Published on March 6, 2014
SNAPSHOT OF RUSSIA’S PPP GOVERNANCE Annual Meeting of Senior PPP Officials 17-18 February, 2014 Paris, France Ian Hawkesworth Head, Capital Budgeting and PPPs Budgeting and Public Expenditures Division Public Governance and Territorial Development Directorate, OECD 1
There is an infrastructure gap in Russia Infrastructure type Volume of investment needed (US $b) Motorways 559 Required for: construction of 451,000 km of new motorways; reconstruction of 14,600 km of federal (approximately US$ 5 million per km) and 35,400 km of regional motorways (approximately US$ 1 million per km). Despite the above due to materialise in 2020, motorway density in Russia (0.07 km per km2) will be lower than in Canada (0.14 km per m2) and China (0.19 km per m2). Railroads 80 Required for: construction of 16,605 km of new roads (approximately US$ 1.5 million per km); reconstruction of 44,200 km of the roads (52% of the total length, approximately US$ 0.75 million per km); development of 659 km high-speed railroad sections (approximately US$ 32 million per km). Energy 70 For energy efficiency programmes and development of social infrastructure, the sector needs approximately US$ 5 billion a year. Ports 33 Current forecasts envisage 5% year-on-year growth of total sea and river port capacity, which amounts to a 620 million tonne increase by 2020. Airports 11 The Ministry of Transportation has selected 24 airports as priority investment objectives. The reconstruction programme needs US$ 440 million for each of these investments. Total 753 Details of investment Source: Gazprombank and EBRD (2012) 2
Russia’s current business climate – attractiveness to foreign investors FDI Regulatory Restrictiveness Index, 2012 3
Framework for analysis The OECD’s PPP Principles (2012) fall under three main headings: 1. Establishing a clear, predictable and legitimate institutional framework. 2. Grounding the selection of Public-Private Partnerships in Value for Money. 3. Using the budgetary process transparently to minimize fiscal risks. 4
1. THE INSTITUTIONAL FRAMEWORK 5
The management of capital projects in Russia is similar to most OECD countries, but many regions are lagging … Ministry of Economic Development Preparation of the government’s overall investment policy and planning framework; hosting embryonic PPP Unit Duma Appropriation to a portfolio of projects or to mega projects Ministry of Finance Supreme Audit Institute Budgetary allocation and medium term planning, selected project monitoring; contains some PPP expertise Monitoring legality of execution Line Departments Regions Project selection, contract negotiation, monitoring of projects Responsible for most infrastructure investment; capacity varies greatly 6
Establish a clear, predictable and legitimate institutional framework supported by competent and well-resourced authorities • There is a need for broader public consultation and debate regarding PPPs, including to clarify their different types and usages. • The institutional framework and the capacity of the public sector should continue to be improved and harmonized, notably at the federal and regional levels. • Russian authorities are aware of the steps needed to establish a good public governance framework for PPPs, and are actively working on updating and strengthening the institutional and legal framework under the leadership of the Ministry of Economic Development. – The passing and specific implementation of the new federal PPP law will be a substantial step in the right direction. – Some ministries/sectors (ex: Transport) possess significant capacities and experiences with respect to the use of concessions/PPP, and could serve as an example for other sectors 7
2. VALUE FOR MONEY 8
Benchmarks on VfM and PPP Units Country Use of relative value for money assessments Use of absolute value for money assessments For PPPs Australia Austria Belgium Canada Chile Czech Republic Denmark Estonia Finland France Germany Greece Hungary Iceland Ireland Israel Italy Japan Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal Slovak Republic Slovenia Spain Sweden Switzerland Turkey United Kingdom United States Russian Federation OECD total : Yes, for all projects : Yes, for those above certain monetary threshold : Yes, ad hoc basis : No n.a: Not applicable Source: OECD (2012) For PPPs n.a n.a .. n.a .. n.a n.a n.a n.a .. Dedicated PPP units in line ministries No dedicated PPP unit exists in central/federal government For TIPs n.a n.a .. n.a .. n.a n.a n.a Dedicated PPP unit reporting to Ministry of Finance .. .. .. .. 17 4 5 1 5 13 8 3 2 9 15 7 4 8 4 6 .. 14 10 .. 9
Ground the selection of PPPs in Value for Money • The infrastructure prioritisation process is comparable to what is found in many OECD countries in defining and pursuing strategic goals (National Development Plan). • There needs to be a stronger focus on how to attain value for money from PPPs, both during the pre-operational and operational phases of PPP projects. • Based on experience with successful PPPs, the Russian authorities are working on developing a public sector comparator, risk management tools, guidelines for the operational phase of PPPs and re-negotiation procedures. • Further steps are needed to promote and ensure sufficient competition in the PPP market. 10
3. THE BUDGET PROCESS 11
Use the budgetary process transparently in order to minimise fiscal risks and ensure the integrity of the procurement process • PPP management and procurement needs to be further embedded into the relatively strong Russian budgeting framework. • Stronger tools to improve transparency about government guarantees and liabilities is needed in order to better manage fiscal risks and ensure affordability of PPP projects at all levels of the government. • Also, more could be done to ensure clarity between the public and private roles of SOEs, and the integrity of the procurement process. – New law on the Federal Contracting System will help further guard against waste and corruption. 12
CONCLUSION The new PPP law is expected to improve the PPP framework substantially. Key points, however, will be the implementation on the ground and the links to other general issues: › Regional implementation of the law › Project preparation › Budgetary transparency (with regards to the disclosure of liabilities) › More competitive markets for PPPs › General investment climate issues 13
Thank you! For more information: www.oecd.org/gov/budgeting/ppp.htm Ian.Hawkesworth@OECD.org 14
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