Nago: A Little City With A Lot Of Perks

Back to Contents of Issue: May 2002

by Takehiko Kambayashi

Nago, tucked into the northern corner of Okinawa's main island, is awash in government cash, tax breaks and other perks. It's also the proposed site of an offshore US military facility. Can this once sleepy city of 56,688 drive the region's economy out of its rut?

The area in Nago proposed as a tax haven -- called the 'international information and financial center' -- would include banks, brokerages, loan brokers and other financial-sector companies. Under the central government plan, a company that wants to establish a business in the area would receive a 35 percent tax break. With that tax break, an average company would pay about 26 percent tax on income; the corporate tax rate is normally 41 percent. Companies would receive the tax reduction for 10 years as long as they hire at least 20 local employees.

Tsunemi Tamaki, a Nago city official and deputy of the team that is setting up the center, says the city has promoted the project to develop the region's economy and stabilize employment. City officials, including Tamaki and mayor Tateo Kishimoto, have visited Dublin, Ireland, to study how that city turned itself into a call center hub.

Not surprisingly, the government decision to turn part of Nago into a tax haven came in December 2001, just before Nago's mayoral election campaign kicked off. Kishimoto, the incumbent mayor and backed by the Liberal Democratic Party, has attempted to soothe prevailing labor unrest about joblessness and skirt the controversial plan to build a US Marine Corps base off the city's east coast -- a plan that he was vague on in his first campaign. The government pledge to make Nago a tax haven came at the perfect time for the mayor. Nago residents say they are more concerned with putting food on the table than discussing a litany of base issues. The promise of more jobs helped Kishimoto easily win election in early February.

The Japanese government has showered Nago with hundreds of millions of dollars in exchange for accepting the new US military base. The sea-based facility will replace Futenma Air Base, which the US and Japan agreed in 1996 to close. The Futenma base is located in a densely populated area in Ginowan, a central Okinawa city, and many locals have long wanted it to go somewhere else.

Nago seems to have become accustomed to carrot-and-stick political maneuvering. The city used the base issue to squeeze more money and projects out of the government, analysts say. But even if Nago builds it, will businesses come? Some critics say a 35 percent tax reduction is not enough to attract companies and the requirement that they must hire 20 or more local employees is too high. @

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