Overview
Number of PPPs and Investment in PPPs
-
PPP Investment
$ 482 M -
Number of PPPs Reaching FC
---- -
Value of PPPs Reaching FC
----
Revenue Model and Government Support to PPPs
-
Number of PPPs with Govt. Support
---- -
Number of User Charge PPPs
---- -
Number of Govt. Pay PPPs
----
PPPs under Preparation and Procurement
-
Number of PPPs under Preparation
---- -
Number of PPPs under Procurement
----
FC = financial closure, Govt. = government, M = million.
Source: ADB. 2019. Public–Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; World Bank. Infrastructure Finance, PPPs and Guarantees. Country Snapshots: Georgia. https://ppi.worldbank.org/en/snapshots/country/georgia.
Until 2013, public–private partnerships (PPPs) in Georgia were implemented in an unstructured and disorganized manner and on an ad hoc basis, without a well-defined institutional, policy, and legal and regulatory framework. The government realized the importance of PPPs as an alternative way of financing infrastructure in 2013 and started developing an institutional, policy, legal, and regulatory framework. Following its decision to promote PPPs, the government initiated the process of developing and implementing specific legislative framework in 2014.
In 2016, the Prime Minister of Georgia, Giorgi Kvirikashvili, issued Decree 245, a policy document that establishes an overall institutional structure and identifies the areas for public–private cooperation through PPPs. The policy establishes the principles for applying the PPP modality, including transparency, foreseeability, nondiscrimination, value-for-money assessment, and allocation of risks, and fiscal affordability. The policy also elaborates on the various PPP types, sectors eligible for PPPs, principles of arrangements, and state support mechanisms. The policy further explains the stages for developing projects, including project identification, screening, preparation, procurement, and management.
In parallel, the MOESD, with technical assistance from ADB and the EBRD also started work on the PPP Law and the secondary legislation. In May 2018, the PPP Law was approved by Parliament, and in August 2018, the secondary legislation was established (Following figure).
Evolution of the Public–Private Partnership Regulatory Framework in Georgia
PPP = public–private partnership.
Source: Korea Development Institute. Researcher Information. www.kdi.re.kr.
The PPP Law and the secondary legislation provide the legal basis for procuring and managing PPPs in Georgia. It covers both concession and non-concession types of PPPs. The definition and eligibility criteria, the various stages for project development and management, and the relevant entities involved in project identification, screening, preparation, procurement, and management, including their functions, are laid out in the PPP Law and the secondary legislation. A process has been established for dispute resolution and identifying and managing contingent liabilities from PPPs. The PPP Law and the secondary legislation also require putting up a formal institutional structure, including a PPP Agency, which has been established under the Office of the Prime Minister of Georgia, and a related risk and fiscal management function under the Ministry of Finance. The PPP Agency became operational in February 2019 and is tasked with providing an independent and holistic evaluation of projects and preparing recommendations for the government. The PPP Law and the supporting secondary legislation are being supported through the development of guidelines for identifying, appraising, implementing, and monitoring PPPs.
The PPP institutional framework consists of the public entities responsible for procuring the project, the PPP Agency, the Ministry of Finance, the Georgian State Procurement Agency, the MOESD, and sector-specific line ministries.
-
National Framework for Enabling PPPs
PPP Legal and Regulatory Framework
Parameters
COMPAREDOWNLOADDoes the country have - National PPP law and PPP regulations? Public financial management laws and regulations? Sector-specific laws and regulations? Procurement laws and regulations? Environmental laws and regulations? Laws and regulations for social compliance? Laws and regulations governing land acquisition and ownership? Taxation laws and regulations? Employment laws and regulations? Licensing requirements? What are the other components of the PPP legal and regulatory framework? - Yes
- Unavailable
LEARN MORENational Framework for Enabling PPPs
PPP Legal and Regulatory Framework
Evolution of the Public–Private Partnership Legal and Regulatory Framework in Georgia
Until 2013, there was no specifically defined policy, institutional, or legal and regulatory framework for implementing PPPs in Georgia. Before the PPP Law and supporting secondary legislation were approved and enacted by the government in 2018, numerous laws governed various aspects of PPP implementation.
The Law of Georgia on the Procedure for Granting Concessions to Foreign Countries and Companies (adopted in 1994), or the Concession Law. This law had many limitations, such as in its scope of application (a concession is a long-term lease agreement signed by the state for exploitating renewable and non-renewable natural resources and for other related economic activities to invest foreign capital). It also had an unclear definition of a contracting entity and had minimal provisions regarding the selection procedures of the concessionaire. This law was repealed in 2018. Other laws include:
- Constitution of Georgia
- Civil Code of Georgia, 1997
- Law of Georgia on Promotion and Guarantees of Investment Activity No. 3425 (30 June 2006)
- Law of Georgia on Investment Funds (14 July 2020)
- Law of Georgia on State Support of Investments 3424 (1 August 2006)
- Law of Georgia on State Procurement N1388 (20 April 2005)
Most PPP projects implemented were governed by government resolutions adopted on a case-by-case basis, wherein the government provided the final approval. For example, in the energy sector, the government approved Resolution 214 of 21 August 2013, which established the rules for expression of interest for technical and economic feasibility studies and for building, owning, and operating electricity-generating plants in Georgia.1
Realizing the importance of increased private sector participation in infrastructure creation and service delivery, the government started developing a PPP institutional, policy, and legal and regulatory framework. The PPP policy also elaborates the various PPP types, eligible, principles of arrangements, and state-support mechanisms. The policy further explains the stages for developing projects, including project initiation, project preparation, bidding procedures, and entering into direct agreements.
The fourth update of the Public Finance Management Reform Strategy has been developed, which covers 2023–2026.2 Within the framework of the Public Finance Management reform, the Ministry of Finance continuously evaluates the current progress, analyzes it, and plans accordingly. The latest update is also based on the Public Expenditure and Financial Accountability Performance Assessment Report for 2022, which was validated with the support of the EU and the World Bank.3 In addition, the Public Investment Management Assessment was also carried out in 2022 using the International Monetary Fund (IMF) methodology. According to the 2022 assessment of Public Expenditure and Financial Accountability, which covers the period up to and including 2021, the investment project management indicator was graded A (according to the 2018 [PEFA], this indicator was graded D).4
One of the challenges outlined within the framework of the public finance management reform strategy is the implementation of the full cycle of investment projects. Therefore, the Ministry of Finance has been actively cooperating with international organizations and financial institutions, including the World Bank and the EU, as part of the technical support to tackle this challenge. The expected outcome of implementing an investment capital project management system is an improved project selection mechanism through which only projects based on an objective analysis will be taken into account in the budget. This will improve medium-term planning and effective use of state finances.
On 10 February 2023, the Parliament of Georgia adopted a new Law on Public Procurement prepared by the State Procurement Agency, within the framework of the EU Association Agreement, to approximate Georgian legislation with that of the EU. The adopted law aims to ensure the effective and fair management of funds allocated to public procurement, enabling integrity and accountability, and directing the process while taking into account environmental, social, and economic aspects from the perspective of sustainable development.5
The revised Investment Capital Project Management Methodology was approved by Resolution N65 on 16 February 2023.6 The updated methodology applies to all new investment and capital projects (including projects worth up to GEL5 million) and according to the value and specificity of the project, the methodology specifies what kind of information needs to be prepared.7
The main objective of the Investment and Capital Project Management Methodology is to identify the guidelines for all central and municipal government entities regarding the selection and approval of capital or investment projects, more specifically, support entities under budget financing to properly evaluate projects and give instructions on procedures for selecting between the competing projects, provide support in strategic planning and budgeting process (country wide as well as sectoral), and ensure transparency, accountability, and effective use of public funds.
The methodology presented as part of the regulations provides clear instructions and criteria about identification and preliminary selection and screening of projects, final evaluation of projects, and instructions on approving projects for budget spending and management of the approved projects. The methodology covers the following project stages: initial and preliminary evaluation, final selection, budgeting, project implementation and monitoring, and final impact assessment.
The complexity of assessments for investment or capital projects depends on the size of the project: (i) small (up to GEL5 million): financial calculation of costs; (ii) medium (GEL5 to 20 million): project concept note, cost–benefit analysis (only financial calculations); and (iii) large (above GEL 20 million): project concept note, cost–benefit analysis (financial and economic analysis).
Document packages for medium and large projects should be presented to the Ministry of Finance (MOF) for small projects only by MOF request. The MOF might require additional documents or a feasibility study. The MOF working group decides to approve or not approve a project for financing, or in some cases request to access alternative means of financing the project. One of the alternative sources of financing that should be evaluated is the PPP mechanism. In case the value-for-money analysis demonstrates that the PPP mechanism has a higher value compared to the traditional method, the MOF can request the project be financed through the PPP mechanism.
The decision of the Government of Georgia on the initiation of the preparation of a PPP project shall be based on the following criteria:8
- the strategic or social value of the project;
- the preliminary assessment of the economic impact of the project;
- the accessibility to public finances for the implementation of the project; and
- the assessment of fiscal risks that may be caused by the project.
