«International PPP Conference»
5-6 October, 2022, Bishkek, Kyrgyz Republic
«Improving the national PPP policy»
The text of the speech by Mr. Anar Salmanov – Director of the PPP Development Center of the Small and Medium Business Development Agency of the Republic of Azerbaijan
Dear participants of the international forum,
Ladies and Gentlemen.
First of all, I would like to express my gratitude to the Director of the National Investment Agency under the President of the Kyrgyz Republic – Mr. Temiraliyev Umbriel Temiralievich, and the Director of the Center for Public-Private Partnership of the Kyrgyz Republic – Mr. Bolotov Sanzharbek Baktybekovich, for the invitation to the "International PPP Conference". By the way, taking into account the very recent appointment of Mr. Temiraliev to a relevant position, I would like to congratulate and wish him every success in this interesting, but at the same time responsible field.
It is very pleasant to be here, on the fraternal land of the Kyrgyz Republic, among friends and like-minded people. It is gratifying to note that under the leadership of the President of the Kyrgyz Republic, Mr. Sadyr Zhaparov, the Republic is on the path of rapid development and successful reforms.
Next year our States will celebrate the 30th anniversary of the establishment of diplomatic relations. And as stated in the text of the message of the President of the Republic of Azerbaijan, Mr. Ilham Aliyev, on the occasion of the Independence Day of the Kyrgyz Republic: "The development of our interstate ties based on a common history, brotherhood and mutual respect is gratifying." A clear example of the fact that relations between the two States have moved to a qualitatively new level is the Declaration on Strategic Partnership and the Memorandum on the Establishment of the Interstate Council signed in April this year.
Our current agenda also has the high goal of moving to a qualitatively new level of the PPP format. As it was correctly noted in the speeches of previous lecturers, it was the development of economic relations between the state and the private sector that laid the foundations of PPP in the modern world.
The experience of the last 20 years shows that this format of business management is a successful mechanism in terms of ensuring economic development, increasing resources and untapped reserves, on the one hand, and the effectiveness of public administration, on the other.
Such partnerships involve the process of expanding and deepening relations between the public and private sectors, including in the Republic of Azerbaijan, where PPP is seen as an effective tool of economic policy that ensures the full use of mutual potential, as well as the coordination of innovative resources and their results. And at this stage, the following comprehensive measures are priority for us:
- improvement of the legislative framework;
- identification of the authorized institution;
- definition of development prospects;
- identification of implementation mechanisms and funding sources;
- creation of a system for improving efficiency based on performance evaluation.
It should be noted that PPP mechanisms were first introduced in Azerbaijan in the 90th years of the last century. As part of the oil strategy being implemented in Azerbaijan, for the first time, PSA agreements were signed between the national Government and global energy and investment corporations, and thus, production in the oil and gas sector of the country began to be carried out by representatives of the transnational private sector.
1. REGULATORY FRAMEWORK
Currently, the PPP environment in Azerbaijan is regulated by the Law (# 177-VG of March 15, 2016) “On the implementation of investment projects related to construction and infrastructure facilities on the basis of special funding”. In connection with the application of this Law, the Decree of the President of the Republic of Azerbaijan (# 1149 of December 07, 2016) approved the Regulations “On Terms of implementation of investment projects related to construction and infrastructure facilities by investors within the "Build-Operate-Transfer" model, requirements to investors in accordance with the types of construction and infrastructure facilities, characteristics and terms of contracts, goods to be obtained as a result of investment". Also, by a resolution of the Collegium of the Ministry of Finance, (# Q-06 of May 22, 2017) was approved Regulations “On the methodology for calculating the amount of cooperation assistance and guarantee liability under contracts concluded under the "Build-operate-transfer" model”.
In order to stimulate investment activity in Azerbaijan, the new Law “On Investment Activity” (# 551-VIQ of June 22, 2022) defines the expansion of the PPP mechanism.
In order to expand PPP in the field of public investment and form an improved regulatory and legal framework for PPP, our activities in this direction continue, and a new PPP-related Law is expected to be adopted very soon. The new bill provides, in particular, for the inclusion of all PPP models and the creation of a new institutionally independent body that will perform these functions.
2. INVESTMENT PIPELINE
We report that in the coming years, foreign direct investment in the non-oil and gas sector of Azerbaijan will be encouraged, and state assets will be transformed into the private sector. Privatization of legal entities (where the controlling stake is owned by the state) and financing of the economy, including through PPP mechanisms, will be carried out. In this regard, the "Strategy for the socio-economic development of the Republic of Azerbaijan for 2022-2026" was approved. The following are the projects that are planned to be implemented in the action plan of the PPP-related strategy:
1. Ensuring the sustainable development of the tourism sector - for this it is assumed:
- increase in the number of medical institutions providing services to foreign citizens in the field of medical tourism under PPP in various cities and regions of the country;
- increasing the share of medical tourism in tourism revenues.
2. Development of transit potential and trade and logistics direction, and for this it is assumed:
- creation of car parks (truck fleets) in the country on the basis of PPP;
- increase in the share of vehicle fleets created under PPP in servicing vehicles engaged in transit and import-export cargo transportation.
3. Implementation of a new privatization strategy within which will be implemented:
- commercialization of economic entities, their transfer to management or the creation of a mechanism for their joint use;
- management or commercialization of state property (enterprises, shares) in the relevant areas.
