This article focuses on the analysis of the overseas PPP model in the organization of institutional settings, project management, investment and financing system in three aspects of the practice and advanced experience, with a view to a more in-depth understanding of the PPP concept, application and management. Finally, aiming at the prominent existing problems in the construction of smart cities in China, we propose to actively promote the application of the PPP model, further attract social capital to participate in the construction of smart cities, expand investment and financing channels, and promote long-term development of smart cities.
I. Background and Advantages of China's Promotion of PPP Model
The government's social capital cooperation (PPP) model has become the direction of urban infrastructure construction at present and in the period to come, and is an important model for advancing the construction of new urbanization. With the accelerating process of urbanization in China, the risk of local debt and the funding gap in urbanization have gradually become a bottleneck restricting the development of new urbanization. Promoting the use of the PPP model is conducive to increasing sources of funds, improving the quality and efficiency of management of infrastructure and public service projects, and starting to become a new means and direction for the Ministry of Finance and the National Development and Reform Commission to address the needs of the new round of urbanization funds.
The Connotation and Basic Pattern of PPP Model
The basic connotation of the government and social capital cooperation (PPP) model is the government's ability to increase the supply of public goods and services and increase supply efficiency. The broad PPP model includes purchase services, franchising, and equity cooperation, and establishes benefits sharing, risk sharing, and long-term cooperation relationships with social capital. The narrow PPP model is dominated by equity cooperation, which is also the key model for the current government's main push.
China vigorously promotes PPP policy and actively carries out pilot promotion
The national level issued a series of normative documents, initiated the PPP legislation, selected a number of pilot projects, and actively promoted the application of the PPP model. At the national level, a series of PPP application normative documents such as Operational Guidelines for Government and Social Capital Cooperation Mode (Trial), Guidelines for the Examination of Fiscal Endurance Capacity of Government and Social Capital Cooperation Projects have been issued, and the basic definition, application scope and feasibility of PPP mode have been issued. Analysis, operation mode, procurement management and other content to make detailed normative guidance. In 2016, the State Ministry of Finance established a legislative working group and studied and drafted the "Government and Social Capital Cooperation Law (Draft Consultation Draft)". The National Development and Reform Commission actively prepared for the construction of the PPP project library, and has issued two batches of 2,531 PPP demonstration projects, with a total investment scale of 4.23 trillion yuan. As of the end of July 2016, 619 projects have been signed with a total investment of 10019.1 billion yuan.
Second, the experience of applying PPP model in developed countries and cities
In respect of the organizational mechanism, an organizational structure that is centrally managed is established, and a strict auditing and performance rating mechanism is formulated and implemented.
The first is to set up a professional PPP support service agency, which is dedicated to providing technical support for investment, financing, project operation, risk management, and other aspects for projects in various regions. At the national level, the PPP Center is mainly established in the Ministry of Finance. Its main functions include three aspects: providing PPP industry screening, PPP model and conflict resolution mechanism design and other policy recommendations; participating in project review, providing technical support and financing of project financial funds, and strengthening Market investor confidence; build PPP policy and project information platform to promote open and transparent market information. The local level is mainly composed of local government trade associations and is mainly responsible for providing PPP project technical assistance and assessment services to various local governments.
The second is to establish a sound PPP project management process specification to ensure that the fund management is open and transparent, the division of powers and responsibilities is clear and adjustable, and risks are effectively avoided. With the United Kingdom as the representative, in the project negotiation process, the government and the private sector in the form of a standard contract specify in detail the responsibilities and obligations that the partners should bear, deal with risks and deal with breach of contract, and focus on strengthening the interests clause involving both public and private parties. In the fund management aspect, the government is the main body of investment management, and it strictly assesses and tracks the use of funds, and regularly discloses the use of funds. In the project operation stage, a project committee is set up by the project participants to carry out periodic review of project contract terms; a special third-party arbitration mechanism is set up to dynamically adjust the terms of the project contracts to ensure the consistency and fairness of the project cooperation objectives. And effective implementation.
Project management, guided by long-term cooperation, focuses on risk sharing and income distribution model design to ensure long-term project operations
The first is to formulate a long-term urban overall planning framework and provide basic conditions for the application of the PPP model. The government formulates a master plan for the city for a longer period of time. It defines the city’s vision for future development from the perspective of purpose, tasks, and effects. It also has strong legal binding and planning continuity, and lays a foundation for market participation in PPP construction. basis. Typical representatives are "Manchester (2010-2030)", "Amsterdam (2010-2040)", "Singapore (2015-2050)" and so on.
