12. Public-Private Partnership

12.1. Overview of public-private partnership regulation

public-private partnership

Public-private partnership (PPP) is a format of long-term, mutually beneficial cooperation between the state (state partner) and the investor (private partner) for the purpose of developing and implementing projects for the creation and/or modernization, operation, and maintenance of infrastructure facilities and/or infrastructure services. This may include, for example, the construction of schools, hospitals, highways and railways, kindergartens, provision of medical services, etc.

A mandatory condition is the participation of business in financing the project through own or attracted funds and the distribution of responsibility and risks with the state. As a result, the state gains the opportunity to accelerate infrastructure development through private investments, and the private partner gains the opportunity to derive profit from the subsequent operation of the facility.

The Kyrgyz Republic actively attracts private investments through PPP mechanisms and considers PPP as one of the key tools for infrastructure development.

The legislation of the Kyrgyz Republic does not impose restrictions on the participation of foreign investors in PPP projects. Foreign investors may participate in tenders on equal terms with local companies, as well as establish project companies on the territory of the Kyrgyz Republic.

PRIVATE PARTNERSHIP

Key advantages for investors:

• the possibility of participation of foreign investors in PPP projects;

• the possibility of establishing a project company (SPV);

• the long-term nature of PPP agreements;

• the possibility of receiving income from the operation of the facility;

• the distribution of risks between the state and private partners;

• the possibility for the investor to independently initiate a PPP project. The investor has the right to independently propose a PPP project to the state partner and participate in the further procedure of its consideration and implementation.

Stages of PPP project implementation:

Initiation of the PPP project

Preparation of the PPP project

Conducting a competition for the selection of a private partner

Conclusion of the PPP agreement and its implementation

The procedure for selecting a private partner, that is, how the private partner will be chosen, depends on the amount of the private partner's proposed investment in the PPP project.

For large infrastructure projects, a two-stage competition is applied, including a preliminary qualification selection of participants and a subsequent selection of the competition winner. For smaller-scale projects, a simplified selection procedure is applied.

If the investment amount exceeds 1 billion soms, the PPP project may be awarded through direct negotiations (i.e., without competition) provided that the grounds for conducting direct negotiations established by law are met. Several PPP projects have already been implemented in the Kyrgyz Republic in the fields of healthcare, education, agriculture, infrastructure, and housing and communal services, which indicates the practical applicability of the PPP mechanism and the state's interest in attracting private investments.

Procedure for selecting a private partner

< 100 million soms

Single-stage method

Two-stage method

Direct negotiations

Selection of competitive

proposals according to

qualification

criteria

I: Qualification selection

II: Winner selection

> 1 billion soms

≥ 100 million soms