Private-Public Partnerships key to Georgia’s infrastructure development

Georgia has a bright future with endless possibilities ahead for infrastructure development but the cost of such projects can hinder development, which is why Private-Public Partnerships (PPPs) are so essential to development, says a top official from a global infrastructure development firm AECOM.

PPPs were in focus at an infrastructure development conference ahead of the European Bank for Reconstruction and Development (EBRD) 24th Annual Meeting in Tbilisi today.

The first panel discussion of the day was focused on a private-public partnership. Photo by Nino Alavidze/Agenda.ge 

Five international experts, including Ed Plewa AECOM Managing Director of Transportation for Turkey, Russia and CIS, led a panel discussion in front of about 100 global government and business officials at Parliament Building in central Tbilisi about the importance of PPPs in the modern world.

Why PPPs are better?

"First of all Georgia has got a lot of potential for development, particularly infrastructure development, and PPP is now another way of funding some of these projects, and Georgia’s beginning to think about PPP,” Plewa told Agenda.ge after the forum.

Ed Plewa, AECOM Managing Director of Transportation for Turkey, Russia and CIS is discussing the benefits of PPPs with Agenda.ge journalist Genevieve Helliwell. Photo by Nino Alavidze/Agenda.ge 

"Not all projects are right but some can be and we will participate in those that can be and ones that are competitive projects.”

A PPP is a government service or private business venture which is funded and operated through a partnership of government and one or more private sector companies.

AECOM, an American-founded company, pre-qualified for Georgia’s Anaklia Port development project but the company did not submit a tender. Plewa said this decision was not reflective of the current environment in Georgia and the wider region but more in line with their chances of winning.

Yes the current climate can have an impact on investors wanting to invest here. Particularly if the currency is falling a little bit then it will affect investments but it depends on how much of that can be covered in the contract. Sometimes there can be some relief given,” he said.

"For Georgia there is potential to bring your infrastructure up to a world-class standard and that will take a while but it can be done. And at the same time I think there needs to be a certain amount of civic effort as well, trying to make the place look really great. The tourism potential of Georgia needs to be developed and it will be very attractive but you need to ‘beautify’ a lot of the place.”

The future of PPPs

Globally PPPs were becoming increasingly more important, said forum panellist Natasha Khanjenkova, EBRD’s Managing Director for Turkey and Central Asia. She noted a "very significant” gap was increasing between the cost of infrastructure projects and the reality of what companies could afford to pay for projects, "so we need the public sector to get involved to cover the gap that continues to grow”.

For PPPs to be successful they needed to be supported by political will, have a credible underlying source of funding, have a "strikingly delicate balance” between risks and rewards and have robust regulatory framework that support transparency and objectiveness, she said.

Natasha Khanjenkova, EBRD’s Managing Director for Turkey and Central Asia: "I think what Georgia has been doing has seen a lot of success in improving its investment climate." Photo by Nino Alavidze/Agenda.ge 

For Georgia’s sake, Khanjenkova said the country had made significant progress in recent years.

"I think what Georgia has been doing has seen a lot of success in improving its investment climate, improving transparency, and institutional capacity – I think that’s an important step. [There is] definitely huge potential here and one of the points for us having our Annual Meeting here is a demonstration of the very strong confidence we have in Georgia”.

Global trends

Today’s discussion was opened by EBRD President Sir Suma Chakrabarti, who said infrastructure requirements were "huge” and likely to rise to around $500 billion USD a year just in the 36 countries where the EBRD worked.

EBRD President Sir Suma Chakrabarti at the first panel descussion opening. Photo by Genevieve Helliwell/Agenda.ge 

In his opening remarks he said there could be no successful transition to market economies and to sustained economic growth without effective infrastructure.

"But, this huge agenda simply cannot be achieved without the strong participation of the private sector,” he said, noting that the EBRD and other Multilateral Development Banks had pledged to scale up substantially their role in financing for development.

"The EBRD in particular will use its experience in our countries of operation on leveraging private finance for infrastructure,” he said, referring specifically to the Bank’s new project preparation facility which would strengthen its role in the infrastructure sector.

The two-day EBRD Annual Meeting will officially launch tomorrow, May 14 in Georgia’s capital Tbilisi. It is the first time this event has been held in the Caucasus region.