A decision made earlier this month with regard to expressway construction underscores the concerns over expressway reform legislation that existed when Prime Minister Junichiro Koizumi pushed it in 2004. He used to say that the reorganization of Japan Highway Public Corp. and three other expressway corporations into six private firms was aimed at ending the construction of superfluous roads.
But just as experts had predicted, the legislation does not look set to curb such construction. On the contrary, under a Feb. 7 decision by the National Land Development and Trunk Expressway Construction Council, the construction apparently will continue as it did in the days when pork-barrel politicians used the public expressway entities to push it.
This 20-member council consists of 10 business leaders and experts from the private sector, and 10 Diet members from both the ruling and opposition blocs, including Liberal Democratic Party secretary general Tsutomu Takebe and LDP Policy Research Council chairman Hidenao Nakagawa. Its decision means that most of the 9,342-km expressway network in a 1999 government plan will be constructed as originally envisaged.
The council discussed what to do with 49 sections on 19 routes, totaling 1,276 km, for which builders had not yet been chosen. Under its decision, the privatized expressway firms will build 42 sections covering 1,153 km using 10 trillion yen in borrowed money. Among the new sections to be built in this way is a section on the Second Tomei (Tokyo-Nagoya) Expressway. This phase of construction will complete the new expressway.
Meanwhile, seven sections totaling 123 km will be built under a new scheme that uses tax money for construction. Three-fourths of the tax funds will come from the central government, the rest from the local governments concerned. The new scheme implies that the profitability of some expressways is so low that tax money is needed for their construction — outlays that will increase financial burdens on state and local governments.
In 2003, it was decided that 2.4 trillion yen in tax money would be used to build 27 sections totaling 699 km. Now, with the new 123 km of sections added, the cost of the tax-funded scheme will increase to an estimated 3 trillion yen. No tolls are charged on expressways built under tax-funded schemes.
Although the council decided to freeze construction of five sections totaling 103 km, there is a strong possibility that this construction may be revived in the future. The frozen sections include two sections of the Second Meishin (Nagoya-Kobe) Expressway, with which an existing bypass runs parallel. Nonetheless, decision-makers may choose to portray the decision to freeze construction as a fruit of reform.
The central point in the expressway-reform discussions was how to realize efficient, rational expressway construction and management, how to prevent 40 trillion yen worth of debts owed by the public expressway corporations from snowballing, and how to expedite debt repayment.
The reform legislation came up with a bizarre mechanism. Aside from the privatized expressway companies, a separate asset-holding and debt-servicing administrative body was set up. This administrative body owns all existing and to-be-completed expressways, leases them to the expressway firms and receives toll revenue as rental fees to pay off the 40 trillion yen debt within 45 years.
But with the expressway firms freed from the burden of debt repayment, they have little incentive to get serious about cutting expressway construction and management costs or refusing new construction. The repayment period is so long that no one is likely to take the responsibility of debt repayment seriously. Construction of new expressway sections by the expressway firms will add 10 trillion yen in debt to the administrative body. The debt is guaranteed by the government.
The prime minister’s advisory panel for privatization of the four expressway corporations had proposed to abolish the asset-holding and debt-servicing administrative body after the first 10 years of privatization and to have the new expressway firms buy back the expressways and take over remaining debt. This mechanism was intended as an incentive to economize and rationalize. But Mr. Koizumi did not push to include this proposal in the legislation; thus it lacks a crucial element.
The new decision on expressway construction should be regarded as a direct consequence of half-baked expressway reform. A failure to repay expressway debt will be remembered as a legacy of Mr. Koizumi’s failure to act.
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