Koizumi to revive economy with zones

Reviewed By Hitoshi URABE

Article:
"Koizumi to revive economy with zones"
http://news.ft.com/servlet/ContentServer?pagename=FT.com/StoryFT/FullStory&c=StoryFT&cid=1027694114848&p=1012571727169
(by David Pilling in Tokyo) Financial Times

Comments:

Mr Koizumi's score for his achievements in the office so far may vary depending on the critic's point of view, but among many "reforms" he has put up on the signboard, the regulatory reform may be beginning to take shape, though in somewhat unexpected way.

The term "regulatory reform" was devised sometime ago, when some people began to promote for less, or even abandon, various restrictions and regulations imposed by the government that were deemed to be in the way for the vitalization of the economy. Initially, it was dubbed as "deregulation," a simple word with a certain inclination. Then came the opposing forces, the bureaucrats, and businesses with vested interests. They claimed that not all the regulations are unnecessary and so the term deregulation would be misleading. In order to reflect that there are necessary and unnecessary regulations, it was considered a more neutral expression would be appropriate, hence "regulatory reform" to indicate the intention to at least review them without any promises.

So much for the political semantics, but what might finally be beginning to take shape is a way to get around the present rules. Instead of attempting to change the regulations themselves now in place, the new idea is to formulate a law to allow regional governments to create a special "zone" in which certain regulations would be voided.

The idea itself is not necessarily new. Many developing countries have adopted special economic zones. The concept is essentially an enhanced bond area where activities inside the zone would not be subjected to various regulations applied to the rest of the country.

The regional governments so far have been very responsive to the idea. There have reportedly been more than thirty plans announced across Japan, some timid, some bold.

The pilot scheme was originally devised in Okinawa, the southernmost and the poorest prefecture composed of small islands. Its plan had been to create a financial special zone, and it did, in April, though no palpable results have been achieved as yet.

Hokkaido in the north has launched a plan to create a zone for agriculture, to get around all the trivial and irksome regulations imposed on farming, and Kobe came up with an idea of a zone for pharmaceutical and nanotechnology research zone, whatever it means. Kita-Kyushu is trying to establish a zone for international distribution, with intent to rid of labor agreements that are making the operation of the port devastatingly costly and inefficient compared to nearby ports such as Busan in Korea.

The Koizumi government is seeking the passage of the relative bill by the end of the year making it possible for those zones to be established by next spring. It must be noted, however, that practically all the "plans" now listed are not much more than mere inspirations and much work needs to be done before they could be a subject of any sort of feasibility assessment. And, of course, the old guards and vested interests are already revving up to prepare for the inevitable and fierce battle.

It is too early to evaluate the policy as a whole, but it should at least have the effect of stimulating various economic related discussions in different regions, which Japan, having been a country where everything is set by the central government, has not experienced for a long time.