Refuge of the roads
“Don’t make highway privatization a failure,” warns this morning’s Nikkei editorial:
The goal of the Japan Highway Public Corporation was to stop building any more pointless expressways and to decrease debt, now at about ¥40 trillion, as quickly as possible. However, there’s a slim chance that we can hope for much from the new corporation regarding those items.
The new private corporation holds no capital but will stick the nation with its debt balance. New road construction will also be ultimately decided upon by a state council. In this structure, which will be completely under state protection and governance, there will be almost no elements through which discipline will come into play in operations. Plans for the laying of 9342 kilometers [of new roadway] are for the most part complete, and there is a strong possibility that the resulting ballooning debt will be shunted off onto the next generation.
This new company, with its complete reliance on state support, has also shown its true colors to the market. Top managers have been arrested on suspicion of bid-rigging, and the books show nothing resembling a drop in losses from unprofitable roads. Even under these exigent circumstances, Japan Public Highway Corporation bonds have remained stable in value. It all makes it look unlike a corporation that’s about to be privatized.
In a risk-free world, ethical considerations go out the window. At the instruction of the Prime Minister, the Privatization Promotion Committee formed three years ago proposed “complete privatization,” by which buy-off of all assets for the privatized corporation would be accomplished in a projected ten years. But LDP Diet members and the heads of regional government bodies violently opposed the proposal, and it was defanged through the machinations of the Ministry of Land, Transport, and Infrastructure and part of the privatization committee. Perhaps because [interested parties] saw this and felt a sense of confidence in their untouchability, it was at this point that large-scale institutionalized bid-rigging really began to effloresce.
The Nikkei editors want Koizumi to use his surge in popular support to make sure the privatization of the highway corporation stands a chance of being a significant part of government finance reform. I don’t know–Japan Post (speaking of defanged proposals) and highway construction? He’d have to be a miracle worker.