General Legal Aspects Of Public Private Partnership In Kazakhstan

Types of PPP in Kazakhstan

There are two types of PPP in Kazakhstan.

Institutional PPP - joint participation of public and private partners in the equity of new project company.

Contractual PPP can be implemented through the following forms:

Trust management Public property leasing/rent Leasing Concessions Contracts on technology development, production of prototype models, trial and job-lot production contracts. Life cycle contract Service contract Industry-specific laws and codes may determine other types of PPP not included in the Law «On public private partnership».

The PPP can be performed at the republican and local level.

PPP projects differ according to organization methods, by the result of which PPP Agreements are concluded. There are two methods:

tender on selection of private partner direct negotiations (the so-called private initiative) Level of guarantees and rights provided to investors by the public partner vary depending on the level of the project (republican or local) and specifics of project (social importance; special significance).

Rights of the private partner in relation to PPP object

Scope of rights that private partner will have in relation to PPP object depends on 2 factors: (1) limitations on object dispose under the law; (2) payments received by private partner from the state.

Limitations on object disposal: First, we shall define objects that generally cannot be transferred under concession. Decree of the President as of March 5, 2007 № 294 establishes a list of objects that cannot be transferred for concession1. In the development of recently adopted Law «On Public Private Partnership», the same list of objects will be adopted. However, such list will include objects that are not subject to the PPP projects in general, and not only for the concession.

Pledge under the concession project: object of concession cannot be pledged or be subject of alienation. Rights of the concessionaire under the concession agreement can be a subject of pledge, but only with the consent of the grantor.

Pledge under the asset management project: pledge is allowed only with the prior written consent of the asset management trustor.

Pledge under other types of PPP projects: the Law «On public private partnership» does not stipulate on pledge restriction, thus, leaving it to the discretion of the parties in PPP agreement. However, if private partner receives CIC (payments from state budget for compensation of investment costs), pledge of the object is possible only with the consent of public partner.

Moreover, some objects' disposal is limited by the Civil Code of the Republic of Kazakhstan due to the "strategic" significance of the objects. Article 193-1 of the Civil Code gives a definition of "strategic object" as the property, which has a social-economic significance for the sustainable development of the Kazakh society, whose ownership and (or) use and (or) control shall influence the state of the national security of the Republic of Kazakhstan2. Encumbrance on strategic objects or their alienation is possible on the basis of the decision of the Government of the Republic of Kazakhstan on...

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