STANDARD TWINNING LIGHT PROJECT FICHE
1. Basic Information
1.1 Programme: IPA 2007
1.2 Twinning Number: HR/2007/IB/FI/06TL
1.3 Title: Strengthening the administrative capacity of Ministry of Finance of the Republic of Croatia in relation to the implementation of the new concession and public-private partnership legislation
1.4 Sector: Public Finance
1.5 Beneficiary country: Republic of Croatia
2. Objectives
2.1 Overall Objective(s):
To effectively implement and enforce a coherent and transparent concessions and PPP system in the Republic of Croatia based on the new concessions and PPP legislation, new institutional setting and best EU practice.
2.2 Project purpose:
To develop methodological tools for fostering the implementation of the new Concessions and Public-Private Partnership legislation; to enhance the administrative capacity of the Ministry of Finance and other relevant stakeholders for implementation of the new concessions and public-private partnership legal framework in Croatia through development of a comprehensive training program.
2.3 Contribution to Accession Partnership/ Stabilisation and Association Agreement/
National Programme for Integration of the Republic of Croatia into the EU (NPIEU)
Croatia 2008 Progress Report states the following with regard to Chapter 5: ‘’Good progress can be reported in this chapter in particular in terms of establishing the necessary institutional set-up capable of managing the public procurement policy and in terms of a adoption of a comprehensive strategy. However, further legislative alignment is needed and administrative capacity remains to be improved at all levels of the procurement system.'' The results of this TWL project will have a direct impact on the further development of administrative capacity of Ministry of Finance in relation to the implementation of new concessions and PPP legislation, as foreseen by Component 2 activities.
National Programme for the Integration of the Republic of Croatia into the European Union - 2008, indicates in Chapter 3.5.2. the following: ‘’Mid-term priorities, and the activities that they entail, involve continued systematic improvement of the concessions system in the Republic of Croatia, primarily relating to activities in accordance with the provisions of the new Concessions Act, and continued monitoring of its application in terms of quality. There are also simultaneous plans in place for the training of persons bound to adhere to the provisions of this Act, and for the coordination of activities whose aim is to achieve the efficient application of its provisions. For that purpose, the Ministry of Finance, as the authority competent for the drafting and implementation of the Act in terms of control, plans to improve and strengthen the administrative capacity of the organizational unit in charge of concessions within the Ministry of Finance.’’ . This TWL project will have a direct impact on the development of administrative capacity of Ministry of Finance, primarily the organizational unit in charge of concessions, as defined by both project activities.
Accession Partnership (Proposal for a Council Decision on the principles, priorities and conditions contained in the Accession Partnership with Croatia and repealing Decision 2006/145/EC of 6 November 2007), with regard to the ability to assume the obligations of membership in the Chapter 5 (Public Procurement), states that it is needed to: ''Adopt and implement a comprehensive strategy, with time schedules and milestones for legislative alignment and capacity building, in all areas of public procurement (public contracts, concessions, public-private partnerships) as well as for review procedures and bodies.'', in relation to which this Project is proposed.
Pre-accession Economic Program 2008-2010 states the following; ‘’…the objective of the Government of the Republic of Croatia is to achieve identification and realization of all PPP projects, in the context of the overall state investment and development strategy, among other things, through the improvement of co-operation between the PPP Sector and the Ministry of Finance. The new legal framework would regulate the basic concepts, competent bodies and general principles concerning concessions and PPP. Improvement of the legal framework for PPP also implies the role of co-ordination as a part of the government activities in the field of PPP, as well as the PPP projects assessment procedure, in accordance with the adopted development strategies and priorities at the national, regional and local level, under the condition of minimizing fiscal risks in co-operation with the Ministry of Finance.’’. The TWL project components foresee the activities that directly correlate with Government objectives in relation to the implementation of PPP and concession based projects. The outputs of this TWL will result in advanced Ministry o Finance capacity to effectively undertake PPP project assessment procedures with the aim of minimizing related fiscal risks and safeguarding fiscal sustainability.
