Essence is obviously not in the form of property

During periods of economic crisis, the most far-sighted governments and businesses actively invest in the development of their infrastructure.
During periods of economic crisis, the most far-sighted governments and businesses actively invest in the development of their infrastructure. The competitiveness of the economy and the nation depends upon it. Countries such as Switzerland and Singapore are proof of this. Our own Government has calculated that initially, the country will need $2.5bn, or about 3.5 percent of GDP for the development of its infrastructure (roads, kindergartens, schools, hospitals). These expenses cannot be financed from the budget. So the question arises as to where the money should come from, given that external loans are undesirable? The most common solution seen in other world practice is the use of the mechanism of public-private partnerships (PPP). Its advantages were discussed at a parliamentary hearing with deputies, members of the Government, businessmen and international experts.

In general the idea of PPP is simple. Private capital is attracted to those areas where the state has an interest, but where there are no resources. The private entrepreneur builds up the business, manages it for a while, then transfers it to the state and receives payment. Many countries have worked according to similar principles for a long time, including our nearest neighbours, the Russians, who started building a high-speed highway from Moscow to St. Petersburg. Through a similar scheme, Northern Ireland has built over 150 schools. Whilst in France, due to interaction between the state and business a huge clinical centre at Sud Francilien was built.

There is no reason why this model should not work in Belarus, where we have a precedent in the project to collect tolls on private roads, which was managed by an Austrian company.

The advantages of PPP are obvious. Private entrepreneurs are valued not only for their capital investment, but they also introduce modern technologies and management techniques. They in turn have opportunities to develop their own businesses, while the state gains the financial means to further modernisation. There are advantages for ordinary citizens too; many Minsk residents, for instance are concerned about deficiency of places in preschool establishments. The development of the private sector in this area and the subsequent opening of more family kindergartens would solve the problem.

Economy Minister, Nikolai Snopkov, outlined his views on the matter, “In industries where the state sector is dominant, the use of the PPP model is an excellent opportunity for both national and foreign investors to gain access to sectors of the economy which are historically under state control, including transport and the energy infrastructure. In other words, PPP is a good alternative to privatisation allowing the government as far as possible to retain some measure of state control.

At the beginning of next year, Parliament will begin discussions on the draft law of public-private partnership. The Chairman of the Permanent Commission of the House of Representatives on Economic Policy, Victor Valyushitsky is certain that this act will form guidelines both for the state, and for private capital. There remains the question of whether PPP will solve the problem of attracting investment. Aide to the President, Kirill Rudyi, called on the members of the committee to look carefully at the issues and not be too hasty to implement a law that has not been properly thought through. The experience of other countries is not all positive and a cautious approach is needed. It is a matter for debate as to whether private entrepreneurs could fulfil the projects on time and on budget at similar quality to that produced by the state. In Great Britain, for example, over the last 20 years, 717 PPP projects were approved but of these, only approximately 70 percent were completed on time and of suitable quality. Every third contract has some part unfulfilled. Risks such as these should not be underestimated. The problem does not only concern private investors, it is doubtful whether the introduction of PPP will reduce the amount of design preparation and documentation or decision-making for the state bodies or that the prices for building materials and services will fall. At the start it is necessary to understand what constrains the development of PPP, to eliminate these obstacles, and then to pass the law.

By Yevgeny Kononov

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