A public-private partnership is a mutually beneficial alliance between the state and business aimed at implementing socially significant projects in a wide range of fields of activity. Currently, many countries use this mechanism to solve significant public problems.

Public-private partnership (PPP) is a mechanism of cooperation between public authorities and private businesses aimed at joint implementation of projects in various areas of the economy and social infrastructure. This format of cooperation is based on the principles of risk sharing, pooling resources and mutually beneficial partnership, which contributes to the sustainable development and modernization of key industries.

Key features of PPP include:

- conclusion of a contract between a public and private partner that defines the terms, obligations of the parties and the parameters of project implementation;

- a long period of cooperation, usually varying from five to thirty years, depending on the complexity and scale of the project;

- joint participation of both parties at all stages of the project implementation-from planning and financing to operation and management;

- consolidation of financial, material and intellectual resources of the public and private sectors in order to improve the efficiency and quality of services provided;

- investments by a private partner aimed at the creation, modernization or operation of infrastructure facilities and other strategically significant assets.

The main objectives of public-private partnership are:

- creating conditions for effective interaction between the state partner and the private partner in order to ensure sustainable socio-economic development of the Republic of Kazakhstan;

- attracting investment in the state economy by combining the resources of a public partner and a private partner for the development of infrastructure and life support systems for the population;

- improving the availability and quality of goods, works and services, taking into account the interests and needs of the population, as well as other interested parties;

- increasing the overall innovation activity in the Republic of Kazakhstan, including promoting the development of high-tech and knowledge-intensive industries.

The principles of public-private partnership are:

- the principle of consistency – step-by-step construction of relationships between public-private partnership entities;

- the principle of competition – determination of a private partner on a competitive basis, except for the cases established by this Law;

- the principle of balance – mutually beneficial distribution of responsibilities, guarantees, risks and revenues between the public partner and the private partner in the process of implementing a public-private partnership project;

- the principle of effectiveness – the establishment of criteria and indicators to assess the achievement of the results of public-private partnership;

- the principle of value for the population – ensuring the development of social infrastructure and life support systems for the population, increasing the availability and quality of goods, works and services, as well as creating jobs within the framework of a public-private partnership project;

- the principle of transparency and accessibility of information – open access to information on the planning and implementation of public-private partnership projects within the limits established by the laws of the Republic of Kazakhstan^[57].

In the two decades since Kazakhstan's independence, the conditions for PPPs have changed, so they can be divided into five stages, shown in Figure 5.3.1.

 

Scheme 5.3.1 – Evolution of public-private partnership in Kazakhstan

 

Public-private partnership (PPP), depending on the method of implementation, is divided into two main types: institutional PPP and contract PPP.

Institutional PPP is carried out through a specially created company – a legal entity registered in the form of a limited liability partnership (LLP) or a joint-stock company (AO). The total share of state and private partner participation in such a legal entity is 100%.

The features of an institutional PPP are as follows:

- it is created for the implementation of a specific project and is valid until its completion;

- performs all project activities on its own behalf, including attracting investment, construction, operation and providing collateral;

- allows you to more effectively distribute risks between partners and manage the project within a separate legal entity.

Contractual PPP is implemented by entering into an agreement between the state and a private partner without creating a separate legal entity. This format is the most common in PPP practice, including in Kazakhstan.

The main forms of contractual PPP include:

- to on cession – transfer of the right to build and operate infrastructure facilities to a private partner with the possibility of generating income from their use;

- trust management of state property – transfer of management of objects to a private partner in order to increase their efficiency;

- and non-material hiring of state property – leasing of public sector facilities by private partners;

- leasing – lease with the possibility of subsequent purchase of public infrastructure facilities;

- additional agreements for the development of technology, production of prototypes and testing – agreements aimed at innovative and research projects;

- life cycle contract – a long-term agreement covering the full cycle of creation and operation of an object, including its maintenance;

- service contract – a contract for the provision of certain services in the field of infrastructure or public services;

- other contractual forms of PPP that correspond to its basic principles.

The choice of PPP format depends on the project objectives, the specifics of its financing, and the distribution of risks between public and private partners.

The state supports the private partner in the framework of public-private partnership (PPP) through various mechanisms aimed at reducing investment risks and improving the economic efficiency of projects.

Forms of state support and a private partner.

Financial support:

- provision of in-kind grants in accordance with the legislation of the Republic of Kazakhstan. State in-kind grant is land plots provided on the right of temporary gratuitous land use to a legal entity of the Republic of Kazakhstan for the implementation of an investment project with subsequent gratuitous transfer to ownership or land use in accordance with the procedure established by this Code and the legislation of the Republic of Kazakhstan on investments^[58];

- off-financing of PPP projects at the expense of budgetary funds;

- state guarantees for the consumption of a certain amount of goods, works and services produced during the project implementation;

- compensation of investment and operating costs associated with the implementation of the PPP project;

- as a reward for managing state-owned PPP facilities.

