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Thursday, November 15th, 2018

Use of public-private partnerships reduced one-time burden on budget by more than 142 billion tenge – Ministry of National Economy

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The Minister of National Economy Timur Suleimenov reported that as part of the policy-making, a number of amendments were adopted in July to the existing legislative acts regarding the recognition of PPP contracts providing for constant payments by the state as liquid collateral for second-tier banks. This measure allows banks to guarantee a refund. Also, in case of non-fulfillment by the private partner of its obligations, there is a procedure for replacing the private partner.

In order to implement a larger number of infrastructure PPP projects with significant payments from the budget, changes have been made to the Methodology for determining the limits of state obligations on PPP projects. For cities of republican significance, the coefficients were increased to 0.5 of their own revenues, taking into account transfers of general characteristics, and the obligations of local executive bodies to STB and other creditors were excluded. This measure allowed to increase the limits of local executive bodies for 2018�2020: the total limit increased from 674.2 billion tenge to 937.5 billion tenge, that is, by 39%.

In general, there is a positive growth trend in the development of PPP in the country. To get more effect, we suggest the Ministry of Finance to ensure the registration of PPP contracts concluded before July 10, 2017, and begin the process of registering PPP contracts for which there are no government obligations. We also propose sectoral state bodies and local executive bodies to give preference to the implementation of category I (projects that do not require any financial measures of state support and sources of cost recovery from the state budget) and category II (projects that require reimbursement of operating costs from the state budget), and to strengthen the control over the implementation of the PPP Roadmap. We suggest the state bodies together with the Kazakhstan PPP Center to improve the qualification of employees on PPP issues, Suleimenov voiced the proposals.

As the minister noted, currently 443 contracts have been concluded for the amount of 1096.2 billion tenge. As of October 15, 275 objects in the amount of 142.1 billion tenge were commissioned, of which for the 10 months of 2018 � 49 objects for 29.1 billion tenge. Today, 721 projects worth 1.5 trillion tenge are at various stages of preparation. The number of projects for 10 months 2018 increased by 253.

By industry, of the 449 contracts concluded, the majority is in the areas of education, health, culture and sports. In turn, the prospects for the use of the PPP mechanism in such areas as water supply, engineering infrastructure, and tourism are outlined.

In general, the use of the PPP mechanism allowed for the period 2016�2018 to reduce 142.1 billion tenge of one-time load on the budget for 275 objects and provide 77,000 visits per month in medical institutions, 30,000 places in kindergartens, six sports complexes with a total capacity of 2500 visits, reported Suleimenov.

Minister for Investments and Development Zhenis Kassymbek, in turn, reported that currently there are 18 projects in the fields supervised by the department under the state-private partnership mechanism, including 3 in the road sector, 1 in railway transport, 2 � in civil aviation, 12 � in the sphere of housing and public utilities and energy saving.

On the project Construction and Operation of the Highway Big Almaty Ring Road (BAKAD), February 7, 2018, a contract was signed with the Consortium Alsim Alarko – Makiol – SK – Korean ExpressWay. The construction began May 31. The issues of land allocation for road construction have been fully resolved, mobilization of equipment and personnel has been completed at the plots, and quarries have been drawn up. It is planned to complete the construction and start operating the road on a paid basis in 2025. About 3,000 jobs will be created during the construction period. This road will allow bringing up to 38,000 automobile vehicles per day outside the city, which, according to Kassymbek, will prevent the formation of transport collapses and have a positive impact on the ecology of the city.

On railway construction project bypassing the Almaty station, it is planned to announce a tender for the determination of the best technical proposal in late October. In general, the project will allow 40% to unload the station of Almaty and reduce the time of transportation of goods passing through it in transit by an average of two days. The period of the project PPP 30 years � from 2021 to 2051.

As part of the PPP project Creating the Infrastructure of the Nur Zholy Automobile Checkpoint at the Almaty / Khorgos Road Section, the Nur Zholy checkpoint was officially launched September 27. Compared to the old Korgas checkpoint, the capacity of Nur Zholy at the border between Kazakhstan and China will increase 10-fold to 2,500 cars per day. Currently, a private partner began operating the project until 2026.

The concession project Construction and Operation of High-Speed Roads of the Turkestan Region will help increase the volume of freight traffic between Kazakhstan and Uzbekistan, bringing it outside the cities of Shymkent and Saryagash to 25,000 cars per day. Currently, consultants have almost completed the development of tender documentation. It is planned to receive an economic opinion until mid-December and to announce a competition at the end of 2018.

Also Kassymbek reported on the implementation and adaptation of the information system for paperless workflow in the field of air cargo � e-Freight.

This PPP project was initiated in December 2016. June 14, 2018, a PPP agreement was signed with a private partner. The implementation of the information system is scheduled for December. This will reduce the time of cargo handling from one day to one hour, Minister Kassymbek informed.

