BISHKEK (TCA) — The Manas International Airport in Bishkek should become one of the main aviation hubs in Central Asia by 2023, the National Development Strategy of Kyrgyzstan for 2018-2040 says. This requires improving the infrastructure and equipment of the airport and bringing the level of its services to international. The airport renovation requires investment and competent management.
The Kyrgyz Government is exploring the possibility of transferring the country's airports to external management as part of a public-private partnership. Why is this necessary? Will the state keep control over the airport infrastructure? These issues are now widely discussed in society.
If airport renovation projects are implemented, passenger air transportation may increase by 30-40%, Daniyar Abdyldaev, director of the Public-Private Partnerships Center under the Ministry of Economy of Kyrgyzstan, told a press conference in Bishkek.
The Manas International Airport (MIA) OJSC includes 11 operating airports across Kyrgyzstan — five international and six regional ones.
Only Manas airport in Bishkek and Osh airport are profitable, while the rest are subsidized.
All of the airports were commissioned from 1960 to 1980, and only Manas airport in Bishkek, Osh airport in the south of the country, and Tamchy airport in the resort area of Issyk-Kul Lake have been modernized.
Due to the outdated aircraft fleet, the European Union included all Kyrgyz airlines in its blacklist, which negatively affects the image of the country.
To be removed from the blacklist, Kyrgyzstan’s civil aviation has to pass through the International Civil Aviation Organization’s (ICAO) audit, which requires large financial costs. The basis audit includes such sections as primary aviation legislation, principles of civil aviation organization, aeronautical personnel licensing, operation of aircrafts, airport and ground-based air navigation services, and aircraft accident investigation.
While the country is blacklisted, it is difficult for Kyrgyzstan to purchase aircrafts through leasing. Staying on the EU blacklist increases leasing payments twice, the Kyrgyz Civil Aviation Agency said.
Kyrgyzstan's airlines have been on the EU blacklist since 2006.
Kyrgyzstan intends to become a transit country with safe and demanded corridors for the transit of passengers and goods. This requires implementing the ICAO standards in all sectors of the air transportation system.
The development of airports of the Manas International Airport (MIA) OJSC is a strategic task because there is competition among international airports in the region.
The need for modernization and development of the airports is caused by such factors as the lack of access to the sea, low quality of services and infrastructure, and a small number of international destinations and direct flights.
Modernization is also necessary due to the Government’s decision to introduce the open sky regime in the country.
According to the Government, one of the most promising options for the development of the aviation industry is to attract an internationally recognized investor with successful experience in implementing similar projects and managing airports in other countries. The investor should finance modernization of the airport to bring its infrastructure and services in line with international requirements.
IFC as a government adviser
Last year the Kyrgyz Government created a working group to develop a project on transfer of Kyrgyzstan’s airports to external management as part of a public-private partnership. The WG included independent experts, Parliament deputies, business associations, and representatives of the Manas International Airport and government agencies.
Nine proposals from international development partners were submitted for this project. The WG decided to start developing the project in partnership with the International Finance Corporation (IFC), a member of the World Bank Group. The IFC has successful experience in implementing such projects.
Cooperation with the IFC will include a comprehensive analysis of all eleven MIA airports and the development of a feasibility study. This will be the basis for the integrated development of the entire airports’ infrastructure in Kyrgyzstan.
If the Government approves the submitted documents, a separate decision will be made on the implementation of the project through a transparent and competitive selection of an investor ensuring the most favorable conditions for Kyrgyzstan.
The PPP mechanism protects the interests of the state, explained PPP Center Director Abdyldaev. The airport infrastructure and the MIA shares will not be transferred to the investor or to third parties. In the case the project is implemented, all new infrastructure and equipment will be transferred to the state, he said.
The term for the transfer of airports to PPP has not yet been determined. According to the PPP mechanism, it will be a maximum of 30 years, Abdyldaev said.
While the airport will be used under the PPP system, the state will also make a profit. It may be at 40/60 or 30/70, he added.
Attracting private management companies to the airport sector through public-private partnership is a worldwide practice.
About 43% of all concession airports in the world are located in Europe, and this practice is gaining popularity in Southeast Europe and Central Asia. The Pulkovo airport in St. Petersburg was the first successful PPP project in Russia’s airport sector. A new airport in Istanbul, Turkey also operates on the PPP principle.
Thanks to PPP, Kazakhstan is modernizing, re-equipping and developing several airports, both regional and international.
If there is an airport in a country’s capital with a passenger flow of more than one million people combined with a smaller regional airport, then it is possible to talk about investment attractiveness, international experts say.
In Kyrgyzstan, given the limited air traffic and poor own air fleet, there are no growth prospects, and the PPP mechanism would not produce the desired effect, some local experts say.
Lacking financial calculations and a ready-made economic justification for the project, the Government invites people to once again believe in promises of officials, Kyrgyz political analyst Sheradil Baktygulov told Region.kg. It is not clear how the strategic facilities will be used, and what benefits external management will bring to Kyrgyzstan. It is naive to believe that thanks to PPP the situation will change, the expert concluded.
Kyrgyz MP Iskhak Masaliev opposes the Government’s initiative to transfer the airports to external management. If ministers and senior executives fail to manage the airports, they should resign, he said.
Another MP, Baktybek Sydykov, believes that the Government’s work on public-private partnership projects is not enough. Kyrgyzstan’s aviation industry needs a national policy, otherwise it will not develop. For 28 years of independence, the Kyrgyz state has not been able to fundamentally reform the aviation industry.
After the transfer of the airports to external management under the PPP project, the airfare should not increase, Abdyldaev said.
Ticket prices depend not only on the airlines but also on the cost of the services of the host airports.
The competition will increase, and air ticket prices would drop and flight safety will be ensured due to using new aircrafts. Private companies operating airports are interested in having low-cost airlines working with them.
This is not the first attempt to transfer the airports of Kyrgyzstan under external control in the PPP framework. In 2017, a similar initiative was taken by the then Prime Minister Sapar Isakov.
“We should be realistic and understand that we will not be able to develop our airports ourselves,” he then said.
A tender was held in which several Russian and Turkish companies participated.
However, under the pressure from the MPs and public, the Government was forced to abandon the idea.
The national privatization program for 2015-2017 provided for the privatization of 51% of the state shares in Air Kyrgyzstan airline. The State Property Fund conducted negotiations with Korean, Arab and Chinese investors, but to no avail.
There were also discussions about the possible sale of a 79% state stake in the MIA OJSC.
The Kyrgyz Government has not yet decided whether all the country's airports or only international ones will be transferred to external management. Preparations for the transfer of airports under the public-private partnership scheme will be carried out before the end of 2020 when the relevant proposals will be submitted to the Government. The final decision will be made by the MIA shareholders.
The Manas International Airport is an open joint-stock company, and 79% of its shares belong to the State Property Management Fund, 8% — to the Social Fund, and the remaining 12% — to individuals and legal entities. According to the Law on Joint Stock Companies, the final decision on managing the company will be made by the shareholders.
Given that most of the shares belong to the state, it is the Government that will decide.