Efficient and functional framework for major investments: Unlocking the huge potential of the Sarajevo Canton
The new Law on Public-Private Partnership of the Sarajevo Canton has created a functional and highly attractive framework for investment and cooperation between the private and public sectors. The law was adopted at the end of 2023 upon the proposal of the Minister of Economy of the Sarajevo Canton, Zlatko Mijatović.
The adoption of this law represents one of the key steps in creating a positive economic climate for stronger growth and development of the Sarajevo Canton, as well as the realization of major investments. To put things into context, one should look at the data from the European Expertise Centre for Public-Private Partnership (EPEC) for the year 2022, which confirms a significant increase in PPP in Europe.
The value of PPP contracts in the European market increased by 17 percent compared to 2021, reaching a staggering 9.8 billion euros! In terms of the number and values of projects in Europe, France and Turkey are leading, while other countries are approaching pre-pandemic figures.
Why is this law important?
For years, we had a legal solution in place that did not bring us any public-private partnerships. We had a law that was almost impossible to implement and which, instead of unlocking public-private partnership as a development option, practically hindered investment realization. Today, we have a more efficient, modern solution and a chance to open up processes in that direction.
Experts say that Public-Private Partnership can be one of the models for successful realization of public investments and to provide public services. Public-private partnerships are also considered an innovative method used by the public sector for contracts with the private sector, which brings its capital and skills to deliver the project on time and within the budgetary framework.
Public-private partnerships will:
- Bring greater efficiency in providing public goods/services to the population,
- Reduce pressure on budgetary funds,
- Overcome public deficit as a challenge in providing public goods/services,
- Share risks associated with a particular activity related to the provision of goods/services,
- Add new value to the community.
It is very important to emphasize that public-private partnership does not mean the sale or privatization of state property, but rather a joint investment through which the private partner gains the right to use resources for up to 30 years, while achieving joint profit and benefit. For example, the possibility of signing so-called equity partnerships, as a model in which the public partner enters the ownership structure of the private partner, has now been abolished, as it was assessed as highly risky and unpopular.
A deadline for concluding PPP contracts has now been prescribed. The biggest change compared to the old Law concerns the work, competencies, and composition of the PPP Commission. The model for forming this commission is now decisively prescribed, how it operates, and what it decides on. It will no longer be a governmental commission with a mandate, but ad hoc commissions will be formed by the municipal council, City Council, and the Government of the Sarajevo Canton in order to better respond to needs and potential projects.
Instead of the previous six sub-legal acts, it is now envisaged to adopt only two such acts. Better regulation of supervision over the execution of contracts and the implementation of this law has been introduced. The infringement provisions have covered a much wider range of possible contract violations. The process of project development and the content of the feasibility study are now more precisely prescribed and described. The resolution of complaints between contractual parties has been decisively defined.
For the first time, risks at certain project stages have been specifically prescribed, and it is precisely defined who provides financial resources for the implementation of the law. A new institute of external audit has been introduced, which is carried out every three years, as well as the selection of a consultant in the process of public-private contracting.
We believe all this will encourage both the administration and the private sector to embark on joint endeavors. We have numerous areas and potentials, especially at the municipal level, where this model can be successfully applied. Our task is to create a framework for business, to reduce burdens, and to open up opportunities. The adoption of this Law is one such measure, of course, we will not stop here and we will continue with the preparation of some other new solutions.