March 24, 2022

Regulation of PPP agreements and concession agreements in Kazakhstan

  1. The concept of PPP
  2. The main tasks and features of public-private partnership
  3. Types and parties of PPP
  4. Implementation of projects under PPP
  5. Concession agreement

 

The concept of PPP

In Kazakhstan in 2015, a new Law “On Public Private Partnership” was enacted. The main goal of PPP is to form and strengthen long-term cooperation between the state and the private sector by pooling resources to improve the availability and quality of public goods and services.

The legislation of the Republic of Kazakhstan in the field of public-private partnership is based on the Constitution Republic of Kazakhstan and consists of the Civil Code of the Republic of Kazakhstan, this Law and other regulatory legal acts of the Republic of Kazakhstan. 

Public-private partnership is a form of cooperation between the state and the private sector. The term itself is a literal translation of “public-private partnership” (PPP). As a rule, such projects are aimed at social areas, for example, the construction of educational or medical institutions, the implementation of road transport communications, etc. First of all, PPP sets itself the goals of developing infrastructure in the public interest by combining the resources and experience of the state and the private sector of the economy in industries traditionally under the responsibility of the state on the basis of a balanced distribution of risks, benefits and costs, rights and obligations. It should be noted that public-private partnership (PPP) is an important tool for attracting investment for economic development. 

Public-private partnership is a form of cooperation between the state and the private sector. The term itself is a literal translation of ‘public-private partnership’ (PPP). The direction of such projects is different, for example, the construction of educational or medical institutions, the introduction of road communications, etc. 

First of all, PPP is aimed at developing infrastructure in the public interest by combining the resources and experience of the state and the private sector of the economy in sectors traditionally associated with the responsibility of the state, on the basis of a balanced distribution of risks, benefits and costs, rights and obligations. It should be noted that public-private partnership (PPP) is an important tool for attracting investment for economic development.

Main tasks and features of public-private partnership

The main objectives of the public-private partnership are:

1) creating conditions for effective interaction between the public partner and the private partner in order to ensure sustainable socio-economic development of the Republic of Kazakhstan;

2) attracting investments in the state economy by combining the resources of the state partner and the private partner for the development of infrastructure and life support systems for the population;

3) increasing the level of availability and quality of goods, works and services, taking into account the interests and needs of the population, as well as other interested parties;

4) increasing the overall innovative activity in the Republic of Kazakhstan, including promoting the development of high-tech and knowledge-intensive industries. 

The Law defines PPP corresponding to the criteria defined by the Law. These features include: building relations between a public partner and a private partner by concluding a public-private partnership agreement; medium-term or long-term period for the implementation of the public-private partnership project (from five to thirty years, depending on the specifics of the public-private partnership project); joint participation of a public partner and a private partner in the implementation of a public-private partnership project; combining the resources of a public partner and a private partner for the implementation of a public-private partnership project; investment by a private partner for the implementation of a public-private partnership project.

Thus, both social interests and the interests of the state and the investor directly are satisfied. In any case, the project must be structured in such a way that it is beneficial to all parties involved. 

Types of PPP

Public-private partnership according to the method of implementation is divided into institutional and contract. Institutional public-private partnership is implemented by a public-private partnership company in accordance with a public-private partnership agreement.

Contractual public-private partnership is implemented through the conclusion of a public-private partnership agreement, including in the following types:

1) concessions;

2) trust management of state property;

3) property lease (lease) of state property;

4) leasing;

5) contracts concluded for the development of technology, the manufacture of a prototype, pilot testing and small-scale production;

6) life cycle contract;

7) service contract;

8) other agreements corresponding to the signs of a public-private partnership.

The parties to a public-private partnership agreement are a public partner and a private partner. In a public-private partnership agreement, several public partners and private partners can act as parties.

The following may also act as parties to a public-private partnership agreement:

1) financial and other organizations that provide financing for a public-private partnership project;

2) industry operators.

