An analysis of build-operate-transfer contracts in the Philippines: a transaction cost economics perspective
Date
2008-03
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Abstract
Despite being among the pioneers in private sector participation in public infrastructure projects in the world, the Philippines faces the challenge of reviving investor appetite in build operate transfer (BOT) projects in the country. Given its dire need for public funds to finance infrastructure facilities, the Philippines persistently needs to attract private sector investments in infrastructure projects. Proposed amendments to the country's BOT law such as House Bill 5002 seek to contribute to a resurgence of such private sector investments. But these fall short of addressing the underlying weaknesses in the current BOT law. Until these amendments take into account the lack of adaptation capabilities, BOT contracts will tend to benefit only one party to the transaction and would be unstable. This study applies transaction cost economics to the analysis of BOT projects. It calls for improving the design of BOT contracts by incorporating provisions for the partnership to adapt to disclosed but unexpected information or events which have important bearing on the agreement.
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Urban planning, Urbanization, Infrastructure development, Infrastructure projects, Private sector, Private investment