Newsletter
LAW FOR PROMOTION OF PRIVATE PARTICIPATION IN PUBLIC INFRA-STRUCTURE PROJECTS TAKES EF-FECT
The Law for Promotion of Private Participation in Public Infrastructure Projects was promul-gated on 9 February 2000. Comprising 57 arti-cles in six chapters, the law provides the basic legal framework for private-sector entities to participate in public infrastructure projects in Taiwan. To achieve its goals, the law places duties on government to facilitate such partici-pation, and provides for incentive measures. In the areas within its ambit, the law prevails over other legislation; other statutes will only apply with respect to matters not regulated by the law.
The government agency responsible for admin-istering the law is the Public Construction Com-mission (PCC), an agency of the Executive Yuan. "Public infrastructure" as referred to in the law means 12 categories of infrastructure to be con-structed for public use or for promotion of public interest: transportation facilities and common conduit; environmental pollution protection fa-cilities; sewerage and water supply facilities; sanitation and medical facilities; social and labor welfare facilities; cultural and educational fa-cilities; major facilities for tour-site and forest recreation; power facilities and public gas and fuel supply facilities; sport facilities; parks fa-cilities; major industrial, commercial, and hi-tech facilities; and development of new town.
For private participation in "major" infrastruc-ture projects (i.e. certain important projects above a specified size), the Law provides for more generous incentives than for other projects. Which projects will qualify as major projects will be defined by the PCC in consultation with the Ministry of the Interior, the Ministry of Fi-nance and the central agencies responsible for the supervision of individual industries.
According to initial resolutions by the PCC, major infrastructure projects will include indus-trial facilities using a land area of at least five hectares, or involving a total investment of at least NT$2 billion; sanitation and medical fa-cilities using at least two hectares of land, or involving an investment of at least NT$500 mil-lion; transportation facilities designated by the Ministry of Transportation and Communications (of any investment value), and power, harbor and hotel projects above a certain value.
"Private-sector entity" as referred to in the law is not limited to a company established under the Company Law, but also include other private juristic persons approved by the authority in charge of individual projects. If such entity is supported by capital contributions or granted funding from government or from state-owned enterprises, such capital or funding must not exceed 20% of the entity's total capitalization or assets. With the approval of the Executive Yuan, limits on foreign shareholdings in such entities may be set by the authority in charge according to the needs of the individual case, and are not subject to the limits on foreign shareholdings imposed by other legislation.
Paragraph 1, Article 8 of the law defines seven models for private participation. Aside from familiar models such as BOT, BOO, and OT, there is also a catch-all clause allowing any other model as approved by the authority in charge. Private-sector entities may also initiate their own plans for participation, and apply to the authority in charge.
Where private participation in a project is ap-proved under the law, the provisions of the Gov-ernment Procurement Law (GPL) will not apply. However, where a dispute concerning the ap-plication and approval procedure arises between an applicant and an authority in charge, the procedural rules provided in the GPL for protests and appeals regarding invitation to tender, tender review and contract award will apply mutatis mutandis.
Chapter 2 of the law, "Land Acquisition and Development", regulates the acquisition and use of land required for infrastructure projects, the use of other land or demolition of structures to facilitate construction work, and the duty of the authority in charge to provide assistance. If land required for an infrastructure project is govern-ment-owned, the authority in charge may, after arranging allocation of the land to the intended use, make it available to the concessionaire by means of lease, creation of superficies, trust, or contributing the royalty or rental receivables from the use of the land as investment. In such cases, relevant restrictions under the Land Law, the State Owned Property Law and regulations of the relevant local governments governing the management of state-owned property will not apply, and favorable rental terms may be offered for the lease of land or superficies.
Where land needed for an infrastructure project is privately owned, the authority in charge or the concessionaire should negotiate with the land-owner to purchase the land at fair market price. If an agreement to purchase the land cannot be reached, and where the land in question is des-ignated as land needed for a government-planned major infrastructure project, the authority in charge may proceed with expropriation accord-ing to the laws. Where the infrastructure needs to pass through over or under any state-owned or private land, the concessionaire may negotiate with the relevant authorities in charge of the management of the state-owned land or with the landowner, to acquire right of superficies for the space required.
Chapter 3 of the law, "Financing and Taxes Benefit", provides for favorable financing terms and tax incentives to be made available to pri-vate-sector entities participating in infrastructure projects. For instance, according to the financing needs of a project, the authority in charge may coordinate and invite financial institutions or special funds to provide medium or long term loans to a concessionaire. Where the loans so provided for major transportation infrastructure projects are to support the government policy and approved by the Ministry of Finance, the line of credit of such loans are not subject to the lending limits imposed by the Banking Law. A concessionaire may offer new shares to the pub-lic without being subject to the restrictions under Item 1, Article 270 of the Company Law. Fur-thermore, a concessionaire which has become a public offering company in due course may issue non-discretionary corporate bonds to raise the fund for the infrastructure project concerned; such a bond issuance is not subject to the re-strictions under Article 247, Item 2, Article 249 and Item 2, Article 250 of the Company Law (but the total value of the issuance must be approved by the Securities and Futures Commission in consultation with the competent authority for the relevant industry).
A concessionaire in a major infrastructure pro-ject enjoys exemption from business income tax for a maximum period of five years starting from the fiscal year in which taxable income is derived after the commencement of the operation of such project. Equipment and machinery imported by a concessionaire or its direct contractor for use in the construction of a major infrastructure project is exempted from import duty under certain conditions.
Lee and Li assisted the PCC in drafting the law, and is now also involved in drafting the subsidi-ary regulations.