Zhejiang launches auctions for sea areas

Individuals and companies looking to use sea areas in Zhejiang province to develop industrial or commercial projects are now required to gain the right to do so through auctions.

Taking the lead in a country with 12 coastal provinces and municipalities, Zhejiang promoted the approach via a new regional law that entered into force on Friday.

Experimental auctions have shown that the practice doesn't lead to a sharp rise in prices to obtain usage rights — only a 10 to 20 percent hike from the base price has been seen.

Officials cheered the practice, saying it can help to curb corruption and maximize the value of seawater zones, a valuable resource.

Experts said that Zhejiang — where the per capita arable land area is only about half of the country's average — has been forced to take greater advantage of its sea areas, but urged other coastal provinces to be careful when trying to follow suit.

Administrating a sea area totaling 260,000 square kilometers — twice as much as its land area — Zhejiang took the lead by auctioning off its uninhabited islands in 2011.

In the new 45-item regional law approved by the local lawmaking body on Nov 29, the government is authorized to divide sea areas into different functional zones, and applicants are required to gain the right to use these waters through means such as bidding, auctions and listings for the purposes of tourism, entertainment and industry.

Winners can use the waters for up to 50 years, and the right can be transferred, mortgaged, rented or inherited. But they are required to stick to the waters' original functions and banned from altering them without approval.

Zhao Limin, head of the provincial ocean and fisheries bureau, said the practice promotes allocation of the scarce resources through the market, and it ensures an "open, just and fair" process.

"Offshore waters are becoming increasingly scarce, and the auctions can curb the corruption that happens in the administrative examination and approval process," he said.

Traditionally, entities take around one year to prepare and apply for water zones from governments. They also need to pay up to 1.35 million yuan ($220,000) for using 1 hectare of seawater for 50 years.

Xu Changle, professor of regional economics at the Shanghai-based East China Normal University, said the shortage of land has prompted Zhejiang to focus more on the development of its islands and waters.

"Compared with the old administrative method, the auction is a good attempt because it brings more transparency," he said in a telephone interview.

"But we all know that the market can fail and auctions cannot ensure the elimination of all backstage operations. Better rules are needed when problems emerge," he added.

Also, some critics said that by organizing the auctions, local governments, which have long been dependent on profits from the sale of land, just came up with another excuse to increase their revenue.

But Xu said it is not the fault of local governments and cautioned other provinces rich in water resources.

"Take Hainan province as an example. It needs to be seen how much capital can be attracted if it puts its waters up for sale," he added.

Xinhua contributed to this story.