BOOK
Reform of China's Urban Water Sector
Tao Fu | Miao Chang | Lijin Zhong | Michael Sievers | Sven-Uwe Geissen | Movva Reddy
(2008)
Additional Information
Book Details
Abstract
Edited by the Water Policy Research Center of the Environment Department of Tsinghua University, this comprehensive report on the Chinese water sector is a collection of findings from recent research conducted by the Center and government consultancy reports. The report presents an overview and analysis of the current situation of the reform of the Chinese urban water sector. This is followed by case studies and appraisals on 17 water industry reform measures collected by the authors in 14 cities. The report then examines key problems of the current water industry reform. The comprehensive scope of this report, the level of detail, as well as the authors’ insights together make this document a unique reference on China’s water industry, as well as an important guide to the future of China’s water management.
The book will be extremely useful for public utility reform in China and in other countries. It will therefore be of particular value to government departments, policy advisors, consultants, financing bodies, and utility service providers.
The report is part of the Water21 Market Briefing Series. Titles in the series provide more focused insight into aspects of the international water sector.
About the authors: Dr Tao FU is Director of the Water Policy Research Center, Tsinghua University, Beijing, P.R. China. Dr Miao CHANG is Senior Research Fellow at the Water Policy Research Center, Tsinghua University. Dr Lijin ZHONG is with the Department of Environmental Science and Engineering, Tsinghua University.
Table of Contents
Section Title | Page | Action | Price |
---|---|---|---|
Contents | |||
Abbreviations | |||
List of abbreviations | |||
List of Figures: | |||
List of tables: | |||
Foreword | |||
Preface | |||
About the authors | |||
Overview and Summary | |||
PART I: THE STATE OF CHINA’S MARKET-ORIENTED REFORM IN THE URBAN WATER SECTOR | |||
PART II: THE CASE STUDIES - 17 REPRESENTATIVE CASE STUDIES IN CHINA’S URBAN WATER SECTOR REFORM | |||
PART III: THE EVALUATION AND ANALYSIS OF CHINA’S URBAN WATERSECTOR REFORM | |||
Policies | |||
Reform models | |||
The competitive concession model | |||
The licensing model | |||
The common and typical problems | |||
Problems with understanding marketisation | |||
Issues relating to the models and operation of marketisation projects | |||
Entrance competition and process competition | |||
The problem with the relationship between asset transfer and operation rights transfer | |||
The problem with determining the value of a concession | |||
Overvaluation of water sector assets is harmful to marketisation reform | |||
Problems with water asset arrangement methods and reasonable returns | |||
Partial optimisation cannot substitute for holistic optimisation | |||
Applicability of bundling small BOT projects | |||
Restrictions on shareholding rights will not hinder the acquisition of pipeline and distribution network operation rights | |||
Differences between projects due to varying focuses | |||
Problems with the development of regulation and management systems for the marketisation reform | |||
A lack of systematic planning in market-oriented reform | |||
Defects in present policies, laws and regulations | |||
Problems related to urban water sector management system reform | |||
Investment and financing issues for marketisation | |||
Pricing and fee collection issues for marketisation | |||
Part I - Reform and the current situation | |||
Chapter I - Construction and development of urban water sector infrastructure in China | |||
1.1 The construction situation for urban water sector infrastructure in China | |||
1.1.1 Four phases of development of the water supply in China | |||
1.1.2 Analysis of the development of China’s urban water supply industry over the past decade | |||
Urban population supplied with water | |||
Total water supplied and types of use | |||
The total water supply production capacity and unused capacity of China’s water supply facilities | |||
Per capita residential consumption per day | |||
Length of water supply pipeline | |||
1.2 China’s wastewater treatment industry: the construction situation | |||
1.2.1 The four phases of development in China’s wastewater treatment | |||
1.2.2 Analysis of the development of China’s urban wastewater treatment industry in the past decade | |||
Annual wastewater discharge, annual treated wastewater and annual wastewater treatment rate | |||
Wastewater treatment capability | |||
Construction of wastewater treatment plants | |||
1.2.3 Development of the recycled water industry in China | |||
Chapter II - Background and need for China’s urban water sector marketisation | |||
2.1 The backdrop of urban water marketisation | |||
2.1.1 Political background to the reform of the water industry | |||
2.1.2 The international background to water industry reform | |||
2.1.3 The policy background to water industry reform | |||
2.1.4 The financial background to water industry reform | |||
2.1.5 Industrial background of water industry reform | |||
2.2 Two motives for China’s urban water sector marketisation | |||
2.3 The need for China’s urban water sector marketisation | |||
2.3.1 Urban water sector is the basis for realising the goal of building a prosperous society | |||
The rapid increase in urbanisation requires major growth in coordinated infrastructure capability | |||
