December 3 (SeeNews) - Bulgaria needs to amend its legislation to make public-private partnerships (PPPs) more attractive to investors and boost its economy, international law consultants Wolf Theiss said.
The country has no single bill regulating the activity of of PPPs. Instead, their operations are regulated by several bills, including the Concession Act and the Public Procurement Act.
The legal framework should become more flexible and there is need for improvement of the administrative capacity, Maria Danailova, senior associate with Wolf Theiss' Sofia office told reporters. Independent control over the PPPs should be introduced as well.
A major weakness of the Public Procurement Act is the short time period for which a procurement deal is assigned. Presently, a contractor is awarded a procurement deal for four years with an option for a five-year extension, while a proper PPP needs a longer period of time to yield results. With regard to the Concession Act, a major holdback is the lack of an option to negotiate the conditions of a concession, Danailova said.
"I believe that a procedure for a competitive dialogue is more appropriate," she said, adding a private company should have more opportunities to negotiate the concession contract.
Currently, the central government or local authorities set the conditions in the concession contract which the concessionaire should either accept, or give up bidding for the concession.
Another shortcoming in the existing Concession Act is the limited right to compensation granted to the concessionaire if the government or the relevant municipality fails to deliver on its pledges in the concession contract. It means the concessionaire cannot recover the total cost of the investment it has made.
PPPs could be the proper decision for the implementation of major infrastructure projects, including roads, water supply and sewerage systems, and energy, said Richard Clegg, managing partner at the Wolf Theiss Sofia office.
"PPPs should be applied to something that can raise the country's gross domestic product threefold in the next decade," Clegg told reporters.
According to Clegg, a PPP is the best option for the government to go ahead with the construction of the Belene nuclear power plant, or add two reactors to Bulgaria's existing Kozloduy nuclear power plant. He believes that a nuclear energy project will help Bulgaria become a net electricity exporter and will enable the government to invest power export earnings in the construction of hospitals and schools.
The project for the construction of the 2,000-megawatt nuclear power plant in Belene is currently on hold over lack of financing and following the withdrawal of Germany's RWE which was the government's strategic partner in the project.
"A proper PPP allows the state to build major infrastructure without paying for it now. Secondly, it allows the state to also guarantee a proper level of quality [of the infrastructure] for a period of 30-40 or 50 years," Clegg said.
Bulgaria's experience with working PPPs so far has been limited to the providing of services, Danailova said. She gave as an example the concessions on the Varna and Burgas airports which the government granted to Germany's Fraport in 2006.
Another PPP example, expected in the short term, is the planned construction of prisons for which the government has allocated 100 million levs ($77.1 million/51.1 million euro) in its 2010 budget bill.
The money can go for the construction of more than one prison, Clegg said. The Bulgarian Justice Ministry has been studying the possibility of building a prison under a PPP scheme in the last two years. At least three international companies, including G4S and Serco, have shown interest in such projects and there are also banks that are ready to provide financing, Clegg added.
According to Clegg, all prerequisites are in place to make such a project become the first proper PPP in Bulgaria. Provided a political decision is taken, the process for the developing a PPP and the establishment of a joint venture company will take six to eight months, he added.
Danailova believes that the first privately-run prison in Bulgaria could be built by the first quarter of 2011.
Vienna-headquartered Wolf Theiss (www.wolftheiss.com) is one of the major law firms operating in central and southeast Europe. It has offices in 12 countries in the region providing consultancy in banking and finance, competition and antitrust, mergers and acquisition, dispute resolution, employment law, energy, infrastructure, telecommunications and information technology, real estate projects, regulatory and procurement, and tax law.
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