Risk Management Strategies for Privatized Infrastructure Projects: Study of the Build–Operate–Transfer Approach in East Asia and the Pacific

Abstract

Private–public partnerships have been adopted for the development of public infrastructure to meet the growing demand for public services. Many Asian countries have used the build–operate–transfer (BOT) approach to develop public infrastructure projects. However, the potential benefits of undertaking a BOT project are accompanied by corresponding risks from the private sector’s perspective. The objectives of this study are (1) to identify and discuss major risks inherent in the East Asia and Pacific regions, and (2) to propose risk management strategies for future BOT projects to be successful. This paper reports the results of five case study analyses undertaken to review their primary risks and mitigated methods. In addition, this paper proposes some strategies for future BOT projects. Two main categories of risks were analyzed: general risks and project-specific risks. Risk management strategies were suggested for each category of risk. The main finding of this study indicates that the private sector cannot be the only participant in risk management. The host government’s active support is the most essential factor for the profitability and economic viability of a BOT project in the East Asia and Pacific regions.