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Public funding and private investment Presenter: Deputy head of Department

Anatoliy Valetov

Moscow Urban Forum

2011

Department for External Economic and International Relations

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DEPARTMENT FOR EXTERNAL ECONOMIC AND INTERNATIONAL RELATIONS

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Department for External Economic and International Relations is a Government’s of Moscow foreign investment body.

Structure of PPP infrastructure projects currently developed by Department

water supply 27%

hotels 7%

waste 10%

parking 7%

rapid transit system 10%

community facilities

4%

transport 7%

energy 14%

industry 4%

medical facilities 10%

Structure of PPP projects

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Areas of PPP implementation

HEALTHCARE

n Main assets have a high deterioration level.

n Low qualification level and aging of medical personnel. Lack of modern training systems for doctors and nurses.

n Outdated equipment and diagnosis techniques.  

n Renovation of existing medical facilities and construction of additional ones as well as operation and maintenance of medical facilities in Moscow.

Current state Investment opportunities

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MISSION •  quality health care in municipal clinics

WASTE MANAGEMENT

n 5.5 tons of sanitary waste is produced in Moscow annually. Capacity deficit of 2-3 million tons is estimated. Moscow region produces another 2 million tons.

n Approximately 80% of waste is disposed on land fills, 13% is incinerated and 7% is recycled.

n Government program priced at a total of 80 billion rubles provides for an increase of incineration capacities outside Moscow City.

n Construction of a modern plant for neutralizing highly toxic waste and sewage drain.

n Construction of waste treatment plants based on technologies providing recyclable discharge.

Current state Investment opportunities

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MISSION •  disposal of solid waste without incineration

•  incineration of highly toxic waste without damaging the environment

PARKING

n Parking lot deficit is over 4 million spaces (with an overall demand for 5 million spaces).

n Planned budget for creating a parking space system is 246 billion rubles for the years 2011-2016.

n In May 2011 Department for External Economic and International Relations along with EBRD issued an analytical report on the parking space sector with comprehensive recommendations for Moscow City Government.

n Developing park-and-ride facilities near rapid transit stations.

n Construction of non-residential buildings in which over half the space is intended for organized parking for local residents.

Current state Investment opportunities

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MISSION •  increase of the capacity of municipal transportation

•  increase turnover of parking spaces •  uniform parking policy across the city

•  usability of the owners of the transport facilities •  increasing of the income of the municipal budget

RAPID TRANSIT SYSTEM

n Outdated car park and operation systems do not meet modern standards.

n A construction of 75 km of new lines must be completed by 2015.

n Metro car park must be completely renewed by 2020 which includes a replacement of 4000 cars and a purchase of 2000 cars for new lines.

n Financial input for construction is estimated at 90 to 150 billion rubles annually. For car park renewal – about 300 million rubles.

n Construction and operation of new rapid transit lines as well as setting-up a joint-venture in manufacturing cars for the rapid transit system.

n Setting-up a joint-venture in manufacturing escalators for the rapid transit system.

Current state Investment opportunities

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MISSION •  accessibility of remote districts of the city

•  comfort and attractiveness of public transport

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Public-private partnership

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PUBLIC-PRIVATE PARTNERSHIP : HISTORY

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THE INVESTMENT CONTRACT

From 1998 to 2008 investment contract was

used as basic scheme of the PPP

CANCELLATION ON IVESTMENT CONTRACTS

Later this form of agreement was stated as inappropriate.

But we still have 1300 of those projects running

NEW MODELS OF PPP

Moscow tried to draft up its first concession agreements,

but they never came to realization

It is essential for Moscow to learn to use new models of public-private partnership in immediate future

With the end of investment agreement’s era the city faced the lack of expertise in any other form of PPP. Recently it has begun to study the implementation of such forms of PPP as concession, release agreements and privatization.

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HURDLES IN USE OF PPP MODELS

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Moscow does not have special PPP law, however, such laws have been adopted in 45 regions of Russia (as of September 2011)

Russian legislation is directed to protect the budget funds and state property and not as much to their involvement in the investment process

Risks are evaluated by investors as high, which affects in terms of investment return and guarantees from the state

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PUBLIC-PRIVATE PARTNERSHIP AS A TOOL INTEGRATING MOSCOW IN THE WORLD INVESTMENT PROCESS

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PPP  

additional funding for infrastructure modernization  

expansion of resource-intensive innovative

industries

introduction of new forms of management

and technology

high financial effectiveness

high control over final result

Implementation of public-private partnership plays an important role in the development of Moscow as a global metropolis

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PRACTICAL STEPS IN IMPLEMENTATION OF PPP

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Setting up of investment committee headed by the Mayor of Moscow

Maintenance of investment projects database

Setting up of Investment Agency���

Adoption of legal acts specifying conclusion procedure for concession agreements

Studying of possibility of enacting a PPP law

Moscow City Government is taking steps to accelerate the implementation of PPP schemes in economy of the city

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