PPP Projects will be Regulated by a New Agency

The government has developed a law on Public and Private Cooperation. Within the framework of the new Extended Fund Facility (EFF) program, approved with International Monetary Fund (IMF) on 12th of April 2017, the government of Georgia has taken over the obligation to create modern legislative and institutional framework for public and private cooperation and submit it to the parliament prior to 31st of December 2017.

To qualify a project as public and private cooperation and put it within the space of regulation envisaged by the draft law, it should comply with the following criteria:

  • Long-term (minimum term for public and private cooperation agreement is determined by a bylaw normative act);
  • Value of the public and private cooperation project should not be less than the value determined by a legal act issued by the government of Georgia;
  • Provision of public services by a private partner or operation and/or creation and maintenance of a public infrastructure;
  • Risk distribution between public and private partners;
  • Full or partial financing of public and private cooperation by private partner.

By the draft law a public and private cooperation agency will be created, which agency will participate to the development of public and private cooperation project and will fulfil function related to public and private cooperation.

One of the important directions of the draft law is provision of guaranties within the framework of public and private cooperation. It is possible to conclude a direct agreement between the parties of public and private cooperation and creditors. Public and private cooperation agreement and/or direct agreement might envisage rights and guaranties of creditor(s), which do not contradict existing legislation.

According to the draft law, within public and private cooperation, the upper limit of state obligations is determined by legislation regulating public finances. Methodology of calculation of the above limit is approved by the government of Georgia.

After adoption of the law, it will be necessary to allocate recourses from the state budget of Georgia to ensure establishment of PLLE Public and Private Cooperation Agency before 31st of March 2018, which agency will participate in development of public and private cooperation projects, provide support of authorized agencies in document preparation, perform evaluation of concepts of submitted projects, etc. The estimated volume of assignments necessary for establishment and operation of Public and Private Cooperation Agency will increase the expenditure part of the state budget of Georgia by approximately 420 thousand GEL.

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