Public- Private Partnership means an agreement between the public and the private sector to provide public assets (services) through investments. At the same time, it is the construction, management etc. work that carried out by the private sector during the period agreed by PPP with a well-defined distribution of risks between the private sector and the state.
The following PPP models are applied in the world practice:
- Build – Operate – Transfer
- Build – Own - Operate – Transfer
- Build – Own – Operate
- Build – Transfer- Operate
- Build – Operate – Keep – Transfer
- Design – Build – Own – Transfer
- Design – Build – Finance – Operate
- Design – Build – Finance – Keep
Currently, “Build - Operate - Transfer (BOT)” of PPP is implemented in Azerbaijan.
The following PPP projects can be implemented based on the "BOT" model:
- bridges, tunnels;
- reservoirs, water treatment facilities, irrigation, drinking and household water, as well as sewerage systems, including main gas pipelines, underground gas reservoirs, city gas networks;
- press and conference centers, as well as educational, health, cultural and tourism facilities;
- commercial buildings, wholesale markets, factories and plants;
- sports centers, dormitories, recreation and amusement parks;
- industrial parks, high-tech parks, agro-parks, high-tech automated control systems and other systems in the field of information technology;
- warehouses for supply of agricultural products and other similar facilities;
- objects and heating systems operating on the basis of geothermal and heat generating capacity of waste, enterprises engaged in the production, transmission, distribution and sale of electricity;
- highways, roads, rail and rail systems, bus station complexes, stations, funiculars and lifting systems, logistics centers, underground and surface parking lots, metro lines and stations;
- special economic zones, seaports and airports used for civilian purposes, complexes consisting of cargo, passenger and yacht ports.
The following state supports are provided within the framework of PPP projects:
- cooperation assistance - financial assistance provided by the Ministry of Economy, agreed by the parties, taking into account the losses of investors and service fees of consumers when it is impossible for them to fully or partially pay the costs incurred by the investor in the investment project;
- state guarantee - a state guarantee is issued for the fulfillment of obligations to investors under a contract concluded in accordance with the "BOT" model. In case of early termination of the contract at the initiative of the investor, the Ministry of Economy is not responsible for the obligations of the investor on the investment project;
- concessions - an investor who implements investment projects related to construction and infrastructure facilities in accordance with the "BOT" model is exempt from state duties and fees related to its activities.
From the point of view of state interests, the wide implementation of PPP projects can be beneficial in several areas: i) attracting local and foreign investors; ii) implementation of social infrastructure projects with the participation of the private sector; iii) optimization of investment expenses in the budget; iv) improving the quality of public (state) services; v) Sharing potential risks through mutual exchange of experience between PPP participants.
From the point of view of investors' interests, wide implementation of PPP projects can be favourable in the following areas: i) long-term and repayable investment; ii) establishment of a reliable partnership; iii) implementation of projects with state support, i.e: obtaining state guarantees, sharing risks with the state, exemption from duties and fees; iv) positive impact on investor’s prestige.