‘Abenomics’ needs more Thatcher: Marubeni chief

Getting government out of water business would be huge, Asada says

by Yuriy Humber

Bloomberg

Prime Minister Shinzo Abe should adopt policies similar to those used by former U.K. leader Margaret Thatcher to bring the world’s third-largest economy out of its “lost decades” funk, says Marubeni Corp. Chairman Teruo Asada.

From a recession in 1981, the United Kingdom went on to post its highest growth rates since World War II as the late prime minister opened up state-controlled industries to domestic and overseas investors and sold off such companies as British Gas and British Telecom. Today, four of the six major companies supplying gas and electricity in the U.K. are owned by overseas utilities.

Thatcher’s decision to hand over water utility management to private companies alone improved the U.K.’s fiscal balance, Asada said in an interview in Tokyo. A move by the world’s most indebted nation to get the government out of the water business could open Japan to more investment and competition, he said.

Deregulation of “airport, port, highway and such kinds of concession businesses should be realized and opened to public and private business groups,” said Asada, whose company is involved in these industries abroad. Lobbying of the government on this issue is under way, he said.

In the U.K., Marubeni’s domestic rival, Sumitomo Corp., bought Sutton & East Surrey Water PLC for $260 million in February. Another trading house, Itochu Corp., last year took 20 percent of Bristol Water PLC for $68 million. Asia’s richest man, Li Ka-Shing, is among the foreign investors in U.K. water companies.

In contrast, Japan’s water market is administrated by the government via the Japan Water Agency. The electricity market, the world’s third-largest, is mostly split between 10 regional utilities that monopolize generation, transmission and distribution in their areas with little competition.

Japan’s highways are split between three government companies by region, while ports are owned by the central and regional governments.

In potentially the first deal of its kind, government-owned New Kansai International Airport Co. plans to hold a global auction of its concession next year with a view to raising as much as ¥1.2 trillion ($12 billion), two sources said in February.

Since being swept into power in the Lower House election in December, Abe has vowed to revive an economy where property prices have dropped for 21 consecutive years, by seeking to spur 2 percent inflation within two years and championing traditional fiscal and radical monetary stimulus.

The result of what’s been dubbed “Abenomics” is a weakening of the yen to a five-year low and a 42 percent jump in the benchmark Topix index this year, the best performance among the world’s top 10 economies.

There’s no need for further yen weakness as advocated by some of the nation’s carmakers, Asada said.

“Some manufacturers say they need a much weaker Japanese yen,” Asada said. “That’s ridiculous. One hundred yen to the dollar, plus minus five, is reasonable and favorable for most companies, especially for the exporters.”

Abe now needs to deliver on promises to take the country into all available free-trade agreements, restart the nation’s idled nuclear reactors and open up public infrastructure businesses, Asada said.

Fears that free-trade accords may kill off domestic farming or that monetary stimulus will push up the cost of the national debt need to be viewed in comparison with continuing the status quo, Asada said.

“We have faced two lost decades,” he said. “Without Abenomics, we’ll have the same thing continuing. In 2013, the introduction of Abenomics is the right thing.”

Marubeni is among the companies speaking with the government about opening wider the so-called concession industries, such as power generation, to any willing bidders, Asada said.

Marubeni owns more than 10,000 megawatts of electricity capacity abroad and very little in Japan, because the market is dominated by regional utilities and because the tariffs being set by the government are too low to justify new investment, he said.

The company would be keen to use any experience gained abroad in Japan and to bring in partners as minority investors to introduce the latest technologies and know-how, he said.

In water treatment, Marubeni has worked with both Veolia Environnement SA and Suez Environnement Co., the two biggest players in the industry, Asada said.

“Many Japanese companies, including trading companies, have much experience and know-how through doing the same kind of business outside of the Japanese market,” he said. “Serious meetings” with the government on this reform will take place, Asada said.

Asada said that some of the 50 commercial reactors idled after the Fukushima disaster started in 2011 need to be restarted and that nuclear energy should account for at least 20 percent of the country’s total electricity supply. New units, such as reactor 3 at the Shimane power plant, have superior safety systems, he said.

Beyond that, renewable energy may climb to 5 percent to 6 percent of total supply within 15 years, he said, adding hydropower could make up another 10 percent and the rest should be split between coal and gas-fired stations.

It’s Japan’s power market opportunities that most attract Marubeni, Asada said. “If we’re allowed, our ultimate target is to be involved in the coal or gas-fired power station business in the Japanese market.”

  • Bruce Chatwin

    Following privatisation of water services in England in 1989, the amount paid for water by consumers increased by 46% during the first nine years, while profits for the companies that took over the services more than doubled (+142%) in eight years following privatisation.

    No wonder Marubeni Chairman Teruo Asada is actively lobbying for the privatisation of water services in Japan. More greed at the trough.

  • Anita Railing

    Ok so Japan sells off everything. Then foreign owners and or private Japanese owners walk into the office and see 100 people shuffling and reshuffling papers. So they fire 80 of them to increase “productivity”. These 80 now take 3 part time jobs at Lawson, Pachinkoland, and the new gambling casinos. How does this help anyone.

  • Jonathan Lunn

    Japan is one of if not the most industrialized nations in the world. It would be a sad day when Japan switches all its nuclear reactors back on. If there was one country I thought could innovate and adapt to any problem it would be Japan. Japan should be the country leading green technology not sticking to the old ways of using fossil fuels.