- 1ADB. 2019. Public–Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/ publication/509426/ppp-monitor-second-edition.pdf.
- 2Ministry of Finance, Georgia. N.D. Public Financial Management Reform Strategy, 2023–2026. https://www.mof.ge/images/File/strategia/2023/30-06-2023/2023-2026%20PFM%20Reform%20Strategy%20_ENG.pdf.
- 3Public Expenditure and Finance Accountability. 2022. Georgia, Public Expenditure and Financial Accountability (PEFA) Assessment 2022. https://www.pefa.org/node/5197.
- 4Ministry of Finance, Overview of Investments/Capital Projects for 2023–2026. https://www.mof.ge/images/File/2022-biujeti/30-11-2022/25.PIM%202023%203.pdf.
- 5Institute for Development of Freedom of Information (IDFI). 2023. The Georgian Parliament Adopts the New Public Procurement Law. Article. 17 February. https://idfi.ge/en/the_georgian_parliament_adopts_the_new_public_procurement_law#:~:text=The%20adopted%20law%20aims%20to,the%20perspective%20of%20sustainable%20development.
- 6Resolution No. 65 on Approval of Investment/Capital Project Management Methodology. https://matsne.gov.ge/ka/document/view/5724007?publication=1.
- 7Ministry of Finance of Georgia. Overview of investment/capital projects for 2024–2027. https://mof.ge/images/File/public%20finances%20in%20Geo/29-12-2023/1/PIM%20report%202023.pdf.
- 8Ministry of Finance of Georgia. 2020. PPP Guidelines. https://ppp.gov.ge/app/uploads/2020/07/PPP-Guidelines-ENG.pdf; PPP Agency. N.D. Guide to Public–Private Partnerships. https://ppp.gov.ge/app/uploads/2021/04/PPP_Guide_logo_colors-ENG.pdf..
PPP = public–private partnership
Sources: Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf; Government of Georgia. 2012. Law of Georgia: Tax Code of Georgia. Tbilisi.https://matsne.gov.ge/en/document/download/1043717/93/en/pdf; Government of Georgia. 2011. Law of Georgia on Public Internal Financial Control. https://matsne.gov.ge/en/document/download/91618/8/en/pdf; Government of Georgia. 2008. Law of Georgia on Recognition of Property Rights of the Parcels of Land Possessed (Used) by Natural Persons and Legal Entities under Private Law. https://matsne.gov.ge/en/document/view/19780?publication=17; Government of Georgia. 2006. Law of Georgia on Public Procurement. https://matsne.gov.ge/en/document/download/31252/51/en/pdf; and Government of Georgia. 1996. Law of Georgia on Environmental Protection. https://www.matsne.gov.ge/ka/document/download/33340/19/en/pdf.
National Framework for Enabling PPPs
Types of PPPs
COMPAREDOWNLOADService Contracts
Management Contracts
Affermage or Lease Contracts
Design-Bid-Build (DBB)
Design-Build (DB)
Build-Operate-Transfer (BOT)
Design-Build-Finance-Operate-Transfer (DBFOT)
Build-Own-Operate (BOO)
Concessions
Joint Venture
Hybrid Contracts
Others
- Merchant
- Rehabilitate - Operate-Transfer (ROT)
- Build- Rehabilitate - Operate-Transfer (BROT)
LEARN MORENational Framework for Enabling PPPs
Types of PPPs
The PPP Law of 2018 does not provide for specific PPP types. It treats all PPP models, including concessions, on an equal basis and provides for concessions, non-concession PPPs, and institutional PPPs. Based on the revenue model, the PPP Law allows for PPPs based on:
- availability compensation and/or performance-based compensation;
- guarantees on consumption, customers or revenues;
- guarantees on the tariff and/or cost of public services;
- guarantees for the long-term purchase of certain types of goods and services at a price determined based on the basis of an agreement. The types of goods and services mentioned are determined by the Government of Georgia;
- grants and/or subsidies aimed at covering certain costs and returns of investments made in accordance with the procedure established by the Government of Georgia and in established cases, including grants in kind;
- transfer of land and/or issuance of permits and licenses provided for by Georgian legislation in cases provided for by Georgian legislation;
- transfer of exclusive right to intellectual property to a private partner;
- granting the private partner the exclusive right to create and maintain and/or operate and maintain and/or provide public services within a certain area of the PPP agreement facility.1
Based on experience from previously implemented PPP projects, some of the commonly used PPP types include management contract, build–operate–transfer, build–own–operate, build–rehabilitate– operate–transfer, rehabilitate–operate–transfer, and lease contract.
- 1Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/ka/document/view/4193442?publication=3.
National Framework for Enabling PPPs
Eligible Sectors for PPPs
COMPAREDOWNLOADTransportation Infrastructure
Road Infrastructure
Rail and Mass Transit Infrastructure
Waterways Infrastructure
Seaport Infrastructure
Airport Infrastructure
Logistics Infrastructure
COMPAREDOWNLOADWater, Wastewater, and Solid Waste Management Infrastructure
Water Resources and Irrigation Infrastructure
Water Supply Infrastructure
Wastewater Infrastructure
Solid Waste Management Infrastructure
COMPAREDOWNLOADICT Infrastructure
Telecommunication Infrastructure
IT and Informatics Infrastructure
COMPAREDOWNLOADEnergy and Electricity Infrastructure
Power Generation
Power Transmission and Sub-Transmission
Power Distribution
Energy Conservation Infrastructure
COMPAREDOWNLOADOther Infrastructure
Zone Infrastructure
Tourism Infrastructure
Oil and gas infrastructure, including bio-energy
LEARN MORENational Framework for Enabling PPPs
Eligible Sectors for PPPs
The current regulatory framework allows for widespread use of PPPs across almost all sectors. According to the 2018 government Resolution No. 426 “On the approval of the rules for the development and implementation of the public–private partnership project,” PPPs may be carried out in any public infrastructure and public service sector except for mining, oil and gas sectors, and related research-development and/or scientific research works. Moreover, according to the changes in PPP Law that were adopted in 2023, the validity of this law does not apply to public railway transport services and public service contracts provided for by the Railway Code of Georgia. According to the PPP policy, the government believes that the sectors where PPP has the most potential are:
- transport (roads, bridges and tunnels, airports, ports, and rail); social infrastructure (healthcare, education, and kindergartens); and
- utilities (water supply, heating, waste, energy, and renewables); and other sectors (correctional facilities, tourism, sports infrastructure, information technology, and agriculture).
The following table presents these potential sectors and subsectors.
Sectors Subsectors Transportation infrastructure Road infrastructure Rail and mass transit infrastructure Waterways infrastructure Seaport infrastructure Airport infrastructure Logistics infrastructure Water, wastewater, and solid waste management infrastructure Water resources and irrigation infrastructure Water supply infrastructure Wastewater infrastructure Solid waste management infrastructure ICT infrastructure Telecommunication infrastructure Information technology and informatics infrastructure Energy and electricity infrastructure Power generation Power transmission and sub-transmission Power distribution Energy conservation infrastructure Social infrastructure Education infrastructure Health infrastructure Public housing Government buildings Other infrastructure Zone infrastructure Oil and gas infrastructure, including bioenergy Tourism infrastructure ICT = information and communication technology, UA= unavailable.
Source: Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/ download/4193442/0/en/pdf.
The PPP Law states that a private entity shall have the right to prepare and submit an initiative proposal to the relevant line ministry of the corresponding sector on the implementation of a concession in the sector determined by a legal act of the Government of Georgia. The selection of a private partner by direct negotiation may be carried out only in the energy sector.
ICT = information communication technology.
National Framework for Enabling PPPs
PPP Institutional Framework
Parameters
COMPAREDOWNLOADDoes the country have a national PPP unit? What are the functions of the national PPP unit? Supporting the design and operationalization of the national PPP-enabling framework?
Helping develop a national PPP pipeline?
Supporting the arrangement of funding for project preparation (budgetary allocations, technical assistance funding from multilateral development agencies, operating a dedicated project preparation/project development fund)?
Guidance for project preparation to and coordination with the government agencies responsible for sponsoring the projects?
Making recommendations to the PPP Committee and/or other approving authorities to provide approvals associated with various stages of PPP process?
- Yes
LEARN MORENational Framework for Enabling PPPs
PPP Institutional Framework
The PPP Law provides for the establishment of the PPP Agency, a body established to implement the functions related to PPPs determined by Article 9 of the PPP Law. The PPP Agency and the Ministry of Finance of Georgia participate in the drafting and assessment of a PPP project within the scope of their authority. The following table describes the respective roles of key entities and institutions in promoting PPPs in Georgia.
