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Dubai Municipality has made nearly Dh1billion since the beginning of
2007 from the build, operate and transfer (BOT) form of project
financing. Under this system an investor pays to lease a piece of land
for a set period, builds on it and operates the asset. At the end of
the lease period the land and everything on it including buildings and
machinery revert to the landowner.A key BOT investment is the
WonderLand theme park near Garhoud Bridge. Other examples are the
Carrefour hypermarket in Shindagha and the Dubai Marine World, which
will be completed soon in Creek Park.
Engineer Mohammed Julphar, Assistant Director-General for Financial
Affairs and the head of the municipality's investments committee, told
Emirates Business that the system saved the municipality time and
effort.
"For example, if the municipality wanted to build a
park, the total cost of building and running it and supervising the
workers and machines, among many other things could be around Dh100
million. With the BOT system, a private company approaches the
municipality and builds the park at their own expense, runs it and
carries out all the work related to it. And the company pays the
municipality rent throughout the lease period.
"In this way
the municipality saves the Dh100 million it would have spent on
building the park as well as saving time and effort. Plus it makes some
money. The total cost of the 10 BOT leases issued by the municipality
since the start of last year is Dh610,500m. The rent we will get from
these projects over the period of the leases is Dh374,200 million.
"These figures add up to Dh984,700 million the actual gain made by the municipality for spending nothing in return."
Strict
regulations limit the number of projects that are approved."The main
objective of the municipality is to serve the community and we are a
non-profit organisation," added Julphar. "Therefore we don't look at
the proceeds as much as the benefits of the projects for the
community." He said lease periods varied from 10 years to 20 years
depending on the type of project, and the cost of the leases also
varied.
"At the end of the period the ownership of the land
and all the buildings, equipment and machinery on it goes back to the
municipality. The lease is paid in instalments to the municipality.
However, the money we receive from the private companies is not really
what matters we care about the service received by the public."
Julphar
said developers benefited from BOT. "If a company buys the land to set
up a project then it will take it many years to make enough profit to
cover the cost. In this system, they are making profit much sooner."
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