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Guidelines not enough

By Song Shengxia  (Global Times)

08:48, July 10, 2012

Recent guidelines by government agencies on encouraging private investment are merely a reiteration of the State Council's policy to support private capital, economists said Monday. The guidelines can not be effective unless State-dominated sectors are willing to dismantle monopolies and small private enterprises undergo merger and consolidation to win large projects, they noted.

"Most guidelines issued recently by government agencies to encourage private investment are not detailed measures aimed at implementing policies, but merely passive responses to the State Council's call to support private investors, and therefore lack effectiveness," Bao Yujun, chairman of the All China Private Enterprises Federation (ACPEF), told the Global Times.

"Vested interests in State-owned enterprises (SOEs) which seek to maintain their monopoly positions still hinder private capital from entering the State-controlled sectors. Without dismantling monopolies to allow private investors to share some of the market, the reform cannot achieve the desired result," Bao said. The Ministry of Culture issued guidelines Monday to encourage private investment in the cultural sector and allow private investors to participate in the restructuring of the State-owned ensembles into joint stock enterprises.

The National Development and Reform Commission, the country's top economic planner, also issued guidelines Thursday to offer preferential energy and water prices to encourage private investment in public utilities projects.

The State Council reiterated in May that relevant sectors and government agencies shall draw up detailed rules to implement the policy on encouraging private investment, which was issued in 2010 and is known as the "New 36 Clauses."

So far, almost all sectors including the railways, banking, energy and telecommunications have already drafted the rules.

However, the rules did not address such issues as how the private capital can enter and exit relevant sectors and how the capital will be managed after it enters these areas.

"In the energy sector for example, the SOEs have already monopolized the sector in terms of capital, technology and human resources. It's difficult for private investors to break the barriers," Ding Yifan, a researcher at the Development Research Center of the State Council, told the Global Times.

"To allow more private involvement in the sector, we must lower the access threshold for private companies especially new energy companies and encourage them to develop new technologies," he said.

Zheng Jiaxin, manager of a Beijing-based energy consulting company, told the Global Times that it will require strategic vision from the government agencies to break the monopolies and allow more private investment across industries.

"The measures released by some local governments to nationalize climate resources such as wind and solar power sent a signal that some local governments are not easing restrictions on private capital but setting up new barriers," he said.

"Speaking of barriers, private enterprises have their own problems - they are usually too scattered with limited capital and resources to compete in State-dominated areas," Bao from ACPEF said, "they should undergo merger and consolidation to form joint stock companies to compete with the SOEs for large projects."

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