Agencies and Their Roles in Promoting Public–Private Partnerships in Georgia
Agency Function/Role in Promoting PPPs Ministry of Economy and Sustainable Development Coordinating government policy and institutional activities to establish the public–private partnership (PPP) framework in Georgia. Fiscal Risk Management Division of the Ministry of Finance Performance of fiscal risk analyses; evaluation and preparation of conclusion regarding the presented projects and regulations; elaboration of recommendations related to presented projects and regulations to eliminate the fiscal risks; collection of financial information for state-owned companies, identification of conditional liabilities, and evaluation of such obligations; identification and evaluation of fiscal risks of contingent liabilities of the state. Enterprise Georgia - Legal entity of public law with the main function to promote foreign direct investments in Georgia. In 2015, the agency moved under the direct supervision of the Prime Minister of Georgia. The agency plays the role of moderator between foreign investors and the government, ensuring that the investor gets different types of updated information and has the means of effective communication with government bodies.
- The agency is also authorized to represent the investor in dealings with other state authorities and to assist the investor in obtaining licenses and permits.
Ministry of Finance of Georgia Article 10 of the PPP Law states the functions of the Ministry of Finance of Georgia as follows:
- Review and assessment of the documentation submitted by an authorized body including the assessment of accessibility to public finances, the assessment of the value-for-money, the assessment of fiscal risks, and other types of assessment, if necessary, within the scope of its authority.
- Review of an initial PPP project and the related documents, and submission of relevant recommendations to an authorized body.
- Review of the terms and conditions of a PPP agreement revised by an authorized body as a result of negotiations with a private partner, and in the case of substantially different terms and conditions from those approved by the government, the conduct of assessment provided for by this article, and, on the basis thereof, the submission of the recommendation on the expediency of the proposed (revised) or other terms and conditions of a PPP agreement to the government in accordance with a legal act of the government.
- Participation, if necessary, in the negotiations related to a PPP agreement, including the amendments to be made thereto.
- Conducting the assessment provided for by the PPP Law related to the amendments to be made to a PPP agreement. A public partner shall submit to the government draft amendments to be made to a PPP agreement in the case of identifying fiscal risks as a result of the abovementioned assessment.
- The development and approval of appropriate methodologies, if necessary, to perform the functions determined by this article of the PPP Law.
PPP Agency Article 9 of the PPP Law establishes the PPP Agency and states its functions as follows:
- Identifying potential PPP projects and proposing them to an authorized body, if necessary, assisting the authorized body in identifying possible PPP projects.
- Assessing the concept of a project submitted by an authorized body and developing relevant recommendations.
- Assisting in the preparation of the documentation related to a PPP, including the documentation related to selection processes, a draft PPP project and other documentation, in the case of the application by an authorized body.
- Exercising the powers determined by Article 14 of this Law related to small projects, if necessary.
- Ensuring the selection, recruitment, and supervision of consultants at any stage of a PPP, if necessary.
- Coordinating relevant actions with authorized bodies, as well as requesting information related to monitoring the implementation of PPP projects.
- Implementing relevant measures to facilitate the enhancement of knowledge and skills of an authorized body in the field of PPPs, to develop institutional potential.
- Creating and managing a database for PPP projects.
- Drawing up the forms of standard documents, including the standard clauses of a PPP agreement.
- The PPP Agency is required to perform its functions and tasks in accordance with the legislation of Georgia. The chairperson of the PPP Agency is appointed by and may be dismissed by the Prime Minister. The PPP Agency is accountable to the Prime Minister.
Sources: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; and Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
In February 2024, training was provided on infrastructure and PPP projects for civil servants. The training content focused on important aspects of project development, including project financing, financial modeling, and legal features. Public servants involved in infrastructure projects and the development process attended the training. They represented various state agencies, including the PPP Agency, Anaklia Deep Water Seaport Development Agency, Ministry of Regional Development and Infrastructure, Ministry of Economy and Sustainable Development, Ministry of Finance, Georgian Energy Development Fund, and Georgian Oil and Gas Corporation.
Entities Responsible for Public–Private Partnership Project Identification, Approval, and Oversight
Consideration Entity Who is responsible for identifying, preparing, and procuring the public–private partnership (PPP) projects? Authorized bodies and local governments with the support of the PPP Agency Is there a PPP committee for providing approvals at various stages of the projects? Who are the other approving authorities besides the PPP committee for projects? Ministry of Finance of Georgia and Government of Georgia Does the country have an independent think tank for various PPP planning, budgeting, and policy decisions? Is there legislation for PPP program oversight? - No
- Unavailable
The Ministry of Finance has created a working group that reviews PPP projects. The working group members are representatives from the Budget Department, the Macroeconomic Analysis and Fiscal Forecasting Department, and the Fiscal Risks Management Division. The government is the final decision-maker on each project at various stages of development.
The identification of a PPP project is carried out by an authorized body or the PPP Agency. In the case of an unsolicited proposal (referred to as an ‘initiative proposal’ by the PPP Law), the identification of the project is carried out by a private initiator following Article 15 of the PPP Law.
After identifying a PPP project, the respective authorized body or the respective line ministry prepares a concept note for the project in accordance with a legal act of the government and submits it for review to the PPP Agency and the Ministry of Finance. The Ministry of Finance has created a working group comprising representatives from the Budget Department, the Macroeconomic Analysis and Fiscal Forecasting Department, and the Fiscal Risks Management Division to review PPP projects. Based on the review by the working group, the PPP Agency and the Ministry of Finance prepare their recommendations and opinion on the project concept note to be submitted to the Ministers Cabinet chaired by the Prime Minister for review. The authorized body then submits the project concept note and the recommendations and opinion from the PPP Agency and the Ministry of Finance for review of the Government of Georgia.
Upon approval of the project concept by the Ministers Cabinet chaired by the Prime Minister, the authorized body undertakes project preparation with relevant support from the PPP Agency and the Ministry of Finance. After completion of the project preparation stage (detailed technical, financial, and economic analysis), the results of project preparation are submitted to the Ministry of Finance for review. The Ministry of Finance prepares its recommendations on the project preparation results, which are then submitted along with the project preparation results for review and approval by the authorized body of the Ministers Cabinet chaired by the Prime Minister.
Upon approval of the project preparation results by the Ministers Cabinet chaired by the Prime Minister, the authorized body prepares the documentation and conducts the bid process to select the private partner. If the implementation of a project is within the competence of more than one authorized body, the Ministers Cabinet chaired by the Prime Minister determines an authorized body to implement the project, or decides on the joint implementation of the project by the relevant authorized bodies.
The authorized body appoints a selection commission following the PPP Law. The selection commission comprises members from the Ministry of Economy and Sustainable Development, the Ministry of Finance, and the PPP Agency, as well as representatives of other state authorities based on the specific nature of the project. This selection commission assesses the applications and a bid submitted by the bidders and determines the winning bidder following the process provided by the PPP Law. The results of the bid process and the agreed or negotiated terms of the PPP agreement are then submitted by the authorized body to the Ministry of Finance for its review. Based on the inputs from the working group, the Ministry of Finance prepares its recommendations and opinion on the results of the bid process and the terms of the PPP agreement, which is then submitted along with the results of the bid process and the agreed or negotiated terms of the agreement for review by the authorized body of the Ministers Cabinet chaired by the Prime Minister.
Upon approval of the results of the bid process, the winning bidder, and the agreed or negotiated terms of the PPP agreement by the government, the authorized body executes the agreement with the winning bidder.
Entities Responsible for PPP Project Monitoring
Is there an entity for monitoring public–private partnership (PPP) projects post-commercial close? Is there an entity for monitoring and management of fiscal risks and liabilities from PPP projects for the Ministry of Finance? - = Yes
The respective authorized body (public partner) and the PPP Agency are responsible for monitoring the implementation of PPP projects and ensuring that project-specific contract terms are being met.1 The Ministry of Finance is responsible for assessing and managing the fiscal risks and liabilities associated with PPPs. As per the PPP Law, there should be an optimal distribution of liabilities and risks between parties, taking into consideration the capacity and expediency over their control by the parties, the public interests, and the characteristics of the PPP in question.
- 1Public Private Partnership Agency of Georgia. 2020. Guide to Public Private Partnerships in Georgia. https://ppp.gov.ge/app/uploads/2020/05/PPP_Guide_ENG_PRINT.pdf.
Source: Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
National Framework for Enabling PPPs
The PPP Process
Parameters
COMPAREDOWNLOADDoes the PPP legal and regulatory framework provide for a PPP implementation process covering the entire PPP life cycle? Does the Feasibility Assessment Stage cover Technical feasibility?
Socioeconomic feasibility?
Environmental sustainability?
Financial feasibility?
Fiscal affordability assessment?
Legal assessment?
Risk assessment and PPP project structuring?
Value for Money assessment?
Market sounding with stakeholders?
Is the PPP procurement plan required? Is there a need to set up a separate PPP procurement committee? Is competitive bidding the only method for selection of PPP private developer? Unsolicited proposals are allowed in energy sector Is the prequalification stage necessary? Or does the PPP legal and regulatory framework allow flexibility to skip the prequalification stage? Does the PPP legal and regulatory process provide the option to the preferred bidder for contract negotiations? Does the PPP legal and regulatory framework allow unsuccessful bidders to challenge the award/submit complaints? What is the maximum time allowed for submitting a complaint/challenging the award by unsuccessful bidders from the announcement of the preferred bidder? Does the PPP legal and regulatory framework provide for transparency? Which of the following are required to be published? Findings from the feasibility assessment?
