Investors have shied away from Public Private Partnership (PPP) projects until now, due to contradicting provisions in the law, as the authorities seek private sector involvement for the construction of large energy and road projects.
A draft of a new PPP law was sent back to Parliament earlier in January after the Romanian president, Traian Basescu, said the bill contained some untransparent provisions that created unpredictability for investors.
“The new law has been the focus of recent debates with political stakes. However, we must not lose sight of the fact that Romania needs a functional PPP law to be able to sustain its economic development,” Nicolae Ursu, senior associate at law firm bpv Grigorescu Stefanica, told BR.
Ursu says the authorities should clarify the conditions in which investors can be unilaterally dismissed by the public partner. Another controversial provision is the re-awarding of the contract.
The senior associate says that investors can be dismissed only if they do not meet their obligations to the financier or the public authority, but this exceptional situation cannot be a reason for re-awarding the contract without observing the public procurement legislation.
The new PPP law is based on the French model and has been drawn up with assistance from the European Investment Bank (EIB), European Bank for Reconstruction and Development (EBRD) and World Bank (WB).
The European Commission, the executive arm of the EU, has closely monitored the drafting of the law, which also underwent amendments from business advocacy groups and chambers of commerce.
“A solid legal framework is of course only one precondition for PPPs. Another equally important aspect is the predictability and transparency of political decisions. Here we can still see room for improvement. Ministers and political directions and strategies change too frequently and too unexpectedly,” Arnulf Gressel, commercial attache at the Austrian Embassy in Bucharest, told BR.
“PPPs in infrastructure, energy or environmental technology require a stable and substantial political and legal environment for long-term. Looking at recent policies, for example renewable energy, Romania has appeared far from providing such prerequisites,” he added.
Investors opt for concessions
Romania has had a PPP law (no.178/2010) for over three years now, but has failed to attract any investors.
Ursu says the current law lacks the clear delimitation from the object regulated by the legislative act of public acquisitions, concessions and public work (government emergency ordinance no.34/2006).
“In simple terms, it is not clear to an investor which of the two regulations applies in the case of, for example, an infrastructure project commissioned by the public authorities. Secondly, it is not distinctly stipulated how the essential rights, such as the right of concession, are transmitted to the project company. Then, there is a stringent need to accurately define certain rights of the project financiers,” added Ursu.
He commented that these are the main reasons why two of the largest infrastructure projects, the Comarnic-Brasov motorway and the Bucharest south ring, were carried out under the provisions of public concessions.
A foreign consortium comprising France’s Vinci, Austria’s Strabag and Greece’s Aktor is set to start construction of the Comarnic-Brasov motorway this April. The road will cost EUR 1.8 billion and should be completed in three years.
Gressel said that aside from infrastructure, the PPP system could be an attractive option in the healthcare or environmental sectors. He added that PPPs are commonly used in waste collection and treatment, and municipal infrastructure in Austria.