The Ministry of Finance, the Ministry of Housing and Urban-Rural Development, the Ministry of Environmental Protection and the Ministry of Agriculture issued a notice on comprehensive implementation of Public-Private Partnership (PPP) in sewage and waste treatment projects. The full text of the notice is as follows:

All provinces, autonomous regions, municipalities, the finance department (bureau) of municipalities with independent planning status, the housing and urban-rural construction department (committee), the environmental protection department (bureau), the agricultural department, Xinjiang Production and Construction Corps’ Finance Bureau, Construction Bureau, Environmental Protection Bureau and Agricultural Bureau:

In order to implement the strategic deployment of the Party’s 18th National Congress on accelerating the improvement of modern market system and ecological civilization system, further standardizing the market operation of the sewage and waste disposal industry, improving the efficiency of government participation, fully attracting social capital, and promoting the healthy growth of the industry, we plan to fully implement the public-private partnership (PPP) model for government-sponsored sewage and waste disposal projects. The relevant matters are notified as follows:

I. Overall Requirements

(1) Guiding ideology: Fully implement the spirit of the 18^th National Congress of the Communist Party of China, the 3^rd, 4^th, 5^th and 6^th Plenary Session of the 18^th CPC Central Committee, answer the calls of the Decision of the Central Committee of the Communist Party of China on Deepening the Reform of Some Major Issues on establishing a marketization mechanism attracting social capitals into ecological environment protection, give market mechanism and government a full play, improve the efficiency of government participation, fully attract social capital investment, better the quality of environmental public services, and further supply-side reform.

(2) Basic principles: Focus on full implementation of the policy, introduce market mechanism in all aspects of sewage and waste disposal, promote PPP application, integrate sewage and waste collection, transshipment, treatment and disposal, to realize the integration of sewage treatment plant and networks and benefit from waste disposal cleaning; effectively implement performance appraisal and paying by efficiency, improve the quality and efficiency of related public services via PPP. Based on local conditions, enhance guidance and support, strengthen the pay-as-you-go mechanism; the government and social capital will negotiate and determine the PPP approach on the principle of market mechanism. Take standardized operation as the starting point, strictly implement the financial PPP work system standard, prevent disguised borrowing of government debt and financial risks, and further promote PPP reform in related fields. Aim to improve efficiency, enhance financing capabilities in related fields, create smooth access to social capital and improve project management.

(3) Overall objectives: The new sewage and waste disposal project involving government fully adopts the PPP model; orderly promote the to-be-finished projects to take PPP approach; develop a unified, standardized and efficient PPP market based on social capital, and optimize the supply structure of related environmental public goods and services.

II. Implementation Requirements

(4) Scope of application: The government participates in currency, in kind or in form of equity, or involves in risk sharing or benefits distribution as public units; various sewage and waste disposal projects with financial affordability and passing value for money assessment fully adopt the PPP model.

(5) Implementation content: With regard to various sewage and waste disposal projects that meet the conditions for fully implementing the PPP model, the path for government participation is only limited to PPP. The government and social capital should sign a PPP agreement, clarifying equity distribution and risk sharing mechanism, and achieve commercial risk isolation by establishing a PPP project company with independent legal personality. The government may provide necessary support to the project on the premise of complying with the relevant PPP policy, but it shall not provide guarantee for project financing, assume unlimited liability for the commercial risks, or promise to repurchase the investment capital of the social capital party, bear any loss of investment capital or promise minimum income to social capital party in any forms.

(6) Standardized operation: Ensure the quality of PPP projects in sewage and waste disposal, standardize the process of project initiation, identification, preparation, procurement, implementation, and transfer, and strictly implement the Instructions on Promoting Government and Social Capital Cooperation in Public Service Field (GBF[2015] No. 42) and other regulations; implement various industry management regulations, technical standards and related tax and fee policies on sewage and waste disposal; strengthen contract management, clarify performance appraisal and pay-for-performance clauses in contracts, and improve service quality and efficiency.

(7) Orderly implementation: The financial and industrial management departments at all levels should reasonably determine the government level and departments involved in the project in light of the economic attributes of the project, the scope of benefits and the industry management model. Based on the non-competitive and non-exclusive characteristics of the project, properly determine the extent of public resource involvement. Restrict government behavior, reduce administrative approvals, and eliminate improper intervention in market operations. Significantly reduce the direct allocation of market resources by governments in this field, and facilitate market resources to maximize benefits and optimize efficiency based on market rules, market prices and market competition.

III. Supportive Policy

(8) Optimizing of fiscal policies: The comprehensive implementation of PPP mode in the sewage and waste treatment field shall be strongly supported. For projects that have not effectively and comprehensively implemented the PPP mode policy, the related budget expenditures shall not be covered in principle. Local governments at all levels should actively promote the transformation of fiscal funds in the field of sewage and waste disposal, with operation subsidies as major means for financial investment; alternatively, initial funds can be allocated from financial capital as rewards, in order to gradually reduce capital investment and investment subsidies. Reinforce the integration of various types of financial funds, fully coordinate the support funds for rural sewage and waste disposal concerning agricultural funds, expand scale economy and economy of scope effect, form a joint force of fund policies, and give priority to private capital participation.

(9) Improving of industry management: The guidance on the comprehensive implementation of PPP mode in the field of sewage and waste treatment shall be strengthened, the relevant plans shall be scientifically developed and strictly implemented, and the relevant projects shall be urged to be implemented more quickly. Through the full implementation of the PPP model, effectively improve the sewage, waste disposal capacity and project management. Effectively coordinate the works within and outside the overall plan for regional river basin environment treatment, sewage water and waste treatment in urban and rural areas, aligned with ecological industry, circular economy development and surface source pollution treatment. Establish and improve the monitoring and supervision system of project service quality, operation cost, safety production and environmental protection indicators, and establish a performance-based PPP profit mechanism.

IV. Organizational Leadership

(10) Working mechanism: The work of fully implementing the PPP model in sewage and waste disposal is based on the principle of “central guidance, local promotion, market allocation of resources and full implementation”; establish a working mechanism featuring central planning and deployment, local government implementation and multi-sector coordination and cooperation.

(11) Local responsibilities: Local governments at all levels are responsible for the full implementation of the PPP model in sewage and waste disposal. It is necessary to establish an efficient working mechanism, strengthen organizational leadership and the assessment of related work.  

V. Others

(12) This notice shall be implemented as of the date of promulgation.

Ministry of Finance, Ministry of Housing and Urban-Rural Development

Ministry of Agriculture, Ministry of Environmental Protection

July 1, 2017