Environmental pollution increases the demand for environmental infrastructure | |||
International goals | |||
Domestic objectives | |||
2.3.2 Marketisation is the direction taken by China’s urban water sector reform in the 21st century | |||
The government agrees with the direction of marketisation | |||
A market mechanism is introduced to improve quality of service, increase construction capital and improve operation and management efficiency | |||
Chapter III - Progress of China’s urban watersector marketisation reform | |||
3.1 The three phases of China’s urban water sector marketisation reform | |||
3.1.1 Urban water sector reform is advancing by trial and error | |||
3.1.2 Features of the third phase of urban water sector reform | |||
3.2 Progress of China’s urban water sector marketisation projects | |||
3.2.1 Survey description | |||
Post-reform solely state-owned | |||
Stock transfer | |||
Joint venture and partnerships | |||
Private operation | |||
BOT and TOT | |||
3.2.2 Analysis of water sector marketisation projects across the provinces | |||
The varying progress of reform across the country | |||
Municipalities directly under the control of the Central government: enough capital; slow reform; mainly large projects. | |||
Northeast areas: slow reform; small and medium projects | |||
Middle and western areas: inadequate capital; anxious local government | |||
Coastal areas: pioneer of the marketisation reform | |||
Analysis of the scale of water supply reform projects | |||
Water supply industry market-oriented reform model analysis and concession management | |||
3.2.3 The situation of wastewater treatment marketisation projects in different provinces | |||
3.2.4 Progress in constructing wastewater treatment plant BOT projects | |||
Developments in the investment and construction of China’s urban wastewater treatment plants | |||
Distribution of urban wastewater treatment BOT projects | |||
Analysis of the scale of urban BOT wastewater treatment projects | |||
Analysis of investment in urban wastewater treatment BOT projects and wastewater treatment price | |||
Investment analysis | |||
Average wastewater treatment cost | |||
Relationship between wastewater treatment cost and wastewater treatment fees | |||
Part II Case studies | |||
Chapter I. Analysis of the framework of reform for China’s urban water sector | |||
1.1 Case selection | |||
1.2 Case analysis framework | |||
Chapter II - The Chongqing Jiangbei Tap Water Company joint venture project | |||
2.1 Project background | |||
2.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problem | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
2.1.2 Main motives for reforming municipal public utilities | |||
2.2 Project model and its characteristics | |||
2.2.1 Project profile | |||
2.2.2 Project company profile | |||
2.2.3 Project characteristics | |||
Project progress and achievements | |||
Granting concession rights | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
The principle of tariff adjustment | |||
Determining reasonable cost | |||
Others | |||
2.2.4 Regulation | |||
Main supervisory body | |||
Other regulatory systems | |||
Regulation of water quality and service | |||
Price regulation | |||
Current water tariff regulation model | |||
Prospective tariff regulation model | |||
2.3 Project appraisal and lessons learnt | |||
2.3.1 Main experiences | |||
The funding model was innovative | |||
Project financing did not increase the shareholders’ capital liability | |||
Problems related to pipe network stockholding in the initial stage were avoided | |||
The venture acquired more investments | |||
Integrated management of both water treatment works and pipelines allowed the investors’ managerial expertise to be utilised | |||
2.3.2 Lessons learnt | |||
There is no sound water tariff forming mechanism | |||
Policy adjustments have incurred unforeseen costs for the enterprise | |||
Intentions between local governments and enterprises differed over the development plans and there were inflexible terms in the agreed plan | |||
Chapter III. The Xuzhou Sanba riverwastewater treatment BOT project | |||
3.1 Project background | |||
3.1.1 Project location | |||
Population and administrative division | |||
Water resource conditions and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social condition | |||
Water tariff reform | |||
3.1.2 Main motives for reforming municipal public utilities | |||
3.2 The project model and its characteristics | |||
3.2.1 Project profile | |||
3.2.2 Project characteristics | |||
Project progress | |||
Granting concessions | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
Basic service price | |||
Tariff adjustment formula | |||
3.2.3 Regulation | |||
Main supervisory body | |||
Other supervisory bodies | |||
3.3 Project appraisal and lessons learnt | |||
3.3.1 Proper pricing and collection of wastewater treatment fees is a prerequisite of effective wastewater treatment | |||
3.3.2 Older-generation environmental protection projects can take off under sound regulation | |||
3.3.3 Problems with construction and operational costs in medium and small-size wastewater treatment plants | |||
3.3.4 Specific suggestions for the Xuzhou project | |||
Chapter IV. The Xiamen Water Groupownership trading project | |||
4.1 Project background | |||
4.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Water tariff reform | |||
4.1.2 Motives for reforming municipal public utilities | |||
4.2 Project model and characteristics | |||
