http://www.uet.edu.pk/research/researchinfo/journal/volume3/5.pdf

http://www.paas.com.pk/images/volume/pdf/368183792-03.pdf

http://civil.neduet.edu.pk/ICCIDC-I/Conference%20Proceedings/Papers/010.pdf

https://ideas.repec.org/p/wbk/wbrwps/498.html

http://www.investopedia.com/terms/b/botcontract.asp

built operate transfer case studies in local construction sector in pakistan

Engineering

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