Jan 9, 2014

MLIT appoints Tokyo, Kawasaki as dedicated companies for Japan's five strategic container ports

Akihiro Ota (center), minister of MLIT handing over the certificate of designation to Yuji Hirano (right), president of Tokyo Port Terminal Co., and Kozo Nagano, chairman of Kawasaki Rinko Soko Futo

The Ministry of Land, Infrastructure, Transport & Tourism (MLIT) has appointed Tokyo Port Terminal Co. (TPTC, with capital of Y16,855 million, headed by its president, Yuji Hirano) and Kawasaki Rinko Soko Futo Co. (with capital of Y100 million, headed by its chairman, Kozo Nagano) as special port operating companies under the Ports and Harbors Act of Japan. The decision to designate the two companies came after examination of their application for appointment in September last year. Akihiro Ota, minister of the MLIT, gave the certificate of designation to Hirano and Nagano at his office. With this, the five port companies at the Keihin (Tokyo, Kawasaki and Yokohama) and Hanshin (Kobe and Osaka) regions selected as strategic international container ports will be transformed into special port operating companies that can enjoy enhanced interest-free loans and preferential taxes in accordance with the predetermined course of the MLIT. The next points of focus will be the integration of the management of the special port operating companies within both the ports in Keihin and Hanshin, as well as the fate of government investments into the two integrated companies that will release their policies within this month.

With the amendment of the Ports and Harbors Act of Japan in March 2011 following the selection of the Keihin and Hanshin ports as strategic ports, the "port operating company system" was established, stipulating the parent organization that will carry out the operation of the strategic container ports in an integrated fashion. Under the said law, one port operating company will be designated for each strategic port (Keihin/Hanshin ports). But as special measure for a four-year period, the pier clusters at the strategic ports may be divided into "special pier groups" and then "special port operating companies" may be designated for each strategic port.

The main benefits of the designation of special port operating companies are: (1) the reinforcement of interest-free loans and (2) the application of preferential tax measures. With (1), the ratio of interest-free loans from the government and port managers during port facility development will be increased to a maximum of 80% from the current maximum of 60%. Meanwhile, under (2), the fixed asset taxes and city planning taxes will be reduced in half for freight handling facilities that will be developed with subsidies or loans from the government.

Based on the port operating company system, the designation of port/terminal companies into the special port operating companies at the Keihin and Hanshin ports is in line with the strategic port policy that targets the privatization of ports in the country. The port companies in Kobe, Osaka and Yokohama have received the designation until 2012, so the inclusion of TPTC and Kawasaki Rinko will shift the future focus to business integration at the special port operating companies in Keihin/Hanshin and to the fate of government investments into the integrated companies.

Upon designation of the five port companies at Keihin/Hanshin ports into special port operating companies after selecting the strategic ports in the summer of 2010, the MLIT decided to integrate the management of the companies by fiscal 2016, when the four-year special measures will end, toward the inauguration of one port operating company each at the Keihin and Hanshin ports. Management integration has to be completed by September 11, 2016 at Keihin and by June 18, 2016 at Hanshin. However, the Keihin ports plan to actually realize the merger by the end of fiscal 2014, while the Hanshin ports aim to complete integration in fiscal 2015.

Further, the MLIT held at the end of last year the fifth meeting of the "strategic international container port policy promotion committee" that is tasked to deepen and speed up the strategic port policies. At the meeting, deliberations were held on the investments of the government into the port operating companies after the management integration. Kotaro Nogami, vice minister of the MLIT who served as committee chairman, disclosed at the press briefing held after the meeting that one port manager raised objection toward government funding. Claiming that, "We think that a certain level of investments from the government would be necessary," he claimed that they intend to hold more discussions on such matters as equity/investment ratio.

While the five port companies at the strategic ports have been designated as special port operating companies, there remains voices of objections on such matters as future management integration and government funding. The above policy promotion committee plans to release the final rules of the strategic port policy within this month, with the concrete policies on the two points drawing a lot of attention from the concerned sectors.

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