2017/2018 Review: FYR MACEDONIA

Overall rating

70%
0 Bankability (%)
 Red Flags

None

1. Compliance
71%
2. Effectiveness
70%

Compliance / Effectiveness

≥ 90% Very high
70 - 89% High
50 - 69% Medium
30 - 49% Low

< 30% Very low

1.

Concession/PPP Legislative Framework Assessment (LFA)

Concession/PPP Legal Framework
74%
Selection of a Project
53%
Selection of the Private Party
84%
Project Agreement
71%
Security and support issues
70%

2.

Legal Indicators Survey (LIS)
on Effectiveness

Policy Framework
80%
Institutional framework
60%
Award Statistics
73%
PPP Business Environment
67%

Summary Report

FYR MACEDONIA

Overview

The Law on Concessions and Public Private Partnerships is the legal instrument regulating non-concession PPPs and concession PPPs in FYR Macedonia (the “Law“). The Law has been amended several times; the last amendment was in 2016. The Law on Public Procurement applies to PPPs/concessions to a certain extent.

The policy framework shows that there is a National Strategy of the Public Procurement Bureau of the Former Yugoslav Republic of Macedonia (2014-2018) that covers the development of PPPs for public services infrastructure. There are no social or political obstacles preventing the overall development of PPPs.

The Law provides for a variety/flexibility of BOT models/concessions, non-concession PPPs/PFIs, an economic evaluation/pre-feasibility study of projects and competitive selection of the private party. There are clear definitions prescribed for the application of the Law. The private partner/concessionaire can be a domestic or foreign legal or natural person or a consortium.

While there is a clear distinction between the public authorities involved, in practice such division is not efficiently implemented.

The Law is silent regarding IPPPs and unsolicited proposals. Sectors for which a PPP/concession may be granted should be more clearly identified and clear provisions should be provided for: the stability of contract provisions, permitting requirements, use of international arbitration, direct agreements and step-in rights. There are, however, provisions on contract transfer.

Unilateral termination is possible for both parties, but the Law prescribes a list of events where the public partner may unilaterally cancel the contract in cases where the private partner seriously violates the obligations. With respect to termination compensation, the Project Agreement Content Bylaw (the “PACB”) indicates that the contract should provide for a contractual penalty.

Securities and Government Support

Although it is not expressly provided for by the Law, it seems to be possible for the public authority to enter into side agreements governed by a foreign law.

The matter of security interest, i.e. security over concessionaire’s rights is regulated and permitted by the PACB.

Although not specifically regulated by the Law, tariffs are adjusted to match cost increases. FYR Macedonia is a signatory to the New York Convention on the recognition of enforcement of foreign arbitral awards (1958).

Templates

A set of well-developed model documents, tender forms and contracts are available. The contracts are to quite good extent standard.

Institutional Framework

The institutional framework shows that there is a Public Private Partnership Council that shall have an advisory role in regards to PPPs. It also promotes PPPs, proposes projects and initiates amendments to the legal instruments.

Experience

Award statistics show that in the period from 2012 – 2016 FYR Macedonia had 25 projects in various sectors including transport, water and waste management, social and health, and public lighting. The highest project value was for the Skopje tram project, which was a PPP in the transport sector and had an approx. value of € 229.64 million. In general, more projects are awarded as PPPs than as concessions. The last concession project was the waste disposal site at the landfill Drisla-Skopje in 2013. The capital/bond market is not involved in PPPs/concessions. Most of the PPPs/concessions have been financed by a foreign bank.

Outlook

Although there has been an increase in PPP projects and concessions, the main challenge is to harmonise all the authorities that are responsible for PPP/concessions with a view to achieving a uniform approach. Tackling that problem should positively reflect on the effectiveness of the whole system.

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