On 29 June, on the initiative of the Russian Ministry of Finance and the French Ministry of the Economy and Finance, and supported by VEB.RF and the International Monetary Fund, The Liability Side of PPP and the COVID-19 virtual workshop was held. The workshop was moderated by Artem Volodkin, Managing Director of the National PPP Centre.
Participants discussed the importance of evaluating financial risks in infrastructure projects, including those delivered on PPP principles, in the context of the COVID-19 pandemic, as well as the necessity to develop a management system for the contingent liabilities of public partners.
An opening address was given by Vladimir Tsibanov, Director of the Russian Ministry of Finance’s Department of Budgetary Policy and Strategic Planning, and Ronan Venetz, Director of the French Ministry of the Economy and Finance’s Department of Bilateral Relations. They stressed the importance of risk management in the sphere of PPP. “The pandemic may become a good stress test for PPP-project risk-control systems, which will bring to light the best practices for their evaluation and minimisation, to provide budgetary sustainability,” stressed Tsibanov. France already has practical models to evaluate such risks, aside from which, PPP projects throughout the European Union undergo strict risk and liability assessments.
Isabel Rial, an International Monetary Fund representative, and Clive Harris of the World Bank, spoke of the systematic evaluation of financial risks, including contingent liabilities, in PPP projects. Together with the IMF, the World Bank has developed a suitable model (PFRAM), which can be used to evaluate the effect of contingent liabilities accepted by public PPP-project partners on budgetary sustainability. A separate platform, created by international development banks (SOURCE), contains various tools for working with infrastructure projects, including the possibility of evaluating their risks. Christophe Dossarps, General Director of the Sustainable Infrastructure Foundation, spoke about the operating procedure of the platform.
Evgenii Dombrovsky, Deputy Director of the Russian Ministry of Finance’s Department of Budgetary Policy and Strategic Planning, and Maxim Merkulov, Managing Director of VEB.RF and Member of the Board of the National PPP Centre, used their speeches to highlight the situation on the Russian PPP market, and the prospects of creating an integrated management system for contingent liabilities in Russia. According to data from the ROSINFRA platform for the support of infrastructure projects, 3,425 PPP projects are realised in Russia for $60 billion, of which 2,684 projects are within the framework of concession agreements, and direct budgetary liabilities for them are valued at $10 billion. Maxim Merkulov underlined that the situation with COVID-19 demands that the Government pays close attention to budgetary stability and risk monitoring.
According to Evgenii Dombrovsky, the Ministry’s chief goals in this regard are: regular evaluation of direct and contingent government liabilities; development of a methodological framework for evaluating contingent liabilities in PPP projects; assessment of risks and liabilities under agreements; and consolidation of information on direct and contingent liabilities.
An important element in identifying and evaluating liabilities is their record in state financial statistics. The particularities of reporting budget liabilities in PPP projects, which are applied to PPP agreements in the European Union according to Eurostat regulations, were disclosed by Luca Ascoli, head of Unit for EDP statistic in Eurostat. He stressed that for statistics, it is the “economic,” rather than the legal, owner of an asset, accounting for risk sharing between parties, which is important.
With a view to informing on international approaches to evaluation, forecast and management of contingent liabilities, VEB.RF and the National PPP Centre, supported by the Russian Ministry of Finance, have prepared a research paper, “Management of Contingent Budgetary Liabilities in PPP Projects.”