4.2.1 Project profile | |||
4.2.2 Project company profile | |||
The Xiamen Environmental Protection Water Treatment Company | |||
The Xiamen China Environmental Protection Wastewater Treatment Company | |||
4.2.3 Project characteristics | |||
Project process | |||
Granting concession rights | |||
Land use | |||
Service price and tariff adjustment formula | |||
Redeployment of redundant labourers and the change of employee identity | |||
4.2.4 Regulation | |||
4.3 Project appraisal and lessons learnt | |||
4.3.1 Main appraisal and summary | |||
Ownership trading complied with standardised bidding procedures | |||
The first in China to hire a water service company as a financial consultant for a project | |||
More focus on the overall strength of the bid winner | |||
Special trading structure | |||
4.3.2 Experience and lessons learnt | |||
The divided system increased the management costs | |||
More attention was given to capital than efficiency improvement | |||
The advantages of the complementary Xiamen Water Service Group were not fully utilised | |||
Chapter V. Market-oriented reform of theShenyang water supply industry | |||
5.1 Project background | |||
5.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
5.1.2 Main motives for reforming municipal public utilities | |||
5.2 Project model and characteristics | |||
5.2.1 No 8 Water Plant joint venture: the Sino-French Water Development Company (1995 to 1999) | |||
5.2.2 BOT for No 9 Water Plant: Huijin Water Service (1996) | |||
5.2.3 Management contract: Sino-French Water Development | |||
5.2.4 Listing in Hong Kong stock market: Shenyang Public Utility Holding Company (0747-HK) | |||
5.3 Project appraisal and lessons learnt | |||
5.3.1 The urban water sector is different from general competitive industry | |||
5.3.2 The lack of democratic decision-making mechanisms causes cursory decisions | |||
5.3.3 Systems without a separation of governmental jurisdictions from enterprise operations will seriously hamper the marketisation reform | |||
5.3.4 The urge to raise funds led to the signing of unequal agreements | |||
Chapter VI. Shenzhen Water Group equity transfer project | |||
6.1 Project background | |||
6.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
6.1.2 Main motives for reforming municipal public utilities | |||
6.2 Project model and its characteristics | |||
6.2.1 Project profile | |||
6.2.2 Joint venture profile | |||
6.2.3 Project characteristics | |||
Project progress | |||
Granting the concession right | |||
Financing mode | |||
Service price and tariff adjustment formula | |||
6.2.4 Regulation | |||
Main supervisory body | |||
Regulatory system | |||
6.3 Project appraisal and lessons learnt | |||
6.3.1 Main appraisals | |||
The paradigm of total equity transfer in the urban water sector | |||
A relatively sound regulatory system | |||
Put the separation of government functions and asset management into practice | |||
Legislative guarantee | |||
6.3.2 Lessons learnt | |||
The company structure hindered the expansion of the scale of development | |||
External investment was constrained by competition among shareholders | |||
Disposal and management of assets in the water sector | |||
Relationship between government regulator and enterprise | |||
Chapter VII. Four market-oriented reformprojects in the Shanghai water sector | |||
7.1 Project background | |||
7.1.1 Project locale | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of the urban water infrastructure | |||
Economic development and social conditions | |||
Water tariff reform | |||
7.1.2 Main motives for reforming the municipal public utilities | |||
Reform process of Shanghai’s investment and financing system | |||
Reform of the management system of the Shanghai urban water sector | |||
7.2 The Shanghai Zhuyuan wastewater treatment plant BOT project | |||
7.2.1 Zhuyuan No 1 Wastewater Treatment Plant | |||
Project profile | |||
Project company profile | |||
Project progress | |||
Granting the concession right | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
7.2.2 Shanghai Zhuyuan No 2 wastewater treatment plant | |||
Project profile | |||
Project company profile | |||
Project process | |||
Granting the concession right | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
7.2.3 Regulation | |||
Main supervisory body | |||
Regulatory system | |||
7.2.4 Project appraisal and lessons learnt | |||
Marketisation framework and cause and effect of project pricing | |||
The government still has investment responsibilities under the market-oriented system | |||
Effects of changes in policies on the project | |||
It is important to choose the type of investors cautiously | |||
The need for proper rules and regulations in the process of water sector marketisation | |||
7.3 The Shanghai Dachang water plant BOT | |||
7.3.1 Project profile | |||
Stage one | |||
Stage two | |||
Stage three | |||
7.3.2 Project company profile | |||
7.3.3 Project characteristics | |||
Granting the concession right | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment model | |||
7.3.4 Regulation | |||
Main supervisory body | |||
Regulatory system | |||
7.3.5 Project appraisal and lessons learnt | |||
A successful investment-attracting project | |||
A model case for dealing with a project under policy changes | |||
The repurchase once again introduced integrity into the water system | |||
The BOT model is not suitable for the potable water sector | |||
Analysis of the reasons why some international water companies exit the Chinese market | |||
