At NCE were held public hearings on the results of the implementation of public-private partnership projects

The complexity and duration of the process of harmonization of PPP projects, their low investment attractiveness, as well as the lack of competence of the participants - these are the main reasons why the public-private partnership in Kazakhstan is developing at low pace.

This was announced today at the National Chamber of Entrepreneurs by participants of public hearings by the results of the implementation of public-private partnership projects.

Deputy Chairman of NCE Yuliya Yakupbaeva noted that this year marks 10 anniversary since the adoption of the Law of Kazakhstan "On concessions", and on October 31, 2015, the Law of RK "On public-private partnership". The new law on PPPs has expanded its field of application, the new contracts were introduced, there were stipulated state support measures and sources of cost recovery.

 However, in practice, according to Yakupbaeva, there is no understanding of the differences between the forms of interaction between the state and business - PPP, concession, trust management, property lease, as well as the methodology for determining the cost of a PPP object, the total cost of government support measures, reimbursement sources, etc.

"In the application of the PPP mechanism, there is a number of outstanding issues. It is the complexity of the processes of harmonization of projects, time consuming procedures and their extreme bureaucracy, low investment attractiveness of PPP projects for potential investors, low competence, knowledge of the parties involved in the implementation of PPP ", - said the deputy chairman of NCE.

There is also a division on national and local PPP projects. The Center of PPP collects statistical data for the national PPP projects, but as for regional no one collects statistics. According to the Ministry of National Economy, 326 PPP projects are at the stage of development, according to RCE - 160.

"At the same time, if you look at these contracts in terms of meeting fully the criteria of PPP, then out of 160 only 62 are real PPP projects. Thus, we need to work out and in the next pool of our proposals to bring a clear understanding of who will coordinate and maintain statistics on the projects of public-private partnership", - said Yuliya Yakupbaeva.

She emphasized that only 13 PPP contracts were signed in the Republic. These are 7 projects in Almaty region on provision in financial leasing of agricultural machinery, 6 projects in Aktobe region: 3 projects in the field of physical culture and sports, 3 projects in health care. Unfortunately, none of the project is fully implemented.

Vice-Minister of Health and Social Development Elzhan Birtanov, who participated in the hearings, agreed with the low competence of both sides – on the part of the state in terms of preparation of projects, on the part of the private sector - in matters of risk analysis and accounting, attraction of investors. According to him, in general, the state has no clear understanding of the purpose of the implementation of PPP.

"According to local executive bodies, 47 projects are under development in health care sector, two more projects are developed by the Ministry. Basically, these are clinics, ambulance stations. These are projects that local executive bodies offer to the private sector for implementation. At the same time over the past 2-3 years no successful tender was held. The only contract was signed in Aktobe for the construction and operation of the emergency medical station", - said Elzhan Birtanov.

"In general, it is important to understand that the total amount of expenses of the state for the project, implemented by PPP mechanism, will be higher than direct funding. The thing is that in PPP the cost of the project includes the margin of the private partner and the value of money for a private business, which is always higher than the budget loan", - said Deputy Minister.

As an example of successful implementation of PPPs in the framework of the meeting was given Aktobe region, where at present are concluded contracts for 6 projects.

Director of the Chamber of Entrepreneurs of Aktobe region Nurlybek Mukanov on the intercom said that in the region, all participants PPP work closely and harmoniously, and thereby manage to achieve such a result.

"All infrastructure has been created: Regional Center of PPP, SEC in Aktobe - a department that provides independent expert opinion for each PPP project. From the beginning of the year, local executive bodies initiated 18 projects worth 17 billion tenge, out of them contracts were signed for 6 projects. Through direct talks entrepreneurs initiated 5 projects", - said Nurlybek Mukanov.

The partner of International Law Firm Grata International Shaimerden Chikanayev in his speech noted that the term PPP is incorrectly interpreted not only in business, but also by the local executive bodies. Even sponsorship projects are taken for PPP sometimes.

"As a lawyer, I see the poor structuring of projects, lack of competence on both sides. They try often to put a tick in the box by announcing the project, but when it comes to their implementation, none of the private partner comes. In fact, local executive bodies do not want to pass objects into private hands", - said the expert.

Yuliya Yakupbaeva noted that on its part the National Chamber of entrepreneurs constantly initiates amendments to the legislative acts in the field of PPP. Currently, the changes are being introduced to the current legislation in the framework of PPP. The proposals of NCE were incorporated in it: allowing simultaneous (concurrent) implementation of expertise and coordination of documents, reduction of the time required for examination, the number of required documents has been shortlisted.

Deputy Chairman of NCE suggested to consider alternative schemes of PPP projects, where the parties to the PPP contract will be the public partner (local executive bodies), the Management Company (the private partner), a construction company, second-tier banks.

"In order to avoid complicated tender procedures, it is possible for small projects to determine the limit of funds. For example, a kindergarten for 250 places worth 750 million tenge. MID together with the management and construction companies, the bank will consider the construction of a model kindergarten. During the construction phase, local executive bodies allocate a speedy budget loan to the management company for 2 years. After this time, the bank returns the local executive body this money. The object is put in the pledge by STB and 15 years later moves to the balance of the state", - Yakupbaeva has shared a new model.

Investment attractiveness of the financial model can also be improved through the rational allocation of public order and market payment. The kindergarten was built on PPP arrangements, will take children not only from the "waiting list", but children out of the akimat’s waiting list in the ratio of 70 to 30%.

The Ministry of the national economy in general has no objection for the elaboration of this model in a pilot mode.