English

New infrastructure facilities without spending budget funds

Jovanka Laličić

Every investment in public infrastructure and facilities, that is, in device and plants that are result of the implementation of the public-private partnership contractual arrangement, shall be considered state-owned, said in the interview for Dnevne novine president of the Legislative Board of the Montenegro’s Parliament, Ms Jovanka  Laličić.

She pointed out that protection of the public interest was one of the fundamental principles of the Law on Public-Private Partnership, which was subject of discussion in the Parliament. Ms Laličić, DPS member, said that state interest in future arrangements would be protected and that criterion for the selection of private partner would be based on an economically most favorable offer.

DN: Proposal for the Law on Public-Private Partnership sparked huge interest and fueled discussion in the Parliament’s session. And while opposition finds objections and expresses concern that state interest and property won’t be protected properly, the proposer guarantees that public-private partnership won’t mean privatization or sale of the state property. Has the future law protected state interest enough?

Ms Laličić: Public-private partnership, which is being introduced in our legislative system for the first time, is new and efficient model of financing, still not well-developed on our market. That might be one of the reasons why it crates such dilemma. Judging by the subject of this law, it is obvious that we are talking about long-term contractual relations between public and private sector, based on the clear-cut division of rights, responsibilities but also risks.

Apart from the contractual, there’s also possibility for the establishment of joint legal entity between public and private sector. Their relations are defined by contract. Therefore, this isn’t privatization or sale of state property, it’s a contractual arrangement with clearly defined rights and responsibilities.

With the aim of protecting state interests, i.e. state property, this law refers us to the application of the Law on State Property and other laws, depending on the subject of the contract. Therefore, it does not derogate from the provisions of the Law in State Property.

The law stipulates that any investment of the private sector in public infrastructure and facilities, devices and plants which are result of the implementation of the public-private partnership contractual arrangement, shall be considered state-owned. One of the fundamental principles of the law is the principle of the protection of public interest, elaborated further through duty that every project of public-private partnership shall be preceded by feasibility analysis based on the public interest assessment. Then, proposal for the project must be approved by the Agency, Ministry of Finance and Protector of Property and Legal Interests.

DN: What is it the citizens and the public should know about the future regulation? What are the new solutions?

Ms Laličić: The proposed Law on Public-Private Partnership creates new concept of joint investment of public and private sector. Application of this law will enable more intense involvement of private sector and it will be applied in the domain of public works and public services.

Public revenues often aren’t enough for the implementation of many projects, particularly infrastructure projects or service provision. This way, we will have an infrastructure facility without the use of budgetary money and service will be provided in much cheaper and quality manner.

Other benefits include transfer of risk form the state to private partner, transfer of knowledge and skills, improvement of Montenegro’s image and positive effect on future investment.

DN: What will be the criteria for the selection of private partner? What requirements private partners will be obliged to meet if they want to establish partnership with the state?

Ms Laličić: This law determines who shall not be considered a bidder at all. Criterion for the selection will be the most favorable offer in the economic sense. In order to determine whether an offer is favorable or not, there is a whole set of sub-criteria, such as quality, importance of the investment, deadlines, price of services, exercise of public interest, effects of that project on employment, improvement of infrastructure and economic development.

DN: What is regional and European experience like?

Ms Laličić: As I said at the very beginning, public-private partnership is something new for us. European states already have a long tradition of cooperation between private sector and public authorities. Great Britain had the most important projects in that context, as well as Ireland, France, Greece, Spain and Portugal.

European states have been improving port terminals and services and airport infrastructure using the concession models of public-private partnership.

Experience of the states in the region in the education sector is particularly important for us. For example, reconstruction of a school or sport halls in Croatia. Croatia currently has 19 projects which are being implemented in accordance with the public-private partnership.

DN: What are domains in which Montenegro can conclude public-private contractual arrangements?

Ms Laličić: Subject of the public-private partnership can be construction, maintenance or use, reconstruction of roads, railways, air transport facilities and airports, telecommunication, healthcare facilities, education institutions, cultural institutions, public utility and sport infrastructure, social housing, tourism, hospitality, electronic and communication networks and radio frequencies.

Domain of energy efficiency can also be subject of public-private partnership, as well as construction or reconstruction of public infrastructure that refers to production, transmission or distribution of water and many other domains. As for public services, social and child protection, hospitality and tourism services, education and healthcare services can be subject of public-private partnership.

DN: The Law stipulates formation of the Investment Agency. What will be its tasks?

Ms Laličić: Investment Agency as new institutional framework will encompass activities of the Agency for the Promotion of FDI, Secretariat for Development Projects, as well as activities of the administrative and technical service of the Council for the Privatization and Capital Projects. The Agency will also include monitoring realization of investment, approving proposals for projects, professional duties related to the promotion of Montenegro’s investment prospects, making assessment of the reasonableness of development and investment programs relevant to Montenegro.

The second highway section will be public-private partnership model

DN: What does the new law provide for Montenegro?

Ms Laličić: It enables Montenegro to attract private capital and build important infrastructure without engaging budget funds. The next highway section will probably be built in accordance with public-private partnership model.

Concessions for natural resources

DN: What is the difference between Law on Concessions and the future Law on Public-Private Partnership?

Ms Laličić: They are adopted at the same time. Law on Concession stipulates rights to use natural resources and goods in general use, whereas Law on PPP regulates concessions on public works and services.

 

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