7.4 The Shanghai Pudong Tap Water Company equity transfer project | |||
7.4.1 Project profile | |||
7.4.2 Project company profile | |||
7.4.3 Project characteristics | |||
Project process | |||
Granting the concession right | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
7.4.4 Project appraisal and lessons learnt | |||
Foreign investor’s strategic entrance into the pipeline and service | |||
There are many factors in the high premium of the Pudong project | |||
The project reflected the market value of system-wide operation in the urban water sector | |||
Attempts to regulate full concessions by installing an official onto the company’s board | |||
Promote the market-oriented reform of Shanghai’s urban water sector | |||
The equal equity proportion leaves hidden trouble for management | |||
Policy obstacles to a 50-year term of operation | |||
A licence type joint venture increases the liability of investors | |||
Profit will come given a little more time | |||
Chapter VIII. The Ma’anshan water supply joint venture project | |||
8.1 Project background | |||
8.1.1 Project locale | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
8.1.2 Main motives for reforming the municipal public utilities | |||
8.2 Project model and characteristics | |||
8.2.1 Project profile | |||
8.2.2 Project company profile | |||
8.2.3 Project characteristics | |||
Project progress and achievements | |||
To date, over CNY9.27 million ($1.22 million) has been invested in upgrades for key equipment, technologies and facilities: | |||
More than CNY18 million ($2.37 million) has been invested in renovating old urban pipe networks and building a new pipe network: | |||
Initiating construction of the No 4 water plant and the mountains and towns water supply project, to satisfy the urban economic development requirements: | |||
About the service quality system | |||
Granting the concession right | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
8.2.4 Regulation | |||
Main supervisory body | |||
Regulatory systems | |||
Regulation for water quality and service | |||
Price regulation | |||
8.3 Project appraisal and lessons learnt | |||
8.3.1 Project appraisal | |||
Successful practice of a concept that achieves win-win situations for all parties | |||
Gradual reform promotes cooperation between government and investors | |||
The favourable investment model helped to advance the new enterprise’s development | |||
Institutional reform and attracting investment together created a smooth transition for the enterprise | |||
A sound model of asset disposal promoted sustainable development of the enterprise | |||
Leasing the distribution network integrated the management of the treatment plant and the network | |||
The shareholder’s strong background created ideal conditions for the development of the newly-established enterprise | |||
8.3.2 Lessons learnt | |||
A worry about the lack of competition | |||
Contracts must specify the responsibilities and obligations of the enterprise | |||
A continuously improving legal system acts as a guarantee for the establishment of a regulatory system | |||
The contract should leave room for future advances in government regulations | |||
Project sustainability is important | |||
Chapter IX. The Macao water supply concession | |||
9.1 Project background | |||
9.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of the urban water infrastructure | |||
Economic development and social conditions | |||
Water tariff change | |||
9.1.2 Background and history of the municipal public utility privatisation | |||
9.2 Project model and its characteristics | |||
9.2.1 Project profile | |||
9.2.2 The Macao Water Supply Company’s concession right | |||
9.2.3 Service price | |||
9.2.4 Enterprise investment components | |||
9.2.5 Regulation | |||
9.3 Experiences from the project | |||
Efficiency and service level significantly improved after marketisation | |||
The right to the concession was gained with only a small investment | |||
The partner has a long record of success | |||
Water tariff includes all production costs and returns | |||
An effective communication mechanism was established between the public and private sector | |||
The regulatory system for system performance comparison should be strengthened | |||
The government has not been fulfilling some of its responsibilities | |||
Chapter X. The Hefei Wangxiaoying wastewater treatment plant TOT project | |||
10.1 Project background | |||
10.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
10.1.2 Main motives for reforming municipal public utilities | |||
10.2 Project model and its characteristics | |||
10.2.1 Project profile | |||
10.2.2 Project company profile | |||
10.2.3 Project characteristics | |||
Project progress | |||
Granting the concession | |||
Means of financing | |||
Land use | |||
Service price and tariff adjustment formula | |||
Staff replacement | |||
10.2.4 Regulation and related policies | |||
Main supervisory body | |||
Regulatory system | |||
10.3 Project appraisal and lessons learnt | |||
10.3.1 Main appraisals | |||
Standardised operations provided a fair and equitable platform for project implementation | |||
The high price of the asset transfer considerably stimulated the market for state-owned assets | |||
Sufficient participation by the relevant government departments in the early project phase promoted smooth project negotiation | |||
The bid winner felt confident about the project risk and payment | |||
