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The Warsaw Voice » Business » July 4, 2014
Innovative Poland
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Better Prospects for PPP Projects in Poland
July 4, 2014   
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Just because the economy has slowed down in recent years does not mean Poland needs less investment in new projects. The opposite is true and it is only natural for both public sector and private investors to show growing interest in public-private partnerships (PPP) as a way to start new projects despite limited budgets. The upcoming string of elections in Poland is working to the advantage of PPP and so are changes to regulations that are planned to strengthen such partnerships. The central government administration has been engaging in PPP on a more regular basis, which is a good sign as well.

According to Centrum PPP, a non-government agency tasked with preparing best practice standards and promoting public-private partnership projects in Poland, a total of 69 announcements were published last year concerning infrastructure projects carried out in the PPP formula. While such advertisements are, of course, important to fostering the market, they do not mean much on their own. What is worth noting, then, is that 15 contracts were signed last year under the PPP law and the law on concessions for construction work or services. Skeptics might describe this as “only” 15 contracts and say that there is a long way to go before the financial aspects of a project are finalized after a contract has been signed. But even if the skeptics are right, the number of contracts is clearly up compared with previous years.

Observers of the PPP market have for years pointed out that Poland lacks PPP projects initiated by central government instead of local government. Such projects, they argue, could serve as a good example, a good message that the center is sending out to say that PPP stands for safe investment and a viable alternative to public procurement. The first project initiated by central government was launched last year when construction began on a district court in the southern city of Nowy S±cz as a public-private partnership. Two other pilot PPP projects will begin this year with the support of the Ministry of Infrastructure and Development. One is a road construction project involving redevelopment and maintenance of roads in Lower Silesia province, and the other prestigious project is the construction of a new Mother and Child Hospital in Poznań. The Ministry of Infrastructure and Development is working on one more project related to energy efficiency.

New risk classification rules
One legislative change pertaining to PPP is the transposition into Polish law of decision 18/2004 of Eurostat, the EU’s statistics office. The decision concerns the inclusion of PPP contracts in public debt and was implemented into Poland’s legal system as of Jan. 1, 2013, by virtue of the law on the reduction of certain administrative burdens on the economy. As a result, item 18a of the PPP law now says that liabilities arising from PPP contracts are not classified as public debt when the private partner assumes the risks bound with construction, availability and demand, taking into account that the risks can be influenced by factors such as guarantees and funding from the public partner or allocation of assets after contracts expire. Previously, this issue was regulated by a directive and not a law. Item 18a has enabled the economy minister to start work on a ministerial directive containing a detailed description of the above kinds of risks and factors that should be taken into account when the risks are assessed. The directive has been submitted for inter-ministerial consultations and according to experts, it could dispel practical doubts caused by the application of Eurostat’s decision.

The first half of 2014 augurs well for public-private partnerships and the emerging PPP market this year, especially because the upcoming local elections are prompting local governments to act and kickstarting new infrastructure projects.

Tomasz Korczyński Advocate, Co-Head of the PPP practice in the Warsaw office of Dentons law firm
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