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A key government economic panel will call for a freeze on dam and road projects on which construction has not yet begun when it issues a blueprint for reform on June 27, government sources said Friday.

The so-called big-boned program to be issued by the Council on Economic and Fiscal Policy will also call for projects to build airports and ports to be scrapped if similar facilities are already located nearby, the sources said.

The proposals follow a promise by Prime Minister Junichiro Koizumi to review public works projects in order to keep the issuance of new government bonds below 30 trillion yen in fiscal 2002.

A final draft of the program recommends that state public works projects be limited to those that will have a nationwide benefit, while schemes that will only benefit local communities should be undertaken by local governments on their own.

The draft also calls for the introduction of an open tender to allocate radio frequencies that are currently set by the government after an application is screened as a way to promote competition.

It also urges that the functions of the Fair Trade Commission be strengthened to promote competition in the information-technology industry and that a review be conducted of the corporate structure of Japan’s dominant telecom carrier, NTT Corp.

The draft also calls for the introduction of a budget account that will combine medical and pension programs, a review of mandated state outlays on medical services and deregulation in the medical service sector to keep growth in state medical expenditures low.

It also calls for a review of the system of providing state subsidies in tax grants to local governments to make up for their revenue shortfalls and local taxes so that local governments can be financially independent.

The draft urges the government to reallocate revenues earmarked for specific purposes, such as those for road construction, while calling on government-affiliated corporations to improve disclosure standards.

As a means of measuring progress in streamlining public works projects, the draft proposes the government strive to reduce the ratio of public works spending to gross domestic product in the medium and long terms. In fiscal 2001, public works spending accounts for 7 percent of GDP.

Gist of council’s reform package

The following is the gist of a final draft of the reform package to be issued by the Economic and Fiscal Policy Council:

* Cut state subsidies and contributions to local governments, while giving them more power to provide public services.

* Curtail local governments’ tax grants that are used to redeem local government bonds issued to finance specific projects.

* Encourage local governments to raise funds independently to finance social infrastructure and social security projects.

* Review the use of revenues set aside for specific purposes, such as road construction.

* Prioritize social infrastructure projects, with emphasis on promoting recycling, revitalizing local regions, promoting human capital, dealing with the aging population, promoting science and technology, and realizing urban renewal projects.

* Place a freeze on dam and road projects on which construction has not yet begun, as well as other projects to build airports and ports if similar facilities already exist near project sites.

* Conduct strict inspections of projects to be financed by funds borrowed from government-affiliated corporations.

* Reduce the ratio of public works spending to gross domestic product in the medium and long terms.

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