4. Development of an innovation ecosystem aimed at:
- encouraging private sector investment in ICT infrastructure projects, including consideration of ICT migration, social security, customs duties and tax incentives;
- achieving positive dynamics in terms of increasing the share of private sector entities involved in investing in infrastructure projects under PPP.
5. Expanding the opportunities for applying innovations in the field:
- development of communication networks together with telecom operators within the framework of PPP;
- achieving positive dynamics in the development of communication networks together with telecom operators within the framework of PPP.
6. Improving the efficiency of gas and heat supply systems in Azerbaijan, in the format:
- development of PPP in the field of heat supply;
- achieving positive dynamics of increasing the share of individuals in the field of heat supply.
7. Increasing the use of renewable energy sources, through:
- expansion of renewable energy infrastructure under PPP;
- ensuring the construction and commissioning of the approved number of installations of RES;
- study of the potential of wind energy in the sea and implementation of preparatory measures towards the use of this potential;
3. INSTITUTIONAL ENVIRONMENT
It should be noted that in order to ensure systematic activities in the field of promoting and supporting PPP projects, a PPP Development Center was established in the structure of the Small and Medium Businesses Development Agency of the Republic of Azerbaijan.
By the decision of the Collegium of the Ministry of Economy of July 16, 2019, the Charter of the Center was approved, where the main areas of activity were determined:
- making proposals for the development of the legislative framework and institutional infrastructure of PPP;
- development, implementation and approval of PPP programs and projects;
- ensuring the expansion of the participation of small and medium-sized businesses in PPP programs and projects;
- capacity building of all stakeholders in PPP;
- implementation of projects in accordance with PPP criteria.
4. OFFICIAL WEBSITE LAUNCHED
The PPP DC is actively working on institutionalization, and one of the completed works is the launch of the official website of the Center this year. The site was developed as part of a technical assistance project concluded with the Asian Development Bank - for which we express particular gratitude to the Asian Development Bank.
The purpose of the site is to inform stakeholders in the framework of public-private partnerships, stimulate the implementation of PPP projects and facilitate access to these services. The site is also integrated with the SOURCE online platform, which provides the development and promotion of global projects.
5. ONLINE LEARNING PLATFORM
In order to promote PPP in the country, the PPP DC has prepared a training course «PPP Environment in Azerbaijan». The training course is implemented in a live and online format.
Training and educational events have been launched for representatives of public and private structures in different regions of the country.
Large-format educational seminars are being held for business representatives on the topic «PPP Environment in Azerbaijan».
6. DATABASE IS CREATED
The PPP DC analyzed initial project proposals received from government agencies and created a centralized information database based on international experience and relevance.
As a result of meetings held with government agencies, the PPP DC has already received preliminary proposals for a number of potential PPP projects that the government intends to implement. At the next stage, more priority projects will be selected and further initiated. It should be noted that information on PPP projects received from government agencies will be posted on the «SOURCE» global platform to search for investors and implement projects.
7. DATABASE FOR PROJECTS
This year, the PPP DC held meetings with 18 central executive authorities and 23 local executive authorities. Up to date, a total of 78 projects have been submitted to the PPP DC. Presented projects can be classified into the following sectors:
- IT sector - projects for the introduction of digital broadcasting of the DAB + standard, an interactive center for space topics, a pilot project "Smart City" in Sumgayit;
- social sphere - objects of culture and winter / summer tourism;
- energy - green energy, waste management projects;
- water management - reservoirs, water treatment facilities, irrigation systems;
- agricultural sector - agricultural parks, enterprises for the supply and processing of agricultural products, refrigeration and logistics warehouses;
- commercial facilities - factories and plants of various orientation;
- transport sector - construction of a system of regular intra-city / inter-city passenger transportation, construction of an international road freight transport system, creation and reconstruction of a garage for postal transportation and logistics;
- health sector - the creation of the Baku Diagnostic Center, creation of a medical institution in Ganja, creation of a general surgery center, reconstruction of the Republican Perinatal Center, creation of a cardiology center, creation of a center for thoracic surgery and intensive pulmonology, creation of regional children's treatment and rehabilitation centers, creation of a clinical burn center, creation of a stroke center, creation of regional medical centers for general profile.
A separate line are initiatives for the development of PPP in the field of transit and transport and logistics sectors. As noted in the speech of the President of the Republic of Azerbaijan, Mr. Ilham Aliyev, at the latest summit of the member countries of the Shanghai Cooperation Organization held in Samarkand, Azerbaijan makes a significant contribution to the launch of regional communication projects, such as the East-West and North-South corridors. The settlement of the Karabakh conflict at the end of 2020 created new opportunities for the development of transport and communication projects in our region. After the opening of the Zangezur corridor, it will further increase the transport capabilities of the countries of the region and will be beneficial for all countries located along this route.
The number of international airports in 2024 will increase from today's 7 to 9. Over the first 7 months of this year, transit through the territory of Azerbaijan has increased by almost 50 percent. Currently, the Baku International Sea Trade Port has a handling capacity of 15 million tons per year, which can be increased to 25 million tons – I would also like to note through PPP as well.
Over the past 20 years, 19,000 kilometers of roads and 1,400 kilometers of railways have been built or overhauled in Azerbaijan. Today, after the victory in the Second Karabakh War in 2020, Azerbaijan is building thousands of kilometers of roads and hundreds of kilometers of railways in the territories liberated from occupation – there are also ample opportunities for large investments in the PPP format.
Summing up the above, it should be noted once again that the fundamental prerequisites and opportunities for the successful development of the PPP format in the Republic of Azerbaijan have been created.
Thank you for your attention!