China News Service, Beijing, April 8 (Reporter Wang Enbo) China’s National Development and Reform Commission and other departments’ newly revised “Infrastructure and Utility Franchise Management Measures” were announced on the 8th, focusing on resolving the entry of private enterprises exposed in this field in recent years. Difficult questions.
Franchising is one of the two main types of public-private partnership (PPP), with revenue mainly coming from user fees. China launched a PPP boom in 2014, moving towards another model in which project revenue is highly dependent on government payment.
Wu Youhong, a researcher at the Investment Research Institute of the China Academy of Macroeconomics, said that in the past 10 years, the franchise model has been weakened and social capital has insufficient motivation to actively innovate, reduce costs and increase efficiency. In the last round of PPP promotion, state-owned enterprises, especially construction-related central enterprises, gained more competitive opportunities by virtue of their construction qualifications, performance, financing and other advantages, while private enterprises' willingness and participation declined.
In order to solve outstanding problems in this field, China launched a new PPP mechanism in November 2023, making it clear that all such cooperation will be implemented under a franchise model, and private enterprises will be given priority to participate.
In line with the new requirements, the revised "Administrative Measures" extend the maximum period of franchise operations to 40 years, encourage private enterprises to participate in franchise projects through direct investment, sole proprietorship, holding, participation in consortiums and other methods, and clarify the franchisees The benefits gained from improving business management and improving technology belong to them.
This revision also clarifies the legislative purpose of promoting private investment in the general principles, adds the sharing of risks between the government and social capital as a basic principle, and requires that franchisees must be selected through open competition. Special financial support measures are designed to encourage private enterprises to participate in franchise terms, and enterprises with different ownership types receive equal financing treatment, so as to increase support for private enterprises.
Low integrity in government performance of contracts is another problem that officials are trying to solve. The revised "Administrative Measures" propose that the performance of government agency franchise agreements be included in the government integrity assessment and evaluation system. Relevant breaches of contract and untrustworthiness will be identified and punished in accordance with relevant regulations; for issues such as arrears and disguised approvals that are exposed, the relevant provisions are clearly stipulated. Public officials will bear corresponding legal responsibilities.
Wu Youhong believes that the revised "Management Measures" will promote the comprehensive return of the franchise model and lay an institutional foundation for ensuring the standardized development and sunny operation of PPP projects. (over)