CONCESSIONS IN THE TRANSPORT SERVICES MARKET: FOREIGN EXPERIENCE AND UKRAINIAN PRACTICE - Scientific conference
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Рік заснування видання - 2014

CONCESSIONS IN THE TRANSPORT SERVICES MARKET: FOREIGN EXPERIENCE AND UKRAINIAN PRACTICE

22.01.2021 13:08

[Section 9. Logistics and transport]

Author: Laponoh Danyil Vitalievich, postgraduate student, Kharkiv National Automobile and Highway University


Infrastructure facilities that are strategically important for maintaining national security and the functioning of the economy and society are under state control. At the same time, government institutions are able to distribute the roles of consumer and producer representatives between different structures [1]. 

On the basis of the separation of buyer and supplier functions, so-called quasi markets are formed, which contributes to an increase in the quality of services provided [2].

The most widespread types of public-private partnerships in Western countries at present include contracts with private firms for the supply of goods and services, the responsibility for meeting the needs of which lies with the public sector, concessions, joint ventures, involving the share participation of private capital in state-owned enterprises. The optimum ratio of public and private capital participation in the realization of property rights is observed in concession projects.

Concessions are the transfer to the concessionaire of an object of state or public property for construction, modernization, operation, management and maintenance on contractual terms and conditions. The main advantage of concessions in transport infrastructure is considered to be the fact that it is an effective mechanism of management of state assets [3]. 

Using the mechanism of concession the state can attract not only funds of private investors, but also advanced management technologies, human and organizational resources of business, ensuring high quality of work [4].

Concessions contribute greatly to the spread of transport in developing countries. 

Table 1 shows official statistics on the implementation of concession projects. The leading positions are occupied by BOT, BTO and greenfield concessions.




BOT: Build, Operate and Transfer. The concession company builds and operates the infrastructure as a user during the concession period, at the end of which the facility is returned to the state. 

BTO: Build, Transfer and Operate. The concessionary company builds the infrastructure object and transfers it to the state ownership immediately after the completion of the construction phase. After the object is accepted by the state, it is transferred to the concession company, which does not have the right to own the object, in accordance with the concession agreement. 

BOO: Build, Own and Operate, or greenfield project. The concession company builds the infrastructure and operates it under the rights of ownership and use. The concession period is not fixed. 

Lease contract: an infrastructure facility is built by the state without the participation of the lessee, who, if national law allows, may invest in the facility. The lessee is responsible for its maintenance, receives a fee from the users and transfers part of it to the state (rent) in order to compensate it for the investment it has made.

Service contract: its main feature is that the concessionaire receives from the state for the management and maintenance of an already completed facility and does not make investments. In some cases, it is close to leasing [5-6].

BOT, BTO and greenfield concessions account for 79% of the total number of projects and 96% of all investments in this transportation industry. Joint ventures accounted for 10% of the projects totaling only $711 million. The remaining projects were management contracts that did not involve private business investment (8 projects, or 11% of the total). 

In the regional structure, traditional concessions are predominantly found in Latin America, greenfield projects in East Asia, and joint ventures in Brazil, Chile and China.

At the stage of formation of market relations, Ukraine, which is the owner of most of the objects of transport infrastructure, was not able to provide a normal reproduction process and adequate to the growing needs of the economy and society of the level of functioning of the transport complex. In developed countries, on average 4% of the budget falls on the transport industry, in some developing countries − up to 8%. In Ukraine this figure is only 2%.

In the conditions of shortage of funds for infrastructure development it is the mechanism of concession that can provide the most effective use of Ukraine's transit potential. Without attracting private sources of financing it is impossible to ensure the implementation of socially significant projects, the concentration of government agencies on administrative functions, improving the efficiency of projects, reducing government risks, attracting the best management personnel and efficient operation of state property.

Thus, in most countries, the limited financial, primarily investment, capabilities of the state and the existing management system do not allow the transport infrastructure to function at the level necessary for reproduction processes and meeting the growing needs of the economy and society. The most important condition for maintaining and developing this sector and improving the quality of its services is the search for and attraction of additional non-traditional sources of financing, primarily on a concession basis. Successful concession activity is possible only if there is a legal framework capable of ensuring equal partnership relations between the state and business, if necessary, of protecting public interests and ensuring transparency of the concessionaires' work. 

The economic potential of concessions in our country is quite high. Concession policy of Ukraine in the field of transport infrastructure reform should take into account the need to both modernize existing facilities and build new ones.

References:

1. European PPP Expertise Centre. EPEC – Library. Access mode: http://www.eib.org/epec/library/index.htm#Market_Updates

2. European PPP Expertise Centre. Review of the European PPP Market in 2018. Access mode: https://www.eib.org/attachments/epec/epec_market_update_ 2018_en.pdf

3. Gerrard, M. (2001). What are public-private partnerships, and how do they differ from privatizations. Finance & Development, 38(3): 45-51.

4. Grimsey, D., Lewis, M. (2002). Evaluating the Risks of Public Private Partnerships for Infrastructure Projects. International Journal of Project Management, 20: 107-118.

5. Kappeler, А. (2013). PPPs and their Financing in Europe: Recent Trends and EIB Involvement. European Investment Bank.

6. West Coast Infrastructure Exchange (WCX). Brochure. Access mode: http://westcoastx.com/about/brochure.html


________________

Scientific supervisor: Shevchenko Inna Yuriivna, Doctor in Economics, Associate Professor, Kharkiv National Automobile and Highway University 

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