Weaknesses Remain in New Rules for China's Toll Roads

From News page 5 issue no. 384 Sept 8 2008
Translated by Ren Yujie
Original article: [Chinese]

Siyang road in Guangzhou only measures 6 kilometers. Its toll collection period, however, lasted nerly nine times its length at 50 years.

The long years of collections were a result of its conssession rights having changed hands twice -once to an Australian company in 1994, and again to a Hong Kong one in 1996. Thus, the toll conssession period extended from the initial 15 years to 50 years.

This is just one example of toll stations that riddle China's highways and byways, thriving in a grey area of regulation.

The stations, many of which were sold by local governments through loopholes, have been pinching drivers with tolls well beyond time limits - 25 years - stipulated in Chinese law.

Starting October 1, any transfer of tolled road's concession rights would have to abide by a litany of specific guidelines to prevent such violation. The new rulings were jointly issued by the Transportation Ministry, Finance Ministry and the National Development and Reform Commission.

Extending Toll Collections through Transfers
Up to now, there have been two ways to acquire tolled road rights, either by transfers of management or equity stakes.

The former method required approval by the Ministry of Transportation, but the latter could be approved directly by local authorities. Many instances of tolled road transfers made avail of the local shortcut and subsequently broke through the time limit of toll collections.

In addition, the jurisdiction to dish out penalty for such violation fell under local governments, but many of whom had been lackadaisical in supervision.

There were at least nine tolled roads with collection periods lasting 50 years and beyond in Guangdong province, the first Chinese province to experiment with building better quality roads through credit and charging motorists to repay loans.

A regulation published in 2004 capped the tolling period at 25-year, and if special terms were met, it could be extended to 30-year. Usually, tolled roads built by local governments would be charging fees for 15 years.

Guangdong, as the first region to have tolled road, was also the first in having toll concession rights transfers. From 1991 to 1999, a total of 52 transfers took place there, among which 34 were transfers of government tolled road to private companies.

For instance, eight years upon completion, Guangdong Jiujiang Bridge project transferred 20 million shares to Malaysia Ipoh Engineering in 1996 and extended the toll collection period to 2018, eventhough the project could have paid off loans through two years of tolling.

In an investigation on transfers of 106 tolled roads' concession rights in 10 provinces in 2006, National Audit Office found that 64 illegal transfers were nonetheless approved by local authorities, which accounted for 60% of the total number. In the same year, MOT issued an announcement to suspend transfers of government loan-backed tolled roads.

Restrictions
The new regulation prescribed the transfer of tolled road concession rights should be through bid invitation after valuation procedures. The process must be publicized in the media and approved by the authorities.

The regulation also prescribed conditions, procedures, income management, administration and withdrawal of transfers of toll concession rights and clarified other legal responsibilities.

In addition, the regulation said upon a transfer took place, the new management could at most apply for an additional five-year extension period for toll collection from provincial authorities. A change of management could not be used as an excuse to raise toll fees.

Moreover, transferring concession rights should be written into local governments' budget management.

However, a local transportation official in Guangdong told the EO that existing tolled roads with prolonged collection periods, like the Sijiaowei toll station, would not be removed even after the new regulation took effect.

Guangdong province NPC member Zhu Yongping said the new regulation did not involve some new provisions on transfers of tolled roads through share acquisitions, so approval and punishment rights for this still belonged to local authorities. Therefore, toll stations such as Sijiaowei could not be removed.

Wang Shuang, a transportation system researcher for Xingye Securities, said the new regulation would have little effect.

Intest Groups
Zhu reckoned that so far, investment companies, banks and government authorities had formed an interest group invested in the transfers of toll road concession rights, which were consistently profitable.

Wang Zechu, a Guangdong Political Consultative Conference member, said the government favored transfering toll road management because it would free them up to invest in other road and bridge projects where they could collect even more fees.

However, according an investigation by the National Audit office, instead of being used for road construction or loan repayment, 5.8 billion yuan of earnings from toll road transfers had either lay idle or was embezzled, among which 1.79 billion yuan were used for building construction, stock investments, issuing bonuses and making overseas investments.

Wang said that common staff of some toll stations could see an 8,000 yuan monthly salary, which was "obviously rather high".

An insider from the Guangdong provincial transportation department told the EO that implementation details for the new regulation would be issued by the end of this year, which would have more definite provisions for dealing with provincial toll stations, such as the one in Sijiaowei.