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Pork-barrel highway entity key target for privatization

by Yuzo Suwa

Kyodo News Japan Highway Public Corp. is the most symbolic privatization target of Prime Minister Junichiro Koizumi’s “structural reforms without sanctuaries” campaign.

The corporation has strong political influence and huge operating expenses — 5.363 trillion yen in fiscal 2001.

That’s about the same as the revenues generated from gasoline and automobile taxes, which are earmarked exclusively for road-building projects — long considered a source of pork-barrel politics — and go to the corporation.

In a revised report this month, the secretariat of the Cabinet’s administrative reform task force proposed that all the corporation’s highway projects currently under construction be frozen.

The task force is supervised by Nobuteru Ishihara, state minister in charge of administrative and regulatory reforms.

However, a high-ranking official of the Land, Infrastructure and Transport Ministry recently put such plans in doubt, saying, “We wonder whether Prime Minister Koizumi and the secretariat can actually persuade members of the Liberal Democratic Party and locals to accept the idea.”

The corporation, which plans to complete 11,520 km of expressways throughout Japan in the early 2000s, said the current plans to construct 9,342 km of expressways can be realized if tolls are kept at their current levels and if the state pays 300 billion yen annually.

But the corporation’s total interest-bearing debts and investment are expected to rise to 34 trillion yen by fiscal 2021, with its revenues from highway tolls fluctuating according to the economic situation. The secretariat and the ministry agree, therefore, that to prevent the corporation from effectively going bankrupt, there is a need to apply the brakes to the extension of expressways.

At an Aug. 10 meeting of the land, infrastructure and transport division of the LDP, its chairman, Hirohisa Kurihara, said: “I doubt the wisdom of freezing projects across the country. Local people cannot understand the policy because expressways are also instrumental in carrying local resources to Tokyo.”

A ministry official added: “I wonder whether there are any LDP Diet members and heads of local governments who would readily agree to the proposed freeze. No brakes can be applied to the corporation without persuasion.”

The official said it is “politically realistic” to accept the idea that the corporation will build 9,342 km of expressways, and the rest will be built by the state.

Secretariat sources said, however, that the secretariat will not allow the corporation to build more expressways and will seek its privatization on condition that it will engage in the management of only the existing expressways.

A ministry official said: “The Tomei and Meishin expressways are a big hit. Even if the corporation does not construct more expressways, it is undoubtedly a very good company. We think the corporation will willingly accept privatization at this moment because the government would have no say about its personnel policy.”

The corporation’s initial policy was to eventually abolish the toll system. This seems a distant goal, however, as a privatized company would carry debt incurred from expressway construction.

Other problems likely to arise are how to check the management of toll gates, service areas, highway cards and other related businesses. The privatization, if not carried out smoothly, would also delay the construction of expressways, official sources said.