It is always a rare occasion when politicians take into consideration and learn from their errors. Fortunately, this is what happened with the long-awaited law on public-private partnership. The legislation has been profoundly reshaped, after it passed at first reading in Parliament in February and all parliamentary parties, including the ruling GERB, acknowledged that it was not functional. Now neither businesses, nor non-governmental organizations express any concerns, which means that this time government may have done their work.
One of the most significant change is related to the scope of the public-private partnership. For example, it could not apply to ports, airports, railway stations, road facilities and other transport infrastructure as the original version envisaged. The production, transmission and distribution of electricity and thermal energy as well as the collection, transportation and waste treatment and irrigation have been removed from the list. In partnership with public institutions, businesses will be able to finance, build, manage and maintain only parking lots, public transport facilities, surveillance and security systems, street lighting, landscaping, parks and gardens, as well as objects of social infrastructure for healthcare, education, culture, sports, tourism, social welfare and places of detention.
The contracts for public-private partnership would be for a period of 5 to 35 years and will necessarily have a statement made on the basis of financial and economic analysis, so that the benefits for both parties are clear. Thus, if the terms change, no annexes will be possible, which have so far been used as a way to radically change the original form of contract and in case of changed terms a solution will be sought after according to the principles inscribed in this statement.
Moreover, companies with which the public sector will work will be determined through an open or restricted procedure, competitive dialogue or negotiation procedure with a notice under the Public Procurement Act. However the truth is that public auctions are still the most transparent procedures in the country and any other approach would be more unacceptable.
With the adjustments to the law, public interest seems to be more protected. To implement public-private partnership ministries or municipalities will form joint ventures with businesses where they will make contributions in kind of the public assets they control. Public institutions have to hold the so-called blocking quota, which in practice will make impossible for the developer to increase the capital or sell assets. Furthermore, it will be impossible to transfer the shares, which means that the company in the partnership will not be able to transfer its duties to another one.
As for the risks in the implementation of this form of partnership, the legislation now envisages for them to be shared between the parties. For example, the private partner always assumes the construction risk and at least one of the risks for availability or demand for the service in the public interest if the price for it is not determined by a statutory or administrative document. An important clarification is that these commitments will not guarantee recovery of invested money to the company. In reality, profits for private entrepreneurs will be there and to a large extent they will be completely secure. The law stipulates that private entities involved in public-private partnership do so at a certain rate of return on its equity, which is provided for by the financial support of the public partner. In other words, the public institutions will provide a predetermined rate of return. In addition to direct payments this will be done by granting rights over other properties for additional business or service. Combination of both will be possible. But if the profits of the private partner from the additional rights granted exceeds the rate of return specified in the contract, the public partner will stop payments and even be able to receive part of the extra revenue.
The BANKER
