JIN-209 -- Can Special Zones Change the Nature of Public Works?

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the Week's Business and Technology News
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Issue No. 209
Thursday, December 19, 2002
Tokyo

CONTENTS

++ Viewpoint: Can Special Zones Change the Nature of Public Works?

++ Noteworthy News
- Foreign Brokerage Firms to Downsize Their Japanese Operations
- Ghosn, Other Business Leaders Call for More Foreign Investment
- GM, FedEx to Test Fuel-Cell Vehicle on Tokyo Streets

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++ Viewpoint: Can Special Zones Change the Nature of Public Works?

Special deregulation zones are helping local governments initiate
small deregulatory reforms that may otherwise go unnoticed.

The concept of special deregulation zones has been promoted as part of
the structural reform pledged by prime minister Junichiro Koizumi.
Both the lower and upper houses passed a bill in December to help
local governments create these zones. The law gives certain exemptions
to regional governments planning to create special zones.

The new law has its shortcomings, of course. First, it failed to allow
private corporations to operate hospitals and schools. That was
supposed to be the core of this special zone project; Koizumi has
pledged medical and educational reforms, or in other words, he has
pledged to open the medical and educational fields to more
competition. While private corporations are currently banned from
running hospitals, some hospitals are owned and run by shareholders
because they were established before the ban was imposed. Second, the
new law only applies to 93 special deregulation zones out of more than
900 proposals to establish the zones sent by local governments last
summer.

The shortcomings, however, shouldn't disappoint those who believe in
deregulation. At the very least, the project brought about many
innovative ideas from local entities. Here are a couple examples from
the medical field:

- Gifu prefecture plans to create "a special health zone" in
which visits to hot springs would be covered by health
insurance.
- Numazumi-cho in Hiroshima prefecture is proposing a medical
zone in which Chinese doctors are allowed to participate in
medial treatments and rehabilitation.

In addition, Mizuho Research Institute (MRI) says the project has
broadened chances for future deregulation. According to MRI, the
ministries concerned have pledged to adopt 111 other proposals for
immediate nationwide implementation. This may include a review of the
physician training system to allow foreign doctors to practice here
or allowing people to pay their local taxes at convenience stores.

At the very least, the project confirmed a clear transition of the
government's policies concerning public works. Under the new plan,
the national government does not pay subsidies to help support such
local initiatives; in exchange for deregulation or preferential
treatment, it expects them to be more self-reliant. MRI warns that the
creation of a special zone may not immediately help boost the economy,
but it also says it's too early to write the project off.

--Sumie Kawakami

Sources:
The Nikkei Net (password protected)
http://www.nni.nikkei.co.jp/AC/TNKS/Search/Nni20021211D11JF985.htm

Mizuho Research Institute
http://www.mizuhobank.co.jp/corporate/information/economics/m_research
.html

Link:
"Nago: The Little City with A Lot of Perks" from our May issue
http://www.japaninc.com/article.php?articleID=800

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy to your browser.)

** Foreign Brokerage Firms to Downsize Their Japanese Operations

In Brief: Many foreign firms are losing money as their commission
revenues from equity trading in Tokyo drop on lackluster trading.

ABN Amro Securities (Japan) is in the process of delisting from
the Tokyo and Osaka stock exchanges as a general trader in order
to relist in January as a trader focused on the futures market.
A report in the Nikkei says that Commerz Securities (Japan)
is also considering exiting the Japanese equity business, while ING
Barings Securities (Japan) and J.P. Morgan Securities Asia are
cutting staff.

Commentary: Foreign brokerages have been steadily downsizing Japanese
operations over the past two years. Merrill Lynch Japan Securities,
Dresdner Kleinwort Wasserstein, Morgan Stanley Japan, Societe Generale
Securities and many others have already cut back. ABN Amro had
downsized its operations before, too. But the Nikkei says the
brokerage's pullout from the Japanese stock market will be the first
by a foreign securities firm (not including firms affected by mergers)
since the 1998 Big Bang that opened up the financial sector to foreign
brokerage houses.

The Tokyo Stock Exchange has continued to see its power diminish.
Market capitalization on the TSE at the end of October accounted for
just 9 percent of the world total, down from 31 percent at the end
of 1990.

Source:
The Nikkei Net (password protected)
http://www.nni.nikkei.co.jp/AC/TNW/Search/Nni20021216MQ0KABUS.htm

President (in Japanese)
http://www.president.co.jp/pre/20020114/03.html

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** Ghosn, Other Business Leaders Call for More Foreign Investment

In Brief: A dozen captains of industry -- including Carlos Ghosn,
president of Nissan, and Minoru Makihara, chairman of the
Mitsubishi trading company -- local government representatives and
academics told prime minister Junichiro Koizumi on Monday that
an increase in foreign direct investment would activate the
Japanese economy, Financial Times reported.

The group, called Invest Japan Forum, set out a 12-point plan to
remove obstacles to investments and introduce measures to entice
foreign companies to invest.

Commentary: It shouldn't take the appearance of Ghosn to convince the
government that Japan needs more foreign money. The numbers look
depressing enough all by themselves: Direct investment in Japan is
about 1 percent of GDP, compared with 27 percent in the US and 22 in
Germany, according to the forum.

Source:
Financial Times, December 17, 2002
http://search.ft.com/search/article.html?id=021217000485&query=Japan&v
sc_appId=totalSearch&state=Form

** GM, FedEx to Test Fuel-Cell Vehicle on Tokyo Streets

In Brief: General Motors (GM) and Federal Express (FedEx) announced on
Tuesday a joint program to advance fuel-cell technology by conducting
the first commercial test of a fuel-cell vehicle in Tokyo.

FedEx will participate in GM's HydroGen3 fuel-cell-testing program for
one year by operating the HydroGen3 on its normal delivery schedules
in the Tokyo area from June 2003 to June 2004. GM's HydroGen3 is the
first fuel-cell vehicle fueled with liquid hydrogen to run on public
roads in Japan.

Commentary: Tokyo is becoming a major international spot for fuel-cell
vehicles. Earlier this month, Toyota and Honda already started leasing
their fuel-cell vehicles to the government. Nissan is also testing
their vehicles in a bid to launch them on the market next year.
Fuel-cell vehicles are one of Japan's "national projects" envisioned
by prime minister Junichiro Koizumi.

Source:
General Motors
http://www.gm.com/cgi-bin/pr_display.pl?3332

Link:
"Power, Style and (Cough) Smog" from our January 2002 issue
http://www.japaninc.com/article.php?articleID=666

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STAFF
Written and edited by J@pan Inc staff (editors@japaninc.com)

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