It sounds as though Osaka needs to fix its subway, but privatization isn't necessarily the answer.
Osaka, Japan’s third-biggest metropolis, plans to sell the city’s 81-year-old subway operator in an initial public offering to lure private investment after ceding ground to Tokyo.
Osaka plans to privatize the operations, which could be valued at more than 600 billion yen ($5.9 billion), in the next few years as part of efforts to become a global metropolis, prefectural Governor Ichiro Matsui said in an April 8 interview. It may also weigh a sale to private investors, he said.
Local governments in Osaka prefecture, near the ancient capital of Kyoto and home to electronics makers Panasonic Corp. and Sharp Corp., are stepping up sales of public assets to cut debt. Osaka is privatizing state-run companies and talking to potential investors including Caesars Entertainment Corp. on a planned $4.9 billion casino resort as it seeks to overcome a declining population.
“I am ready for the subway sale any time,” said Matsui, 50, who also is secretary-general of the Japan Restoration Party. “Osaka city assembly members should all have a sense of urgency to move this economic stimulus forward, as Osaka needs to bring in economic revival.”
A proposal to privatize the metro, which carries 2.24 million passengers daily, was submitted to the city assembly in February 2013, according to documents posted on the Osaka government’s website. The proposal, which is under discussion, would have Osaka transfer the subway operations to a separate government-owned entity and then fully privatize them, the documents show. It didn’t elaborate on the sale method or valuation.
The Osaka subway, which started operations in 1933, has nine lines running in the city and totaling 138 kilometers (86 miles). The privatization proposal will need endorsement by two-thirds of the assembly to be passed.
Osaka prefecture’s economic output dropped 6.2 percent to 36.6 trillion yen in the year through March 2012 from a decade earlier, according to the latest data compiled by the Cabinet Office. That compares with a 0.4 percent decline in Tokyo’s output, to 92.4 trillion yen.
The population of Osaka prefecture fell to 8.85 million as of March 1, down 0.1 percent from a year earlier. It’s forecast to shrink another 5 percent by 2025, according to a report compiled last year by the National Institute of Population & Social Security Research. Tokyo’s population, which rose 0.5 percent to 13.3 million in the year to March 1, is projected to decrease to 13.2 million by 2025.
“Osaka’s economic revival is vital to helping Japan avert a default or economic crisis, as Tokyo’s growth alone won’t be enough to bring momentum to the country’s overall economy,” said Matsui. “Other prefectures should follow suit.”
Osaka joins the nation’s capital in seeking to sell transportation infrastructure. The Tokyo metropolitan government has been studying a sale of its 46.6 stake in the city’s subway operator, Governor Yoichi Masuzoe said March 19.
Matsui said in January his government has been holding talks with global casino operators including Caesars Entertainment, Genting Singapore Plc and MGM Resorts International on a plan to build a resort complex in the Osaka Bay area that would cost at least 500 billion yen.
In February, Matsui said the prefectural government plans to sell Osaka Prefectural Urban Development Co., a commuter rail operator, to Nankai Electric Railway Co. for 75 billion yen. State-owned New Kansai International Airport Co. is working with Sumitomo Mitsui Financial Group Inc. to sell rights to operate two of Japan’s biggest airports, people familiar with the situation said last month.
“By turning to a small government from a big one, Osaka is shifting to companies those things that can be left to the private sector,” Matsui said. “The casino-resort project, airport privatization and subway sale have great potential to lure private money into Osaka and its surrounding areas.”
To contact the reporters on this story: Shigeru Sato in Tokyo at firstname.lastname@example.org; Emi Urabe in Tokyo at email@example.com To contact the editors responsible for this story: Philip Lagerkranser at firstname.lastname@example.org Ben Scent
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Photo Credit: Osaka wants to sell shares of the subway system to the public, and then privatize it. Pictured, the subway cars in Osaka are sure full of advertising, as shown on August 29, 2009. Doug / Flickr.com