Regarding the implementation of PPP projects in the housing and utilities sector, the minister noted that within the framework of the implementation of the Head of State’s Address, the ministry is monitoring the implementation of 11 local PPP projects in the housing and utilities sector.

At present, contracts have been concluded with private investors on six projects in Atyrau, East Kazakhstan, Pavlodar regions and the city of Almaty. At the same time, the most promising, in our opinion, is the concession project for Construction of a Desalination Plant in Mangystau region, worth about 50 billion tenge. The implementation of this project will reduce the shortage of drinking water in the region by 71.4%, said Kassymbek.

In the sphere of energy saving, the project Modernization and Operation of the Lighting System of the Building in the Administrative and Technological Complex Transport Tower is being implemented. This is the first republican project in the field of energy conservation, implemented on the principle of PPP using the mechanism of energy service contracts. Also, together with the regions, three energy saving projects are being implemented for a total amount of 9.7 billion tenge.

The Minister of Healthcare Yelzhan Birtanov reported on the development of public-private partnership in the field of healthcare. The list of PPP projects in health care currently includes 261 projects, including three republican and 258 local ones. For 68 contracts concluded, 193 � are under preparation.

The projects envisage the construction and operation of medical ambulatories, medical and obstetric and medical stations, clinics, hospitals, equipment with medical equipment and others, Birtanov noted.

To date, three PPP projects for the establishment of university hospitals are being implemented in Kazakhstan. A positive economic opinion on the concession offer was received at the university hospital in Almaty, and tender documentation is being developed. Documentation is being developed at the University Hospital in Karaganda together with the Asian Development Bank. According to the project of creating a unified hospital for 1,265 beds at KazNMU, an economic opinion of the Ministry of National Economy on the investment proposal was received.

For projects of local importance, there is an increase in the activity of individual regions. So, out of 68 PPP contracts concluded, 34 were made in 2018. In total, 190 local projects are at the preparation stage, 64 of them are at the competition stage. For 2016�2018 there is a positive trend in the conclusion of PPP contracts in the regions. By the end of 2018, it is planned to conclude another seven PPP contracts. Of the 67 contracts concluded, 44 PPP facilities were commissioned. They included magnetic resonance and computer tomographs, 11 medical ambulatories, 8 laboratories, 6 hemodialysis and ophthalmological centers, 3 city polyclinics and rehabilitation centers and one ambulance station, and 1,003 workplaces were created.

For the implementation of PPP projects in the framework of state programs (Program PPP), the necessary amendments were made to the Densaulyq State Program of Health Development for 2016�2019. Approaches for the development of a network of primary health care approved at a meeting of the Government, the construction of outpatient polyclinic facilities will be implemented including in the framework of the Program PPP.

The equipping of healthcare organizations in the framework of the Program PPP is being developed as part of the Comprehensive plan to combat cancer in the Republic of Kazakhstan for 2018�2022.

The work will continue on the implementation of an investment planning system based on regional long-term plans in 2018.

In general, the implementation of measures for the development of health infrastructure should allow the planned implementation of 1.3 trillion tenge of investment for the development of about 2,000 outpatient facilities and 427 hospital facilities. Together with measures to develop competition, improve the tariff policy, digitalization, the results of the introduction of PPP mechanisms will be a modern efficient infrastructure of health organizations in the context of Compulsory Social Health Insurance implementation, Birtanov said.

Chairman of Atameken National Chamber of Entrepreneurs Ablay Myrzakhmetov noted in his report that over 2.5 years the number of PPP projects has increased 20 times.

In 2016, when the law was passed, there were three projects. Now the number of completed projects and planned has increased by 20 times. Including 60% in education, 20% in health care. These are very good indicators, said Myrzakhmetov.

In addition, Myrzakhmetov spoke about the monitoring of public-private partnership projects. Ministry of National Economy together with Atameken created the Council for Monitoring the PPP Sphere, which included deputies, leaders of associations, public figures. The council analyzes PPP projects from various angles.

Akims of the Zhambyl region A. Myrzakhmetov, Atyrau � N. Nogayev, North Kazakhstan � K. Aksakalov, Astana � B. Sultanov reported on the progress of PPP projects in the regions.

Deputy Prime Minister Erbolat Dossaev noted a positive trend in the development of public-private partnerships and said that further work will be built with an emphasis on the development of PPPs in lagging regions. It was noted that all the conditions for this have been created, the proposals of the Ministry of National Economy will also be taken into account. In addition, special attention will be paid to the development of PPP projects in the fields of transport and infrastructure development.

Summing up the issue, the Prime Minister Sagintayev instructed the regional akims to focus on the quality of the implementation of PPP projects. The Ministry of National Economy is entrusted with monitoring the issues of the limit. Central state and local executive bodies should consider PPP projects through the prism of feasibility and quality, based on the allocated limits, including in capital-intensive areas.

Source: Prime Minister of the Republic of Kazakhstan

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