Material and technical support:

- provision of land plots in accordance with the land legislation of the Republic of Kazakhstan;

- transfer of the right to use state-owned objects for project implementation;

- providing the PPP facility with engineering and transport communications (roads, power supply, water supply, etc.).

Other forms of state support:

- favorable tax conditions and preferences in the framework of investment incentives;

- organizational support in the process of project approval and implementation.

Forms of private partner participation in PPP.

The private partner assumes a key role in the implementation of the project, ensuring its financing, management and operation.

Financing and investments:

- involvement and investment of own and borrowed funds in the project;

- search for additional sources of financing;

Creation and operation of PPP facilities:

- construction, modernization and maintenance of infrastructure;

- operation of facilities in accordance with the terms of the agreement.

PPP Project Management:

- development and implementation of effective project management mechanisms;

- ensuring the sustainable functioning of PPP facilities.

Ensuring the quality and availability of services, i.e. ensuring the proper level of quality of goods, works and services provided under the concluded contract.

Sources of financing for PPP projects.

PPP projects can be financed from various sources, including:

- medicinal products of a private partner;

- land resources (loans, bond loans, project financing);

- reproduction of the state budget to the extent stipulated in the terms of the contract;

- financing by quasi-public sector entities (for example, national companies, development funds);

- other sources that are not prohibited by law.

Thus, successful PPP implementation is based on a balanced distribution of responsibilities and risks between the state and the private partner, which contributes to the effective development of infrastructure and the economy as a whole.

Public-private partnerships cover a wide range of projects aimed at developing social and economic infrastructure. The following types of projects can be implemented under PPP:

Education:

- construction, reconstruction and operation of kindergartens, schools, colleges and universities;

- creation and management of student dormitories;

- modernization of school canteens to improve the quality of food for students.

Sports and culture:

- construction and operation of sports complexes, stadiums, ice arenas and other facilities for mass and professional sports;

- creation of cultural centers, theaters, and museums with the involvement of private investment.

Healthcare:

- construction, reconstruction and operation of hospitals, polyclinics, and medical centers;

- organization of private management of state medical institutions;

- development of specialized medical services, including diagnostics, rehabilitation and telemedicine.

Municipal infrastructure and utilities:

- trust management of public utilities (water supply, heat supply, outdoor lighting networks);

- creation and operation of waste processing plants and other environmental facilities.

Transport and logistics:

- construction and operation of highways, bridges, tunnels;

- development of urban public transport, including the construction of metro, tram lines, and bus terminals;

- management of airports, railway stations and ports in the framework of PPP.

Digitalization and innovation:

- introduction of smart urban technologies (smart lighting, intelligent transport systems);

- development of telecommunications infrastructure, including 5G networks and digital platforms for public services.

The list of planned and implemented PPP projects in Kazakhstan is available in the Register of PPP Projects on the official website: <url>.kzppp.kz.

Advantages of PPP:

- unloading the state budget at the expense of private investments;

- the ability to finance large infrastructure projects without significant one-time costs on the part of the state;

- use of management experience and innovative approaches of the private sector;

- more efficient use of resources due to the focus of the business on efficiency and profitability;

- equal distribution of risks between the state and the private partner;

- use of long-term contracts that ensure the stability of financing;

- a private partner can quickly organize the financing, design and construction of facilities.

- flexibility in project implementation compared to traditional government tenders;

- use of modern technologies and international standards;

- the private partner's interest in ensuring high quality and accessibility of services;

- PPP projects are implemented for a long time (from 5 to 30 years), which contributes to the stability and predictability of infrastructure development;

- clear contractual obligations ensure reliable interaction.

Disadvantages of PPPs:

- the need for detailed planning, legal expertise and agreement on the terms of the contract;

- high transaction costs (for development, negotiations, consulting);

- PPP projects require significant investments that can take decades to pay off.

- not all private investors are ready to invest in long-term initiatives with high uncertainty;

- a private partner, striving for payback, can set high tariffs for services;

- the possibility of forming private monopolies for key infrastructure facilities;

- in case of financial problems with a private partner, the state may be forced to assume obligations under the project;

- the possibility of inefficient redistribution of budget funds;

- the possibility of changing the legislation, which may affect the conditions of project implementation;

- political risks, including changing government priorities and abandoning previously agreed projects;

- the possibility of corruption risks when entering into contracts;

- insufficient control by the public and independent experts.

Thus, public-private partnership is an effective tool for infrastructure and social development, but its successful implementation requires clear legal regulation, competent risk allocation and monitoring of compliance with obligations on the part of all participants.

 

---

^[57] Law of the Republic of Kazakhstan «On Public-Private Partnership» dated October 31, 2015 https://adilet.zan.kz/rus/docs/Z1500000379. Date of access 11.08.2025

^[58] Article 12 of the Land Code of the Republic of Kazakhstan. https://kodeksy-kz.com/ka/zemelnyj_kodeks/12.htm. Date of access 12.03.2025