To use this site, please disable the ad blocking feature and reload the page.
This website uses cookies to collect information about your visit for purposes such as showing you personalized ads and content, and analyzing our website traffic. By clicking “Accept all,” you will allow the use of these cookies.
Users accessing this site from EEA countries and UK are unable to view this site without your consent. We apologize for any inconvenience caused.
The project risks peculiar to overseas operations were not carefully scrutinized, and appropriate human resources were not adequately secured. The Land, Infrastructure, Transport and Tourism Ministry and a public-private investment fund under its umbrella bear a heavy responsibility to eliminate a huge deficit.
An expert panel at the ministry has released a report on what the public-private investment fund — the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) — should be like and its management reform as the fund is facing huge losses.
The role of public-private investment funds is to complement private businesses by investing public money in areas where the private companies alone cannot bear the risks.
Since 2013, the government has established various kinds of public-private investment funds as part of its growth strategy. There are more than 10 major ones, of which JOIN has been supporting infrastructure exports by Japanese companies, such as for railroads and urban development.
The report reveals a problem with the fragile investment system.
In the Shinkansen bullet train construction project in the U.S. state of Texas, JOIN fully covered the development costs by investing in and financing the project because the U.S. operating company was having difficulty raising funds.
It must be said that the public sector took too much risk, deviating from the principle of complementing the private sector. Another significant problem was the lack of human resources with expertise in railroads.
In the case of Brazil’s urban railroads, JOIN failed to properly scrutinize risks specific to overseas countries, such as the slump in demand caused by deteriorating public security and other factors.
As a result of these repeated failures, JOIN posted a loss of about ¥80 billion in fiscal 2023. The accumulated deficit is expected to exceed ¥100 billion by the end of fiscal 2024. A situation must be avoided in which the public will be burdened with the debt while JOIN cannot resolve the losses.
In response to the report, JOIN and the ministry have compiled a management improvement plan.
In order to curb risks, they will set a cap on the amount of investment per project so that investment will not lean toward specific countries or projects, according to the plan. In addition, they intend to refrain for the present from investing in startup companies and other entities whose success or failure is difficult to discern. All of these are likely appropriate measures.
However, they said that even if this management improvement plan is implemented, the accumulated deficit will not be eliminated until fiscal 2049.
A plan that will take 25 years from now to complete may be out of step with the public’s perception. It will be essential to constantly check projects and at the same time review the management structure and the way human resources are utilized so that the time period for eliminating the deficit can be brought forward as much as possible.
As China’s influence on infrastructure development in developing countries grows, there is a strong need for the Japanese government to promote infrastructure exports. It is important to identify and support projects that will contribute to the country’s national interests.
