Uzbekistan: PPP Projects In Infrastructure Sector

Last Updated: 20 February 2019
Article by Kosta Law Firm

The area of PPP is still at the initial stage of development in Uzbekistan. The Law on PPP has been drafted several times, but has not been approved yet. As a result, a PPP mechanism is being regulated through the approval of sector-specific laws and regulations that underpin the PPP program. The institutional framework is represented by one specialized state institution (the PPP Development Agency under the Ministry of Finance of the Republic of Uzbekistan (the "Agency")) and other state organs that regulate a specific sector, where the PPP is being implemented. PPP projects related to infrastructure can be initiated in the following sectors that are of the main government interest: road infrastructure, renewable energy, irrigation and water development, subway, utility networks, and infrastructure of airports.

Legal frameworks for PPP projects

Having regard to the absence of the single Law on PPP, the legal framework is being developed through bylaws, PPP-specific legislation (decrees and resolutions), though, not all industries have relevant bylaws for PPP projects. In the absence of specific regulatory framework, public - private partner relations are regulated by the PPP agreement.

Additionally, simple partnerships and concession agreements can be used as tools for the implementation of PPP projects. If the entity from the private sector decides to implement the project through the conclusion of the concession agreement, the Law "On Concessions" will regulate PPP. In the case of simple partnership, the Civil Code of the Republic of Uzbekistan will determine the legal framework of PPP. Each type of the agreements has its own peculiarities that may put limits on the PPP project. A simple partnership limits the number of eligible partners, as it is possible to establish simple partnership only between two commercial organizations. Pursuant to the Law "On Concessions", the private party of the concession agreement shall be a foreign entity, the agreement shall not exceed the period of 15 years and shall relate to the allocation of land, property or subsoil.

Institutional framework for PPP projects

The Agency is a new specialized organ, which is responsible for the coordination and monitor of the PPP projects' implementation. Besides, tender documentation, as well as draft PPP agreements and amendments thereto, are subject to agreement with the Agency, as it is a part of the Tendering Committee in all PPP-based projects. It also has a right to request and receive information on the progress of implementation, feasibility and financial performance of PPP projects from their initiators and participants.

One of the purposes for the creation of the Agency was to avoid the need to address different state organs when initiating and implementing a PPP project, as well as seek information on potential PPP projects from different sources. All information concerning PPP projects shall be concentrated on the official website of the Agency, however, currently the website is under development. As practice shows, the coordination function of the Agency is still underdeveloped and there is still the need to address different corresponding state organs in order to initiate the implementation of the PPP projects (e.g. the road infrastructure projects involve the State Committee of the Republic of Uzbekistan on Roads, projects associated with the renewable energy – JSC "Uzbekenergo", construction of subway networks - JSC "O'zbekiston Temir Yo'llari", projects for development of utility and water networks - Agency "Kommunkhizmat" under the Ministry of Communal Services and projects associated with the infrastructure of airports - JSC "Uzbekistan Airports").

Moreover, in our opinion, insufficient development of PPP-based projects' sector is also associated with the shortage of specialists having experience and knowledge in the preparation of PPP projects. This also results in delays of their implementation at the initial stage.

Sectoral priorities for PPP in Uzbekistan

Every 3-5 years the Government determines economic sectors of main priority and approves state programs, which contain the portfolio of major investment and infrastructure projects. The entities from the private sector can familiarize themselves with the list of potential projects and send their commercial proposals to the corresponding state agency that are also mentioned in such lists.

Presidential Decree No. PP - 4067 dated December 19, 2018 (Decree No. PP - 4067) provides for the State Investment Program for 20191 with the projects relating to subway networks, irrigation and water development and construction of roads fully or partially financed by the state budget (Annexes 4 and 17), centralized investments (Annexes 5-9 and 18), loans from foreign creditors under the state guarantee (Annex 10), the Fund of the Republic of Uzbekistan for Reconstruction and Development under the Cabinet of Ministers of Uzbekistan2 (Annex 11) and direct investments (Annexes 13-14) . Presidential Decree No. PP – 3874 dated July 19, 20183 (Decree No. PP – 3874) also provides for the list of potential investment and infrastructure projects for 2018-2019 partially or fully financed by the foreign direct investments.

Therefore, the examination of the approved investment and infrastructure projects has the potential to be a pivot in the process of finding opportunities in the sphere of PPP projects.

Road infrastructure

Annex 16 to the Decree No. PP – 4067 provides for the projects concerning road infrastructure. The projects are initiated by the State Committee of the Republic of Uzbekistan for Roads. Such projects include (a) the construction of the tunnels and intercity toll roads, where the company "GP Papenburg Baugesell Schaft" (Germany) is the potential investor and (b) the construction of the municipal roads, where the position of potential investors/creditors is vacant. Annex 6 also contains projects concerning road infrastructure including construction and reconstruction of roads in the regions of Uzbekistan.

