Sunday, October 2, 2011

No. 87: Water business in Japan and the world (6) (October 3, 2011)

Trend of cooperation between the public and private sectors
In the basic policy for future growth, the Japanese government showed the resolution to promote active utilization of public private partnership (PPP) for the strategic maintenance of social capitals. In Japan, the government has been improving the system for the private-public initiative in the water business. Private finance initiative (PFI) was introduced in 1999, and the Ministry of Health, Labour and Welfare Ministry allowed private companies to work on the maintenance of the water service in 2002. And private companies were allowed to take chare in the maintenance of public water-related facilities in 2003.

The above modifications were introduced by many water business operators nationwide, and they helped them strengthen their business infrastructure. However, there are few cases that introduced PFI. This is because local bonds are widespread as a favorable fund procurement method. However, fund-raising by local bond will not be as favorable as in the past because both the central and local governments have financial difficulty. In addition, the management efforts of the public sectors alone are not enough to cope with the declining demand due to decreasing population.

In the situation mentioned above, utilizing private funds based on the cooperation between the public and private sectors, such as PFI, will be indispensable. It is reported that the PFI promotion committee set up in the Cabinet Office is discussing the introduction of the concession system that private companies are allowed to get the right to operate the whole of the water business. That is, the concession system is one step ahead of the PFI and one step before the full-scale privatization. (To be continued)  

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