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Tuesday, Sep. 25, 2012

Rebuilding holdups stall aid to small firms


SENDAI — Crucial state-backed subsidies to rehabilitate small businesses that were wrecked by the Great East Japan Earthquake have been held up by delays in restoring the infrastructure in Tohoku's shattered coastal areas.

News photo
Finished product: A worker displays a shark fin at the Fukuju Suisan fish-processing factory in Kesennuma, Miyagi Prefecture, in August. KYODO

Some 18 months after the natural disasters, 61 percent of the subsidies approved by prefectural governments in fiscal 2011 haven't been distributed because work to rebuild areas hit by land subsidence and to zone and restore flooded farmland has made little headway, hampering the reconstruction of stores and plants.

The subsidy program, funded by the central and local governments, is intended to cover up to 75 percent of the cost of building new facilities or restoring businesses that must be considered essential to local economies and national supply chains, among other criteria, in order to qualify.

Small businesses need to team up as groups to have any hope of getting the subsidies, and even then, aid is only made available after stores or factories are rebuilt.

Since the use of public funds to assist private businesses is an unusual step, the program has attracted a flurry of applications.

In the fiscal year to March 31, ¥202 billion for small business reconstruction was approved in the three hardest-hit prefectures — Iwate, Miyagi and Fukushima. However, only ¥77.9 billion has so far been distributed to the companies.

As of early September, total subsidies received by firms stood at ¥37.9 billion in Miyagi, or just 32 percent of the amount approved, ¥16.4 billion in Fukushima, about 42 percent, and ¥23.6 billion in Iwate, or 54 percent.

Meanwhile, the number of recipient businesses in Miyagi came to 558, or 47 percent of those approved, 526 in Fukushima (49 percent), and 206 in Iwate (about 70 percent).

In the port city of Kesennuma in Miyagi Prefecture, work to reclaim tsunami-ravaged land for a complex of fish-processing businesses finally started in August.

A similar reclamation project is expected to approach completion by the end of the year in Ishinomaki, another port city in the prefecture. But "some companies have given up on reconstruction" due to the difficulties they have found themselves coming up against before they receive the subsidies, said the president of a fish-processing firm.

In neighboring Fukushima Prefecture, many companies have no clear prospect of restarting because the revamping of hot zones since the nuclear crisis at Tokyo Electric Power Co.'s Fukushima No. 1 plant has yet to begin in some municipalities, according to an official of a local commerce and industry association.

The town of Minamisoma, Fukushima Prefecture, finally had its exclusion zone designation lifted in April. Nevertheless, Mitsuo Co., a maker of hydraulic cylinders that runs a plant in the city, faced difficulty getting a group of businesses together to apply for subsidies because some affiliated firms evacuated due to the disaster.

In the early days, soon after the disasters struck, employees were eager to return to work at the rebuilt plant in their hometown, but the company had to wait until July this year for its subsidy application to be approved.

Adding to the delays in infrastructure work, prices for construction materials shot up and shortages of construction workers became more acute due to demand for them in other reconstruction projects. The cost asphalt, fresh concrete and other materials rose 10 to 20 percent from before the March 2011 disasters, with some areas seeing spikes as high as 50 percent above predisaster levels.

As the actual costs soar over the estimates submitted on their subsidy application forms, businesses are having a hard time finding funds to tide them over until the subsidies arrive. These financing problems, in turn, are stunting the recovery of damaged facilities.

When it applied for the subsidies, Sasakei, a producer of "kamaboko" (processed fish cake) based in Natori, Miyagi Prefecture, estimated the cost of restoring its facilities at ¥570 million.

However, the actual cost rose to some ¥700 million because of soaring prices caused by increased demand for reconstruction materials and factory parts. The aid will end up covering less than two-thirds of the expenses, down from the intended three-quarters.

Sasakei President Keisuke Sasaki is worried about "whether customer orders will come back after the company suspended operations for 1½ years."

In the meantime, the company is facing repayments for the loans taken out to reopen the business.

The subsidies approved in the previous fiscal year need to be distributed in the current year ending in March 2013, but it is uncertain whether many recipients will be able to complete their reconstruction projects by this deadline, an official of the Ofunato Chamber of Commerce & Industry in Iwate Prefecture said.

The owners of several other small business are finding themselves in the same bleak boat.

The national government is discussing extending the deadline for receiving the subsidies into the next fiscal year, which will end in 2014.

Still, uncertainties continue to afflict small companies in the disaster zone.

"I heard some business operators say that employees are reluctant to return because of o fears of another tsunami," Koichiro Suda, an executive of the Ishinomaki fish-processing business cooperative, said. "Even if we get the subsidies, we still have mountains of other problems to solve."

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