The second is to implement rigorous project evaluation standards and design tailor-made projects that are practical and feasible. Through rigorous assessment and decision of the project to adopt the financial feasibility of PPP, based on this, targeted design of a reasonable joint venture program and strict implementation to ensure long-term project operations. For example, in Indianapolis, USA, through the franchise model, the operating rights of 3631 parking meters in the city for 50 years were transferred to Xerox Corporation. The company is responsible for the overall maintenance and operation management of the inventory project. In terms of revenue sharing, a set quota is set. When the project income does not reach this quota, the government divides it by 30%; when it exceeds the quota, it divides it by 60%. Through innovative operating models, all parties involved will achieve a win-win situation.
With regard to sources of funds, the Bank will focus on commercial loans and capital markets, supplemented by regional development banks, industrial funds, and financial funds to form a diversified financial service system.
The PPP model-driven project financing model is transformed from government credit financing to “government credit + project assets†financing. The project risks are gradually returned to the project's own production and management risks, supplemented by a complete contract system and a clear legal structure. Commercial financing can be achieved. As the main channel, financing costs have also been greatly reduced. Specific financing channels include: First, commercial loans, including syndicated loans. The second is the capital market, including government bonds issued by local governments, project income bonds, corporate bonds, and asset securitization products. Third, PPP funds, from the perspective of the international market, are mainly divided into two categories: government-sponsored PPP funds and market-initiated PPP funds. The fourth is financial funds. The government injects a certain percentage of shares of the project company through financial funds, and directly puts limited financial funds into project construction to achieve effective control of the project direction.
III. Suggestions for Promoting the Application of PPP Mode in the Field of Smart Cities in China
China’s current smart city construction is fully implemented by the government as its main body of promotion. However, due to the lack of understanding of the smart city’s systematic projects and the lack of consideration of the smart city’s operating model, some urban smart city plans are blindly pursued for large and complete construction and operating funds. The scale of the demand is huge; the construction is heavy and the operation is light, and the lack of project operation and profit model design are all difficult. Some of the projects are difficult to sustain. In order to innovate the smart city development model, expand investment and financing channels for smart city construction, and resolve the difficulties of large-scale investment and sustainable operation in smart cities, we recommend accelerating the introduction and promotion of pilot application and popularization of the PPP model in the smart city area, and promoting smart city health. development of.
The first is to establish a diversified investment and financing system for smart cities, to promote the transformation of financing guarantees from government credit to projects with model innovation, and to attract companies to actively participate in the construction of smart cities through commercial bank loans, application for social funds, issuance of corporate bonds, and project income bonds. Expand funding sources for projects and improve the stability of capital flows.
The second is to improve the professional operation level of smart cities, to attract social capital to participate in the operation of smart cities, to give full play to the professional advantages of social resources in project management, capital turnover, and service quality improvement, and to form a long-term operational mechanism for smart city projects.
The third is to improve the third-party evaluation mechanism for PPP projects and reduce project operation risks. Focusing on key links such as program design and contract development for key construction projects in smart cities, we will introduce third-party assessment agencies to regularly evaluate project implementation and dynamically adjust price plans to ensure that profit margins are in a reasonable space.
about the author
Liu Xiaolin: Master of Engineering from Beijing University of Posts and Telecommunications. Currently working in the Department of Information and Application Research of the Institute of Industry and Planning of the China Institute of Information and Communications, he is mainly engaged in policy research, planning consulting, and industry research in information technology applications, the Internet, and smart cities.
Chen Cai: Deputy Director, Information Technology Department, Planning Institute, China Institute of Information and Communications, Senior Engineer, Ph.D. Research areas include planning and consulting in information technology, smart cities, internet of things, and next-generation networks. In recent years, it has won two technical awards at the college level and five technical awards at the same level. He has published more than 10 papers at home and abroad, and has participated in two monographs. As the person in charge of the research institute smart city, he participated in the national informatization policy research, planning and formulation and major project promotion work, and undertook many ministries, provinces, and municipal issues and projects.
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