[talk] Why was the Privatization Debate left Unconcluded?

Takaaki Kawashima: MKS Partners Limited, Managing Partner

Before MKS, Takaaki Kawashima spent 24 years in a wide range of banking businesses at Industrial Bank of Japan (IBJ). He was involved in corporate finance, investment banking, project finance, and in management of alternative assets both in Japan and internationally. At IBJ Securities, he was executive director and responsible for both debt and equity primary markets. He has a LLB from Keio University and an MBA from Northwestern University.

Yasuyoshi Masuda: Professor for the Economics Department at Toyo University

Yasuyoshi Masuda is professor at the Economic Depertment of Tokyo University. His major published works include Kinyu Kaikoku (Opening of Japan in the Area of Finance) and Global Money. He is a graduate from the Department of Economics at Kyoto University.

Akira Yasujima: President and CEO of Nippon Mirai Capital Co., Ltd.

He joined Industrial Bank of Japan in 1979 and worked in the area of investment banking as an adviser of MBO and M&A. He worked for Private Equity Department of the IBJ as a General Manager. He left the bank in 2001 and established his company in 2000. He received his B.A. in Economics from the University of Tokyo in 1979.

Isn’t there a misunderstanding that privatization would solve all problems…..

From their experiences in corporate acquisitions and restructuring, both Mr. Yasujima and Mr. Kawashima expressed similar viewpoints and cast doubt on the proposals by the Japan Highway Public Corporation Privatization Committee. The repayment of the huge amount of debt reaching approximately 40 trillion yen and the construction of new highways while incurring such a debt. These two come to the following concluding comments on the Committee’s proposals: Even if the assets and liabilities are moved into the holding organization by separating asset holding and operation, there would be no investors who want to invest in such a new corporation which assumes future consolidation of asset holding and operation. Therefore, listing of such a new corporation would not be expected.

The problem of huge amounts of debt of the Japan Highway Public Corporation should be solved as little burden to the nations as possible. Towards that end, the inefficient and uncontrolled construction of highways must be stopped. Most of the Japanese people aware on this point. However, Professor Masuda points out that privatization is just one of the many measures towards the resolution for such a problem, and that the debate of the Privatization Committee itself will become meaningless unless there is a vision for road administration.

What should be the assumptions to draw a vision for future highway policy? The three gentlemen point out following two conditions: First, who is going to bear the burden of repayment of past debts that have amounted to 40 trillion yen, and secondly, who is going to bear the cost of new construction. Both issues are extremely political questions and conclusion to these issues can not be reached at the level of the Privatization Committee. Therefore, the three points out that the real role expected to the Privatization Committee should have been to initialize the debate on privatization and to return the debates to the field of politics.

Seven members of the Privatization Committee were forced to started without clearing these conditions, and according to Professor Masuda, “in a sense, they were given a losing deal”. However, the real shape of the Japan Highway Public Corporation which were kept in the dark have gradually become clearer, such as the huge amounts of debt which added up to 40 trillion yen and the deficit of 7 trillion yen in substance about. Therein lies the raison d’etre of the Privatization Committee.