Strategy for the development of the Public Procurement System and the related Action Plan, adopted by the Government of the Republic of Croatia, envisages strategic measures and activities aimed at setting up a legislative and institutional framework for concessions and PPP. These include activities envisaged by these TWL Project components, creating an interconnected mechanism for achieving the set objectives. Direct fulfilment of Strategy Action plan measures are also foreseen by this TWL project, primarily the following:
· Action plan point 8 – Recruitment of 4 employees for the Concessions Department with the aim of strengthening the administrative capacity. In this regard please note that the new employees will have to undertake continuous wide scope of education in the field of concessions and PPP which is a measure that will benefit form this TWL project, primarily Component 2 activities and also spinoff effects of Component 1 activities.
· Action plan point 12 – Preparation and implementation of education and training programmes in the field of concessions and fiscal aspects of PPP. With relation to this measure Ministry of Finance proposed TWL Component 3 activity 2.3.
· Action plan point 32 – Guide for concessions. The development of the Guide for concessions is foreseen by 1. activity 1.4.
It should be taken into consideration that the Strategy for the development of the Public Procurement system in the Republic of Croatia lays down a very wide and complex scope of measures and plans, especially in relation to concessions and PPP legislation that requires a high level of administrative capacity and expertise of Ministry of Finance staff. In that regard Ministry of Finance proposes these TWL components in such a manner so that the results of those have a direct positive impact on the above said future institutional requirements.
3. Description
3.1 Background and justification:
In order to further promote the opportunities and possibilities which present themselves through concession and PPP-based investments made by economic operators, resulting in increased budget revenues and multiplicative positive economic effects, the concessions system in the Republic of Croatia is deemed to be strengthened. For this purpose the Government of the Republic of Croatia has prepared a new Concessions Act (OJ 125/08) that introduces the rules and principles that comply with all the provisions of the acquis communautaire which regulate works concessions (Directive 18/2004/EC).
The Government of the Republic of Croatia has adopted a Strategy for the development of the Public Procurement System in the Republic of Croatia. This Strategy arises from and relies on the framework strategic document of the Government of the Republic of Croatia “Strategic Development Framework 2006 – 2013”, and other documents of the Government of the Republic of Croatia which address the public procurement system from different frames of reference, such as the “National Programme for the Accession of the Republic of Croatia into the European Union”, the “Pre-accession Economic Programme 2007 – 2009”, the “National Anti-Corruption Programme 2006 – 2008” and recently adopted “Anti-corruption Strategy (5 June 2008)”.
The goal of the single public procurement system is co-ordinated implementation of procedures and the award of public procurement contracts and concessions transparently, providing equal treatment to all those participating in the public procurement system, encouraging competition and sustainable economic development, promoting the use of public-private partnerships, and simultaneously providing uniform legal protection.
The Strategy envisaged that the following tasks in the field of concessions are to be fulfilled:
– Adoption and start of implementation of the Concessions Act;
– Drafting of the Strategy for harmonisation of the sector-regulating laws with the umbrella Concessions Act;
– Amendments to and harmonisation of the sector laws regulating individual types of concessions with the umbrella Concessions Act;
– Development of institutional framework and strengthening administrative capacity:
1. Conducting a call for applications for the civil service aimed at strengthening administrative capacity of the Concessions Department;
2. Education of the persons obliged to adhere to the Concessions Act and the private sector.
There are two separate pieces of legislation that regulate public procurement and concessions in the Republic of Croatia, namely the Public Procurement Act and Concessions Act. The key actors in the field of concessions and public procurement in Croatia are as follows:
- Department for Concessions, within the Economic Affairs Directorate of the Ministry of Finance,
- The Directorate for the Public Procurement System within the Ministry of Economy, Labour and Entrepreneurship and
- Agency for public-private partnerships.
The Concessions Act promulgates a clear set of rights and obligations of concessionaires and concession donors, meaning inter alia Croatian Parliament, Government of the Republic of Croatia, central state bodies and municipalities. The Act also provides uniform legal protection before the State Commission for Supervision of Public Procurement Procedure.
The third legislative element of the new public procurement system in Croatia is the new PPP Act, which sets the rules and principles of the procedure for evaluating, approving and monitoring PPP project proposals, as well as post-tendering procedural steps in order to follow-up the execution of contracts.
