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Justification for the Works Concession for “Civil Airport for Public Use Sofia” – Public State Property

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Justification for the Works Concession for “Civil Airport for Public Use Sofia” – Public State Property JUSTIFICATION FOR THE WORKS CONCESSION FOR “CIVIL AIRPORT FOR PUBLIC USE SOFIA” – PUBLIC STATE PROPERTY The justification for the works concession for site “Civil Airport for Public Use Sofia” – public state property has been drafted on the grounds of Art. 58 of the Concessions Act. The justification is a result of the preparatory actions, ensured by the Minister of Transport, Information Technology and Communications, Grantor, pursuant to Art. 43b, Para 3 of the Civil Aviation Act in connection with Art. 39, Para 1 of the Concessions Act. In the course of the preparatory work the Minister of Transport, Information Technology and Communications has made assignments and as a result of that technical, financial and economic, legal, environmental and social analyses have been developed. The analyses are in implementation of a Agreement for Advisory Services, signed on 25 October 2017 between the Ministry of Transport, Information Technology and Communications, as a Client/Grantor and the International Financial Corporation (IFC), part of the World Bank Group, as a Agreementor, in partnership with the European Bank for Reconstruction and Development (EBRD). The purpose of the justification for awarding a works concession for a site “Civil Airport for Public Use Sofia” – public state property, is to justify the lawfulness and advisability of the concession, as well as of the decision for opening the procedure. I. ADVISABILITY OF THE CONCESSION 1. A main priority in the field of transport in the Governance Program of the Government of the Republic of Bulgaria for the 2017 – 2021 period: Efficient maintaining, modernizing and developing transport infrastructure, attracting investments and improving the safety and security of the transport sector are among the main priorities in the field of transport in the Governance Program of the Government of the Republic of Bulgaria for the 2017 – 2021 period. 2. In compliance with the priorities of the Government, affirmed with the Strategy for the Development of the Transport System of the Republic of Bulgaria until 2020: The opening of the concession procedure for Sofia Airport is compliant with the Government priorities, affirmed with the Strategy for the Development of the Transport System of the Republic of Bulgaria until 2020, for: 2.1. Building and efficiently maintaining, integrating, modernizing and developing the national transport infrastructure; 2.2. Integrating the Bulgarian transport system into the European transport system; 2.3. Transparent and harmonized conditions for competition on the transport market and ensuring a good business environment; 2.4. Providing adequate financing for the functioning and development of the transport sector; 2.5. Limiting the negative impact of transport on the environment and people’s health; 2.6. Achieving a high level of transport safety and security. 3. In addition to the above, the purpose of this concession includes, but is not limited to: 3.1. Effective and efficient management of Sofia Airport (the Airport) and improving the competitiveness and quality of airport services, in strict compliance with the international 1 norms and standards, as well as with the requirement for maintaining and optimizing the required level of service provision – optimal; 3.2. Implementing new technologies to improve the safety and security of the object of the concession, flight safety and the organization of the handling services, as well as improving the staff qualification; 3.3. Developing and modernizing the airport, including improving the efficiency of airport facilities, modern environmental protection and modernizing the security systems at Sofia Airport, as well as transferring managerial knowledge and expert capacity and developing the commercial activity; 3.4. Reaching the best airport levels, as well as airport development as a world class airport and a hub for the flights between the Middle East, Transcaucasia and Central Europe; 3.5. Developing and strengthening the position of the airport as regional center as well, developing new routes from/to Sofia, including new scheduled long-haul and intercontinental routes (passenger and/or cargo) without damaging or compromising the existing route network, building the necessary infrastructure and relevant facilities, and accounting for the forecasted traffic increase – improving the operation and the quality standards of the services, pursuant to the international good practices, the European Union law and any applicable legislation; 3.6. Ensuring regular revenues in favor of the state at the concessionaire’s risk. The aim for awarding the concession is to transfer the operational and construction risk from the state to the concessionaire and the functions of the state shall remain regulatory and supervisory. The state shall retain its ownership rights over the public state property assets, object of the concession, and shall acquire ownership rights to the public state property assets built by the concessionaire during the concession period. 4. For completeness of this justification, the benefits from the concession award for the state, the customers and society should be mentioned, which may be summarized in the following way: 4.1. For the state: the direct economic benefits for the state shall be the revenues from the initial and annual concession remunerations, from profit tax and from investments made by the concessionaire in the public state property; 4.2. For the airlines and the passengers: the investments, which the concessionaire shall make in airport infrastructure, equipment and in improving the technology and work safety shall lead to reducing the processing time, improving the efficiency and security level for passengers, cargo and technological processes. The time saved, the efficient service provision and the higher security are beneficial for airlines and passengers; 4.3. Benefits from generating new workplaces: the benefits from the concession award are related to generating new workplaces during the investment activity, as well as during the exploitation of the object of concession. The valuation of benefits from the generation of new workplaces during the concessionaire’s investment activity is based on the fact that part of the investment costs is designated for labor costs. Following the concessionaire’s investments in construction, reconstruction and modernization of the object of concession and the implementation of policies, attracting new airlines, the passenger and aircraft traffic will increase, therefore additional staff will be needed to process the larger volumes; 4.4. Benefits for the business: speedy and high-quality airport services, good infrastructure, convenient and high-quality customer service, fast and trouble-free arrival at the desired destination are among the essential benefits for the business. In turn, the good airport infrastructure inevitably suggests high-quality and accessible road, water and sewer infrastructures leading to the airport, which would also be expected to be improved. Transforming the airport into a modern technological site as a result of the investments in infrastructure also suggests developing the area around the airport, shaping it into a 2 contemporary business center, as well as providing high-tech services with the necessary quality; 4.5. Social benefits: the concession will have a certain positive social effect on the region. The concession award for Sofia Airport is expected to result in the following socio- economic benefits: creating new workplaces in the region during the period of construction activities and of business deployment; revenues from personal income tax and social security contributions as a result of the new workplaces created; savings from social contributions, including for unemployed aviation staff, etc. Other benefits, which cannot directly be measured, are increasing the economic and commercial activity in the region; improving the business and regional infrastructure; multiplied effects, such as greater budget opportunities for investments in other areas. Attracting a private investor to improve the quality of the aeronautical services, expand the commercial activities and increase the revenue therefrom, to ensure professional operations management of the airport infrastructure and facilities and to increase the traffic and passenger flows, coupled with the Bulgarian government priorities, set out in the Strategy for the Development of the Transport System of the Republic of Bulgaria until 2020, as specified above, determines the practicality of the concession award. The advisability of the concession is also substanciated by the adopted general concession award conditions, including, but not limited to, the exclusion from participation conditions, the requirements to the bidders and the evaluation criteria. II. MAIN LEGAL ACTS FOR CONCESSION AWARD. LEGAL AND FACTUAL GROUNDS FOR CONCESSION AWARD The relevant applicable legal acts for the concession award are laid in detail in the legal analysis, and for the purposes of this justification there should be an explicit reference to the Concessions Act (CA), its implementing regulations, the Civil Aviation Act (CAA), with its implementation regulations, the directly applicable acts of the European Union law in the civil aviation field, as well as the main international agreements in this field – Chicago Convention on International Civil Aviation, signed in Chicago on 07.12.1944 (Chicago Convention); Convention for Suppression of Unlawful Seizure of Aircraft,
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