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After months of wrangling, a special task force of the ruling Liberal Democratic Party announced July 11 its final plan to streamline government-affiliated financial institutions, including abolition of the Japan Development Bank in 1999.

The LDP panel’s report also calls for a merger of the Export-Import Bank of Japan and the Overseas Economic Cooperation Fund, but it drops an earlier plan to privatize the Central Bank for Commercial and Industrial Cooperatives.

Under the plan, the JDB, a leading government-linked financier established in 1951, will be abolished and replaced with a new public financial body to take over some tasks still deemed necessary. The government will terminate the JDB’s main service of extending low-interest loans to large businesses in major industries, now that the bank’s initial goal of fostering the nation’s industries in the devastating wake of World War II has been accomplished, according to the LDP panel.

The new entity will take over such activities as extending loans for infrastructure development in local areas, environment protection projects and disaster-prevention measures, as well as fostering new industries, the report says. Koko Sato, head of the LDP panel on administrative reform, delivered the report to Prime Minister Ryutaro Hashimoto in the afternoon after obtaining official approval from the ruling party.

Conventional businesses JDB has dealt with would be eligible to receive funds from the new bank only if they are considered strategically important to the economy and if it would otherwise be difficult for them to obtain loans from commercial banks, the report says. Announcement of the report was postponed numerous times since early May, when the reform package plan was to be finalized, mainly due to time-consuming negotiations within the LDP and government ministries. Both sides were strongly opposed to relinquishing their long-held vested interests in government-affiliated financial institutions.

Until last week, Sato had said that JDB’s role would first be trimmed by terminating loans to companies such as those in the power and airline industries, because they are now financially secure enough to borrow from private banks at higher interest rates. But the final report does not mention specific industries to be cut from public financiers.

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