Procurement notice?
Outcome of stakeholder consultations from market sounding?
Clarifications to prequalification queries?
Prequalification results?
Clarifications to pre-bid queries?
Results for the bid stage and selection of preferred bidder?
Final concession agreement to be entered between the government agency and the preferred bidder? And other PPP project agreements executed between government agency and preferred bidder?
Confidentiality
- Yes
- No
- Unavailable
LEARN MORENational Framework for Enabling PPPs
The PPP Process
As per the PPP Law and guidelines1, a PPP project should be implemented following the procedure determined by the law, which includes the following stages:
- Identification of the project and initiation
- Preparation and approval of the project
- Selection of a private partner
- Monitoring and implementation of the project
The follow-up assessment process of a project is shown in the following figure.
- 1Ministry of Finance of Georgia. PPP Guidelines. March 2020. https://ppp.gov.ge/app/uploads/2020/07/PPP-Guidelines-ENG.pdf; PPP Agency, Guide to Public–Private Partnerships. https://ppp.gov.ge/app/uploads/2021/04/PPP_Guide_logo_colors-ENG.pdf.
PPP Project Process Flow
PPP = public–private partnership
Source: Ministry of Finance of Georgia. Public–Private Partnership Guidelines. March 2020.
The following table highlights the various steps involved in each stage of the PPP process.
The Public–Private Partnership Process in Georgia
Stage Description Identification and initiation of the PPP project The identification of a PPP project should be carried out by an authorized body or the PPP Agency in accordance with Article 12 of the PPP Law. In the case of an unsolicited proposal (referred to as an ‘initiative proposal’ by the PPP Law) regarding the implementation of a concession, the identification of a PPP project may also be carried out by a private initiator in accordance with Article 15 of the PPP Law.
The identification and preparation of a PPP project should be carried out in accordance with the PPP Law, taking into consideration the state development plan and strategy and the municipality development strategy and action plan.
After the identification of a possible PPP project, the authorized body prepares a project concept note (PCN) in accordance with the PPP Law and requirements stipulated in the PPP guidelines and submit it for review to the PPP Agency and the Ministry of Finance.
The PCN should provide the following detailed information about projects, including:
- Preliminary assessment of needs of project implementation and its compliance with public interest and relevant state strategies
- Preliminary assessment of the value of the project
- Preliminary suggestion regarding the form of the PPP and functions of public–private partners
- Preliminary assessment of budget availability and fiscal risks
Based on the review of the PCN in accordance with the evaluation criteria defined by the PPP Law and further elaborated in the PPP guidelines, the PPP Agency issues a recommendation and the Ministry of Finance prepares an opinion and conclusion regarding the PCN.
The authorized body submits the project concept with the recommendations of the PPP Agency and the opinion from the Ministry of Finance to the Government of Georgia (Ministers Cabinet chaired by the Prime Minister) for review.
The decision of the Government of Georgia on the initiation of the preparation of a PPP project is based on the following criteria:
- strategic or social value of the project
- preliminary assessment of the economic impact of the project
- accessibility to public finances for the implementation of the project
- assessment of fiscal risks that may be caused by the project
In the case of approval of the project concept by the government, the authorized body proceeds to the second (preparation) phase and carries out preparatory work for the project and, if necessary, ensures the participation of the PPP Agency and the Ministry of Finance in the project within the scope of its authority.
Preparation and approval of the project The preparation of a PPP project is carried out in accordance with the PPP Law. The authorized body within the framework of the PPP Law prepares a financial and feasibility study and analysis in which, among other things, the following are assessed:
- the cost of the PPP project and the potential social and economic consequences of its implementation, accessibility to the budget by the authorized body for the implementation of the PPP project in the case of the state’s financial participation.
- the environmental and social impact assessment of the project implementation and the measures determined by the legislation of Georgia to be taken to mitigate any negative impact.
The results of the PPP project preparation are submitted to the Ministry of Finance for review. The Ministry of Finance prepares an opinion in accordance with Article 10 (1) (a) of the PPP Law within the period determined by a legal act of the government.
The documents and relevant research related to a PPP project, together with the opinion of the Ministry of Finance, are submitted to the government for review, before initiating the selection process for a private partner.
The government, on the basis of the submitted documentation, makes a decision on the approval of the PPP project, on the refusal to approve the PPP project, or on the revision of the PPP project.
In the case of approval of the PPP project by the government, the authorized body prepares the documentation for the selection process and initiates the stage of selection of a private partner.
The government is authorized to define additional requirements for carrying out a feasibility analysis within the framework of a PPP.
If the implementation of a PPP project is within the competence of more than one authorized body, the government determines the authorized body to implement the PPP project, or makes a decision on the joint implementation of the project by the relevant authorized bodies.
Selection of a private partner The selection of a concessionaire is carried out by the authorized body on the basis of the selection process provided in Articles 18–20 of the PPP Law. The process for selecting a concessionaire maybe public or closed. A public selection process is open to the participants of the selection process that meet the requirements established for the selection process. The selection process is usually public, except for those related to state security interests, which are closed. The selection process for facilities of special importance may be public or closed on the basis of a decision of the government. The main stages of the selection process of a concessionaire are:
- announcement of the selection process
- submission of the qualification documents by the participants of the selection process
- qualification assessment of the participants of the selection process
- invitation to submit a proposal
- submission of proposals by the participants of the selection process
- assessment of proposals within the framework of the selection process
- selection of a short list and/or the identification of the winning participant
- conduct of negotiations regarding the terms and conditions of a PPP agreement with the participants of the selection process, the participants determined by a short list, or the winning participants conclusion of a PPP agreement
The documentation for the process of selecting a concessionaire should include the information necessary for the preparation and submission of the application for the selection process, as well as the criteria, procedures, and appropriate terms for selecting a concessionaire.
The authorized body has the right to make an amendment to the documentation for the process of selecting a concessionaire, with the exception of the conditions provided for in the law. In such case, the period of familiarization with the application and the documentation of the selection process is extended by the period between the announcement of the selection process and the period when the relevant amendments were made, except for cases where the amendment is of a technical character and aims to correct or verify technical matters only.
The requirements for the documentation of the selection process of a concessionaire, the procedure for making amendments thereto and for their publication, as well as the procedure for making requests during the qualification stage of the selection process, and the procedure and the methodology for the assessment of proposals within the framework of the selection process, are determined by a legal act of the government.
The criteria for the assessment of a proposal within the framework of the selection process of a concessionaire are determined so as not to restrict competition. The period of implementation of a PPP project, the amount of private funding to be made, the quality of works to be carried out or services to be provided, and/or other criteria based on the specific nature of the project or a combination thereof, are defined as the criteria for the assessment of a proposal. The criteria and the procedures for the assessment of a proposal for a PPP are determined by the authorized body
The authorized body establishes a selection commission in accordance with the PPP Law. The selection commission is chaired by the head of the authorized body or a person designated by him/her. Experts and specialists in respective fields are invited to the selection commission with the right to deliberative voting.
The selection commission assesses the submitted applications. The rules of operation of the selection commission are determined by a legal act of the government.
After carrying out the assessment of applications for selecting a concessionaire and after completing the stages determined by the PPP Law, the authorized body submits the agreed and negotiated terms and conditions of the PPP agreement to the Ministry of Finance for its review and recommendations.
The results of the assessment of the selection process of a concessionaire and the agreed and negotiated terms and conditions of the PPP agreement, together with an opinion from the Ministry of Finance, are submitted to the government for review.
On approval of the results of the bid process, the winning bidder, and the agreed and negotiated terms of the PPP agreement by the government, the authorized body executes the PPP agreement with the winning bidder.
Implementation of the project The respective authorized body (public partner) and the PPP Agency are entrusted with the authority to monitor the implementation of the PPP projects. The Ministry of Finance is responsible for the assessment and management of fiscal risks and liabilities associated with PPPs in Georgia.
The authorized body is required to monitor the fulfillment of the obligations assumed under a PPP agreement by a private partner in accordance with the procedure provided for by a legal act of the government.
Appropriate public infrastructure and related documents should be available to the authorized body, taking into account the restrictions determined by Georgia’s legislation and the PPP agreement.
Notwithstanding the above points, the authorized body may not interfere with the commercial activities implemented by a private partner or its contracting third party.
The PPP Agency ensures the publication of annual reports on all initiated PPP projects.
Follow-up assessment of the project The follow-up assessment of the implementation of a PPP project is required to be carried out within a year after the termination of the PPP agreement.
A report on the follow-up assessment of the implementation of a PPP project should be submitted by the authorized body to the PPP Agency and the Ministry of Finance. The Ministry of Finance should draw up an analysis of the follow-up assessment of the implementation of the PPP project and prepare appropriate recommendations.
