Oleksiy Shostak, the mayor of Malyn, a city located in north central Ukraine, smiled with satisfaction as he watched a group of third graders leaving Malyn School #1. This past winter, three schools in the city switched from natural gas to biofuel heating.
Shostak glanced at the boiler house, which provides heat for the schools’ 1,700 students. “I think the city will have no trouble meeting the new restrictions on imported natural gas,” he said. “This will also allow us to cut municipal heating costs.”
In 2012, Russian natural gas was increasing in price and supply was becoming vulnerable to political disagreements. That’s when the Zhytomyr Regional Council turned to the USAID Public-Private Partnership Development Program for help to convert municipal boiler houses from imported natural gas to locally produced biofuel. The council needed help to attract funds and expertise from the private sector.
Switching to locally available biofuel, such as wood or straw pellets, had the potential to reduce expenses while ensuring a reliable supply of heating fuel. USAID selected Malyn, which is located in Zhytomyr oblast, for a pilot project to test a newly developed business model known as a public-private partnership (PPP), which leverages the expertise and resources of the private sector.
“Zhytomyr oblast has a wealth of wood and agricultural byproducts, and it is shame to waste it by using natural gas for heating,” said Georgiy Geletukha, head of the Bioenergy Association of Ukraine. “With these resources, it shouldn’t take Ukraine long to substitute up to 18 percent of its natural gas use with local biofuel.”
PPP and Infrastructure Expert Center (PIEC) held a successful promotional event on June 4 when Serhiy Nadal, Mayor of the western city of Ternopil, gave a talk about potential projects for the city. Mayor Nadal is familiar with PPPs as a mechanism for attracting private investment for public service projects and took the opportunity to discuss them with approximately 30 potential investors. He focused the need for private sector participation in healthcare, education, transportation, communal services, and other sectors. Energy efficiency and environmental protection were also highlighted. He was joined by members of the Ternopil City Council.
PIEC was established in May 2014 to serve as a platform for promoting PPPs. The meeting with Ternopil city officials was the first held by PIEC for showcasing opportunities in Ukrainian municipalities. PIEC plans to host other mayors of progressive cities to address issues and help prioritize reform and advocacy efforts.
The Cabinet of Ministers of Ukraine approved a new policy on Public-Private Partnerships (PPPs) on August 14, 2013, sending a clear message that the Government is continuing serious efforts to improve the quality of infrastructure and public services by engaging the private sector. The adoption of the Concept of Public-Private Partnership Development in Ukraine for 2012 – 2017 is designed to unify efforts and guide actions needed to create new business opportunities to improve services in health, education, energy, solid waste management and other key sectors. This is the first major policy on PPPs adopted since the 2010 framework law, clearly supporting the Government of Ukraine’s economic reform program.
This new policy framework lays the groundwork for further PPP development in Ukraine by identifying current obstacles and defining the government’s role in addressing them, including:
Strengthening legislation and regulation affecting PPPs;
Improving the overall business climate;
Building institutional capacity; and
Developing a comprehensive strategy and implementation plan to accelerate the use of PPPs throughout the country.
The Ministry of Economic Development and Trade (MOEDT) received extensive assistance from the Public-Private Partnership Development Program (P3DP), funded by the United States Agency for International Development, during their work to develop the Concept. In addition to providing examples and advice based on international best practices, P3DP helped facilitate a participatory approach that engaged representatives of key stakeholder groups through seminars and roundtable discussions to ensure viewpoints of national and municipal governments, international financial institutions, NGOs, academia and the private sector were considered.
Details of government processes and institutional support for PPPs will be addressed in the PPP Strategy and Implementation Plan that is expected to be completed later this year. In the meantime, through formal adoption of this Concept, the Government of Ukraine has sent a positive signal to municipalities, oblasts and the private sector that it is actively working to create the environment needed for PPPs to become a viable tool for municipalities and agencies striving to improve services available to all Ukrainian citizens.
The P3DP team met with First Deputy Minister Mr. Maksiuta to discuss next steps of joint cooperation.
On March 14, President Yanukovych by special Decree approved Ukraine’s “National Action Plan for 2013.” The plan assigns responsibilities, outlines specific actions, and establishes target dates and indicators related to implementation of the country’s Economic Reform Program for 2010-2014.
Of special note, as a result of extensive efforts of P3DP, a 5-year USAID project being implemented by FHI360, the Plan includes specific actions to promote and support the use of public-private partnerships in improvement of infrastructure and delivery of public services. Specific responsibilities assigned to the Ministry of Economic Development and Trade (MOEDT) include facilitating the adoption of the “PPP Concept for 2013-2018″ by the Cabinet of Ministers of Ukraine by June 2013 and adoption of the “PPP Strategy and Implementation Plan” by the Verkhovna Rada of Ukraine by December 2013. Both of these documents were a result of cooperative efforts of the MOEDT and P3DP.
In addition to providing regular consultations and advisory memos, P3DP fielded a team of Ukrainian experts to draft the PPP Concept and accompanying Strategy and Implementation Plan based on international best practices. The draft Concept and general approach was presented during a round table to allow multiple stakeholders from the Government of Ukraine, municipalities, private business and others to provide input. Their viewpoints are reflected in the final Concept which framed drafting of the PPP Strategy and Action Plan. The documents establish basic tenets to guide PPP development in Ukraine, outline principles on which partnership relations between the state and private sector will be based, and provide directions to improve PPP institutional support and the legislative environment.
On March 15, just one day after the President’s approval of the National Action Plan for 2013, the P3DP team met with the MOEDT leadership and PPP unit representatives to agree on a set of specific actions to accelerate achievement of their PPP related responsibilities. Anatolii Maksiuta, First Deputy Minister of MOEDT, stated “We need to continue the close cooperation between MOEDT and P3DP in ensuring not just the improvement of the PPP environment, but supporting municipalities to create and implement actual PPP projects”. It was agreed to create a joint workplan prior to the end of March. The high level of collaboration between P3DP and the MOEDT is becoming even more rigorous as a result of the President’s approval of the Action Plan for 2013.