Distinguish between Build-Operate-Transfer (BOT) and Build-Own Operate (BOO) methods of private participation in the provision of infrastructure (see Appendix 1. 1). From the perspective of government, how is choice rationalized as between the two methods? What is the preference of the private sector in this regard?

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APPENDIX 1.1 TERMINOLOGY OF PUBLIC-PRIVATE PARTNERSHIPS Acceptance of private participation in the provision of basic infrastructure is growing all across the world, in virtually every area. The trend has given rise to a form of public-private partnership that was non-existent up to a few years ago but is now highly formalized. In support of this partnership, several generic contractual arrangements have been developed, particularly in emerging market countries, as discussed below. Build-Operate-Transfer (BOT) The BOT model is used when the government seeks to eventually acquire. by transfer, an asset that has been developed, constructed and operated for a fixed term by the private sector. A BOT project involves a grant by the host govemment to private sector parties of a right (based on a contract, licence or concession) to own and operate a project for a determined length of time, often up to 30 years and sometimes more. Private parties develop, build, operate and manage the project for the duration of the agreed term, subsequent to completion of construction, with the goal of recouping con- struction, operation and financing costs, and making a profit. At the end of the contract term, the project is transferred to the host govemment. BOTs are attractive to governments that have not decided to withdraw totally from the provision of infrastructure services to the consuming pub- lic. In this respect, two features of the BOT model should be considered. First, the host government to whom the project is transferred should have the managerial expertise and technological capability to effectively control and operate the project. Second, the contracts should create incentives for the private sponsor(s) to ensure that the project, at the time of transfer, will be capable of being operated economically and efficiently for its expected remaining useful life. Since the government has a potential ownership stake in BOT, its risk- sharing involvement in this type of project, as shown in Figure A1.1 is more significant, i.e., it should be willing to absorb more risk than would be the case for a Build-Own-Operate (BOO).