PPP Environment in Azerbaijan
Public-Private Partnership Development Centre Increasing the role of the private sector in economic development through public-private partnership (PPP) modalities is set as a priority target in strategic roadmaps and other conceptual papers on socio-economic development of Azerbaijan approved by the President of the Republic of Azerbaijan. Hence, the Public-Private Partnership development Centre has been established under the Small and Medium Business Development Agency of the Republic of Azerbaijan in order to ensure systemic approach in promoting and supporting PPP projects. Model Charter on Public - Private Partnership Development Centre was approved by the Decision of the Board of the Ministry of Economy of the Republic of Azerbaijan dated July 16, 2019.
Main areas of activity of the Public-Private Partnership development Centre are as following:
- making proposals on development of legislative base and institutional infrastructure of public-private partnerships
- preparation, implementation and coordination of programs and projects on public-private partnerships;
- ensuring and broadening the participation of SMEs in public-private partnership programs and projects;
- raising awareness and capacity building for all stakeholders in public-private partnerships;
- analyzing and screening of projects in accordance with the criteria of public-private partnership and taking relevant measures for their implementation.
PPP environment in Azerbaijan was regulated by the Law of the Republic of Azerbaijan dated March 15, 2016 “On the Implementation of Special Financing for Investment Projects in Connection with Construction and Infrastructure Facilities”, “Rules on establishing terms of execution of investment projects by investors with respect to construction and infrastructure facilities based on "Build-Operate-Transfer" model, requirements to investors depending on the types of construction and infrastructure facilities, specifications and terms of agreements, and ways of determination of the value of goods and services to be produced through investment” approved by Decree of the President of the Republic of Azerbaijan dated December 7, 2016, and “Methodology for calculating the amount of cooperation assistance and guarantee obligations of the contract concluded within the “Build-Operate-Transfer” model” approved by the Decision No. Q-06 of the Board of the Ministry of Finance dated May 22, 2017.
On December 27, 2022, the new Law of the Republic of Azerbaijan "On Public-Private Partnership" entered into force, and with the entry into force of this law, the normative legal acts listed above were canceled, and the provisions of the Civil Code and the Law "On Investment Activity" will be applied to the concluded contracts.
According to this law on PPP, a public-private partnership is a joint activity of a public partner and a private partner based on an agreement concluded in accordance with the Law on the provision of public services, as well as the creation and management of infrastructure related to the provision of those services.
The Ministry of Economy of the Republic of Azerbaijan is identified as the authorized body in the field of public-private partnership, including the implementation of the following functions in this field:
- participate in the formulation and implementation of state policy;
- prepare the draft of the tender documents and contracts or the main conditions of the contracts for the execution of the project;
- organize a competition or direct negotiations for the purpose of identifying a private partner;
- ensure the evaluation of project proposals and the creation of a relevant database;
- organize the preparation of the set of conditions of the competition and the agreement with the state partner on the project, organize the tendering of the public-private partnership project or the conclusion of the contract on the basis of direct negotiations, as well as changes to the contract.
Public-private partnership projects are financed from sources not prohibited by the laws of the Republic of Azerbaijan. The form and methods of state participation in projects are determined by the Ministry of Economy based on the technical and economic justification of the project and are noted in the set of conditions of the competition. The upper limit of the state obligation related to public-private partnership is determined by the Ministry of Economy for each project.
Public-private partnership projects, their selection procedure and requirements for applicants are regulated by Chapter III of the law, public-private partnership competition - by Chapter IV of the law, the terms of the public-private partnership agreement, the procedure for concluding, changing and canceling it - by Chapter V of the law, government support and guarantees to private partners and creditors - by Chapter VI of the law, monitoring and accountability of the implementation of public-private partnership projects - by Chapter VII of the law.