1. Background
With the recognition that private investment in public sector projects has been shrinking and that private investment is essential to successfully carry out national priorities, the government devised measures to boost public-private partnership. Also it developed measures to enrich existing public-private partnership projects, for example, by addressing negative public sentiments towards those projects. To this end, a joint taskforce involving private and public sectors, such as the finance ministries and relevant agencies has been formed.
2. Detailed Initiatives
Expanding Public-Private Partnership Projects: Leveraging Private Sectors’ Creativity and Efficiency
After reviewing prospective target areas for the public-private partnership projects, the possibility of attracting private investment for public projects, as well as project feasibility, the government will identify new public projects for private investment and determine which public-funded projects can be switched to public-private partnerships. In close cooperation with related parties, the government will prioritize and conduct feasibility study on projects based on the likelihood of attracting private investment. Also, public projects which need additional review, such as a road investment project in metropolitan areas will be discussed with involved parties for smooth implementation.
Improving the System: Removing Obstacles to Private Investment
The government will, in principle, allow private developers to propose BTL (build-to-lend) projects, but review, on a case-by-case basis, projects which require certain qualification or approval from the National Assembly. The government will boost mixed model (BTL+BTO) projects for areas, such as railway service where profitability is low, by shaping out detailed investment guidelines. For auxiliary businesses deriving from key projects, the government will consider applying a differentiated profit-sharing ratio by project, instead of a fixed one, for the net profits that exceed the predetermined amount when signing the concession agreement.
Increased Government Support: Ensuring Smooth Project Operation
The government will encourage developers to pay land acquisition cost in advance by offering guaranteed loan products in order to ease financial burdens arising from delayed land acquisition cost payment. The government will expand the foundation for penetrating overseas public-private partnership markets by effectively reinforcing international cooperation through inter-governmental MOUs and IR (investment relations) on public-private partnerships. Also the government will integrate the currently existing eight types of levies imposed during construction project approval procedures into a single bill.
Enriching Public-Private Partnership Projects: Regaining Trust in the Government
The government will aggressively restructure the existing public-private partnership projects to ease the burden of fulfilling MRG (minimum revenue guarantee), and regaining trust as a result.
3. Expected Effects
By allowing private developers propose BTL projects, and by boosting mixed model (BTO+BTL) projects, the government will be able to promote increased private investments in public projects. It will also be able to supply key essential SOC facilities in a timely manner by supplementing the government’s revenue shortage with private capital. Offering financial support for developers in their timely payment of land acquisition cost, the government will be able to ensure smooth project operation since it will be able to prevent acquisition cost hike and project delays. In addition, the government will offer substantial support for local companies in their global market reach by increasing exchanges on public-private partnerships with other countries, and by jointly participating in project information sessions etc.
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