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Legislation vital to PPP practice

Updated: Jul 11,2016 1:57 PM

Premier Li Keqiang urged more efforts to create a better legal environment to attract more social investment and promote public-private partnership (PPP).

The Premier heard a report on promoting the PPP model at the latest State Council executive meeting in Beijing on July 7.

PPP promotion cannot be said to be going smoothly. Compared to the large volume of PPP projects, up to 10.4 trillion yuan nationwide by the end of May according to data from the PPP center at the Ministry of Finance, local practices are relatively few.

Private investment fatigue is a big reason, as official data show that the year-on-year growth rate of private investment from January to May this year was 3.9 percent, 7.5 percentage points below last year’s figure for the same period.

The State Council takes this issue very seriously, and talked about public and private investment at four of nine State Council executive meetings held since May 4 this year.

During those meetings, the legislation on PPP got the attention of Premier Li Keqiang, who asked the State Council’s law office to see beyond the interests of departments when drafting laws.

The office director also stressed that unified laws should be adopted to secure PPP promotion.

Why does legislation matter to PPP promotion?

It comes down to the issue of private enterprises being less willing in investment. An independent media organization called WednesdayNews interviewed several private entrepreneurs, and many of them said they lack confidence in investing.

“It seems good when we negotiated a project, but after putting money into it, the unfavorable conditions emerge, and the bad effects are revealed,” said Zheng Zhe, chairman of the board at Gulifa Group.

Other entrepreneurs said that private firms are vulnerable as a group, because the government has more invisible power and a bigger voice under an insufficient legal system.

The legislation on PPP will address the various uncertainties, clarify rights, responsibilities and interests, and create a transparent environment for investment.

The government must avoid losing credit when cooperating with private capital, said the economist Zhang Lianqi, adding that creating legislation for the rights and interests of private enterprises will make the entrepreneurs feel safer.

It is inevitable to bring in private investment through PPP, said Shao Yu, chief economist at Orient Securities Co.

A sound environment with intellectual property protection, and equal rights and opportunities will help PPP promotion, unleash entrepreneurs’ innovation, and build a good relationship between politics and commerce, he said.