What Is a Basic Industry?

The basic industry is a collective name for various industrial sectors that provide raw materials, power, and basic conditions for the processing industry. It mainly includes industrial sectors such as agriculture, energy, raw materials, medical treatment, raw materials, transportation and education. The characteristics are: large investment, long construction period and slow results. The economic structure occupies a considerable proportion, which is essential for the development of other industries and is the basis for the development of other industrial sectors; most of the products belong to primary products or intermediate products; compared with the products of the processing industry, their added value of labor is relatively low. ^[1]

Basic industry

Basic industry refers to being in a basic position in the development of a country's national economy. It plays a role in restricting and determining the development of other industries and determines other

The basic industry has the following attributes:

The most critical issue of basic industry investment is investment and management methods. It not only directly affects investment efficiency, but also determines the source of funds for investment.

Basic industry investment mechanism

It is worth noting that different investment and management methods actually mean different cost compensation methods. From the practice of various countries, the main investment methods are:

Direct investment

That is, the government directly invests in infrastructure and provides it to the public free of charge, and the government bears the entire cost. This is the most basic and most traditional form of government investment. It is suitable for infrastructure projects that benefit the general public and benefit substantially. At this time, the government actually relies on tax financing.

Direct investment, non-commercial operations

That is, the government directly invests in non-commercial operations by a specific public sector to which the government belongs. The so-called non-commercial operation is not for profit. The operating entity charges the user an amount equal to or less than the operating cost. This approach is suitable for infrastructure projects that benefit the general public but differ in the amount of benefits, which are exclusive but not suitable for the private sector. At this time, there are actually two ways of project cost compensation: taxes and royalties.

Indirect investment

That is, the government only provides investment loans, and the private sector invests and operates in a commercial manner. It is suitable for general infrastructure and basic industrial projects where the beneficiaries are not universal enough, are exclusive and suitable for private sector operations. At this time, the project cost compensation actually comes from the price of providing project services.

In addition to the above several basic methods, in practice, there are many other combinations of investment and management methods in the basic industry, such as BOT and government investment and financing.