Koizumi Cabinet E-mail Magazine No. 142 (June 3, 2004)
[Lion Heart -- Message from Prime Minister Junichiro Koizumi]
Privatization of the Highway Public Corporations
Yesterday, on June 2nd, the law to privatize four highway public corporations was enacted.
It marks another memorable day for the structural reforms of the Koizumi Cabinet promoted under the policies of "leave to the private sector what it can do" and "leave to the localities what they can do" as a law of great importance, on par with the privatization of the three postal services, has been enacted. My heartfelt thanks go to everyone who has lent their support in the enactment of this Law, the members of the Promotion Committee for the Privatization of the Four Highway-related Public Corporations and others concerned and of course to the readers of this e-mail magazine.
Already three years have passed since the summer of 2001 when I first proposed the "privatization of the highway public corporations." Up until then, no one, not a single politician let alone a political party, had ever articulated the privatization of the highway public corporations.
It cannot be contested that the highway public corporations have played a major role in developing the network of highways throughout the nation.
Still, should the government continue on with its old practices, albeit ones that have worked reasonably well to date? That was the question that served as the starting point for the structural reforms of the Koizumi Cabinet.
It is understandable that any region in the country would want a road being built in its locality, particularly if the construction of that road would not incur any financial burden. With requests coming in from all over the nation, the highway public corporations have managed to develop highways with money borrowed from the Fiscal Investment and Loan Program financed by postal savings and other programs. The plan was for these loans to be paid off through highway toll fees.
Over the course of the 48 years since they were established, the highway public corporations have proceeded with the development of highways, but at the same time they have amassed a massive debt amounting to approximately 40 trillion yen. Problems with their subsidiaries have also cropped up.
Privatizing highway public corporations under the policy of "from the public sector to the private sector" will enable them to further cut costs through management efforts and to steadily pay off the vast debt they have accumulated. This conviction is what led me to go for privatization.
At the outset, all we heard from opposition and ruling parties, from central and local governments alike were counterarguments along the lines of, "There is no way a private company could be expected to be able to build highways."
As we set about the preparatory study for privatization, we realized just how lacking in cost consciousness the highway public corporations had been. Take the emergency telephones installed alongside highways, for example: there are over 20,000 in place nationwide, each one costing as much as 2.5 million yen. Given that these telephones are only used in case of emergency, we checked whether there might not be a better deal available. Indeed, we found some telephones that cost as little as 400,000 yen each. Without any further ado, we have been using the 400,000 yen units for the installation of new emergency phones since last fiscal year.
Through thorough cost reductions, privatization will slash by almost half the current 20 trillion yen being spent on toll road projects, enabling the approximately 40 trillion yen in accumulated debt to be paid off in full within 45 years of privatization. At the same time, the first ever reduction in highway tolls will be made possible, with tolls lowered by an average of 10 percent by the time of privatization. We will also drastically review highway construction plans.
The privatization of the highway public corporations is undoubtedly a groundbreaking reform. It will enable the privatized highway corporations to harness fully the knowledge and ingenuity of the private sector, based on independent management decisions. In this way, I expect that highway infrastructure and services will be improved and debt repayment realized.
The Japanese economy may not be out of the woods just yet, but the annualized growth rate for the three months from January to March this year stood at 5.6 percent. This is a figure that can surely give everyone hope for the future.
What is more, the growth that is being achieved now is not being brought about by government expenditure as used to be the case in the past. With government expenditure decreasing, the growth now being witnessed is fuelled by the private-sector, led for the most part by expanding domestic demand. This is one fact that we must bear in mind when we look at figures for growth.
"Self-help and self-reliance" - namely the spirit to help yourself and a self-disciplined mind - are without a doubt the engine that drives reforms forward.
What really counts is the motivation of each and every person. On my part, I will work hard to realize a society in which the ingenuity and hard work of the private sector can earn its due reward.
* The title of this column "Lion Heart" is a reference to the Prime Minister's lion-like hairstyle and his unbending determination to advance structural reform.
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