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Wednesday, July 7, 2010
OKINAWA'S HOSTAGE ECONOMY
Futenma relocation has certain bidders salivating
Bases may be public burden but state largess eases pain for some
NAGO, Okinawa Pref. — Last month an executive of a major construction company in Nago confessed what was considered a long-held industry secret in this city that is poised to be the replacement site for the Futenma military base: For decades most local contractors had rigged bids for public works projects, and small players still do.
"We were told (by city officials) not to compete with each other. We were told that otherwise we would not be nominated (by the city) as bidders," the executive told The Japan Times on condition that neither he nor his company would be identified.
The practice of "dango" illegal bid-rigging on government public works projects — in which bidders collude to choose a winner among themselves on a rotating basis while avoiding competition — had continued at the initiative of the Nago Municipal Government for several decades, the executive said.
Now big companies like his, classified as super-A by the city, no longer engage in bid-rigging because the legal penalties were greatly strengthened in 2006, but many smaller firms still follow the practice, he said.
The executive alleged that companies with strong connections with municipal executives under previous Mayor Yoshikazu Shimabukuro, who was in office until January, were often favored by the city in public works bids.
"Yes, there are lots of rumors about that, so I think that's actually true," he said.
Many people in Nago suspect Shimabukuro was willing to accept the relocation of the Futenma base, now farther south on Okinawa Island in the city of Ginowan, because of his close — if not corrupt — ties with construction firms, which worked as vote-gathering machines during past mayoral elections.
Many other Okinawan political and business leaders also appear to be willing to accept U.S. bases because of base-related construction and other pork-barrel projects the central government dangles as carrots to win over locals to accept the burden of hosting the unpopular installations.
"It's true some people in Okinawa, although their number is very small, have special interests in trying to attract U.S. bases," said Tsuyoshi Watanabe, a reporter at the daily Okinawa Times and author of two books on political negotiations over U.S. military bases in the prefecture.
The central government has long pressured local leaders to accept Nago as the replacement site for the Futenma base while promising massive pork-barrel budgets if they approve the plan, he said.
This "carrot and stick" tactic of the central government has sharply divided communities like Nago into probase and antibase camps, Watanabe pointed out, adding that such "a tragedy" should not be repeated.
Indeed, since the 1996 Japan-U.S. agreement to return the current site of the Futenma base, the central government has brought a number of big construction projects to northern Okinawa, particularly in Nago, a city of 60,000, in a bid to get local leaders to accept the base's relocation.
The construction projects include facilities for the 2000 Group of Eight summit hosted by Nago, and projects under the Special Northern Okinawa Promotion Measures that were adopted in 2000 and totaled ¥100 billion over 10 years. Much of the funds have been invested in expensive public works projects.
City officials, including former Mayor Shimabukuro, have claimed they accepted the Futenma relocation plan to benefit the entire local economy, and have denied any illicit bidding.
"I know very well various things have been written by weekly and monthly magazines as well as newspapers . . . but I'm convinced there is nothing (to substantiate) those allegations," Shimabukuro told the municipal assembly on March 17, 2008.
Experts, however, say disclosed data of bid results for public works have pointed to rigged bids during Shimabukuro's stint, alleging critical information on the secret lower price limit might have been leaked to favor certain contractors.
The city of Nago sets the lowest bid price floor for public construction works to prevent undercutting by contractors. The price floor is decided by the mayor, deputy mayors and other city executives and is supposed to be a tightly held secret because a bidder would easily win a contract if they know what it is.
According to a Feb. 26 report by the Asahi Shimbun, of the 310 construction works for which the price floor was set between fiscal 2006 and 2009, the winning price for 61 contracts came in within less than 0.1 percent of what was believed to be the secret floor price. Experts say this indicates that price information was leaked.
"It's impossible for a construction firm to bid as close 0.1 percent of the (secret) price floor. This means the price information was leaked" to favor a certain bidder, said Mitsuru Suzuki, a former senior official at the Fair Trade Commission and an expert on bid-rigging issues.
According to Suzuki, Nago is a rare case because the mayor himself was involved in setting the lower price limit. Most other cities keep mayors out of it because of their close ties with construction companies, which often act as vote-generating machines.
"Usually those who are not chosen through an election decide the price limit because a mayor often owes a lot to construction firms during election campaigns. I haven't heard of any other cases like Nago," Suzuki said.
Despite the widely circulated image of beautiful white beaches and emerald-green coral seas, Okinawa is also an island of massive construction works.
The replacement air base to be built at Nago's Henoko coast is a prime example of a project that will need massive landfill work.
And the project is believed to greatly benefit a local contractor group led by businessman Hirotsugu Nakadomari, one of the most influential supporters of Shimabukuro and a longtime advocate of bringing the Futenma base to an area along and extending off the Henoko coast.
According to the Ryukyu Shimpo newspaper, Okinawa increased 0.3 percent in land area from newly filled-in shallows between 2000 and 2007, the highest growth ratio for any prefecture during that period.
"In fact, not many natural sea coast remains untouched in Okinawa. . . . Fill work has become an activity in and of itself. Many filled-in areas have been left unused. That's a characteristic of Okinawa," wrote Kunitoshii Sakurai in 2009, when he was president of Okinawa University, in a book titled "Okinawa 'jiritsu' he no Michi wo Motomete" ("Okinawa in Search of 'Self-reliance' ").
Most massive public works projects in Okinawa have been conducted under a special law for promoting the prefecture's development that was enacted in 1971.
To promote the area's rural economy and compensate for the burden of hosting huge U.S. bases, the central government has spent about ¥200 billion to ¥340 billion every year over the past three decades under the special development law. Much of the funds have gone to public construction works.
Under the 10-year temporary law, which has been extended three times and is now effective until March 2012, the central government provides subsidies to cover 90 percent to 95 percent of public works expenditures in Okinawa, although such subsidy rates for other prefectures are about 50 percent.
This special promotion law is "a dangerously powerful drug" and the Okinawan economy has become addicted to economic assistance from the central government, said former Vice Defense Minister Takemasa Moriya, who was a key negotiator with Okinawa and the U.S. military over base-related issues.
Moriya pointed out that under government budget rules, economic promotion funds are not supposed to be spent to directly benefit specific individuals.
Thus, that money often ends up being used in the construction of huge public facilities.
"After all, such construction projects only benefit construction firms, not the ordinary people who are living around bases and actually suffer a lot" from noise pollution and the potential danger of accidents, Moriya said.