10.3.2 Lessons learnt | |||
The transfer of overvalued assets is not favourable to the long-term development of the water sector | |||
Making traditional enterprises restructure first before reforming is the basis for marketisation reform | |||
Chapter XI. The Harbin Pacific wastewater treatment plant BOT project | |||
11.1 Project background | |||
11.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Water tariff reform | |||
11.1.2 Main motives for reforming municipal public utilities | |||
11.2 Project model and its characteristics | |||
11.2.1 Project profile | |||
11.2.2 Project company profile | |||
11.2.3 Project characteristics | |||
Project process | |||
Granting the concession | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
11.2.4 Regulation | |||
11.3 Project appraisal and lessons learnt | |||
11.3.1 A smoothly implemented project | |||
11.3.2 Positive impact on the investment environment | |||
11.3.3 Effective control of cost and price | |||
11.3.4 The company did not choose project financing | |||
11.3.5 The long-term success of the project is dependent on the government’s credit worthiness | |||
Chapter XII Construction and operation of the Guangzhou Xilang wastewater treatment system | |||
12.1 Project background | |||
12.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
12.1.2 Main motives for reforming municipal public utilities | |||
12.2 Project model and its characteristics | |||
12.2.1 Project profile | |||
12.2.2 Project company profile | |||
12.2.3 Project characteristics | |||
Project process | |||
The Beijing Urban Sewage Group | |||
Granting the concession | |||
Financing model | |||
Land use | |||
12.2.4 Regulation | |||
12.3 Project appraisal and lessons learnt | |||
12.3.1 The first operation and management project that was openly bid for | |||
12.3.2 Achieved system-wide operation of the water supply system | |||
12.3.3 Effective risk control | |||
12.3.4 Policy obstacles to the sewer network equity holdings | |||
Chapter XIII. The Chengdu No 6 water supply plant BOT project | |||
13.1 Project background | |||
13.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of the urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
3.1.2 Main motives for reforming the municipal public utilities | |||
13.2 Project model and its characteristics | |||
13.2.1 Project profile | |||
13.2.2 Project company profile | |||
13.2.3 Project characteristics | |||
Project progress and results | |||
Granting the concession contract | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
13.2.4 Regulation | |||
The supervisory body | |||
The Chengdu Municipal Construction Commission | |||
The regulatory systems | |||
Approval regulation | |||
Regulation of water quality and service | |||
Price regulation | |||
13.3 Project appraisal and lessons learnt | |||
13.3.1 Main appraisal | |||
A successful example of project financing that properly followed protocol | |||
Breaking the monopoly of the wholly state-owned basic urban infrastructure industry and expanding financing channels | |||
The introduction of both foreign funds and advanced technology was beneficial | |||
13.3.2 Lessons learnt | |||
Inaccurate forecasting of the volume of water put this project in a tight spot | |||
Unreasonable batching of investments with high costs | |||
The water supply plant BOT project resulted in a separation within the water supply system | |||
The government’s decision-making and risk analysis abilities are to be improved | |||
Chapter XIV. Changzhou Chengbei wastewater treatment plant TOT project | |||
14.1 Project background | |||
14.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problems | |||
Construction of urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
14.1.2 Main motives for reforming the municipal public utilities | |||
14.2 Project model and its characteristics | |||
14.2.1 Project profile | |||
14.2.2 Project company profile | |||
14.2.3 Project characteristics | |||
Project progress | |||
Granting the concession | |||
Financing model | |||
Adjustment principle for the service price | |||
14.2.4 Regulation | |||
Main supervisory body | |||
The Changzhou Drainage Management Division | |||
The Changzhou Municipal Urban Group Corporation | |||
The Changzhou Municipal Bureau of Environmental Protection | |||
Regulatory system | |||
Approval regulation | |||
Regulation of water quality and service | |||
Price regulation | |||
14.3 Project appraisal and lessons learnt | |||
14.3.1 Solely transferring the right to operate was an important characteristic | |||
14.3.2 Public investment and standardised operation | |||
14.3.3 Those responsible for attracting investment displayed effective organisation, solidarity and excellent cooperation | |||
14.3.4 Careful and thorough work in the early stages assured the success of the work in the later stages | |||
14.3.5 The project guaranteed a basic balance between the rights and obligations ofthe investor | |||
14.3.6 The project benefited the general public with a fixed price for the transfer of the right to operate and opened the unit service price for public bidding | |||
14.3.7 The investor with the best overall service won the bid | |||
14.3.8 Investment attraction was a great way to choose investors | |||
14.3.9 The lack of property rights ownership influenced the financing of the project to an extent | |||
Chapter XV. The Beijing Dongba and Fatou wastewater treatment plant BOT projects | |||
15.1 Project background | |||
15.1.1 Project location | |||
