PPP: promises, problems

导语：政府和社会资本合作（PPPs）已经吸引了有限的私有利益，并引发了跨部门之间的圈地战争。李克强在2016年的国务院常务会议中反复强调要推进PPP项目。前财政部长楼继伟也致力于控制监管，并尝试推进“强制”PPP项目。

Public Private Partnerships (PPPs) draw limited private interest and spark interagency turf war

state pushing PPPs

PPP was repeatedly promoted by Li Keqiang 李克强 in State Council executive meetings throughout 2016. Lou Jiwei 楼继伟 former finance minister fought to control supervision and pushed for exploring mandatory PPPs. They are slated to

● invite private investment: it encourages private firms to participate in government-initiated projects, providing an alternative investment option with stable returns. Since data was available in May 2012, private investment saw its first y-o-y decline in June 2016. Recovering in August, it remains low

● finance local government: the 2014 Budget Law made irresponsible borrowing more difficult. To fill gaps, local governments increasingly turn to private capital, especially as they struggle to meet annual fiscal targets, and their debt swells

● drive new growth: the central push to limit asset bubbles makes localities more reliant on other growth channels, including infrastructure investment

● increase efficiency: private sector buy-in brings in expertise and more market-savvy management

private sector unimpressed

Of the 10,471 registered PPP projects with total value of C¥12.46 tn, only 11 percenthave been implemented by end September 2016. Faring better weredemonstration PPP projects under Ministry of Finance (MoF) supervision, with 58.2percent implemented. Private investors complain

● SOEs, allowed to bid for PPPs in China, dominate profitable projects that generate steady revenue streams, such as building highways; State Council has sent inspection teams to provinces, urging fair treatment of private investors, but this has only pushed localities to favour SOEs more subtly

● local governments sometimes exploit private firms, changing the terms after signing contracts; MoF proposed to deduct local government transfer payments if they fail to pay private contractors. This controversial clause was omitted from the final management measures

● returns are unsatisfactory: value for money (VfM), fiscal affordability and PPP suitability tests are intended to ensure returns; for unprofitable projects that offer public services, like aged care, increased subsidies are necessary to offer returns, but this is difficult given fiscal shortfalls

● there is no comprehensive PPP Law; this leaves space for ministries to squabble over controlling projects, creating uncertainty for investors

agency turf war

Standards and budgeting for PPP projects are in theory controlled by MoF, whileNDRC directs project selection and price setting. In practice, both agencies havetried to cover both functions, separately issuing project lists and guidelines forfund use. To end interagency competition, on 7 July 2016, Li Keqiang announcedthat public service PPPs will be under MoF’s jurisdiction, and infrastructure PPPsunder NDRC. The State Council Legislative Affairs Office will lead drafting the PPPLaw.

However, the boundaries between public service and basic infrastructure PPPs arenot well defined, argues Wang Shouqing 王守清 Tsinghua University, as manybasic infrastructure projects, like building hospitals and schools, provide publicservices. When MoF issued ‘Notice for promoting PPP in public serviceindustries’on 11 October, it included the following sectors as public service projects under MoF’s jurisdiction

● energy

● transport

● water resources

● environmental protection

● agriculture

● forestry

● municipal construction

This is at odds with NDRC’s assertion that these sectors are basic infrastructure on both 18 August and 27 October.

The two ministries use different standards to evaluate PPP projects, complicating investors’ decisions. MoF uses value for money analysis (VfM), emphasising investment returns and cost efficiency for the public. NDRC did not include this standard in its ‘Guiding principles for implementing PPP projects in traditional infrastructure industries’; it may instead use feasibility studies to assess commercial viability.

legal fix needed

The PPP Law, currently being drafted, should clarify MoF and NDRC’s jurisdictions and set up contract safeguards to protect private investors. Other suggested and ongoing adjustments include

● increased transparency: the government is pushing for better information disclosure, suggests Wang Shouqing 王守清 Tsinghua University, such as publicising contract details and financial transactions

● more liquidity: Shanghai United Assets and Equity Exchange (SUAEE) is preparing to launch a PPP trading platform; as PPP projects often last more than 20 years, a vibrant secondary market will encourage more private participation

● better funding: more stable and long-term investors, like insurance funds, may enter PPPs

● perks from government: experts have suggested preferential tax policies to improve interest in PPPs

roundtable

Jin Yongxiang 金永祥 | Dayue Consulting CEO and founder

Jin is a PPP pioneer, advising private investors as early as the 1990s. Already a consultant for MoF’s PPP database, he recently became one for NDRC’s too. NDRC and MoF PPP guidelines are at odds with each other, argues Jin. NDRC policy includes neither VfM nor fiscal affordability assessment; MoF uses these to select private investors. NDRC policy stipulates private partners can bypass rebidding for facility procurement only if they were selected through bidding originally; MoF policy allows firms to bypass rebidding on other grounds. Finally, NDRC allows state organs and their entrusted organisations to carry out PPP, whereas MoF permits only government, designated functional departments, and designated service agencies to do so. As both ministries built their own PPP databases, says Jin, the greatest concern is that NDRC will dispute the legitimacy of MoF’s projects, and MoF will refuse to fund NDRC’s projects.

编辑： 李姝乐