The PPP Agency should request from the Ministry of Finance an analysis of the assessment carried out by the authorized body with its recommendations and submit an overall assessment to the government with recommendations on how the process of the assessment and implementation of PPPs may be improved in the future.
PPP = public–private partnership.
Sources: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; and Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
Source: Asian Development Bank. 2019. Public-Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; Public Private Partnership Agency of Georgia. 2020. Guide to Public Private Partnerships in Georgia. Tbilisi. https://ppp.gov.ge/app/uploads/2020/05/PPP_Guide_ENG_PRINT.pdf; and World Bank. PPP Knowledge Lab. Georgia. https://library.pppknowledgelab.org/documents/5554/download?ref_site=kl (accessed 25 July 2020).
National Framework for Enabling PPPs
Standard Operating Procedures, Tool Kits, Templates, and Model Bid Documents for PPPs
Parameters
COMPAREDOWNLOADDoes the country have PPP Guidelines/PPP Guidance Manual? Does the PPP Guidelines/PPP Guidance Manual adequately cover the process, entities involved, roles and responsibilities of various entities, approvals required at various stages, and the timelines for the various stages of the PPP project life cycle? What are the templates and checklists available in the PPP Guidelines/PPP Guidance Manual? Project Needs Assessment and Options Analysis checklist?
Project Due Diligence checklist?
Technical Assessment checklist?
Environmental Assessment checklist?
PPP Procurement Plan template?
Does the country have standardizedmodel bidding documents for PPPs? Model Request for Qualification (RFQ) document?
Model Request for Proposal (RFP) document?
Model PPP/Concession Agreement?
State Support Agreement?
VGF Agreement?
Guarantee Agreement?
Power Purchase Agreement?
Capacity Take-or-Pay Contract?
Fuel Supply Agreement?
Transmission and Use of System Agreement?
Performance-Based Operations and Maintenance Contract?
Engineering, Procurement and Construction Contract?
Does the country have standardized PPP agreement terms? Does the country have standardized/ model tool kits to facilitate identification, preparation, procurement, and management of PPP projects? PPP Family Indicator?
PPP Mode Validity Indicator?
PPP Suitability Filter?
PPP Screening Tool?
Financial Viability Indicator Model?
Economic Viability Indicator Model?
VFM Indicator Tool?
Readiness Filter?
Is there a framework for monitoring fiscal risks from PPPs including the following? Process for assessing fiscal commitments?
Process for approving fiscal commitments?
Process for monitoring fiscal commitments?
Process for reporting fiscal commitments?
Process for budgeting fiscal commitments?
Are there fiscal prudence norms/thresholds to limit fiscal exposure to PPPs? - Yes
- No
- Unavailable
Source: : Asian Development Bank. 2019. Public-Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; Government of Georgia. 2018. Law of Georgia on Public-Private Partner-ships. Kutaisi. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf; and World Bank. Benchmarking Infrastructure Devel-opment. Georgia PPP Summary. https://storage.googleapis.com/wb-bid/Economy/Summary/BID_2020_Georgia_PPP_Summary.pdf.
Key Clauses Related to PPP Agreements
Parameters
COMPAREDOWNLOADDoes the law specifically enable lenders the following rights: Security over the project assets?
Security over the land on which they are built (land use right)?
Security over the shares of a PPP project company?
Can there be a direct agreement between the government and lenders?
Do lenders get priority in the case of insolvency?
Can lenders be given step-in rights?
Does the law specifically enable compensation payment to the private partner in case of early termination due to: Public sector default or termination for reasons of public interest?
Private sector default?
Force majeure?
Does the law enable the concept of economic/financial equilibrium? Does the law enable compensation payment to the private partner due to: Material adverse government action?
Force majeure?
Change in law?
- Yes
- No
- Unavailable
LEARN MORENational Framework for Enabling PPPs
Standard Operating Procedures, Tool Kits, Templates, and Model Bid Documents for PPPs
Key clauses related to public–private partnership agreements
The PPP Law defines the following provisions that a PPP agreement should include:
- the subject of the PPP agreement, the scope and characteristics of the work to be carried out, and other matters related to public infrastructure and/or services to be provided within the framework of the PPP;
- the procedure for the distribution and transfer of property rights (if any) relating to public infrastructure and/or other property provided for by the PPP agreement between the parties;
- the period of validity of the PPP agreement;
- any availability payment/performance-based compensation, and/or other payments (if any) to be made to the private partner;
- payments (if any) to be made to the public partner; and
- the grounds and procedures for the termination of the PPP agreement, and the consequences thereof.
In the case of an institutionalized PPP, in addition to the provisions determined by the legislation of Georgia, a partners’ agreement or charter should include:
- the types, amount, and the form of joint financial resources;
- the procedures for making such organizational changes for which the private partner requires consent from the public partner, including the change of a partner of an institutionalized PPP company; and
- the conditions and procedures for replacing the private partner, or for the withdrawal of the public partner from an institutionalized PPP company.
The PPP agreement is a fixed-term agreement. The principles for determining the said term are defined by the PPP Law. Within the framework of a PPP agreement, the parties, under Georgia’s legislation, may conclude a direct contract and other agreements permitted by the legislation.
There is no provision in the law empowering the concessionaire to pledge or assign the assets for which it has user rights under a project agreement or shares of the project company or project agreement.
The PPP agreement may include the power to exercise a right to temporary administration by the authorized body or a creditor in some cases of substantial violation of an obligation by a private partner, or in other cases provided for by the PPP agreement. The authorized body or the creditor would have the right to temporarily carry out the operation of public infrastructure and/or the provision of public services to ensure the protection of public interests. The costs incurred for the temporary administration would be covered by the party determined by the PPP agreement. In the cases provided for by the PPP agreement or a direct contract, the authorized body or a creditor may replace a private partner with another private partner. The new private partner should meet all the qualification requirements (if any) and other requirements, based on which the PPP agreement was concluded with the original private partner.
A direct contract could be executed between the parties to the PPP agreement and a creditor. This contract would provide for the rights and guarantees of the creditor such that they do not contravene the legislation of Georgia. It would also provide the creditor with the right to replace the private partner and to carry out temporary administration of the PPP project. This contract would also provide for the obligation of the parties to exchange information on the implementation of a PPP agreement, a provision on paying compensation to the creditor (including in the case of failure to fulfill an obligation) and other terms and conditions agreed by the parties. Any action by the creditor or a private partner intended to violate a right originating from this contract or the PPP agreement would be prohibited, except for the cases explicitly defined by the legislation of Georgia, the direct contract, or the PPP agreement.
The Law of Georgia on Insolvency Proceedings provides the hierarchy of creditors for determining the order by which the claims will be satisfied. The first three ranks cover enforcement and other expenses. Secured creditors are listed in the third rank. The secured creditors will be able to satisfy their claims from the granted collateral on a priority basis in comparison with unsecured creditors. The ability of the secured creditors to enforce their rights under the security documents, or collect from the collateral provided, may be adversely affected by the tax lien, which may be claimed by Georgia’s tax authorities in case of tax liability of the owner of the collateral.
The parties to the PPP agreement have the right to amend the PPP agreement at any time, based on mutual agreement, under the same PPP agreement and the legislation of Georgia. An amendment that concerns the essential terms of the PPP agreement should be submitted for approval by the government in accordance with the government’s legal act.
The amendments to be made to the PPP agreement that may include fiscal risks should be submitted to the Ministry of Finance by the authorized body. If, according to the Ministry of Finance, there are signs of fiscal risks in a proposed amendment, and/or if the amendment affects the initial value of the PPP project in the volume determined by a legal act of the government, such amendments would be submitted to the government for review.
A PPP agreement may be terminated by the agreement between the parties. The consequences of the termination of a PPP agreement shall be determined by Georgia’s legislation and the PPP agreement between the parties.
Sources: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf; and World Bank. PPP Knowledge Lab. Georgia. https://library.pppknowledgelab.org/documents/5554/download?ref_site=kl (accessed 25 March 2024). Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; and Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
National Framework for Enabling PPPs
Unsolicited PPP Proposals
Parameter
COMPAREDOWNLOADWhat are the advantages provided to the project proponent for an unsolicited bid? Competitive advantage at bid evaluation?
Swiss Challenge?
Compensation of the project development costs?
Government support for land acquisition and resettlement cost?
Government support in the form of viabiity gap funding and guarantees?
- Yes
- No
LEARN MORENational Framework for Enabling PPPs
Unsolicited PPP Proposals
The PPP Law allows for the submission and acceptance of unsolicited proposals, also referred to as initiative proposals in the PPP Law. The relevant provisions of the PPP Law related to unsolicited proposals (applicable only to the energy sector) are as follows:
- A private initiator has the right to prepare and submit an initiative proposal to the relevant line ministry of the corresponding sector to implement a concession in the sector determined by a legal act of the government.
- An initiative proposal shall be submitted in accordance with a legal act of the government.