Population and administrative division | |||
Water resource condition and water pollution problem | |||
Construction of the urban water infrastructure | |||
Economic development and social conditions | |||
Reform of the water tariff | |||
15.1.2 Main motives for reforming the municipal public utilities | |||
15.2 Project model and its characteristics | |||
15.2.1 Project profile | |||
15.2.2 Project company profile | |||
15.2.3 Project characteristics | |||
Project process | |||
Granting the concession | |||
Financing model | |||
Land use | |||
Service price and tariff adjustment formula | |||
Basic service price | |||
Principle of tariff adjustment | |||
15.2.4 Regulation | |||
Main supervisory body | |||
Regulatory system | |||
Regulation of approvals | |||
Regulation of water quality and service | |||
Price regulation | |||
15.3 Project appraisal and lessons learnt | |||
15.3.1 Main appraisals | |||
The Beijing municipal government’s deep understanding of marketisation was a guarantee of success for the project bidding | |||
Both parties’ extensive experience allowed them to create a sensible implementation scheme during the negotiation phase | |||
Standardised operating procedures and the participation of a professional consultancy ensured openness and equity in the project’s operation | |||
A successful attempt to bundle small projects for bidding | |||
The project diversified the operational models for Beijing’s wastewater treatment sector | |||
15.3.2 Lessons learnt | |||
There was insufficient preliminary communication among government departments | |||
There was an unsound legal framework and contradictions in the procedures | |||
Project company financing was constrained | |||
Financing difficulties in small BOT projects | |||
Part III. Analysis | |||
Chapter I. Policy analysis of urban water sector market-oriented reform in China | |||
1.1 Government policies that promote urban water sector market-oriented reform | |||
1.1.1 Open market policies | |||
Opinions on promoting and guiding private investments (1 February 2002) | |||
Catalogue of industries to guide foreign investment (4 March 2002) | |||
Notice on accelerating project pro-phase work and promoting industrialisation of the urban water supply and wastewater treatment (Jibantouzi[2002] No 1451, 11 November 2002) | |||
Opinions on promoting industrialisation of urban wastewater and garbage treatment (10 September 2002) | |||
Opinions on accelerating municipal public utility marketization (Jiancheng [2002] No 272, 27 December 2002) | |||
Notice on improving investment and promoting economic development (20 May 2003) | |||
Decision on some issues concerning the improvement of the socialist market economy (October 2003) | |||
Catalogue of priority industries for foreign investment in the Central-Western region (revised in 2004) (23 July 2004) | |||
1.1.2 Investment and financing policies | |||
Policies on clearing up fixed return | |||
Concerns of investment system reform | |||
Interim measures for the management of central budgetary investment subsidies and interest discount projects | |||
Financing policies | |||
1.1.3 Policies relating to enterprise organisation reform, property right transfers and property management | |||
Summary of major policies | |||
Related policies and regulations | |||
Rules on the evaluation and management of state assets (No 91, 1991) | |||
Notice of China Securities Regulatory Commission, the Ministry of Finance and the State Economic and Trade Commission on the relevant issues concerning the transfer of state-owned shares and corporate shares of listed companies to foreign investors (Zhengjianfa[2002] File No 83, 1 November 2002) | |||
Interim provisions on introducing foreign investment to reorganise state-owned enterprises (8 Novmeber 2002, entered into force on 1 January 2003) | |||
Interim measures for the supervision and administration of state-owned assets of the enterprises (13 May 2003) | |||
Interim measures for the management of the transfer of the state-owned property right of enterprises (promulgated on 31 December 2003 and entering into force on 1 February 2004) | |||
Notice on the Relevant Issues concerning the Transfer of the State-owned Property Right of Enterprises (Guozifachangquan[2004] File No 268, 25 August 2004) | |||
Opinions on strengthening the regulation of operation of urban wastewater plants (Jiancheng [2004] File No. 153, 30 August 2004) | |||
1.1.4 Water price policies | |||
Current policies and regulations on water pricing | |||
Law of the People’s Republic of China on prevention and control of water pollution (issued on 11 May 1984, put into effect on 1 November 1984, revised on 15 May 1996) | |||
Price law of the People’s Republic of China (issued on 29 December 1997, put into effect on 1 May 1998) issued by the Standing Committee of the National People’s Congress | |||
Measures for managing the urban water price (issued and put into effect on 23 September 1998) | |||
Notice on relevant issues concerning implementation of measures for managing the urban water price (issued and put into effect on 2 June 1999) | |||
Notice on strengthening the charging of wastewater treatment fees and establishing a positive operation mechanism for urban wastewater treatment and centralised treatment (issued and put into effect on 6 September 1999) | |||
Circular on urban water supply, water saving and water pollution control (File No 36 from the State Council, issued on 7 November 2000) | |||
