Public-private partnership-based services could be one of the better solutions for developing urban environmental infrastructure - which includes sewage treatment and municipal solid waste disposal services - in developing countries. Due to the low availability of funds for investment in the public sector and operating inefficiencies in government-run utilities, public-private partnership (PPP) can help to provide environmental services by calling on private-sector investment and managerial and technical skills. The Chinese government is facing a "capital bottleneckA and low efficiency in the existing government-run system for developing urban environmental infrastructure (UEI). To achieve the environmental targets under the Tenth and Eleventh Five Year Plans (2001¨2010), the Government needs to draw up financial strategies and implement financial mechanisms that include PPP. There is no substantial experience of establishing PPP systems in most developing countries, including China. This study identifies the role of PPP, and examines the necessity of introducing the PPP system in China. It also clarifies the reform process in the UEI sector, existing policies, and important options for PPP-based projects and services. The study focuses on key issues like target setting, pricing regulations and tariff policy design, policies for promoting PPP, and contractual arrangements. It is based on international experiences and seeks to examine how these can be applied in China in order to enhance UEI implementation capacity.
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