Su Yang

Research Report No 081, 2004

The chief objective of the State in developing the sand industry is ecological restoration, but the motivation of enterprise participation is their high expectation on the future return of this industry. In view of huge losses caused by the deterioration of the ecological environment in the three north regions, all local governments in these regions should give full consideration to the proportions of water resource distribution in ecological protection, living and production needs, make ecological restoration the chief objective of the development of the sand industry, only approve the entry of and lend support to enterprises conducive to regional ecological restoration, and effectively improve the development conditions. In light of the above, the author proposes:

I. Make Plans in Advance, Strengthen Management and Conduct Effective Overall Control and Dynamic Monitoring

There are many constraints in realizing the healthy development of the sand industry. Therefore, the local governments should formulate industrial development plans according to law through general investigations, consider the proportions of water distribution in ecological protection, production and living needs in light of policies and government development plans, clearly define the areas and the methods and extent of industrial development, and carry out planning by areas and development by industries.

Toprevent desertification, we must first control the water. The core of sand-control management is to manage the intensification degree of industries and their development scales according to the conditions of surface and underground water. Therefore, the local governments should not pursue large scale and fast development when formulating industrial development plans. They should especially avoid using political mobilization method to attract business and investment, but assess and set the entry restrictions according to the environmental impact of development projects of the sand industry, and exercise overall control over development scales according to the conditions of local water resources. The local governments should strengthen the supervision roles of the environmental protection departments or forestry departments over the sand industry, empower them with the right to check and rectify enterprises that have already entered the sand areas for development activities. They should also set up specialized desertification monitoring centers and conduct dynamic monitoring over the conditions of local water resources, and manage the sand industry accordingly.

II. Make Overall Plans for Various Development Resources, Combine the Roles of Government with Market Mechanisms so as to Promote the Development of the Sand Industry

The State should adopt the method of project bidding to operate construction funds and grain subsidies appropriated to the local government for promoting rest-grazing, returning farmlands to forests and sand prevention and control, and should adopt the contract system management method. They can thereby enable some enterprises engaged in the sand industry to participate in the operation, which will not only ensure efficient utilization of state input in ecological construction in a market way, but also solve the problem of insufficient capital or high financing costs of such enterprises, and consequently create a mutual promoting mechanism between industrial development and state ecological construction.

In areas to be developed under the local desertification prevention and control plans, the local government should extend the terms of land utilization, allow enterprises to pay land rents by installments during the terms of land utilization, and reduce investment pressure of enterprises which are at the initial business establishment stage.

The State should improve the current interest discount method used for special loans for desertification control. It should adopt the fixed-target, fixed-term and fixed-rate interest discount measures, and adopt different repayment terms for sand industry projects with different public welfare results based on environmental impact evaluations, so as to guide and support standard development of enterprises. For example, the loan repayment terms of planting and processing industries of medicinal materials that have long investment cycles should be extended to seven to ten years.

The State should grant more preferential tax treatments. As the period between making the initial investment and obtaining significant economic returns of sand industry projects is quite long, the State should further extend the terms of exemption and reduction of agriculture taxes and taxes of special agricultural and forestry products, and reduce the tax rates.

June 2004