At the Third Annual PPP in CEE Conference hosted by Jacob Fleming, which took place in Prague on 15 – 16 October 2007, we could clearly identify strong interest in the approach the CEE governments and municipalities are taking. Our experience also from the previous years has shown that this session is one of the best ways to get information about upcoming projects. Also, it is one of the easiest ways the private sector can actually get a hold of the public sector representatives and get all their questions answered.

At the Third Annual PPP in CEE Conference we had the pleasure to host two interactive panel discussions with public sector representatives.

Interactive Governmental Panel

Interactive Governmental Panel had the pleasure to host Dobrinka Krasteva from the Ministry of Finance, Bulgaria, Liga Neilande from the Latvian Investment and Development Agency, Julia Szucs from the Hungarian Ministry of Economy and Transport as well as Oksana Sliusarenko from the Ministry of Economy, Ukraine. The session was chaired by Marcel Babczynski of the Erste Corporate Finance.

Each representative provided a brief outline of the current situation of PPP and possible future developments.

Bulgaria is currently working on the following PPP projects, mainly form the transport infrastructure: the Cherno More motorway connecting the biggest Bulgarian cities on the Black Sea cost – Burgas and Varna. Its length is 100 km; cost amounting to 360 million euro. Currently the project is under development, a PPP Feasibility review was done by KPMG, however a new traffic analysis needs to be done, and EBRD will be involved. The Hemus Motorway connects Sofia with Varna, crossing the northern part of Bulgaria (length 450 km, cost amounting to 1.2 billion euro). Currently, with the project in its initial phase, EBRD will be involved and the PPP feasibility study has to be prepared. Trakia Motorway connects Sofia and Burgas, crossing the southern part of Bulgaria (length is 390 km; cost amounting to 600 million euro, real toll concession). This project is currently ready to be signed; final comments from EUROSTAT were received in mid October 2007. The issues that remain to be solved in Bulgaria is political will, changes in the legislation, combining PPP with EU Grants and developing unified concept of PPP.

The Latvian Investment and Development Agency cooperates with the Latvian Ministry of Finance, and assists with the implementation of PPP projects, proposals for promotion of PPP developments, provision of informative and legal services and the elaboration of standard documentation. Latvia adopted their PPP Policy Framework Document in 2005 and is currently working on a PPP Action Plan which is due to be finalized in 2009.
The tasks in the Action Plan include establishing adequate institutional set-up for PPP’s and promotion framework, legal framework, PPP’s interaction with national planning instruments and disseminating knowledge effectively on PPP.
Latvia has currently projects running in district heating, reconstruction and management of State Roads. The City of Riga has launched a major transport project on its Northern Corridor which is aimed at improving the corridor connection through Riga and to reduce traffic congestions in the city.

Looking at Hungary we can see that it is probably one of the most advanced countries in the CEE region in terms of PPP. This might be caused by an efficient system of inter-ministerial cooperation established by the government in 2003. The Inter-ministerial Committee is coordinated by the Ministry of Economy and Finance and it’s mainly active in the field of preparing and following up PPP projects, collecting PPP experience and building up the national PPP knowledge center. From the formation of the Inter-ministerial PPP Committee till now it has supervised 85 projects.
Currently, Hungary is planning the following projects administered by the Ministry of Economy and Transport: Motorway M6 2nd section (in preparatory phase), New Electronic Highway Toll Collection System (in preparatory phase), Ferihegy Airport – Budapest Downtown high-speed rail project (in preparatory phase), M44 Motorway and the new section of the M3 Motorway. The Ministry of Justice and Law Enforcement is currently concerning the project of the Budapest Regional Court of Appeal.
The Prime Minister's Office has plans for a new Government Quarter (in preparatory phase). Further developments will probably be concentrating in the following sectors: motorways and public roads, reconstruction of railway stations, hospitals and medical services.

