Beijing's New Rules on Municipal Infrastructure Projects

Beijing municipality's Concessions for Urban Infrastructure Procedures (the Procedures) were announced on September 10 2003 and became effective as of October 1 2003. At the same time Liu Zhihua, the vice-mayor of Beijing, also announced 50 new infrastructure projects in the capital city worth over US$7 billion. As part of Beijing's drive to modernize its basic infrastructure, the Procedures reflect an attempt to increase both domestic and foreign investment for the financing and operation of new and existing infrastructure construction projects.

"Concession Operations" for Infrastructure Projects

Historically, PRC state-owned companies have dominated investment in large urban infrastructure projects, and domestic and foreign private investment has been prohibited or tightly restricted. Under the Procedures, private investors are now permitted to bid for project construction and operation rights through a public tendering system. To encourage such investment, three investment methods are promoted: build-operate-transfer (BOT); transfer-operate-transfer (TOT); and entrusted operating concessions for public services. Under all three forms, the winning bidder will be granted, upon successful completion of contract negotiations with the granting authority, a concession to operate the relevant project. A concession operation is defined in the Procedures as the grant of an administrative licence to an enterprise or other organization for the purpose of operating a specific urban infrastructure facility for a specified period and scope.