Bulgarian MPs passed at second reading on June 1 the much-awaited Public-Private Partnership Act, which will allow the state and municipalities to offer services through joint ventures with private businesses.
The law will allow central and local authorities to transfer land to such joint ventures, with private investors footing the construction bills for items ranging from hospitals to schools, kindergartens to prisons, ports to homes for the elderly. For constructions that will not generate any revenue, the authorities will be allowed to make financial contributions towards meeting project costs.
The private partners will be required to assume at least part of the risks, as outlined in each individual contract, but that would not guarantee them a return on their investment, according to the law. Partnership contracts would be signed for periods ranging from five to 35 years, their length depending on the nature of the joint project and its financial costs.
Regardless of the size of the stake held by state or local authorities in the joint venture, such stakes would have blocking power, ensuring that the interests of the public sector are protected. In the past, joint ventures with the private sector have resulted in the loss of control to the private shareholders, a seminal example being the Plovdiv International Fair. The law will have retroactive action and this provision will cover existing public-private ventures as well.
One specific area left outside the law’s prerogatives is the mining sector, where public-private partnerships will not be allowed. The law goes into effect on January 1 2013, with the exception of several provisions referring to municipalities, which will go into force on September 1.
Municipalities, in particular, have been capped in the amount of funding they can spend on public-private partnerships and would also require ministerial approval if their joint ventures are to offer public services delegated by central authorities.
New public-private partnerships will require government approval to be included into the operational plan for each budget period and a public register of current joint ventures would be available online at no cost, maintained by the Finance Ministry.
The immediate beneficiaries of the new law will be sports clubs, whose owners will be able to enter public-private partnerships with local authorities (which usually own the stadiums that clubs play on) and invest in the infrastructure. Also, Bulgaria’s seven largest cities will now have access to 160 million leva in funding under the European Union’s JESSICA programme, for investment through public-private partnerships.