Public–Private Partnerships In Kazakhstan: Call For A Reset?

Since 1991, Kazakhstan has had to rely on the deteriorating infrastructure it inherited from the Soviet Union. As a result, nearly every piece of public infrastructure (such as roads and hospitals) in Kazakhstan requires a different degree of upgrading or expansion.

Kazakhstan authorities that traditionally spurred economic growth through expansive public spending have come to recognize that they cannot finance the necessary investments in public infrastructure from current budgets anymore and that a major part of future financing must flow from the private sector to meet the demands of the immense infrastructure financing gaps.

The need for the inflow of private capital is becoming ever more pressing because of the sharp decline in commodity prices and wide-ranging spillovers from Russia's recession, as well as the low demand from China that hurts Kazakhstan's export revenues.

As a result, faced with gloomy growth projections and shrinking budgets, the government of Kazakhstan seems finally to recognize that it has only one effective method to finance its growing infrastructure needs: public-private partnerships (PPPs).

PPPs as a financing mechanism, if properly used, can be a handy tool for the Kazakhstan government to not only attract private sector funds to infrastructure projects, but also to address corruption problems in public procurements and to provide a proper legal framework for the ongoing privatization of state-owned assets.

Kazakhstan, in particular, should tap the huge potential of PPPs participating in China's Belt and Road Initiative by promoting good PPP practices to ensure high quality at lower costs.

For instance, the light rail system project in Nur-Sultan city, which was not structured as a PPP with financing and investments coming from China, should have been implemented under the open tender PPP legal framework in the first place.

The failure to structure this project as a PPP from the outset is now causing this...