Creating and sustaining economic opportunity in Ukraine

What is the Public–Private Partnerships Development Program in Ukraine?

The Public–Private Partnerships Development Program (P3DP) is a five-year initiative to help Ukraine’s national and municipal governments engage the private sector in improving the country’s infrastructure and public services through effective public–private partnerships (PPP). When implemented, successful PPPs can directly benefit both individuals and communities, supporting greater confidence in government’s ability to deliver needed services to its citizens, and enhance a country’s economic competiveness. P3DP is funded by the U.S. Agency for International Development and led by FHI 360, with additional field expertise provided by the William Davidson Institute of the University of Michigan.

What are the objectives of P3DP?

P3DP has five key objectives: Improve the PPP legal and policy frameworks to create a viable environment for long-term contracts; establish a PPP unit within the Ministry of Economic Development and Trade of Ukraine to ensure continuity of legal and policy improvements; develop the capacity of individuals and institutions to implement and sustain PPPs; implement a series of pilot PPPs across the country in key sectors; and integrate environmentally conscious practices throughout each pilot.

What progress have you made so far?

P3DP helped to establish a standing PPP unit within the Ministry of Economic Development and Trade. This was an important step toward increasing national and municipal capacity to partner with the private sector. FHI 360 has worked closely with this unit to determine the most viable and attractive sectors in which to develop pilot partnerships.

P3DP has also held trainings, practical workshops, study tours, large conferences and other informational opportunities on PPPs to build interest and trust in the process of developing and sustaining public–private partnerships. By laying this groundwork, Ukraine is now ripe, from a legal and policy standpoint, for PPP opportunities. Even in these times of political uncertainty, opportunities for PPPs exist. When stability returns, the use of PPPs is expected to grow dramatically.

What is a PPP? How does a PPP differ from other types of partnerships or alliances?

A public–private partnership is a long-term contractual relationship (often 5–15 years in duration) between a government entity and a private-sector entity. A PPP obligates the private partner to provide what would otherwise be a public service (such as electricity, water, solid waste management, health care or education), and the public partner must ensure payment for the duration of the partnership. PPPs are not to be confused with global development alliances or corporate social responsibility initiatives of the private sector. Instead, they are business relationships. To succeed, PPPs must be based on a business model in which service delivery is improved for the benefit of the people and there is profitability for the private partner.

Can you describe an example?

A helpful example is the proposed urban park renewal project in Simferopol, Ukraine. In this case, the city does not have the money to maintain a huge park in the center of town. Municipal leaders want to engage a private-sector partner to develop restaurants, cafes and rides in the park, which would allow the private entity to earn money. The private entity would be obligated to pay taxes to the city and improve the green areas, making the space more attractive and useful. It would also create new jobs, which would further revitalize the area.

The potential public benefits of this project are clear. If successful, the new revenue to the city could be reallocated to other parks and recreation needs. What would make this project attractive to a private company is the potential profit that could result from having the exclusive right to operate the park for the duration of the partnership.

Which of the public–private partnership pilots are likely to be most transformative?

Only sectors with both significant public demand and private interest were selected for pilots. These include solid waste management, urban parking, health care facilities and services, education facilities and city park management. Success in any of these areas could lead to replication and increased private-sector participation in the future.

Solid waste management is a daily concern for people in Ukraine and has sparked a lot of public interest. However, the proposed PPPs for health hold the greatest potential for systemic transformation. Currently, Ukrainians are entitled to free health care. In reality, the quality, access and consistency of health services and facilities are unequal. If early pilots to address these disparities through partnerships with private entities are successful, they could transform health service delivery in critical ways that improve quality of life and economic opportunity.

Why is private-sector involvement so important in development?

National and city budgets are getting tighter as demand for funds to improve the quality of public services and rehabilitate or build new infrastructure increases. Availability of donor funds is also diminishing. For this reason, PPPs ought to be considered an integral part of any country’s development strategy. Creating mechanisms that encourage PPPs helps ensure that investment opportunities are identified and that the private sector participates in the process of improving infrastructure and service delivery in the long term, which may extend beyond the life of any single government development initiative.

How is P3DP unique in Ukraine and the larger international development community?

At a time when the level of foreign direct investment in Ukraine remains extremely low, P3DP is demonstrating that viable economic partnership is possible with the right legal and regulatory framework. The project is executing a broad spectrum of activities, all with the goal of improving the delivery of public services. Successful implementation builds the confidence of investors, showing them that it is possible to overcome historical challenges to doing business in Ukraine. It also paves the way for future investments as the private sector sees the country as a viable option for partnerships. Importantly, if public–private partnerships can succeed in the challenging Ukrainian environment, the case is made for using this strategy in development efforts throughout the world.

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