[paper] Genron NPO’s Opinion against the “Final Report” on the Highway-related Public Corporations

The final report of the Promotion Committee for the Privatization of the Four Highway-related Public Corporations compiled in December had content far removed from the viewpoint of “privatization,” though there were some highly-regarded points such as limiting the construction of new roads. The reason that there was confusion in the committee until the last minute was that the committee had low understanding about “privatization” throughout the discussions and while the discussions were made with an even construction of new expressways in view.

From the first place, this promotion committee did not seem so promising. From time to time, Prime Minister Koizumi has used the political method of breaking through the wall of vested interests with “privatization” as a tool. A method that stimulates the opposition would be interesting for “show,” but in order to really derive a conclusion with “privatization,” political decisions and instructions would be required to precede that. These are decisions on whether new expressways should be constructed, who should bear the excessive debts of the past, and what would be the ideal expressways considering the future conditions of Japan. It is nothing but political irresponsibility to wholly entrust the “privatization” arguments to the committee without making such decisions. There is a clear misunderstanding that “privatization” will solve everything. It is obviously an illusion that a company with excessive debts of over 40 trillion yen, which takes almost 50 years to repay by toll revenue, can construct new roads as well as become listed. If the public corporations were really to be “privatized” and taken over by private companies, the present excessive debts would have to be reduced to a repayable amount by public burden so that the private companies could support themselves in the market, and a scheme would have to be created to enable the private companies to carry out business management based on their independent decisions completely free from politics.

In the recent final report, however, the conclusion was to minimize public burden, and to divide the public corporations into an organization that would inherit the expressway assets and the debts, which are to be repaid at an early stage (in 50 years at the latest), and five private companies divided by area, which are to manage and construct expressways by paying the lease fee to the above organization. This content is far from the real “privatization” that allows self-sustained business in the market. A company that takes 50 years to repay its debts cannot survive in the market, and also the asset holding company is under the large influence of the state. The private companies, which will borrow those assets and continue to pay the lease fees from the toll income, are only companies that borrow the roads and collect tolls merely sending the cash flow from right to leave. There will be no business incentive to improve efficiency and increase the cash flow.

This conclusion is chiefly a result of the promotion committee shouldering all the issues that should have actually been decided by the government. During the course of discussion, the committee chairman at the time repeatedly stated that “that would be politically difficult to accept” and some other members also seemed to have an ulterior aim to make the conclusion convincing for the highway related politicians as well. Then there would be no reason being in the “privatization” promotion committee. The only policies that could be passed by majority vote in the end were to limit the private companies’ construction of new roads and to convine the asset holding organization and the private companies in ten years’ time.

In October, the Secretariat released an estimate that the Japan Highway Public Corporation itself had debts exceeding its assets; in a sense, this was the last chance for the committee to return to previous arguments. At that point, the promotion committee should have focused on the real “privatization” scheme and asked the government for a decision, because if the supposedly profitable Japan Highway Public Corporation also had excessive debts, it would be a great problem that would overturn the arguments up to that point. However, that estimate was burked within the committee without being examined seriously, and confusion continued only over the limitation of the construction of new roads.

We think that expressways already attained the civil minimum in the 1980s and had to prioritize economic rationality ever since. In our opinion, expressways cannot be constructed by the conventional toll pooling system or long-term reimbursement, and the direction of expressway construction must be changed. We thought the road-related public corporations themselves should be “privatized”, but without running away from public burden for the repayment of past debts. To avoid the public burden at present means to hand over the burden to future generations. It would be unduly irresponsible to think that future generations would be able to repay the debts that could not be repaid even now. Furthermore, we think future expressway construction should be considered within the system design of Japan, which takes account of Japan’s future conditions, such as a population decrease and economic stagnation, and its realization should be sought, based on the premise of injecting public money, in the process of realizing decentralization where taxpayers can decide on such road construction. To keep the conventional style of road construction that had been conducted under rapid economic expansion means to give top priority to road construction. Funds would be further limited since the national finance is on the verge of collapse. Will general taxpayers continue to hold such demand when the aging of the population and the decline in the birthrate gives rise to higher policy demands for welfare, nursing care, and the environment? Politicians must make this inquiry to the nations.

If we are to return to the argument of the “privatization” of the road-related public corporations based on the above, the private companies must strictly keep corporate business principles by definition of “privatization”. Since the important thing for private companies is to restructure their balance sheets, they must be free to review their respective assets and the generated cash flows, and dispose any roads that should be cleared up. In this respect, the task for the promotion committee would have been to assess the assets of the public corporations and find a way for them to survive as private companies without establishing a separate asset-holding organization. Even if there were roads that had to be disposed of as a result, it would be more reasonable for the government to take responsibility to make the decision on the injection of tax income or continuance of the construction.

The final report was apparently a partial solution. However, as long as it has been decided upon, the initial goal must be attained at all costs. The initial aim of privatizing the public corporations was to put an end to plans that lacked economic rationality in view of market rules, to settle the debts that had ballooned in the past, and to stop any further increase of debts. Although the arena will be shifted to the government from now on, the government should at least avoid repeating the past mistake of only emphasizing further road construction, but should review the direction of expressway construction from the standpoint of Japan’s new system design.