- The line ministry should assess an initiative proposal. If it gets approved, the line ministry should ensure the implementation of appropriate measures for its initiation under the PPP Law and a legal act of the government. Procedures for the review and approval of PPP projects identified by the authorized body and through an initiative proposal are identical. In the case of an initiative proposal, the feasibility study may be conducted by a private initiator in the cases provided for by a legal act of the government.
- The selection of a private partner, after deciding on the implementation of a PPP project, should be carried out under the PPP process provided in the PPP Law for solicited proposals, or by direct negotiation.
- The selection of a private partner by direct negotiation may be carried out only in the energy sector.
If a participant of a selection process other than a private initiator or a related person (affiliated person) is selected as a result of the procedures followed for solicited proposals, the winning participant should reimburse the private initiator for expenses incurred during the preparation and submission of the initiative proposal, the amount of which became public at the stage of the selection process. The amount should not exceed the amount determined by a legal act of the government.
Based on past evidence, unsolicited projects have been accepted, particularly in the energy sector. In the absence of a PPP Law at that time, these unsolicited proposals were governed through Order 40 by the Minister of Energy. Adopted on 10 April 2017, Order 40 provides for the terms and conditions for submission to the Ministry of Energy and review of the proposals on technical and economic feasibility study, construction, ownership, and operation of hydropower plants, which are not included in the list of potential power plants in Georgia. This rule also includes the mandatory provision of a Memorandum of Understanding executed based on this order, to sell 20% of the full annual power generation of the facility on the internal market for the first 10 years of operation, annually, during the period agreed under the memorandum.
Sources: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; and Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
National Framework for Enabling PPPs
Foreign Investor Participation Restrictions
Parameter
COMPAREDOWNLOADPPP projects with foreign sponsor participation (number) - Unavailable
LEARN MORENational Framework for Enabling PPPs
Foreign Investor Participation Restrictions
Georgia’s current legislation grants foreign investors the right to invest in almost any field of activity with a few exceptions. Restrictions are imposed on investments in the fields that represent the exclusive authority of the government (e.g., energy dispatching activities). The PPP Law does not set any limitations on foreign investor participation in PPP projects. The only limitation is made for state-owned or municipal-owned enterprises. They are supposed to participate in the share capital of the bidder or private partner directly or indirectly as a minority shareholder. However, the amount of such investment by the state-owned or municipal-owned enterprises cumulatively shall not exceed the threshold established by the government’s decree.
According to the Law of Georgia on Promotion and Guarantees of Investment Activity, foreign investors enjoy the same rights as a company registered in Georgia unless limited by Georgia’s legislation. Having paid taxes and duties, an investor is entitled to convert the proceeds (income) from an investment and other funds in a Georgian banking institution at the market exchange rate and repatriate them abroad without limitation. The investor may also freely sell, lease, or mortgage property obtained in Georgia. The investor is entitled to take any of the investor’s movable property abroad. As a general note, the fundamental principles of PPPs under the PPP Law include the nondiscrimination principle of fair and equal treatment of all public, private, and foreign and domestic entities.
Furthermore, the PPP Law does not set any limits for foreign investor participation in PPP projects. The only limitation is made for state- or municipal-owned enterprises, which are supposed to participate in the share capital of the bidder or private partner directly or indirectly as a minority shareholder but in the amount cumulatively not exceeding the threshold established by the government’s decree. The Law of Georgia on Agricultural Land Ownership restricted foreign citizens (as well as local companies with participatory interest of foreign citizens) and legal persons registered abroad to own agricultural land plots in Georgia. However, this article was invalidated by Decision 3/1/512 of 26 June 2012 of the Constitutional Court of Georgia. In 2019 the entire law was repealed. Instead, the Organic Law of Georgia on agricultural land ownership was enforced, which states that subject to the restrictions established by this law, agricultural land may be owned by a foreigner, if they inherited this land. Exceptions are permitted by the decree of the government even in cases when a land is owned by a private legal entity registered in Georgia, whose dominant partner is a foreigner and/or a legal entity registered abroad or whose dominant partner cannot be determined.1
- 1The Organic Law of Georgia on Agricultural Land Ownership. https://www.matsne.gov.ge/ka/document/view/4596123?publication=0.
National Framework for Enabling PPPs
Dispute Resolution
Parameter
COMPAREDOWNLOADDoes the country have a Dispute Resolution Tribunal? Does the country have an Institutional Arbitration Mechanism? Can a foreign law be chosen to govern PPP contracts? What dispute resolution mechanisms are available for PPP agreements? Court litigation
Local arbitration
International arbitration
Has the country signed the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards? - Yes
LEARN MORENational Framework for Enabling PPPs
Dispute Resolution
The Law of Georgia on Promotion and Guarantees of Investment Activity delineates two dispute resolution mechanisms: (i) the courts of Georgia, or (ii) alternative dispute resolution subject to agreement between an investor and a state or international agreement between states. For a foreign investor to address the International Center for Settlement of Investment Disputes, this right must be granted by an international agreement (often bilateral agreements) or through an agreement between the investor and the state.
As per the PPP Law, the relationship between the parties to a PPP project based on a PPP agreement should be regulated by the legislation of Georgia. The PPP Law provides for the following dispute resolution mechanism for PPP projects:
- The participant of the selection process has the right to appeal the decision or action of the authorized body or selection commission related to the selection process to the Public Procurement Dispute Review Board created based on the Law of Georgia on Public Procurement under the procedure established by the same law and the corresponding statutory act (to take effect from 1 January 2025). The above condition shall not restrict the right of a participant in the selection process to appeal directly to a court decision or action of the authorized body or selection commission related to the selection process.
- Disputes that arise out of a PPP agreement, a direct contract, and/or other agreements related to PPPs shall be resolved following the procedure for resolving disputes agreed by the parties under the relevant agreement.
- Parties shall have the right to define a specific mechanism in a PPP agreement for resolving a dispute, including national or international commercial arbitration. If the parties do not define a preferred mechanism for resolving a dispute in the PPP agreement, the dispute shall be reviewed by a court of Georgia.
Sources: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf; and Government of Georgia. 2018. Law of Georgia on Public–Private Partnerships. https://matsne.gov.ge/en/document/download/4193442/0/en/pdf.
National Framework for Enabling PPPs
Environmental and Social Issues
Parameter
COMPAREDOWNLOADIs there a local regulation establishing a process for environmental impact assessment? Is there a legal mechanism for the private partner to limit environmental liability for what is outside of its control or caused by third parties? Is there a local regulation establishing a process for social impact assessment? Is there involuntary land clearance for PPP projects? - Yes
- No
LEARN MORENational Framework for Enabling PPPs
Environmental and Social Issues
The PPP Law lists environmental and social sustainability as one of the key principles of PPPs and sets out the need to evaluate the conformity of PPP to applicable environmental and planning requirements, as well as to environmental and social impact assessments that take place before executing the agreement.
Georgia’s law requirements and procedures for environmental impact assessment (EIA) are set out in the Code of Georgia on Environmental Impact Assessment, adopted on 1 June 2017.1 The Code repealed the Law on Environmental Impact Permits.2 Consequently, the permit was substituted by a similar document on environmental protection. The code regulates matters related to strategic documents and public or private activities, which may have significant effects on the environment, human life, and health. Following the structural changes of the government, the Ministry of Environment and Natural Resources (formerly responsible for issuing the environmental impact permit) has been merged with the Ministry of Agriculture. The merger of the two ministries formed the Ministry of Environmental Protection and Agriculture of Georgia.
The main stages of EIA include a scoping procedure, preparation of an EIA report by the person carrying out the activities or by an adviser, public participation, assessment by the Ministry of Environmental Protection and Agriculture of information included in the EIA report, conduct of an expert examination, and implementation of a transboundary EIA procedure, if necessary. A decision is issued by the Ministry of Environmental Protection and Agriculture, assuming the state review is favorable. This is an essential prerequisite for the issuance of a construction permit.
Since the mid-1990s, Georgia has developed and updated several laws to regulate land ownership rights and expropriation processes. All land rights are registered in the National Agency of Public Registry maintained by the Ministry of Justice of Georgia. Expropriation of property is permitted for social needs. The Organic Law of Georgia on Expropriation of Property in Urgent Necessity of Ensuring Social Needs (adopted on 11 November 1997) outlines grounds and procedures for expropriation in cases of necessary social needs.3 Expropriation is allowed if an individual’s life and health, state, and public security is in danger due to one of the grounds provided under the organic law. The decision on expropriation is made by the state. The owner shall receive full and fair compensation before expropriation. In urgent cases for public needs, the grounds and procedures of expropriation in urgent cases are provided by the Law of Georgia on Expropriation for Public Needs (adopted on 23 July 1999).4
Expropriation is allowed in cases provided for under the law. The decision on expropriation is made by the courts of Georgia based on the order of the Ministry of Economy and Sustainable Development (MOESD). The owner shall receive full and fair compensation in advance. In case the owner and the expropriator do not agree on compensation, each is entitled to address the court.
