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Issues Concerning the Implementation of PPP Healthcare and Social Infrastructure Projects Discussed at EEF Online Session

2 August 2022
Вопросы реализации проектов ГЧП в сфере здравоохранения и социальной инфраструктуры обсудили на онлайн-сессии ВЭФ

Proposals for optimizing support mechanisms were put forward by representatives of federal and regional authorities, financial institutions and investors.

As part of the lead-up to the Eastern Economic Forum, an online session was held on the Implementation of PPP Healthcare and Social Infrastructure Projects. The event was organized by the Far East and Arctic Development Corporation (FEDC), the Ministry for the Development of the Russian Far East and Arctic, the Primorye Territory and the Roscongress Foundation. During the session, representatives of federal and regional authorities, financial institutions and investors discussed the existing support for the construction of social infrastructure, and proposed mechanisms for improving the effectiveness of financial instruments. The session was moderated by Alexey Tokar, Executive Director for PPP Projects at FEDC.

The session was opened by Anatoly Bobrakov, Deputy Minister of the Russian Federation for the Development of the Far East and the Arctic. He noted that the relatively new mechanism of the Far Eastern Concession was already being viewed by the market as an effective tool for supporting investors.

“Our goal is to fast-track the creation of infrastructure. To that end, the Ministry for the Development of the Russian Far East and Arctic devised the Far Eastern Concession, to attract private finance to regions in the Far Eastern Federal District and pool the efforts of banks, regional and federal authorities in the building of infrastructure. The mechanism is already working – to date, 8 pilot projects with total investments of ₽12.3 billion have been approved and are being implemented. At the same time, aspects that need addressing are being identified – including the duration of concession agreements, the optimized drafting of design documentation and the creation of project selection criteria,” he said.

Pavel Puzanov, Deputy Chairman of the Amur Region Government, noted that unlike in large, complex projects, an implementation period of 10 years is too long for small projects: “For some social projects, such as the creation of a paediatric clinic or a school, a period of at least 10 years severely restricts decision-making within the framework of the Far Eastern Concession. Where a project is structured over a long period of up to 10 years, the budget efficiency is cancelled out by the financial terms and the interest rate. In this case, the costs may exceed the project’s price tag. For such individual social projects, we’ve estimated that the optimum period, taking inflation into account, is 57 years,” Pavel Puzanov said. “And the second issue is the interest rate subsidy. For individual social projects of particular importance, there should be a subsidy mechanism similar to infrastructure bonds, as well as loans not only for business but also for concession holders. That incentivizes work.”

Alexander Levintal, Managing Director for the Far East at DOM.RF, said that the concession mechanism combined well with DOM.RF’s tools for the implementation of projects involving the comprehensive development of areas: “We finance projects from the “infrastructure menu” drawn up by the RF Government on the President’s orders. The concession mechanism was brought in last year, and a pilot project has already been carried out in the Sakhalin Region. In addition, under the Far Eastern Quarter programme, engineering infrastructure is being built, and we’re helping in terms of social facilities with the use of infrastructure bonds, and are looking at opportunities to use the Far Eastern Concession.” He also stressed that the cost of borrowing is also important – despite the growth of key rates, DOM.RF is making funds available on the same terms as before – 4% per annum.

The issue of the requirements applicable to a future facility was raised by Vladimir Demidyuk, CEO at VTB Infrastructure Holding: “Often, the concession projects that we’re discussing as investors don’t have clear characteristics – there’s no input data for a financial assessment. This is especially true for healthcare facilities. We’re proposing that a mechanism be approved under which, before embarking on the search for an investor, the region must have drawn up a planning design with a description of the key requirements for the facility, the required IT solutions and their link to specific land plots, and setting out figures on the maximum cost.”

Anna Baginskaya, Head of the PPP Center at Sberbank, also noted that the formalization of an investor search request from a region was key, as it affects both the duration and the quality of development of a project. She also stressed the need to draft clear rules on the selection of projects for financing under the Far Eastern Concession programme.

Valery Eremin, CEO at Sistema Concessions (Sistema Holding Company) also noted the importance of defining the quota rules: “I believe that regional quotas to be the fairest way of distributing funds. Each region in the Far East has unique features and its own economy, and I don’t think it’s fair to make a competition for projects between all the regions in the Far Eastern Federal District. A quota should be assigned to each region separately, and the entity itself can then select projects in accordance with the criteria. Likewise, in the Arctic, I wouldn’t want to be limited to the Arctic Circle, but to have the opportunity to create infrastructure a little further south.”

The 7th Eastern Economic Forum will take place on 5–8 September 2022 in Vladivostok at the Far Eastern Federal University (FEFU) campus. It is organized by the Roscongress Foundation. Media representatives can register for EEF 2022 on the official website.

For EEF 2022 updates and news, go to the official Forum social network pages 


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