The shortage of public funds to finance the construction of new infrastructure projects and the rehabilitation of the existing facilities, coupled with increased demand for capital on traditional alternative sources (e.g., national and international development banks and agencies), have contributed to the creation of alternative forms of project development. Well-publicized examples are Build-Operate-Transfer (BOT) and Build-Own-Operate-Transfer (BOOT) projects, where private sector consortia have become responsible for project promotion. The success of such projects is equally important for the promoter as well as the government. This paper focuses on the role of the government in making the BOT projects successful.

Traditionally, the financing of infrastructure projects is the responsibility of the government. However, because of budgetary constraints and other priorities to be taken care of, governments have not been in a position to fund infrastructure development activities effectively (Nair P and Kumar Deepak, 2006).

In the year 1996, the world bank had estimated that an expenditure of US$200 bn a year must be made on infrastructure development worldwide in the developing countries, and the Asian countries would account for 80% of this expenditure (Stager, 1996). The bottlenecks in the mobilization of public funds and foreign debts have enhanced the interests of the developing countries in the provision of infrastructure projects through Build-Operate-Transfer (BOT) type of schemes (Pahlman, 1996). In addition, there is an increased understanding on the part of the government that they should not own and/or operate the infrastructure projects because of the less effective utilization of resources, when compared with the more flexible and cost conscious private sector (Dias Jr. and Joannou, 1995).

The BOT is a device that helps the government to develop infrastructure projects by transferring all the risks and responsibilities to the private sector. Rather, it requires appropriate allocation of risks and assigning risks to those best placed to control them. The risks for the government include: delays in land acquisition for the project due to litigation, possible failure of the promoter to complete the project as per contract, less utilization of the infrastructure facility generated resulting in benefit to the community falling short of the projections, etc.

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