How to make PPP work in Russia
The public and private sectors give different assessments of the advantages and opportunities of PPP projects in Russia.
However, they agree that legislation must be improved and they underline the importance of a clear state policy on PPPs. An appropriate allocation of liability for risks in PPP projects between the state and the private sector is paramount.
In this overview, we present the findings of a survey that EY did this year of players on the Russian PPP (public-private partnership) market.
The public and private sectors give different assessments of the advantages and opportunities of the practical implementation of PPP mechanisms.
Public officials regard off-budget financing as the key task of PPPs. They count on transferring liability for key project risks to the private sector and expect a low cost of private capital.
The private sector is prepared to provide optimal value for money, but in return expects state support and guarantees as well as an adequate return on investments.
Market players agree that certain sectors, with the exception of social infrastructure, are relatively promising.
Transport and utilities are the industries that show the most promise for PPP mechanisms in the next five to ten years
The state needs PPP projects in the social sphere, but has not as yet created the conditions for projects in this sector.
Federal and regional PPP legislation should be flexible and coordinated, and a number of related issues need to be resolved in the areas of tariff formation, access to land, taxation, budget formation, etc.
The quality of project preparation remains low. State bodies lack experience. State institutions for the support and development of PPPs are insufficiently developed at the federal and regional levels. Investors are also concerned about the low creditworthiness of Russian regions.
Projects may be made more attractive by means of state guarantees, the accumulation of experience with PPPs and an appropriate allocation of liability for risks.
A clear state policy on PPPs is of key importance for all market players.
For more detailed information on a variety of legal, financial and commercial issues relating to PPP projects please click on the headings below:
- Advantages for the state
- Industry appeal
- Regulatory framework
- Quality of preparation of PPP projects
- State policy on PPPs
- Terms of financing / Role of development institutions
- Allocation of risks