CFLD executive president shares PPP experience with World Bank

How PPP can bring mutually beneficial results

Zhang explained that CFLD has emphasized the principles of self-sustaining and compatible incentives in the operation of its PPP model and thus generated win-win results between the organization and the governments involved.

The self-sustaining principle has relieved the concerns of local governments to invest or guarantee or sign minimum-guarantee clauses. The utility of social capital has helped New Industry Cities lure high-end industries, the latest technologies and high-skilled talent, produced additional fiscal revenue, and boosted the payment abilities of local governments.

The government can collect newly added fiscal revenue to pay for developmental PPP service fees, achieving an internal balance between revenue and expenditure and healthy budgets.

According to the principle of compatible incentives, the government will authorize social capital with specific economic development tasks in a region and evaluate its performance through criteria such as fiscal revenue, GDP, people's livelihoods, employment, and ecological conservation. Only when social capital meets these standards will local governments pay for relevant PPP services with newly created financial revenue in the region.

Social capital will receive increased payment for their PPP services when producing enough fiscal revenue under the principle of compatible incentives, and vice versa. Involved enterprises are highly motivated and there is no risk for government since the two sides have common goals and will make full use of their separate strengths.

CFLD will provide local governments with professional services such as planning and design, land consolidation, infrastructure development, building of public facilities, industrial development, and urban operation and maintenance. It will do so under the principle of compatible incentives, developing a comprehensive and systematic solution to the high-quality growth of a county.

Zhang said that CFLD has made investments in and is directly operating 77 New Industry Cities at present, 30 of which are listed in the PPP project pool released by the Ministry of Finance.

More specifically, five such projects, which are located in Gu'an of North China's Hebei Province, Lishui of East China's Jiangsu Province, Nanxun in East China's Zhejiang Province, Tuanfeng in Central China's Hubei Province, and Xinzheng in Central China's Henan Province, have been recognized by the Ministry of Finance as national demonstration PPP programs.

In addition, the projects in Gu'an and Lai'an have been listed by the National Development and Reform Commission as typical PPP cases.

Furthermore, the UN in May 2018 added the New Industry City in Gu'an to its list of 60 people-oriented and sustainable development PPP projects, and local Zhejiang government itself recently put the New Industry City in Jiashan County and Jiashan onto a list of high-quality development representative cases.