Notice on further promoting urban water price reform (issued on 1 April 2002) | |||
Water law of the People’s Republic of China (issued in 1988, revised on 29 August 2002 and put into effect on 1 October 2002) | |||
Notice on further strengthening water-saving in urban areas and ensuring water supply safety (issued on 22 August 2003) | |||
Measures for administering the price of the water supplied through water networks (put into effect on 1 January 2004) | |||
Notice on promoting water price reform, promoting water-saving and protecting water resources (File No 36 from the General Office of the State Council, issued and put into effect on 9 April 2004) | |||
Aim of water pricing | |||
Composition of the water price | |||
Water resource fees | |||
Price for engineering water project supplies | |||
Water price | |||
Wastewater treatment fee | |||
Price of recycled water | |||
1.1.5 Concession policies | |||
Current policy presentation of the concession concept | |||
Amplification of the term ‘concession’ in Opinions on accelerating marketisation of municipal public utility institutions | |||
Provisions on concessions in Measures for the administration of municipal public utility concessions | |||
How to understand current concession policies | |||
Scope of application of concessions | |||
The bidding procedure | |||
Regulation | |||
1.1.6 Regulation policies | |||
Regulation policy framework | |||
Policies on water quality standards and water quality monitoring for the water supply | |||
Regulation policies for wastewater treatment and treatment system | |||
1.1.7 Policies on the use of recycled water | |||
Policies for promoting the use of recycled water | |||
Standardisation policies for the use of recycled water | |||
Market guidance policies that centre on the water price | |||
1.2 Making and implementation of major local reform policies | |||
1.2.1 Promotion of Opinions on accelerating the marketisation of municipal public utility institutions by local governments | |||
Reform plans | |||
Concession and regulations | |||
Compensation and price mechanism | |||
Investment and financing mechanism | |||
Enterprise reform and property rights transfer | |||
Disposal plan for state-owned assets | |||
Policies on land-use | |||
Preferential reform policies | |||
Financial subsidies | |||
Preferential tax policies | |||
Favourable policies for land use | |||
Other preferential policies | |||
1.2.2 Local government promotion of Measures for the administration of municipal public utility concessions | |||
1.2.3 Local government’s promotion of the reform policies for water prices and wastewater treatment fees | |||
Chapter II. The major reform models in China’s urban water sector | |||
2.1 Market-oriented reform models in the urban water sector | |||
2.1.1 Defining the government’s responsibility in the urban water sector is a prerequisite to establishing a model for regulation | |||
2.1.2 Reform experiences of other countries | |||
The British model | |||
The French model | |||
The Dutch model | |||
2.1.3 Differentiation of market-oriented reform models | |||
Competitive concession (concession) | |||
Licence mode | |||
2.2 Chinese water sector reform model choice | |||
2.2.1 Several models co-exist in the Chinese water sector | |||
2.2.2 Competitive concession is the current leading mode | |||
2.2.3 The Chinese water sector’s marketisation system needs a combination of the above two major models | |||
A favourable link will follow the principles below | |||
System support for the combo model | |||
Chapter III. An analysis of the market-oriented reform of China’s urban water sector | |||
3.1 The transformation of the government’s ro | |||
3.1.1 The role of transformation in the relevant management departments | |||
The function of the government under the planned economy system | |||
Transformation of the government’s function in the water sector | |||
3.1.2 The responsibilities of major government departments | |||
Construction departments | |||
Water resources departments | |||
Other major administrative departments | |||
3.1.3 The reorganisation of state-owned enterprises | |||
3.2 The rise of social enterprises | |||
3.2.1 Investment project analysis of the major enterprises in the industry | |||
3.2.2 The investors’ main strategies | |||
Well-prepared state-owned enterprises | |||
Capital investment enterprises | |||
Foreign-funded enterprises: from the active entry of international capital to the strategic adjustment of multinationals | |||
The environmental engineering enterprises that were grafted onto the capital market | |||
Chapter IV. Analysis of key problems in China’s urban water sector marketisation reform | |||
4.1 Clarification of the problem with understanding urban water sector marketisation | |||
4.1.1The problem with understanding the aims of marketisation | |||
4.1.2 The problem with the vague positioning and characterisation of the water industry | |||
4.1.3 Marketisation does not mean the government no longer invests in the water sector | |||
4.1.4 Water sector marketisation is not the same as privatisation and internationalisation | |||
4.1.5 Ambiguous understanding of the regulatory function of the government | |||
4.2 Issues relating to the modes and operations of marketisation projects | |||
4.2.1 Entrance competition and process competition | |||
4.2.2 The problem with the relationship between asset transfer and operational rights transfer | |||
4.2.3 The problem with determining the value of a concession | |||
