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Results of the FY2010 "Survey on the Strategic Maintenance and Management of Social Capital Stock in the Future, etc."— Planning and Finance
— Over 90% of local governments in Japan recognize that the cost of renewing, maintaining and managing social capital stock will become a fiscal issue in the next 10 years and that they need to introduce effective and efficient measures, in relation to roads and water supplies, etc. as a matter of urgency —

November 8, 2010

  • Over 70% of all local governments in Japan are already finding it difficult to renew, maintain and manage social capital stock owing to fiscal problems; the ratio rises to 90% if local governments that expect to have difficulty in maintaining and managing social capital stock within the next 10 years are included.
  • While progress has been made in the field of social infrastructure (schools, hospital, cultural facilities, etc.), with the introduction of measures such as the designated manager system, the field of economic infrastructure (roads, water supplies, sewage, etc.), where there are restrictions on outsourcing to the private sector, has yet to be addressed.
  • Major obstacles to the use of private finance initiatives (PFIs) and public-private partnerships (PPPs) include a lack of experience and expertise, and an absence of private-sector businesses capable of undertaking such initiatives. Legislation relating to economic infrastructure must also be created or revised.

In July-August 2010, The Japan Research Institute, Limited (JRI) conducted a survey among the planning and finance divisions of 856 local government bodies around Japan, of city level and above, regarding the strategic maintenance and management of social capital stock in the future.

A large proportion of Japan's social capital was constructed during the period of rapid economic growth, and will be reaching the age at which it requires renewal at around the same time. However, while the building of new infrastructure, such as public facilities and roads, has been planned and methodical, subsequent maintenance and management has not always been carried out in the same manner. Moreover, the fiscal problems that have faced local governments in recent years mean that spending on maintenance and management, which should normally have to rise, has, if anything, been falling. It is likely that much of the social capital managed by local governments around Japan has not been properly maintained and managed, owing to fiscal difficulties, and is already in a dangerous state.

The "New Growth Strategy — a Scenario for Revitalizing Japan" approved by the Cabinet in June notes that there is concern that Japan will be unable to renew its social capital in the future due to fiscal constraints at national and regional level and that there is a need for strategic maintenance and management of social capital stock. It also takes the view that, in light of Japan’s difficult fiscal circumstances, active use should be made of PFIs and PPPs to ensure effective and efficient maintenance and management, as well as the creation of new facilities.

The survey was conducted among planning and finance divisions considered likely to have a grasp of circumstances across their government body, with a view to identifying areas of social capital stock maintenance and management in which local governments around Japan are experiencing financial difficulties, and to what extent local governments are addressing strategic maintenance and management, etc., the need for which is identified in the New Growth Strategy. The survey included questions on financial issues relating to the renewal, maintenance and management of social capital stock, progress on implementing effective and efficient renewal, maintenance and management methods, issues encountered, and action that local governments would like to see from central government.

For more information on the content of this report, please contact Kazuhiro Azuma, the Japan Research Institute, Limited.

E-mail:200010-info@ml.jri.co.jp

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