Resolution of the Cabinet of Ministries No. 990 dated December 5, 2018 establishes the temporary procedure for implementing PPP projects in road infrastructure sector. The Resolution envisages projects in the sphere of ensuring road traffic safety and development of modern road infrastructure. The Resolution also provides for the projects concerning the construction of toll roads that shall be started on January 1, 2020.

The Resolution distinguishes three main spheres where the PPP can be initiated: (i) implementation of the integrated monitoring systems and intelligent cameras, (ii) implementation of paid parking areas, and (iii) implementation of the roadside infrastructure projects, where investors and/or companies take obligations for the improvement of the territories along public highways. Both public and private partners can initiate the projects that will last for 10-year period. The PPP is implemented on tender basis.

The following state organs play the role of public partners under the PPP agreements in this sector:

  • implementation of the integrated monitoring systems and intelligent cameras - the Ministry of Internal Affairs of the Republic of Uzbekistan;
  • implementation of paid parking areas – corresponding local municipalities (khomiyats);
  • implementation of the road-side infrastructure projects – the State Committee of the Republic of Uzbekistan for roads4.

Renewable Energy

International Finance Corporation (IFC), a member of the World Bank Group, has signed a mandate with the Government of Uzbekistan to increase its renewable power capacity and encourage private sector investment in Uzbekistan's renewable-energy sector. As transaction advisor, IFC will advise the Government and the state-owned national power utility provider, Uzbekenergo,5 on structuring a PPP to mobilize private sector experience and capital to construct and operate a 100-megawatt solar plant. That will be the first phase of a larger initiative to generate up to 1-gigawatt of new solar energy.

Resolution of the Cabinets of Ministers No. 633 dated August 8, 2018 6 stipulates that the Government is interested in searching and attracting on a competitive basis private investors for the design, financing, construction and operation of photovoltaic energy production facilities in Uzbekistan with an investment volume of up to $ 1 billion based on PPP. It is to note that the projects associated with the construction of a solar photovoltaic station with a capacity of up to 100 MW fall into the group of PPP pilot projects.

Despite having significant solar resources, Uzbekistan is highly dependent on natural gas for electricity generation. The Government aims to develop the renewable energy sector to diversify the country's energy mix and attract private investment in the sector. The projects shall envisage the use of alternative sources of energy such as solar, hydropower, wind, energy storage, green buildings, and waste-to-energy. As the result, the incentives and proposals in this sphere from the private sector are welcomed.

The investors will be selected through a transparent and competitive tender. They will have the opportunity to conclude a land lease agreement/a concession agreement and exploit the main assets of the power plant.

Irrigation and water development

Annex 5 to the Decree No. PP – 4067 provides for the list of the projects that are going to be implemented in 2019 concerning the construction and reconstruction of the irrigation and reclamation facilities. Annex 8 comprises projects pertaining to the construction and reconstruction of the drinking water supply and sewerage systems.

Subway and utility networks

The Government has shown its interest in these sectors and the potential projects in the framework of PPP are being developed. Please see Decree No. PP – 4067 and Decree No. PP – 3874. To date, however, there are opportunities related to the projects for the development of the utility networks only within the framework of the Public Procurement. For more information, you can visit:

https://www.ebrd.com/work-with-us/procurement/notices.html?1=1&filterCountry=Uzbekistan&filterContract=Project%20goods,%20works%20and%20services&filterNoticeType=General%20Procurement%20notices

Infrastructure of airports

Pursuant to Presidential Decree UP-5584 dated 27.11.2018 7, by May 1, 2019, the Cabinet of Ministers of Uzbekistan shall approve a roadmap for reforming the aviation transport sector and promotion of the private partners involvement, including foreign direct investment, in the development of airports in 2019-2030.

The State Committee of the Republic of Uzbekistan for Investments, the Ministry of Finance of the Republic of Uzbekistan and JSC "Uzbekistan Airports", with the involvement of the World Bank Group, shall ensure:

  • by April 1, 2019, the determination of an airport or a group of airports in which projects will be implemented under a PPP;
  • until January 1, 2020, initiation of tenders for the implementation of projects on the terms of PPP in the selected airport or group of airports.

Footnotes

1 http://lex.uz/docs/4117467?query=%D0%A3%D0%B7%D0%B1%D0%B5%D0%BA%D1%8D%D0%BD%D0%B5%D1%80%D0%B3%D0%BE

2 https://ufrd.uz/

3 http://www.lex.uz/ru/docs/3835897

4 http://www.uzavtoyul.uz/en/

5 http://www.uzbekenergo.uz/en/

6 http://lex.uz/ru/docs/3860084?twolang=true

7 http://lex.uz/docs/4082764

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