BIZCHINA / Environment
Foreign Investment
Updated: 2006-04-21 14:14
Introduction to Foreign Investment in Environmental Protection
Implementing BOT (Build-Operate-Transfer) projects to introduce foreign
investment to the infrastructure was advanced during the Eighth Five-Year
Plan period. The Chinese government attached importance and supported BOT
projects while taking transportation infrastructure projects as the
experimental unit.
BOT suggests private partners or the international syndicate will finance
and construct the infrastructure after obtaining a projects construction
license from the government. Infrastructure operations will continue
until the investments, along with reasonable profits, are retrieved. The
project will then be transfered to the owner (the government) at no
charge.
Essentially, BOT projects are public projects financed and constructed by
private organizations with a government warranty. BOTs fit into the
developmental guidance of the environmental protection of the
governmental policy and are related to the idea of the collective
treatment of pollution.
At the same time, this industry has a bright market prospect in China
that is fairly appealing to foreign investors. Therefore, BOTs have a
wide developmental future in the area of environmental infrastructure
construction. In recent years, there have been good attempts in some
regions to launch some successful cases that pioneered an important
method for financing and constructing environmental protection projects.
In addition, with the upsurge of protecting the environment since the
Eighth Five-Year Plan, international financial organization loans and
foreign governments began to incline towards environmental protection
projects. During the Ninth Five-Year Plan (1995-2000), the utilization of
foreign investment in environmental protection grew rapidly, which mostly
came from international financial organization loans and foreign
governments.
Until the end of 2000, about US$8 billion has been used, which accounted
for 10 percent of total foreign contractual loans from abroad. Foreign
investments not only make up for the lack of investment in environmental
protection, but also introduce advanced technological facilities and
managerial experiences and train a number of capable people while
promoting the gradual establishment of an environmental protection
mechanism.
Loans associated with domestic capital have financed many environment
projects and large-scaled projects in pivotal cities, such as Beijing,
Tianjin and Chongqing, involving the treatment of urban sewage, rubbish,
air pollution, ecologic construction and protection, industrial
environmental protection and clean/reusable energy resources.
Since the task of environmental protection construction is quite
difficult during the Tenth Five-Year Plan, with great demands on
investment, we should move forward in intensifying the use of foreign
investment.
During the Tenth Five-Year Plan, the overall requirements for
environmental protection are as follows: sticking to the five-year plan's
programming and continuing the active and reasonable use of foreign
preferential loans and multilateral and bilateral donations; vigorously
attracting foreign direct investment and taking on various means to
encourage and direct foreign investment for the environment, shooting for
a significant increase of foreign investment; focusing on introducing
advanced technologies, key facilities and modern management techniques,
making great efforts in using foreign capital and promoting environmental
protection to develop in line with the economy.
Along with the gradual establishment of compensating mechanisms, such as
the policy of charging for waste output and the introduction of the
market mechanism in environmental protection, a good condition for
foreign investment has been created. During the Tenth Five-Year Plan, the
industry, as a new increasing part of the national economy, will have
massive developmental potential and the potential to attract foreign
direct investment, as well as the opportunity to be a hot spot for
foreigners. Our government will take the following steps to encourage
foreign investment in environmental protection.
First of all, it will open up more outlets for foreign investment and
relax restrictions while speeding up the amelioration of related
regulations and statuses. The Chinese government will encourage foreign
investors to direct their funds to ecological environment and
environmental protection projects, such as handling urban sewage,
rubbish, clean energy resources and environmental protection facilities,
providing preferential policies to encourage the above-mentioned
activities.
Secondly, it will take measures to widen the channels and methods for
foreign investment and direct foreign investment to the environmental
protection industry via different means and channels. Apart from the
cooperation and co-investing with foreign investments, mergers and
acquisitions, project financing and BOTs should also been explored to
boost foreign investment during the Tenth Five-Year Plan.
Thirdly, the government will encourage foreign capital to flow towards
the construction of the environmental protection industry to stimulate
the development of manufacturing of related products and make the
industry the new booming part of China's national economy.
[Source: State Environmental Protection Administration]
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