- 1Government of Georgia. 2017. Law of Georgia on Environmental Assessment Code. Kutaisi. https://matsne.gov.ge/en/document/download/3691981/1/en/pdf.
- 2Government of Georgia. 2008. Law of Georgia on Environmental Impact Permits. Tbilisi. https://matsne.gov.ge/en/document/download/20206/13/en/pdf.
- 3Organic Law of Georgia on Expropriation of Property in Urgent Necessity of Ensuring Social Needs (adopted on 11 November 1997). https://www.matsne.gov.ge/en/document/view/28354?publication=3.
- 4The Law of Georgia on Expropriation for Public Needs (adopted on 23 July 1999). https://matsne.gov.ge/ka/document/view/16480?publication=7#!.
Source: Government of Georgia. 2017. Law of Georgia on Environmental Assessment Code. https://matsne.gov.ge/en/document/download/3691981/1/en/pdf.
National Framework for Enabling PPPs
Land Rights
Parameter
COMPAREDOWNLOADWhich of the following is permitted to the private partner: Transfer land lease/use/ownership rights to third party
Use leased/owned land as collateral
Mortgage leased/owned land
Is there a legal mechanism for granting wayleave rights, for example, laying water pipes or fiber cables over land occupied by persons other than the government or the private partner? Is there a land registry/cadastre with public information on land plots? Which of the following information on land plots is available to the private partner? Appraisal of land value
Landowners
Land boundaries
Utility connections
Immovable property on land
Plots classification
- Yes
- No
LEARN MORENational Framework for Enabling PPPs
Land Rights
The key regulations governing land-use rights and land acquisition are the Civil Code of Georgia, the Law of Georgia on State Property, and the Local Self-Governance Code. In practice, the government makes land available and provides the right to build to execute each PPP scheme. This has been one of the essential obligations of the government in existing PPP projects. The objectives of land use and the time frame of assignment of the required lands for each project are agreed on a case-by-case basis with the government, and a further special decree regarding such land transfer is issued. The transfer is registered with the National Agency of Public Registry and, usually, the registered land rights are attached to the performance obligations of the private partner. Transfer of land lease or land use or ownership rights to a third party, use of such land as collateral, or mortgage of leased or owned land is allowed with the consent of the relevant government body. It is also noteworthy that the obligation for investment and privatization is attached to such land plots to benefit the government until the obligations under the relevant agreement by the private party have been fulfilled. Furthermore, the provision of land and subsoil use rights or any other licenses or permits is one of the types of government support in PPPs.
The PPP Law provides for the transfer of property rights to the private partner to help the private partner adequately discharge its obligations under the PPP agreement. Related to this, the PPP Law also provides specific conditions for the use of public infrastructure transferred to the private partner to help fully discharge its obligations under the PPP agreement. The relevant provisions of the PPP Law governing the transfer of property rights are as follows.
- The PPP agreement may determine that appropriate rights to public infrastructure and/or related property be transferred to a private partner by the authorized body. Further, it may determine whether or not the public infrastructure and/or the related property shall be returned to the authorized body after the termination of the PPP agreement.
- The transfer of state property to a private partner and the related relations shall be regulated under the Law of Georgia on State Property, except for the exceptions provided for by the same law.
- The procedures and conditions for the transfer of municipal property shall be determined by an ordinance of the Government of Georgia, and the procedure and conditions for the transfer of property owned by the Autonomous Republics of Abkhazia and Adjara shall be determined by appropriate legislation.
- Unless otherwise provided for by a PPP agreement, a private partner shall have a right to transfer the rights to public infrastructure and related property, with the prior written consent of a public partner, to a third party under the same conditions and for a period which does not exceed the period determined by the PPP agreement.
The relevant provisions of the PPP Law governing the use of public infrastructure are as follows:
- Public infrastructure shall only be used for the purposes determined by a PPP agreement unless otherwise determined by legislation.
- A private partner is obliged to observe the terms and conditions determined by a PPP agreement, and the standards intended for the use of public infrastructure.
Source: Asian Development Bank. 2019. Public–Private Partnership Monitor. Second Edition. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf.
Government Support for PPP Projects
Project Funding Support
Parameters
COMPAREDOWNLOADProject Funding Support Is there a dedicated government financial support mechanism for PPP projects?1 What are the instruments of government financial support available under this government financial support mechanism? Capital grant
Operations grant
Annuity/availability payments
Guarantees to cover
Currency inconvertibility and transfer risk
Foreign exchange risk
War and civil disturbance risk
Breach of contract risk
Regulatory risk
Expropriation risk
Government payment obligation risk
Credit risk
Minimum demand/revenue risk
Risk of making annuity/availability payments in a timely manner
What are the caps/ceilings for the government financial support under each of the abovementioned government financial support instruments? Is there a minimum PPP project size (investment) for a PPP project to be eligible for receiving government financial support? Are there minimum equity investment requirements which the private developer should meet for availing any of the above government support mechanism? Are there minimum financial commitment requirements for the private developer equity before the government support could be drawn? Is the government financial support required, usually the bid parameter for PPP projects? Are unsolicited PPP proposals eligible to receive government financial support? Are there standard operating procedures for providing government financial support to PPP projects? Appraisal and approval process
Budgeting process
Disbursement process
Monitoring process
Accounting, auditing, and reporting process
Who are the signatories to the government financial support agreement? Authorized body, which initiates the PPP projectWho is responsible for monitoring the performance of PPP projects availing government financial support?2 Independent engineer?
Government agency?
Ministry of Finance?
What are the other forms of government support available for PPP projects? Land acquisition funding support?3
Funding support for resettlement and rehabilitation of affected parties?
Tax holidays/exemptions?
Real estate development rights?4
Advertising and marketing rights?
Interest rate/cost of debt subventions?
Other subsidies and subventions?
Can the other forms of government support be availed over and above the government financial support through various instruments listed above? - 1There is no dedicated financial support mechanism. Financial support is decided and set up on a per project basis
- 2Independent Engineer, Implementing Agency, and PPP Center
- 3Where land is required, the project is usually on government land or on land acquired by the government
- 4Though such rights are granted, the Government does not provide financial support for real estate development
- Yes
- No
- Unavailable
LEARN MOREGovernment Support for PPP Projects
Article 28 of the PPP Law provides the forms of support and compensation for a PPP project from the government. Taking into account the restrictions provided for by the legislation of Georgia and/or a PPP agreement, a public partner may take into consideration the support of the Autonomous Republics of Abkhazia and Adjara, and/or municipal support for a private partner, and the following forms of government support.
- Availability payment and/or performance-based compensation;
- Guarantees for consumption, consumers, and income;
- Guarantees for tariff and/or cost of public services;
- Guarantees on the long-term procurement of certain types of goods and services at the price determined on the basis of an agreement (the types of goods and services are determined by the Government of Georgia);
- Grants and/or subsidies aimed at covering certain costs and returns on investments made in accordance with the procedure and in the cases provided for by the Government of Georgia, including grants in kind;
- Transferring land and/or granting permits and licenses provided for by the legislation of Georgia in the cases provided for by the legislation of Georgia;
- Granting exclusive rights to intellectual property to a private partner; and
- Granting exclusive rights to a private partner to establish and maintain, and/or operate and maintain a facility of a PPP agreement, and/or to provide public services within certain territories.
A PPP agreement may include (i) the payment of a fixed amount by a private partner to a public partner as a lump sum, or in installments; (ii) the payment of the partial income by a private partner to a public partner; (iii) receivable from the operation based on a PPP agreement, or the transfer of property owned by a private partner, and/or of property created based on a PPP agreement to a public partner; and (iv) the payment of a relevant fee in other forms permitted by the legislation of Georgia. A PPP agreement may include a combination of any forms of payment provided for by Article 28 of the PPP Law.
The upper limit of the government’s liability within the PPP framework shall be determined by the legislation regulating state finances. The government shall approve the methodology for calculating the limit provided by Article 28 of the PPP Law.
Source: Asian Development Bank. 2019. Public-Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf.
Project Development Funding
Parameter
COMPAREDOWNLOADProject Development Funding What are the various sources of funds for PPP project preparation? Budgetary allocations
Dedicated project preparation/project development fund
Technical assistance from multilateral/bilateral/and donor agencies
Recovery of project preparation funding from the preferred bidder
At what stage of the PPP project, can the project preparation/development funding be availed by the government agency? Pre-feasibility stage
Detailed feasibility stage
Transaction stage
Is there a list of project preparation/project development activities towards which the project development funding can be utilized? Can the project development funding be utilized to appoint transaction advisors for PPP projects? Is there a specific process to be followed by government agencies to appoint transaction advisors? What are the payment mechanisms for making payments to transaction advisors? Timesheet-based
Milestone-based
Are there standard agreements and documents to avail project development funding? Who are the signatories to the project development funding agreements? Respective agencies - Yes
- No
- Unavailable
LEARN MOREGovernment Support for PPP Projects
Project Development Facility
There is no Project Development Fund available for PPP projects in Georgia.
