Public-private partnership project

In the message of the Head of State to the people of Kazakhstan dated November 30, 2015, it was noted that for the “unloading” of budget expenditures, mechanisms of public-private partnership should be actively applied. Additional measures need to be worked out to encourage private investment in priority sectors of the economy. It is important to attract private investors more widely not only in the construction of roads, gas pipelines, hospitals, schools and other facilities, but also in their reconstruction and maintenance (hereinafter referred to as the Message).

Public-private partnerships are a form of cooperation between the state and the private sector. In general, PPPs are mutually beneficial cooperation between state bodies and entrepreneurs in industries related to the sphere of responsibility of the state on the basis of a balanced distribution of risks, benefits and costs, rights and obligations defined in the relevant agreements.

PPP project - a set of sequential measures for the implementation of PPP, implemented over a limited period of time and having a completed nature, in accordance with actual Law and the budget legislation of the Republic of Kazakhstan.

Public-private partnerships in the form of concessions are used by many countries. Particularly often, the PPP mechanism is used for the construction of road infrastructure.

Concession is one of the types of PPP agreement providing for the creation or reconstruction of state property at the expense of the investor. The concession mechanism allows for the implementation of large-scale infrastructure projects by attracting private investment and replacing them with part of budget expenditures. 

Concession project - an investment project involving the preparation and holding of tenders for the right to conclude a concession agreement, develop project documentation, prepare the construction site, as well as create and reconstruct capital construction projects as part of a concession agreement, implemented for a limited period of time and having a completed nature, according to budget legislation of the Republic of Kazakhstan and actual Law. Concession projects can be classified as concession projects of special significance, the list of which is determined by the Government of the Republic of Kazakhstan.

 In pursuance of the Message, the Committee for Roads of the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan is working on the implementation of concession projects in the road sector.     

In accordance with international best practice, the Ministry of Industry and Infrastructural Development of the Republic of Kazakhstan (hereinafter - the Ministry), together with the project consultants, carried out work to amend and supplement the legislation of the Republic of Kazakhstan in the field of concession.

The implementation of the project under the concession scheme suggests that the Concessionaire assumes the risks associated with the design, construction and further operation of the concession facility. If the project is implemented according to alternative schemes, these risks are completely transferred to the state. At the stage of creating the object, the Concessionaire will be interested in the quality of construction, as in the future, it is responsible for the operation of the road in the long term and the receipt of compensation of which is extended for many years. During the operation phase, the Consortium carries out all types of repairs, road maintenance, collection of fares in favor of the state.

So, at the legislative level, mechanisms for regulating currency risks have been introduced, the rights of creditors in international practice referred to as the “Step-In” in the form of a new institution - the “Direct Agreement” signed between the grantor, the concessionaire and the creditors of the concessionaire, have been introduced. In addition, the main provisions of compensation are fixed in case of early termination of the concession agreement taking into account the balance of risks of the parties.

According to the proposed structure of the project, compensation for investment and operating costs, as well as compensation for road management will be paid to the concessionaire through the mechanism - “availability fees” - these are fixed payments from the state, while the entire fee from the toll road tolls goes to republican budget.

So, at present, 2 concession projects are under development and implementation in the framework of public-private partnerships.