I. Zapatrina,

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Experience and perspectives of implementation of
state-private partnership (SPP) projects in
housing and communal sector

• I. Zapatrina,
• Chairman of the Board of
• Ukrainian Public-Private Partnership Development
  Support Center,
• doctor of economic sciences

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State-private partnership in the world, 2010

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SPP objective, instruments, principles

• Objective satisfaction of interests of the
  society, implementation of projects of social
  importance, increasing of the efficiency of
  public management system
• Instruments of achieving the objective
  attraction of financial resources, intellectual
  potential, experience, competence and
  technologies of private sector by the public
  sector.
• Principles
• Trust, observance of obligations
• Diversification of risks
• Consolidation of finances, competence,
  intellectual potential, technologies

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Current opportunities on implementation of
infrastructure projects
Infrastructure project
SPP
Budget
Credits of IFI

• - Long period of preparation and signing of
  agreements
• Budget guaranties
• insufficient qualification of local personnel
  (projects preparation, negotiations, projects
  implementation)

• - Decreasing of the budget load and tariffs
• Increasing of number of investment projects to be
  implemented
• Attraction of new technologies, experience and
  knowledge
• Employment increasing

• Budget load
• Limited number of projects
• Uncertainty in stable, rhythmical financing
• Absence of stimulus of efficient project
  management

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What SPP could bring?

• 1) Attraction of financial resources, experience,
  technologies
• 2) Optimization of budget expenditures for
  infrastructure
• 3) Renewal of infrastructure, decreasing of
  logistics expenditures of business (34 in cost
  Peru?, 10 - USA)
• 4) Increasing of availability, quality and
  reliability of services
• 5) Employment increasing, internal market
  development
• 6) Speed up of economic growth

Effect on GDP growth of a 1 increase in
infrastructure assets (percent)
Direct effect Indirect effect Total
Power generation capacity per worker 0,07 0,02 0,09
Source J.L.Guasch Granting and Renegotiating
Infrastructure Concession, WBI Development
Studies, 2004
7) Assistance in economic reforms
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Barriers for implementation of infrastructure SPP
projects at the example of Latin America

• 1. Regulatory risks and their influence on the
  capital cost
• Increasing of capital attraction costs by 2-6 in
  certain countries
• Increasing of capital attraction costs by 5
• Tariffs increasing by 20

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Infrastructure Concession, WBI Development
Studies, 2004
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Barriers for implementation of infrastructure SPP
projects at the example of Latin America

• Law qualification of public sector

Total Energy Transport Water and sanitation
Renegotiated contracts, 30 9,7 54,7 74,4
Average time to renegotiate since award, years 2,2 3,1 1,6
1000 contracts, 1980-2000 Source J.L.Guasch
Granting and Renegotiating Infrastructure
Concession, WBI Development Studies, 2004
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Readiness of public sector to SPP
Initiators of renegotiations
Sector Both Government and operator Government Operator
All sectors 13 26 61
Water and sanitation 10 24 66
Transport 16 27 57
Some of the renegotiation outcomes
Renegotiation outcome of renegotiated contracts
Delays on investment obligation targets 69
Reduction of investment obligations 62
Tariff increases 62
Source J.L.Guasch Granting and Renegotiating
Infrastructure Concession, WBI Development
Studies, 2004
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Incidence of renegotiated concessions
Feature of renegotiation
Lowest tariff 60
Investment requirements 70
Performance indicators 18
Regulatory body in existence 17
Regulatory body not in existence 61
Regulatory framework embedded in law 17
Regulatory framework embedded in resolution 28
Regulatory framework embedded in contract 40
Source J.L.Guasch Granting and Renegotiating
Infrastructure Concession, WBI Development
Studies, 2004
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Barriers for implementation of infrastructure SPP
projects at the example of Latin America

1. Political instability (change of priorities,
   review of economic course)
2. Underdevelopment of institutional environment and
   low quality of institutes
3. Unreadiness of public authority to adequate
   reaction on aggressive private operators
4. Speeding up of GPP initiation process and their
   contractual mounting
5. Negative attitude of population to the private
   sector
6. Too high expectations related to SPP

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Lessons for Ukraine

• Creation of conditions for SPP (reforms, system
  modernization of legislation, strict observance
  of laws and agreements)
• Development of institutional environment (quality
  of institutes, science, self-regulated
  organizations)
• To hurry slowly (to start with small pilot
  projects housing and communal sector,
  untraditional energy sector)
• Formation of trust, understanding and mutual
  responsibility in relations society state
  private business

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Concept of GPP development in housing and
communal sector

• Tasks
• Creation of conditions for GPP development in
  housing and communal sector (modernization of
  legislation, development of state regulation
  system, justification and ability to forecast the
  tariffs).
• Development of new models and mechanisms o
  private sector attraction to housing and communal
  sector .
• Determination of ways and directions of budget
  support as an element of SPP stimulation in
  housing and communal sector and the criteria of
  providing such support.
• Widening of positive experience of GPPP
  mechanisms application in housing and communal
  sector.
• Determination of stages, principles and
  peculiarities of introduction of GPPP mechanisms
  in housing and communal sector of Ukraine.

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Risks in implementation of SPP projects in
housing and communal sector

1. Imperfect legislation (taxation, tariffs,
   controlling bodies, non-transparency, etc.)
2. Lack of proper institutional infrastructure
   (preparation, selection, monitoring of GPP
   projects)
3. Insufficient qualification of public authorities,
   loss of institutional memory
4. Political instability, lack of continuity
5. Lack of experience in implementation of GPPP
   projects
6. Negative attitude of the society to the private
   business
7. Overexpectations of municipalities and the state
   regarding private partners
8. Decentralization of water supply and sanitation
   sector and heat supply sector
9. High risks for officials related to decision
   making, non-adequate remuneration for the
   qualified activity

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Encouraging factors

1. Interest of the state and municipalities to SPP
   because of lack of budget financing
2. The law on National regulation commission at the
   communal services market
3. Experience of formation of investment projects
   pool in the framework of the World Bank project
   (Ministry of housing and communal services)
4. Interest of IFI to crediting of energy saving
   projects (EIB, IBRD, EBRD, Swiss initiative, Fund
   of clear technologies)
5. Experience of regional companies establishment
   (Water of Donbass)
6. Concept documents (law on SPP, concept of state
   regulation, concept of SPP in housing and
   communal sector, program of reforming of housing
   and communal sector, draft laws in field of
   housing and communal services)
7. Existence of positive and negative examples of
   SPP
8. High potential on implementation of SPP projects
   (waste water treatment, replacement of pumps,
   accounting ), influence of situation in the
   country on ecological situation in the
   neighboring countries (general water resources)

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What could be expected by implementing SPPP
projects in housing and communal sector?

1. Introduction of the best experience, new
   technologies
2. Attraction of financial resources (own and
   loaned) for modernization of infrastructure
3. Overcoming fragmentation of enterprises of heat
   and water supply, efficiency increasing
4. Avoiding populism regarding housing and communal
   sector. Formation of lobbyists of reforms
5. Increasing of general level of professionalism in
   infrastructure enterprises management due to
   operators competition
6. Quick and adequate reaction on economys demands,
   technological, social and ecological challenges

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Key factors of SPP development in housing and
communal sector

• Qualification of public sector
• Institutionalization of SPPP market
• Systematic qualified work on legislation
  improvement
• Establishment of national regulation commission
  and ensuring of professional regulation
• Introduction of nondiscriminatory transparent
  procedures
• Professinal and responsible dialogue with the
  society
• Partnership with science

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