Powerhouse partnerships
With housing costs soaring, strikes crippling the healthcare system and deadlines to improve infrastructure looming, Poland has a lot on its plate. Many projects ought to have been started already, but languish in the planning or financing stages. In order to get things moving, some say, the only option is to embrace public-private partnership agreements.
The government seems to be exploring the idea more eagerly these days, and the Lord Mayor of London, John Stuttard, was in Warsaw in early July to discuss ways that Poland can benefit from the UK's experience with PPP solutions for social- and infrastructure-development programs. Poland's law on public-private partnerships was ratified in 1994 and yet the country has not implemented a single large-scale project under the law to date. Many critics blame the inefficacy of the law, which has undergone constant revisions and is currently awaiting ratification of its latest amendment.
However, experts in the public sector are acutely aware that Poland can't afford to tweak the bothersome bill any longer, particularly with Euro 2012 only a few years away. According to Roman Rewald, president of the Polish-American Chamber of Commerce, "completing all construction and infrastructure work in the proper time frame with regard to Euro 2012 is impossible without the implementation of PPP projects."
Edward Kozłowski, of consulting firm REAS, agrees that public-private partnerships provide a variety of benefits. "On the one hand, the public sector - represented by an agency of the local government - offers a tender for a particular service. On the other hand, the private investor provides not only investment capital, but reliable solutions, innovative construction technology and efficient financial and administrative management as well," he explains. "Risks are distributed across the board, according to the administrative capability of all involved parties."
Health of the State
New stadiums are not necessarily at the top of the list of concerns for the average Pole, who tends to be more interested in schools and hospitals. "Warsaw needs at least three new hospitals," says Alicja Żelichowska, director of the bureau of investor services at Warsaw's City Hall. "We are currently looking for a European benchmark and exploring potential partnerships with international consulting companies that would help us determine quality control factors, accounting procedures and the terms of operation and dissolution. In the meantime, we are involved in a pilot project that involves making use of public funds to provide private healthcare under the national healthcare program [NFZ]."
That private healthcare provider is Medicover. In mid-July, Medicover received a building permit for the first private hospital in Poland, to be located in the Miasteczko Wilanów section of Warsaw. General contractor Warbud and engineering firm Arup will begin construction on the site by the end of July. Upon completion in 2009, the hospital will have 16,000 sqm of area with 180 beds, which Medicover plans to expand to 270 in the future. The facility will house a number of specialized units, five operating rooms and a research center.
According to Agnieszka Szpara, Medicover's managing director in Poland, the healthcare provider intends to make the hospital open to a range of clients, including "customers of other health insurers or providers and potentially for NFZ patients as well." Szpara expects the Medicover hospital to reach its planned capacity within the first two years of operation.
Housing hopes
REAS's Kozłowski suggests that PPP solutions could also prove particularly useful in addressing the housing crunch in Poland's big cities. "The local government is not obligated to devote large portions of their annual budget for the construction of homes," he remarks. "Instead, the financial burden is absorbed by a private developer who, in turn, receives an annual sum from the government in the way of a 'rental fee' for usage of the developed property."
This partnership allows governments to spread the costs of such projects over time - typically from five to 30 years - and provides investors with a stable income for that period, in addition to the potential income drawn from commercial projects built on the site. The developer maintains ownership of the property until the expiration of the contract, at which point ownership is handed over to the local government. The financial institutions involved also benefit from the security of the contracts governing such transactions. According to Kozłowki, there were at least two such deals last year in Warsaw and Poznań.
Weighing all
contingencies
"Each case is different and must be considered on an individual basis, where the risks and benefits for each side are weighed individually and documented accordingly," remarks Jonathon Cripps, head of the project and infrastructure team at Eversheds, which prepared the Poland-Ukraine bid for Euro 2012.
"This is Poland's chance to put its mark on the world. All that is necessary is the political will to make PPP work." l
