Author: Aurelia George Mulgan, UNSW, Canberra
Construction contractors in Japan are dancing with delight at the Abe administration’s public works spending spree.
With the masses of projects that have suddenly come their way, they are now fighting over dump trucks, heavy machinery and construction technicians.
The new Liberal Democratic Party (LDP) government under Prime Minister Abe has put top priority on economic revival, campaigning in last December’s election on a promise of allocating ¥200 trillion over 10 years for public works. In January, it announced a package of ‘emergency economic stimulus measures’ amounting to ¥20.2 trillion (almost one-quarter the size of the annual budget) in the hope of creating 600,000 jobs and boosting real GDP growth by 2 per cent. The most significant characteristic of this package is public works spending, with a total allocation of ¥5.5 trillion, which is more than the initial budget of ¥4.6 trillion for public works in the 2012 fiscal year. This means a year’s worth of public works is due to be implemented in just a few months.
Japanese construction companies, particularly the smaller contractors, have been suffering from government cuts in public works expenditure. Between 1998 and 2011, the total annual public works allocation fell by more than half, from ¥14.9 trillion to ¥6.2 trillion. The Democratic Party of Japan (DPJ), which took power in September 2009, continued the more severe cuts begun under the Koizumi administration. Its mantra of ‘from concrete to people’ justified a redirection in public spending away from public works to social security programs.
Regardless of the economic rights and wrongs of the Abe government’s pump-priming, the main political risk from the massive boost in public works spending is the recreation of the political infrastructure of Japan’s ‘construction state’. The revival of this old-style LDP pork-barrelling will see the re-emergence of a number of interrelated political and administrative practices, which will have widespread ramifications throughout the Japanese political system and the economy.
Influence-peddling by LDP politicians seeking money for favours from construction companies will increase, leading to money politics and financial scandals. There will be a return to large-scale bid-rigging (dango) by construction companies with the collusion of politicians and government officials. The political power of large, general construction companies (zenekon) famous for building economically wasteful projects will be restored. Local construction companies will mobilise in elections as vote-gatherers and money donors for LDP candidates, and petitions for public works projects filed by municipal and industry organisation leaders will put direct pressure on LDP politicians to deliver pork to specific groups and regions.
This style of politics will reinvigorate the LDP’s public works ‘tribes’ in the Diet — the ‘construction tribe’ (kensetsu zoku), ‘transportation tribe’ (unyu zoku), ‘road tribe’ (doro zoku) and ‘agricultural and forestry tribe’ (norin zoku) — who will wield excessive influence over the allocation of particular public works projects. They will also gain power over personnel and administrative matters in the corresponding ministries (chiefly the Ministry of Land, Infrastructure, Transport and Tourism [MLIT] and the Ministry of Agriculture, Forestry and Fisheries). There will be more competition between ministries for a slice of the public works pie leading to a distortion in policy programs in favour of public works. Moreover, former public works bureaucrats will be encouraged into national politics with funding from construction companies. The overall effect will be a reinforcement of the dual structure of government–party policy making and a corresponding weakening of the decision-making power of the cabinet.
As Naoyuki Inukai pointed out in the Mainichi Shimbun of 17 December 2012, because the LDP went through a process of insufficient reform during its period in opposition, the zoku lay in wait ready to be resuscitated, as did the cosy connections between the LDP and the construction industry hoping for favourable treatment in budgets and policies. He predicted a return of the zoku working for the interests of both industries and ministries.
Former minister of economy, trade and industry (METI) Toshihiro Nikai, widely known as the ‘don’ of the kensetsu zoku, campaigned in the recent lower house election on a promise to link up the main highways on the Kii Peninsula in Wakayama, a project previously condemned by the DPJ as an example of wasteful public works. It requires 22 tunnels over 38 kilometres through mountains for a total cost of ¥197 billion. Nikai thinks the notion of ‘from concrete to people’ is nonsense; he argues that in recent disasters, ‘concrete protected people’s lives’. Suspicion fell on Nikai in 2009 over accepting illegal donations from Nishimatsu Construction company.
It did not take long for similar allegations about an LDP politician to emerge in the new Abe administration; upper house Diet member Nobuaki Sato is being investigated by the media and the Japanese Communist Party for suspect financial connections with the construction industry. Sato is a former MLIT administrative vice-minister who will be contesting a seat for the LDP in the national proportional representation (PR) constituency in the upper house election this coming July. His political fund management organisation and the LDP’s Tokyo upper house PR Constituency 55th Chapter, which he leads, reportedly received donations from zenekon and other construction-related companies and organisations totalling at least ¥140 million between 2006 and 2011. He is now busily raising political donations from construction companies and organisations to fund his 2013 re-election bid. The Japan Federation of Construction Contractors was asked to purchase 1,500 tickets at ¥20,000 each to Sato’s fundraising party for a total donation of ¥30 million.
After entering the upper house in 2007, Sato quickly rose to be a kensetsu zoku as acting chairman of the LDP’s Land and Transportation Division. He is also deputy chairman to Nikai in the Comprehensive Investigation Committee for Strengthening National Land, from where the proposal to carry out ¥200 trillion worth of public works investment over 10 years emanated. Once again, the familiar pattern of a leading promoter of large-scale public works also being a major beneficiary of donations from the construction industry has re-emerged.
It is also possible that resuscitated zoku giin and pork-barrel politics will drag down Abenomics. As Hirotoshi Ito has pointed out, we have already seen more than enough cases under LDP administrations where cosy ties among politicians, bureaucrats and industries centring on public works have seized budgets, used up funds and prevented new projects and growth strategies from being implemented. The alignment of politicians’ interests with the vested interests of bureaucrats and industries has a long history in Japan. This structure has the disadvantage of preventing reforms from being carried out and hindering growth. The Abe ‘bubble’ may yet be created and then deflated by revived ‘construction state’ politics.
Aurelia George Mulgan is Professor at the University of New South Wales, Australian Defence Force Academy, Canberra.