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Paving way for private biz going into military
(China Daily)
Updated: 2005-06-07 09:20

With the go-ahead from regulators, China's private businesses are making inroads into one of the last "bridgeheads" of State monopoly developing weapons for national defence.

The historic move to open up weapons research and development indicates again that the country honours its commitment to supporting the growth of the non-public economy, even if that means giving access to its military industry.

Under the new policy of the Commission of Science, Technology and Industry for National Defence, private and foreign-funded ventures will be treated equally when it comes to vying for licences to develop certain categories of weaponry.

The commission announced late last month that it will issue around 300 weapons development and production licences in the second half of this year to suppliers including private enterprises, which are allowed to produce weapons considered "sub-systems or special auxiliary products."

Like the country's ongoing efforts to break up monopolies in telecommunications and civil aviation industries, the commission's exertion is noteworthy and promises great benefits, if well implemented.

It is fair to argue the policy is mightier than the sword, because it renders an avenue for civilian manpower and money to help reinforce national defence, which is, in fact, an obligation of society.

The technological ingenuity of the country's private enterprises is evidently not in doubt. Those in IT and new materials sectors, for instance, have expertise that few State military industrial firms can ever match.

It is also true that many private businesses itch to return something to society, after benefiting for years from the country's preferential policies and reforms.

And many believe that contributing to national defence by participating in weapons programmes is profitable and honourable at the same time.

Then comes the so-called "Catfish effect," meaning the removal barriers for private and foreign-funded companies to enter the weapons industry will put State-owned players under the ever mounting pressure of competition.

But from the business and legal perspectives, a host of things must be cleared to turn the commission's new licensing regulations into bona fide fillips to the country's defence, as well as to private and foreign-funded firms.

First, the commission must address public concerns about the quality of weapons to be supplied by private companies.

Equally important is to ensure "secrecy-keeping" of private and foreign-funded firms engaged in national defence weapons research and development.

The commission's licensing regulations, to be effective on June 15, have made due stipulations for the above concerns. It is then up to the enforcers to translate them into concrete action.

Second, the commission is widely anticipated to come up with more specific implementation guidelines with regard to which weapons or equipment programmes might be open to private or foreign-funded suppliers or how they can choose.

Third, the commission's regulations serve only to lower the threshold for non-public companies to enter the military sector.

As a subsequent development, government departments should alter and adapt rules and regulations once tailored exclusively to State-owned military industries, for example, by giving equally preferential taxation to other businesses.

Last but not least, legislators must also act.

The policy of granting permission to private and foreign-funded enterprises to participate in the development and production of weapons is, actually, going further than some of the country's statutes allow.

For example, Article 64 of the Company Law, enacted in 1999, says "companies designated by the State Council to produce special products or in special industries shall adopt the form of a wholly State-owned company."

Experts say national defence weapons fall into the category of "special products."

Another example is with the country's Provisional Regulations for Private Enterprises, effective since 1988, which rules out private firms operating in military industries.

As in the past, lawmakers will have to revise related statutes to pave the way for private businesses to have a foothold in the now monopolized sector.

Such revisions will take place very soon to facilitate reform, according to an official with the Commission of Science, Technology and Industry for National Defence, who identified himself only as Li.

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