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Wednesday, Oct. 27, 2004

MISMANAGEMENT, VAGUE STRATEGY

Report condemns failed Osaka projects


Staff writer

OSAKA -- The virtual bankruptcy of three municipal public-private projects designed to attract international investment was the result not only of poor management and vague strategy but of a refusal by management to adopt to changing economic conditions.

These were the main conclusions of a final report from an independent commission set up by the Osaka Municipal Government to examine why three third-sector projects -- the Asian Trade Center, the World Trade Center, and the Minatomachi Distribution Center -- were forced to seek protection from their creditors in February.

Total accumulated debt for all three projects had climbed to nearly 1.85 trillion yen by the time they sought a bailout.

The report was presented to Osaka Mayor Junichi Seki late last week.

The three projects had combined operating losses of 567 billion yen in fiscal 2003.

"The biggest problem was that operators of the three projects failed to revise their business plans after the collapse of the bubble economy," the report notes.

In unusually strong language, the commission blamed an atmosphere among city government bureaucrats managing the projects that discouraged open communication of the problems.

The report also criticizes then Mayor Takafumi Isomura, who stepped down in November after eight years in office, for not demanding more answers when it was clear that rosy initial projections for all three projects were not being met.

"The mayor at the time, as well as top city officials, had almost no explanations from those managing the projects about projected demands for the projects," the report says.

When commission members spoke to Isomura earlier, according to the report, he said he felt that there was little he could do about the three projects.

The ATC, which opened in 1994, and the WTC, which followed a year later, have been the targets of harsh criticism from the Osaka international business and diplomatic communities as well as local citizens' groups for almost a decade.

Osaka had said that it wanted to use both facilities to attract foreign investment.

But foreign businesses shunned both buildings, citing their poor locations -- nearly 30 minutes from the Osaka city center -- and a lack of tax breaks and other incentives that would have made relocating in Osaka cost competitive.

Local citizens groups, meanwhile, were angry that tax money was being used to prop up what they considered two white elephants that did little more than provide jobs for city bureaucrats.

Yoneko Matsuura, the head of civic group Mihariban, said last week's report vindicated all of the concerns and complaints her group has had over the years. But it did not go far enough, she said.

"There is still the issue of who, exactly, in the municipal government was responsible for the decisions," she said. "Who made what decisions, and when is still not clear.

"But we will think about using this report as the basis for a lawsuit against the city to pursue such questions."



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