The PPP Act also provides the ground for establishing the PPP Agency as the central coordinating body for PPPs while placing Ministry of Finance as the main authority for fiscal and financial aspects of PPPs. These two institutions create the core of the PPP system in the Republic of Croatia with clearly defined responsibilities and authorities.
Concessions are and shall continue to be one of the main instruments for providing public services and works, and also for the exploitation of public and other goods in the Republic of Croatia. This, along with the necessary further implementation of the Strategy for the development of the Public Procurement System in the Republic of Croatia, calls for development of detailed methodological tools; training needs assessment; elaboration and dissemination of training materials; training of staff engaged in concessions granting procedures.
In such circumstances there will be a strong need for developing methodological tools and related manuals and documents for fostering the implementation of the new Concessions and Public-Private Partnerships legislation as well for enhancement of administrative capacity of the Ministry of Finance.
3.2 Linked activities (other international and national initiatives):
SIGMA assistance. Description: Ministry of Finance has, during the course of drafting the new Concessions Act, received significant assistance by SIGMA consultants – a common programme by the OECD and the EU, principally funded by the EU. SIGMA has reviewed the drafts in multiple stages and also gave final opinion on the Concessions Act and consequently recommendations to the European Commission. With regard to previous assistance on developing the new Concessions Act, SIGMA experts shall continue with these activities in the form of expert legal interpretation and practical implementation of Concessions Act provisions regulating concession type definitions and their inter-correlations, and also concession (contract) value calculations. This assistance shall be provided in the form of 1-2 day workshops during July 2009 on jointly selected case-study examples from Croatian experience, based on the new concessions and PPP legislation, including aligned sector regulating acts governing concessions.
Phare 2006 TWL project ‘’Further Development of State Commission for Supervision of Public Procurement Procedures and Review System in the Republic of Croatia”. The overall objective of the Project is to contribute to the development and strengthening of a sound and transparent public procurement review system in the Republic of Croatia, in accordance with EU standards and reducing the potential for fraud and corruption in public procurement. The purpose of this project is further development of the administrative capacity of the State Commission for Supervision of Public Procurement Procedures and awareness raising about the new public procurement review system. This project started in November 2008 and will end in August 2009.
PPIAF Program Management Unit support Project – beneficiary: Ministry of Finance – project initiated. Title: ‘Review of the Institutional Framework and Development of Fiscal Risk Assessment Model for the Public Private Partnerships (PPPs) in Croatia''. This proposed PPIAF-funded capacity building is intended to improve administrative competence in the Ministry of Finance as well as key line ministries and the PPP Agency in facilitating PPP overall and fiscal risks assessment and safeguarding fiscal capacities. More specifically, the funding will provide the country with the world-wide best practices with managing PPPs. The project objective is to examine the new legislative framework for PPPs and concessions in the Republic of Croatia as well as identify the administrative and institutional capacity of Ministry of Finance, Agency for PPP and selected line ministries and other public sector entities for the implementation of said acts and enforcement of future PPP projects. Upon concluding the initial review part of the project the service provider shall prepare a Practical Handbook for internal use of Ministry of Finance primarily and Agency for PPP on the implementation of Fiscal Risk Assessment methodology with regard to PPP project review stages as they are defined by the PPP Act. The project also foresees 2 three-day workshops. The first one shall be organized for a total of 15 representatives, 7 of which from the Ministry of Finance, 2 from the Agency of PPP and 6 from line ministries, on fiscal prudence in the use and design of PPPs, by undertaking a combination of theoretical and world-wide practices with PPPs and practical, hands-on risk assessment education on several PPPs case studies. Additional workshop shall be organized for Economic Affairs Department representatives on the application of the Practical Handbook drafted by the service provider that shall than be tested on case-study examples from Croatian experience. The Practical Manual shall also act as a basis document for similar activities foreseen by this TWL project. This project is expected to improve technical competence in order to raise the awareness of the potential fiscal impact of the outcomes under PPPs, setting accountability for the adequacy of risk analysis, assumptions, and decisions that involve fiscal risks and for managing the overall risk exposure of the government. The project started with a kick-off visit/meeting held on 12-13th of May 2009. The project duration is 3 months.