Public-private partnership: Ukraine and international experience

Topical
today remains an interest in public-private partnerships. In a broad sense,
public-private partnership is seen as the interaction of government and
business (one or more) for the funding and management of special state or
municipal institutions in various fields.

It
should be noted that Ukrainian legislation uses the term “state-private
partnership,” while in law and practice of other countries the term
“public-private partnership” is used more often.

         The
emergence of a public – private partnership and its forms

         For the
first time, PPP appeared in 1992 in the UK with the help of John Major who
proposed the so-called “private finance initiative”. The main idea of
​​this initiative is to attract entrepreneurs to cooperate with public
authorities in order to develop the economic and social spheres. By the way,
this initiative has become a base for the future public-private partnership of
some other countries (eg Australia). Regarding the development of PPP in
Ukraine officially the development of PPP began its countdown only in 2010,
with the adoption of the Law of Ukraine “On public-private
partnership.” Although the Law of Ukraine “On Concessions” was
adopted in 1999.

         Regarding
forms of the PPP, there is no single answer to this question, because there is
a separate legal practice in each country. For example, in Ukraine, the most
common type of cooperation is the concession. There are seven basic forms of
concession. Thus, they can change and intermingle, creating a completely new
form.

         The
simplest form – BOT, or in other words – Build – Operate – Transfer. BOT is a
mechanism that allows the private entity to use the object of the contract
during the term of it while after the end of the agreement the object should be
transferred to the State. The most striking examples of this form of concession
can be Japan, China, and Israel. For instance, on the basis of BOT, the China
Hotel was built in 1979. The second example of public-private partnerships in
the form of concession is BOOT (Build – Own – Operate – Transfer). The main
difference between this type and the previous one is that the ownership of the
object of the contract belongs to the state, even during the procession of the
contract. Australia seems to be important to mention, because in this country
is possible to depart from the last requirement of the contract, namely the
transfer of the object of the contract to the state ownership. Also, some
countries, such as Canada, Australia, and New-Zealand, use the BOOT term to
replace the BOT.

         Other
examples are the BTO, BOO, BOMT, DBOOT, and DBFO. Thus, the construction of
wind power in the Republic of Mauritius was under the BTO scheme.

         Sectors
of the PPP use

         The
sectors in which the public-private partnership is used should be also
mentioned. As noted above, the UK is the most successful country in the
implementation of the PPP. A list of spheres where the PPP is used in this
country can be seen as a proof of this. The only exceptions in the list are a
construction of ports. France on this issue almost caught up with Britain, as
all areas of activity somehow could include PPP. Only three areas of activity,
namely the construction of airports, ports, and social structures, currently in
the process of preparation. Note, that there is no Ukraine in the list for
because our country has just started its way in this area. Although the need
for investment in Ukraine is significant. Thus, the spheres of energy, that
reaches 39.53%, infrastructure – 23.23%, and in processing industry – 11.64%.

         PPP in
Ukraine

         There
are 243 public-private partnership projects in Ukraine that are in the process
now. Of these, 210 on concession contracts, while only 33 contracts under the
terms of joint activities. The biggest areas that use this type of partnership
is processing waste (47.7%) and water (32.5%). The rest is occupied by
transport infrastructure (7.0%); recreation, culture, sports and real estate
(1.2%); production of heat and electricity (4.9%) and other sectors (7.4%).

         But this
is not all. The use of public-private partnership is planned for 321 additional
projects. 105 of which are water supply facilities, 51 – energy production, 32
projects in the fields of recreation, culture, and sport, as well as in waste
treatment and 4 projects in health care. For comparison, there are 550 such
projects in the UK that worth over 56 billion euros.

         International
experience

         Regarding
international experience in public-private partnerships can be noted that from
1990 to 2010 significantly increased private investment in the
telecommunication sector (from about $ 5 000 to about $ 70 000). The energy
sphere became equal to telecommunications by 2010, to $ 70 000, while in 1990 a
number of investments were equal to zero. It is interesting that the water
supply remains close to none while in 2007 there was a rise to $ 10 000.

         Summarizing
the above, we can conclude that Ukraine should have a long way through in the
PPP sphere based on the best international practices.