Moving further eastwards to Ukraine, it is worth noticing that foreign investment is the largest source of financing in Ukraine. The Ukrainian government is closely working with companies and international financial organizations especially with the World Bank and EBRD. It is considered that the government’s role is not to manage economy and interfere with market dynamics but rather to provide the enabling framework for enterprises to flourish through a strong business climate and PPPs. Strong support was expressed for the idea that investment incentives and mechanisms such as free zones, disadvantaged zones, and fiscal investments are only effective in the presence of a favorable business, investment climate and developed PPPs. As for the upcoming UEFA EURO 2012 championship, Ukraine is busy with preparations. The tasks to be done include the adoption of a “State Target Law” on preparation and holding the Championship, balancing private and public interests, establishing transparent and equal conditions for investment activities, ensuring the political stability of the country and maintaining the sustainable economic development of Ukraine’s regions. The plans of the Ukrainian governments consist of plans for construction, modernization, repairing of public automobile roads; construction, modernization, repair of railroads and railway stations; modernization of 5 airports in Kyiv, Lviv, Dnipropetrovsk, Donetsk, Odesa, Kharkiv; 2 stadiums, 22 sport training centers, 330 hotels; 5 clinics and 4 educational centers for preparing volunteers and state employees. The program budget is about 25 billion dollars (4 billion – state budget, 21 billion– investors).

Interactive Municipal Panel

Municipalities were the main focus in the afternoon session. Represented were the City of Wasaw by Alicja Zelichowska, the City of Talinn by Linas Naujokaitis and the City of Budapest by Andrea Somogyi. The session was chaired by Peter Snelson of Atkins.

Starting with the Polish capital, Warsaw sees the main need for investments in the field of health services,transport and road infrastructure, sewage system and waste management, bridges and metro, housing and urban regeneration, public education and sports facilities, especially with the upcoming EURO 2012 UEFA championship. Warsaw sees the main opportunities for PPP especially in terms of increased innovation and efficiency and high quality of service, risk transfer, long-term public profit, know-how employment benefit and capacity building. Still there are some obstacles to be taken into account, such as increasing the efficiency of the administrative process, receiving the public & political support and removing existing structural impediments.

The capital of Lithuania, Vilnius is also developing very dynamically. The main reasons why PPP is deployed here are mainly to approach the city’s problems by overcoming budget limits; it is an alternative when seeking to improve the quality of public services and where privatization is not possible.

The most successful PPP project in Vilnius is the development of the new city center which started in 2002. It is a continuation of old urban concept to form modern “Architectural hill” on the right bank of the Neris River. Part of the projects was also Vilnius City Municipal administration building (20-storey) with Europe business centre (33-storey) functioning since 2004. Another building, the Europe business centre is the highest skyscraper in Baltic States. The hottest spot of modern Vilnius has already attracted € 142 million in investments and is expected to attract another € 130 million in short-term. Still the city needs to find ways to overcome certain problems, especially in terms of assigning the responsibility for PPP projects and financial obligations under PPP vs. municipal debt, Land property restitution remains a problem as does public services transfer vs. public administration functions transfer.

Finally, the session ended with another Hungarian example of successful PPPs in Budapest. The capital of Hungary takes advantage of PPP especially because of the pluses that this kind of cooperation brings – such as efficient operation, alternative utilization of state capital goods effect plus income, increase in know-how of both public and private sector, decreasing the public partner’s risk and strong professional supervision. One the other hand it is necessary to say that the city also sees several disadvantages, mainly in that the long-term contracts latitude of public partner is limited, there is too much perceived risk because of previous bad experience and that the state engages serious resources at such an early stage.

Budapest is currently planning several projects, for example the Corvin-Szigony project, Traditional Jewish Quarter in Pest, Óbuda Gasworks (Óbudai Gázgyár), the City Hall project and the Public Warehouses Project (Közraktárak). The latter was described in more detail. The main idea behind this project is to enrich the public realm – especially the Danube area - of the metropolis with creative spaces. The budget to be invested into this project is €32 million and the project should be running between April 2008 and November 2009. The development program will include cultural facilities, restaurants, commercial and shipping. Extra features such as waterfront and international ship terminal, university surrounding and active regeneration area will also be involved.

Both panel discussions met with extremely positive feedback proven by the extended question and answer session in the course of which everybody could get their questions answered