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Politics

Japan looks to remove hurdles for privatizing infrastructure

Management concessions for airports, sewage systems help repair aging facilities

Sendai Airport in northern Japan welcomes travelers upon its privatization in 2016.

TOKYO -- Japan intends to cut the red tape faced by local governments that wish to privatize airports, sewage systems or other parts of their infrastructure in order to reduce the cost of maintaining aging facilities.

The central and local governments devoted 3.6 trillion yen ($32 billion at current rates) in fiscal 2013 to maintain infrastructure, a spending figure that could balloon to 5.1 trillion yen in fiscal 2023.

Meanwhile, so-called private finance initiatives, or the funding of public infrastructure with private money, have totaled 9.1 trillion yen nationwide through fiscal 2015. Such deals include Kansai Airport near Osaka as well as Sendai Airport, in which management rights to the facilities were sold to private concerns.

The sewage system for Hamamatsu, a city in central Japan, will fall under private management for two decades starting in fiscal 2018. The city will receive roughly 2 billion yen annually from the concession contract, and citizens might see smaller bills depending on the impact to the local budget.

But unlike airports, few sewage systems have been handed over to private management. Prime Minister Shinzo Abe's administration looks to streamline the privatization process.

Each private finance initiative currently requires approval by regional legislatures, a process that can take months or even years. If the infrastructure remains publicly owned under the deal, then the private manager cannot set usage rates without ratification by the local government.

Abe's administration aims to eliminate the need for legislative consent and have municipal governments enact privatization schemes through ordinances. The private operators would be able to assign usage fees via simple notifications. The proposal to amend the relevant legislation will be submitted to the Diet, which meets for its regular session Jan. 22.

The Japanese government also will arrange for consultation concerning such deals, aiding regional governments that often lack the personnel to provide such services.

A central government plan amended last year targets raising 21 trillion yen from purchases, investment and other spending from private finance initiatives between fiscal years 2013 and 2022. The Abe administration favors private management of infrastructure, anticipating quality upgrades and more efficient service.

More public infrastructure will age beyond its projected lifespan in the coming years. In fiscal 2011, 2% of Japan's sewage systems were at least 50 years old, the general benchmark for repairs as defined by the infrastructure ministry. But that figure is set to reach 7% in fiscal 2021 and 23% in fiscal 2031.

Japanese government surveys show that private sources manage 60% of France's water systems and half of that nation's sewage systems. In Spain, private operators handle 50% of the water systems and 60% of the sewage system. Public spending reportedly has been reduced as a result.

(Nikkei)

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