4.2.4 Overvaluation of water sector assets is harmful to marketisation reform | |||
4.2.5 Problems with water asset disposal methods and reasonable returns | |||
4.2.6 Partial optimisation is no substitute for holistic optimisation | |||
4.2.7 Applicability of bundling small BOT projects | |||
4.2.8 Restrictions on shareholding rights will not hinder the acquirement of pipeline and distribution network operating rights | |||
4.2.9 Project differences due to varying departure points and focuses | |||
4.3 Issues relating to the water sector reform policies and laws and improving the management system | |||
4.3.1 Problems with pre-project research, systematic planning and sound decision making | |||
Market-oriented reform lacks systematic planning | |||
Detachment from other elements of urban planning restricts water sector development | |||
4.3.2 Defects in present policies, laws and regulations | |||
Policy authority | |||
Limitations of concession policies | |||
Ambiguous stipulations for the composition of pipeline investment | |||
Lack of policy guidance in the assessment of the management of state-owned assets in the water sector | |||
Unfulfilled incentive systems and ambiguous preferential policies | |||
The information dissemination system and complaint and response mechanisms are imperfect | |||
Implementation and operability of policies and regulations | |||
4.3.3 Problems related to urban water sector management system reform | |||
Establishment of a regulatory system | |||
Regulatory departments overstep their jurisdictions in management and their consciousness of power is too strong | |||
The absence, mismatch and weakness of management of industry regulatory departments | |||
Flaws and confusion in the existing regulation system | |||
Lack of ability and measures to regulate | |||
Lack of supervision of the government: supervision by the public and vertical supervision between different levels of the government | |||
There is a lag in the establishment of regulatory systems at the local level | |||
Management issues during the project construction phase | |||
Treating water sector marketisation projects the same way as any other ordinary construction project in the bid process | |||
The rights and interests of bid winners are not fully realised | |||
Collaboration problems in public bidding and construction management | |||
Issues relating to land-use rights hinder the implementation of BOT projects | |||
Lack of standardisation and guidance for financing models such as BOTs and TOTs | |||
4.4 Issues in the investment and financing systems in urban water sector marketisation reform | |||
4.4.1 Problems in government financing | |||
A vague understanding of the use of government funds | |||
The price of introducing investment through stimulating reserve assets | |||
Unclear channels between government policy-based funds and marketisation projects | |||
Inefficiency of government investment | |||
4.4.2 Uneven enterprise investment and financing channels | |||
The restrictions of financial instruments | |||
Project financing is difficult to achieve | |||
The difficulties that traditional urban water sector enterprises face | |||
4.4.3 Sources of capital for water infrastructure construction are not connected to the long-term capital markets | |||
4.5 Pricing and fee collection policy issues of water sector reform | |||
4.5.1 Issues and discussions on water resource fees | |||
Mixed in with the price of engineering water | |||
The water resource fee should properly take the form of a water resource tax. | |||
4.5.2 Pricing of the engineering water supply and its regulation | |||
The pricing mechanism for the engineering water supply is gaining more and more attention from society | |||
The pricing of the engineering water supply requires market restraint and public participation | |||
Reform in the water resource industry is the premise behind rationalising the engineering water price | |||
4.5.3 Cost components and regulation of the urban water price | |||
4.5.4 Wastewater treatment fee and aquatic environment price | |||
The aquatic environment price is an institutional fee charged by the government | |||
Survey and analysis of the major problems in wastewater treatment fee collection | |||
Some cities have not yet begun to charge a wastewater treatment fee, and the charging level is low | |||
The wastewater treatment fee for self-provided water sources is hard to collect | |||
The wastewater treatment fee and the wastewater discharge fee | |||
4.5.5 Pricing mechanism and full cost recovery accounting | |||
The premise of a scientifically-based water pricing mechanism is the complete separation of the engineering water price | |||
The pricing foundation of the engineering water price is full cost recovery accounting | |||
Full cost recovery accounting does not only apply to engineering water pricing | |||
4.6 The development problems of other related organisations in urban water sector market-oriented reform | |||
4.6.1 Financial organisations | |||
4.6.2 Professional service agencies | |||
Professional agencies may help local governments to create water sector reform plans | |||
Bring the functions of professional consulting firms, Attorney legal services and bidding agencies into play | |||
4.7 Main issues in the use of recycled water | |||
4.7.1 A lack of policies that encourage wastewater recycling | |||
4.7.2 The urban water price system is not fully functional | |||
4.7.3 Lack of associated infrastructure |