Laws to privatize road entities enacted by Diet

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The Diet on Wednesday enacted a set of laws to privatize four debt-ridden expressway corporations in fiscal 2005.

The laws are part of moves to have Japan Highway Public Corp., Metropolitan Expressway Public Corp., Hanshin Expressway Public Corp. and the Honshu-Shikoku Bridge Authority repay their combined debts of 43.8 trillion yen and realize toll-free expressways in 45 years.

The privatization measure is high on Prime Minister Junichiro Koizumi’s agenda to reform inefficient government-linked corporations, as is privatization of the nation’s postal services.

But the legislation allows the government to complete the remaining 2,000 km of the 9,342 km planned expressway network — even though none of the sections are deemed profitable.

The government expects the privatized firms to spend 7.5 trillion yen for new expressway construction, while the state and local governments will jointly shoulder a further 3 trillion yen to complete the network.

Critics have called the plan a hoax that gives the privatized firms little autonomy, and have raised doubts over the debt-repayment scheme. They have also charged Koizumi with backing down from his initial commitment to cut the construction of unnecessary expressways.

The package, which cleared the House of Councilors with support from the ruling coalition, calls for the creation of six privatized entities by splitting Japan Highway — the largest of the four expressway firms — into three regional companies, and the establishment of a separate asset-holding and debt-servicing administrative body in fiscal 2005.

The six privatized entities will be given special status and undertake toll-collection, expressway maintenance and road construction while leasing expressways from the administrative organ by using toll revenues to cover the maintenance and lease fees.

Lease fees will be decided by the expressway operators and asset-holders, and will be reviewed every five years.

Even after the privatization takes effect, the central government will maintain a hand in the management of the expressway firms.

Under the package of laws, the central and local governments will together own at least one-third of the shares in each of the privatized firms.

Each company’s president must be approved by the land minister. The privatized companies will also be required to conclude agreements with the administrative organ and apply to the land minister before beginning new road construction.

While the companies can refuse a government request to build a road if they consider it to be unprofitable, they will be forced to comply if an advisory panel to the land minister judges their decision unreasonable.

The administrative organ will own the completed expressways. It will be tasked with repaying the expressway firms’ combined debts by using the road lease fees paid by the expressway operators.

The administrative body is scheduled to repay the debts in 45 years. It would then hand over the expressway assets to the central and local governments before disbanding. The expressways would then be toll-free.

“We would keep watch (on the privatization process) until the privatized companies are inaugurated in fiscal 2005,” said Nobuteru Ishihara, minister of land, infrastructure and transport.

“I’ll do my utmost so that I can hear people say that services are improved and tolls are lowered” through privatization, he said.

He said tolls will be an average 10 percent lower before privatization takes effect.

Alternative legislation proposed by the Democratic Party of Japan was voted down in the House of Representatives.

The DPJ had called for the introduction of toll-free expressways in fiscal 2008 by repaying debts through the issuance of government bonds that would be redeemed with road-related tax revenues.

The government has been promising toll-free expressways for decades.

But after a popular expressway is paid off, its tolls are used to cover the cost of unprofitable pork-barrel expressways in rural areas.

“The problem is that a (similar mechanism) will practically continue under the privatization scheme,” said Kazuaki Tanaka, former acting chairman of Koizumi’s advisory panel tasked with deliberating over the privatization issue. Tanaka resigned in protest from the panel in December when the government mapped out the draft legislation.