A key government panel on Friday formalized an interim report on ways to privatize four road-related public corporations, proposing to freeze a number of pending highway projects and minimize the financial burden on taxpayers.

But tough political battles lie ahead as the Diet, where a majority of lawmakers want to maintain the current road construction plan, has the final say over whether the laws will be revised or enacted.

The final report will merely serve as the basis for bills to be drawn up during fiscal 2003 that would enable the proposed special firms to be set up by fiscal 2005.

Under the scheme proposed by the interim report, an independent body would be established to manage all the debts and assets of the four public firms.

The body would lease toll expressways to the new privatized corporations and repay their debts.

The privatized bodies should have voluntary management power, the government’s involvement should be minimized, and laws should be drawn up to ensure the bodies’ independence, the report says.

However, the seven-member panel of experts avoided the most politically sensitive issue in its interim report: how much of the currently ongoing construction works — totaling about 2,000 km — should be canceled.

“It is the government that decides which parts of the ongoing works should be canceled,” said panel chairman Takashi Imai at a news conference following Friday’s panel session.

The four firms — Japan Highway Public Corp., Metropolitan Expressway Public Corp., Hanshin Expressway Public Corp. and Honshu-Shikoku Bridge Authority — are currently saddled with debts totaling 40 trillion yen.

After the news conference, Imai, honorary chairman of Japan Business Federation (Nippon Keidanren), said the panel will not recommend the cancellation of any specific sections of planned roads, but instead would provide standards against which judgments could be made.

The standards will probably include data outlining costs and benefits, the progress of the planned road construction works and the amount of debts the new privatized bodies can bear, he said.

Some panel members, including key member Naoki Inose, called for the cancellation of all projects that have a progress rate of less than 50 percent.

Imai’s comments indicate the panel has chosen an approach that will avoid conflicts with powerful ruling party politicians who oppose the panel’s privatization drive, which the panel says would scale down the current planned expressway network totaling 9,342 km.

Inose, the most vocal member calling for the cancellation of most of the current projects, admitted the panel has its limits.

“Don’t rush,” he said. “An abundance of data have been made open to the public through the panel’s deliberations, so I think common sense will work” to help form national consensus over how much of the current projects should be stopped.

But the opinions of lawmakers and local politicians are likely to differ from that of Inose. A national association of governors nationwide has opposed the panel’s drive to cancel much of the current expressway projects, and a number of influential politicians have threatened to block passage of any necessary bills at the Diet.

Some of the seven members are still divided over whether the new privatized bodies could maintain their independence under the proposed scheme.

A policy should be established to avoid increasing further financial burdens on the privatized bodies, and it would work as a brake against political pressure to build more unprofitable roads, the panel said.

But the proposed scheme would also allow the debt-asset management body to provide the privatized bodies with funds for new expressway projects, which some members worry could work as a loophole to expand unprofitable projects for the new entities.

“I am still not sure this scheme is the best,” said Yuko Kawamoto, who gave tentative approval to the final version of the report.

The panel also appears to be well aware of the necessity to gain public support, stressing its reform-oriented stance.

The final version of the report recommends new privatized entities aim for listing on the stock exchange, thereby securing morale and incentives for the companies’ new management team.

In the final report, the panel concluded that the four semi-governmental firms are no longer able to continue building new expressways under the current scheme, which poses no financial burdens for local governments but heavily depends on loans from the “zaito” governmental investment program.

Much of the zaito funds come from people’s assets at the public postal savings system.

“If Japan Highway Public Corp. cannot repay its debts, it would eventually mean people’s postal savings would be lost,” Imai said. “That should be avoided at any means.”

Restructuring the nation’s roads

The following are the main points of an interim report submitted by an expert panel discussing privatization of four public road corporations.

* The four firms should be reformed into privatized entities that have independent management.

* The new privatized bodies should have the goal of becoming listed on a stock exchange.

* An independent body should be set up to handle all the assets and liabilities of the four firms. It should lease toll expressways to the privatized bodies and repay debts for them.

* The financial burdens the privatized bodies incur in building new expressways should be limited to the amount they can raise themselves, and the profitability of each project should be secured.

* The debt/asset management body can provide the privatized bodies with funds for new expressway projects if it does not increase its the total liabilities.

* The land minister and the Japan Public Highway Corp. should immediately start reviewing all ongoing construction projects with the option of freezing some work.

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