Source: Asian Development Bank. 2019. Public-Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf.
Maturity of the PPP Market
Parameter
COMPAREDOWNLOADPPP Project Statistics Is there a national PPP database for the country?
Is the distribution of PPP projects across infrastructure sectors available? Transport?
Energy?
Water?
Municipal solid waste?
Social infrastructure?
Information and communication technology?
Is the distribution of PPP projects across various stages of the PPP life cycle available? Pre-feasibility/preliminary assessment stage?
Full feasibility assessment stage?
Transaction stage?
Commercial close?
Financial close?
- Yes
LEARN MOREMaturity of the PPP Market
The PPP Agency is obliged to establish and manage a database for current and completed PPP projects. For the creation and efficient management of a PPP project database by the PPP Agency, as well as for making reports, an authorized body, upon an appropriate request, shall submit a copy of a signed PPP agreement to the PPP Agency with all annexes and amendments and related documentation, in accordance with a legal act of the government. The database of PPP projects should be publicly available, except for restricted information, under Article 16 of the PPP Law. The Ministry of Finance also holds information on PPP projects.
Furthermore, the PPP Agency should ensure the publication of annual reports on all initiated PPP projects. An annual report for each PPP project shall include:
- a brief project description;
- progress achieved within the year during project implementation, taking into account those measures that need action and which formed the basis of project approval; and
- a financial report of a private partner in compliance with financial reporting standards, following the procedure established by the legislation of Georgia.
Source: Public–Private Partnership Agency of Georgia.
PPP Project Pipeline
Parameter
COMPAREDOWNLOADDoes the country publish a national PPP project pipeline? At what frequency is the national PPP project pipeline published? Is the national PPP project pipeline based on the national infrastructure plan for the country? - No
- Unavailable
LEARN MOREMaturity of the PPP Market
The PPP Agency publishes annual reports, which include data on all the potential PPP projects that were at the pre-feasibility stage and have been approved by the agency. As of 2023, these constitute only projects from the energy sector (Following figure). For example, in 2023, a total of 32 energy projects were reviewed and approved by the agency with a total investment of $583.2 million. Out of these 32 energy projects, 13 were solar power plants, four were wind power plants, and 15 were hydropower plants.
Potential PPP Projects in the Energy Sector Reviewed by the PPP Agency (2020–2023)
PPP = public–private partnership.
Source: PPP Agency. Annual Reports.
Source: Asian Development Bank. 2019. Public-Private Partnership Monitor. Second Edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf.
PPP Book
Parameters
COMPAREDOWNLOADSources of PPP Financing Who are the typical entities financing PPP projects in the country? Private developers
Construction contractors
Institutional/financial/private equity investors
Pension funds
Insurance companies
Banks
Nonbanking financial corporations/Financial institutions
Donor agencies
Government agencies and state-owned enterprises
What is the distribution of financing among these entities financing PPP projects? Does the country have the history/track record of issuing bonds by infrastructure projects? How many infrastructure projects private developers for infrastructure projects have raised funding through bond issuances? What is the value of funding raised through capital markets by PPPs? Does the country have a matured derivatives market to hedge certain risks associated with PPPs? Does the country have a national development bank? Does the country have credit rating agencies to rate infrastructure projects? Typically, what are the credit ratings achieved/received by infrastructure projects? Is there a threshold credit rating for infrastructure PPPs below which institutional investors, pension funds, and insurance companies would not invest in infrastructure PPPs? What is the typical funding model for infrastructure PPPs -- corporate finance or project finance? Project Finance Are there regulatory limits/restrictions for the maximum exposure that can be taken by banks to infrastructure projects? - Yes
- Unavailable
LEARN MOREMaturity of the PPP Market
The potential sources of financing for infrastructure development are the Ministry of Finance of Georgia, the World Bank, Japan Bank for International Cooperation, Japan International Cooperation Agency (JICA), ADB, and the EBRD.1 The following table summarizes the types and features of these key infrastructure financing sources.
- 1Transport Corridor Europe Caucasus Asia (TRACECA). Country Report on Infrastructure and Finance: Georgia. http://www.traceca-org.org/fileadmin/fm-dam/Investment_Forum/101208_GEO%20country%20report.pdf.
Main Infrastructure Financing Sources in Georgia
Item Non-Limited Recourse Hard Currency Loan Non-Limited Recourse Local Currency Loan Project Financing from Local Public Sector Banks Interest Rate Swaps Currency Swaps Project Financing through Project Bond Issues Maximum tenor (in years) 7–8 years 4–6 years UA Forward duration of 5–10 years Forward duration of <5 years NA Upfront arrangement fee (bps) 40–200 bps 40–50 bps UA NA NA NA Floor rate LIBOR National Bank of Georgia refinancing rate UA NA NA NA Margin rate (bps) 650–900bps 800–1,000 bps UA NA NA NA Percentage of foreign debt out of total debt for project financing UA UA >50% Percentage of project bonds out of total debt for project financing NA NA UA <30% Typical debt-to-equity ratio UA UA 60:40 Timeline to financial close (month) UA Minimum DSCR covenant levels UA Nominal interest rates UA Real interest rates UA Security package UA bps = basis points, DSCR = debt service coverage ratio, LIBOR = London interbank offered rate, NA = not applicable, UA = unavailable
An empty cell indicates that the column head does not apply.
Source: ADB. 2019. Public–Private Partnership Monitor .second edition. Manila. https://www.adb.org/sites/default/files/publication/509426/ppp-monitor-second-edition.pdf.
Historically, large infrastructure projects in Georgia were financed through donors and concessional loans. About 60% of the public debt is a result of infrastructure project borrowings. The largest multilateral lender is the World Bank followed by ADB. Among bilateral lenders, Germany’s KfW and JICA have provided the largest amount of concessional financing for infrastructure.
Joint Stock Company (JSC) Development Fund of Georgia (DFG) is a state investment fund. It continues to operate based on the JSC Partnership Fund, founded in 2011, which operated under this name until September 2023, before the reform of the fund. DFG’s main objective is to attract and support private investors through participation at the early stage of investment projects (co-investment in equity, subordinated loan, etc.).The major investments for the fund continue to go to power generation, agriculture, real estate, and manufacturing. The energy sector projects include the Gardabani Thermal Power Plant and the Nenskra Hydropower Project.2
Although there are arguments for treating infrastructure expenditures differently from current expenditures, financing infrastructure with borrowed funds affects budget deficit and increases debt. Considering the government’s commitment to gradually reduce the budget deficit, it might need to fund the infrastructure projects partially from its revenue resources.
One of the key objectives outlined in the Government Debt Management Strategy of Georgia 2023–2026 is increasing the focus on development-oriented external loans. Generally, the Government of Georgia takes two types of loans from multilateral and bilateral creditors. The first type is investment loans, which are taken directly for specific projects; the other is reform-supporting loans, such as program loans.
The goal of the current objective is shifting the focus on the loans with a relatively high transformational effect due to the domination of foreign currency-denominated loans and the debt larization goal. Therefore, it is envisaged that loans will be taken with different principles based on the type of loan. For example, investment loans will be taken only for large-scale and complex projects that require support from development partners during the project implementation process, such as sharing expertise to achieve high performance. This means that the government will not take investment loans for projects that can be implemented with the same success and efficiency using only budget resources.
As for program loans, from 2022, external borrowing is available only for significant transformational reforms. This includes programs that require extensive technical assistance to implement reforms aligned with international best practices. Program loans are taken only for significant government reforms.3
- 2Development Fund of Georgia. https://fund.ge/site/projects/4.
- 3Ministry of Finance of Georgia. 2023. General Government Debt Management Strategy, 2023–2026. https://mof.ge/images/File/sagvalebi/2023/14-03-2023/Government%20Debt%20Management%20Strategy%202023-2026.pdf.
Credit Rating Agencies in Georgia
Agency Rating Outlook Date Fitch BB Positive January 2024 Scope BB Stable February 2024 Moody’s Ba2 Stable March 2024 S&P Global BB/B Stable February 2024 Sources: FitchRatings. https://www.fitchratings.com/entity/georgia-85877873 (accessed 27 March 2024); Scope Ratings. Sovereign & Public Sector. 2 February 2024. https://www.scopegroup.com/ScopeGroupApi/api/analysis?id=80296a40-a050-48a3-b8e3-54151c587088 (accessed 27 March 2024); Moody’s Ratings. Rating Action: Moody’s Changes Georgia’s Outlook to Stable from Negative, Affirms the Ba2 Rating. 26 March 2026. https://www.moodys.com/research/Moodys-changes-Georgias-outlook-to-stable-from-negative-affirms-the--PR_479489 (accessed 27 March 2024); S7P Global Ratings. Georgia (Government of). https://disclosure.spglobal.com/ratings/en/regulatory/org-details/sectorCode/SOV/entityId/395594 (accessed 27 March 2024).