New rules is­sued to bring pri­vate cap­i­tal into in­vest­ment pro­gramme

The Myanmar Times - Weekend - - International Business -

CHINA is­sued guide­lines on Thurs­day to en­cour­age more pri­vate sec­tor cap­i­tal for pub­lic-pri­vate part­ner­ship (PPP) projects that chan­nel funds into state in­fra­struc­ture projects.

The govern­ment will step up fi­nanc­ing sup­port for PPP projects in­volv­ing pri­vate cap­i­tal by mea­sures such as in­vest­ment sub­si­dies, the Na­tional De­vel­op­ment and Re­form Com­mis­sion said on its web­site.

China is keen to at­tract pri­vate cap­i­tal to govern­ment-led projects to al­le­vi­ate a debt bur­den for lo­cal au­thor­i­ties, and has promised poli­cies to sup­port PPPS, though con­cern about fair ac­cess and low re­turns have de­terred pri­vate sec­tor in­vestors.

State-owned en­ter­prises, which tech­ni­cally qual­ify as the “pri­vate” com­po­nent of PPP projects, have crowded out true pri­vate sec­tor par­tic­i­pa­tion, which com­pli­cates the govern­ment’s ef­fort to re­duce the debt bur­den on the state sec­tor.

Bei­jing has also re­peat­edly said it would take mea­sures to boost pri­vate in­vest­ment across the econ­omy - stuck in sin­gle-digit growth rates for more than a year - which has re­quired the govern­ment to step in with stronger fis­cal sup­port.

The guide­lines state that pri­vate in­vestors’ opin­ions must be con­sid­ered when cre­at­ing PPP poli­cies, and that those over­see­ing projects should al­low pri­vate in­vestors to avoid be­ing re­spon­si­ble for com­plex early-stage work.

“Con­tin­u­ally open the in­fra­struc­ture sec­tor. Apart from in­dus­tries re­stricted by law, fully open to pri­vate cap­i­tal, and do not re­strict pri­vate cap­i­tal par­tic­i­pa­tion in PPP projects in any form or by any means”, the NDRC di­rec­tive said.

More chan­nels for project fi­nanc­ing should be de­vel­oped, in­clud­ing se­cu­ri­ti­sa­tion and bonds, while gov­ern­ment­backed funds should in­vest in projects that in­clude pri­vate cap­i­tal, the NDRC said.

Gov­ern­ments can also con­sider full or par­tial eq­uity trans­fers of PPP projects to pri­vate firms in or­der to en­tice more pri­vate par­tic­i­pa­tion, the guide­lines said.

The value of China’s 14,220 ex­ist­ing PPP projects to­talled 17.8 tril­lion yuan ($2.69 tril­lion) by end-septem­ber, ac­cord­ing to a na­tional database man­aged by the fi­nance min­istry.

While pledg­ing to make it more at­trac­tive for pri­vate firms to in­vest in PPP projects, the govern­ment has also called out lo­cal gov­ern­ments for us­ing the pro­gramme to raise debt through “dis­guised chan­nels”.

China will pre­vent il­le­gal fi­nanc­ing via PPP projects and fend off risks of hid­den debt for lo­cal gov­ern­ments, the guide­lines said.

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