Development and Reform Commission's 'retrial' of 10 trillion PPP

On the first day of the implementation of the Regulations on Government Investment, the National Development and Reform Commission issued detailed regulations on PPP project management. On July 1, the National Development and Reform Commission issued the latest notification that PPP projects should strictly implement the Regulations on Government Investment and perform the procedures of examination, approval and filing in accordance with the regulations. Both "open the front door" and "block the back door". A series of regulatory policies have been intensively landed. Can the total amount of more than 10 trillion PPP projects avoid risks and achieve efficiency optimization?

The Notice on Strengthening Investment and Construction Management of PPP Projects in accordance with the Regulations (hereinafter referred to as "Notice") issued by the National Development and Reform Commission on July 1 requires that the feasibility demonstration and examination of PPP Projects be carried out comprehensively and thoroughly, and the decision-making procedures for PPP Projects be strictly carried out in accordance with the law and regulations. It is noteworthy that July 1 is the day when the Government Investment Ordinance (hereinafter referred to as the Ordinance) comes into force. The Regulations promulgated in May stipulate that "government investment funds should be invested in public welfare services, infrastructure and other fields", which is basically consistent with PPP projects. However, the Regulation does not clarify the relationship between government investment and PPP, which leads to speculation about the impact of the Regulation on PPP operation and management.

And the Circular of the National Development and Reform Commission made it clear that PPP projects should strictly implement the Regulations on Government Investment and the Regulations on the Approval and Recording Management of Enterprise Investment Projects, and perform the procedures of examination and approval and filing in accordance with the regulations.

Specifically, PPP projects with government capital injection should be examined and approved in accordance with the Regulations. PPP projects that fail to fulfill the procedures of examination and approval, approval, filing, feasibility demonstration and examination according to law and regulations are not standard projects and may not start construction. It is not allowed to evade or replace the procedures of project approval, approval, filing, feasibility demonstration and review in any form such as implementation plan review.

PPP expert and Professor Wang Shouqing of Tsinghua University mentioned in the relevant seminar held in May that the high rank of the Regulations has given clearer guidance to the policies of various ministries and commissions that have emerged in endlessly overlapping or even conflicting situations in the past few years, as well as different interpretations of various parties. Violations are more accountable.

"The Regulations not only emphasize the early stage of the project, but also emphasize the supervision and evaluation of several key stages, which does not conflict with PPP." Wang Shouqing said that this laid a better foundation for the standardization of PPP project screening, research and demonstration and other early links to ensure the success and sustainability of the project.

According to the latest notification of the National Development and Reform Commission, all projects that intend to adopt the PPP model should carry out feasibility demonstration. When the location of the project changes, the scale, standards and main contents of the project change greatly, and the investment scale of the project exceeds 10% of the approved investment, the original approval, approval and filing organs should be requested to re-implement the procedures for project examination and filing. The marriage between government and social capital began in 2013. According to the data of PPP Center of Ministry of Finance, by the end of May this year, 9,000 projects and 13.6 trillion yuan of investment had been accumulated in the management database, 5740 projects and 8.8 trillion yuan of investment had been landed, with a landing rate of 63.8%. Hou Ming, an expert in PPP expert Bank of the Ministry of Finance, pointed out in an interview with the media that after more than six years of development, PPP has formed a system. Some projects have entered the operating period and a number of high-quality projects have emerged. It can be said that PPP is guiding social forces to participate in the supply of public services, improving the quality and efficiency of supply. It has played a very important role. However, in the process of development, many local governments have flocked to PPP, and the corresponding expenditure has repeatedly crossed the red line of "not exceeding 10% of the general public budget expenditure", burying risks for the local invisible debt, which has resulted in the intensification of the PPP liquidation and rectification storm when the Ministry of Finance strictly regulates the local debt. In the first half of last year, about 5 trillion yuan of projects were "liquidated".

Since this year, the work of clearing and returning warehouses has continued. According to the latest data, in May this year, 72 projects of the local government voluntarily withdrew from the management repository, with an investment of 58.3 billion yuan.

"At the beginning of March, after the promulgation of the Ministry of Finance's Opinions on Promoting the Normative Development of Government-Social Capital Cooperation (No. 10 of Finance and Finance [2019]), all localities further strengthened the warehousing audit and normative management, and continued to take the initiative to clean up irregular projects." The person in charge of PPP Center of Ministry of Finance said.

Document No. 10 of Finance [2019] mentioned by the above-mentioned person in charge clearly defines the qualifications that "standard PPP project" should meet. The document reiterates that while evading the 10% red line of fiscal affordability, a 7% warning line has been added, and requires that areas with financial expenditure responsibility of more than 5% should not be added to government-paid projects.