The state provides an entrepreneur – a private partner with support in the form of:

  • providing in-kind grants in accordance with the legislation of the Republic of Kazakhstan;
  • co-financing of PPP projects;
  • guarantees of consumption by the state of a certain volume of goods, works and services produced during the implementation of the PPP project;
  • others.

participate in the following forms:

  • provision of land plots in accordance with the land legislation of the Republic of Kazakhstan;
  • granting the right to use objects of state property;
  • provision of engineering and transport communications for the PPP facility;
  • others.

and also provides compensation for investment and operating costs for a PPP project, remuneration for the management of a state-owned PPP facility, etc. in accordance with the PPP legislation.

The entrepreneur, for his part, participates in the following forms:

  • financing of PPP projects;
  • creation and operation of PPP facilities;
  • PPP project management.
  • others.

and ensures the quality and availability of goods, works and services under the concluded PPP agreement.

In addition to own funds, sources of financing for PPP projects can be:

  • borrowed funds;
  • state budget funds in the amount stipulated by the terms of the agreement;
  • funds of subjects of the quasi-public sector;
  • other means not prohibited by law.

Implementation of projects under PPP

projects can be:

  • construction (reconstruction) and operation of educational facilities (kindergartens, schools, student hostels);
  • modernization of school canteens;
  • construction and operation of sports facilities;
  • construction and operation of medical organizations;
  • trust management of public utilities (outdoor lighting networks);
  • others.

Partnership implies a mutually beneficial distribution of obligations, guarantees, risks and incomes between the participants in the process of project implementation.

The terms of the PPP are fixed by the PPP agreement.

There is an approved list of objects that cannot be transferred for the implementation of PPP has been

Such objects include:

  • land, water (except for the right of temporary free land use), flora and fauna;
  • specially protected natural territories (reserves, sanctuaries, etc.);
  • objects of cultural heritage;
  • main railway network;
  • water facilities of particular strategic importance (dams, hydroelectric facilities);
  • medical organizations working in the field of HIV prevention;
  • depositories of pathogens of especially dangerous infections;
  • others.

PPP projects are socially oriented and aimed at improving the welfare of the population. PPP is a profitable mechanism for both the state, investors and the population.

The first Law of the Republic of Kazakhstan “On Concessions” was adopted on December 23, 1991. This law was aimed at regulating the legal conditions for the implementation of a certain type of economic activity by foreign investors in the territory of the Republic of Kazakhstan and the provision of certain objects for rent to them.  

Objects of tourist activity, social and public infrastructure and life support in all sectors (spheres) of the economy, with the exception of objects, the list of which is determined by the Government of the Republic of Kazakhstan, can be transferred to the concession.

The concession implies mutual obligations of the parties to the concession agreement, and not an exclusive right or authority granted by the relevant authority to the project company to develop the project (as may be the case in some countries). Kazakhstan legislation classifies a concession agreement as a private law agreement that combines several types of civil law agreements provided for by the Civil Code.

 The concession agreement is concluded in the following forms:

      1) a concession agreement, which provides for the creation of a concession object by the concessionaire with the subsequent transfer of the concession object to state ownership;

      1-1) a concession agreement in the healthcare sector, providing for the creation by the concessionaire of the concession object and the operation of the concession object by the concessionaire together with the functional operator, determined in accordance with the Code of the Republic of Kazakhstan “On the health of the people and the healthcare system”;

      2) a concession agreement providing for the joint activities of the concessionaire and the grantor in the creation (reconstruction) and operation of the concession facility;

      3) a concession agreement providing for the transfer of a state-owned concession object to trust management or property lease (lease) to the concessionaire for the purpose of reconstruction and operation;

      4) a concession agreement providing for the transfer of the concession object owned by the concessionaire for property lease (lease) to the concessor or a person authorized by him, including with the right to redeem the concession object by the concessionaire.

The concession agreement may include elements of one or more types of agreements provided for in paragraph 1 of this article, as well as include elements of other agreements not prohibited by the legislation of the Republic of Kazakhstan, aimed at the creation (reconstruction) and operation of the concession facility.

 

 

 

Sources: Law of the Republic of Kazakhstan dated July 7, 2006 No. 167-III “On Concessions”

 https://online.zakon.kz/Document/?doc_id=30062571&pos=3;-106#pos=3;-106

Law of the Republic of Kazakhstan dated October 31, 2015 No. 379-V “On public-private partnership”

https://online.zakon.kz/Document/?doc_id=37704720