EY Law’s Bogdan Malniev Interviews the Head of the PPP Unit of the Ministry of Infrastructure of Ukraine, Taras Boichuk, on the 2020 Deal of the Year in Ukraine.
Malniev: You were the driving force behind the Government’s preparation of the pilot concessions. Can you tell us a bit about how this started?
Boichuk: It was so long ago that few people actually remember the story. What the private sector saw from the announcement of the tender was just the tip of the iceberg. The preparation of the project started in 2016 and it took three years of hard work within the Government to actually prepare the projects and launch the concession tenders.
Malniev: And there were a few difficulties along the way.
Boichuk: You might say that. Some minor things like changes of the President and Parliament, Martial Law, and, when we thought it couldn’t get any worse, COVID-19 knocked on our door. But the persistence and professionalism of the project team saved the day.
Speaking of difficulties, as you also well remember, the project began under a different law on concessions than the one under which it was completed.
Malniev: Yes. And we had to run the concession tender under the archaic old concession law, while the concession contract had to marry both the old and new legal reality. The legal approach we had to take in this situation would be well understood by genetic engineers.
Boichuk: I would say another complication stemmed from the nature of PPP itself. These kinds of projects exist in parallel in two worlds. On one side is the public sector, where the grantor operates within the government’s bureaucracy. It is typically very conservative in its interpretation of the law (government officials do not like taking any risks), while being ultimately responsible before the constituents for the success of the project to the benefit of the nation. On the other side, you have private businesses, which have a completely different mindset.
Malniev: Could you comment on this as the person whose job was basically to bridge this gap and get the deal done?
Boichuk: Yes, this was the key difficulty, and I would argue that, in our case, this was even harder than for others. When we started out, our government had zero experience with these kinds of projects and, to be honest, did not quite have a perfect track record in dealing with private investors. The same could be said about the other stakeholders – municipal authorities were skeptical, labor unions were wary, and I would also say that some private businesses very much lacked an understanding of how this project could be done. Our office’s role was to be an intermediary between all these sides, explaining the benefits of the project, its structure, the roles and responsibilities of all participants, and to basically get everyone on board. It was not easy to sell this thing to everybody.
Malniev: I can imagine this was truly a difficult part of the project.
Now that the first concessions have been signed and are moving forward, the idea of PPPs has suddenly become hugely popular in Ukraine. Transport infrastructure is of course leading the way with new concessions in ports, roads, railway stations, etc. In line with the general decentralization trend in the country, municipalities are increasingly taking a lead – with already announced projects in healthcare, and possibilities in energy, transportation, and social infrastructure. What would you, as a true pioneer of this area in Ukraine, recommend to those at the beginning of this winding road?
Boichuk: First, talk to everybody. It is crucial to identify all stakeholders at the beginning of the project and to structure an efficient and professional communication channel with them. These projects always involve multiple parties on both the public and private sides, and they only work when all key sides are on board. It is very important to heed the interests of the impacted communities and labor unions and involve them from the very outset. It may be hard in the beginning, but trust built from honest and active communication will pay golden dividends at the later stages of the project.
Second, assemble a strong project team. You need a governmental project management office that leads the way, you need a lead transaction advisor (the IFC did a fantastic job here), and you need financial, legal, technical, and environmental consultants. Support of the transaction from IFIs (such as EBRD and IFC) helps build trusting relationships with potential investors. Quality of people matters – the team must have expertise both in how these kinds of projects are done in terms of international practice and in terms of local laws, regulations, practices, and public sector realities. And always remember that no force on earth can stop an idea whose time has come.
Anything you might add yourself?
Malniev: Fully agreeing with your points – I would add a third: be flexible, open-minded, and creative. A project of this complexity is unlikely to be a straight road to success. There are bound to be unexpected situations, positions of stakeholders, changes in government, changes in laws, legal challenges, etc. All of these have happened in our case, and all had to be accommodated and dealt with. You have to be well-prepared, but also be ready to improvise when the situation demands it. I think both of us pretty much had to do that in our respective roles to get the job done.
My final advice goes to the lawyers and probably applies to all types of deals – but it is especially pertinent to multi-party PPPs. Fight for your client but remember that, ultimately, it is your job to get the deal done. Do not be afraid to suggest a compromise, especially if there may be no other way to achieve the result.