Journal of Applied Input-Output Analysis, Vol. 3, 1996

The Importance of Public Investment in Relation to

the Asahikawa-Douhoku Region of Hokkaido1

By

Yoshihiko Kamehata*, Romit Dasgupta** and Hideaki Onodera***Abstract
Following the collapse of the "bubble" economy, questions have been raised regarding
the efficacy of the economic effects of public investment. However, public investment inregional cities provides opportunities for qualitative improvements in these cities. For

example, the public investment project planned for Asahikawa in Hokkaido takes into
consideration both the economic and the social welfare effects of investment. This planshows ways to generate growth without causing problems of a "bubble" economy. The
following is a discussion of this public investment.

1. Introduction
The development of a site of approximately 80 hectares in the area of Asahikawa
Station aims to make Asahikawa a major hub city in Hokkaido by re-developing andimproving the city's central area. In order for this to be realized, a variety of public
works projects, such as elevation of the railway tracks, land re-adjustment, etc., need
to be undertaken simultaneously.

The size of this project is on a scale comparable to the public investment
undertaken by the national government at the time of the official establishment of
Asahikawa village a century ago, and the construction in 1970 of the country's first
Pedestrian Mall in Asahikawa named Heiwa Dori Kaimono Kouen.

Since the founding of the village was based on a plan to develop Asahikawa as amajor food producing area and a vital military centre of Japan (this is overlooking thecriticisms of the functions of a military city), the public investment undertaken at thetime was not merely concerned with civil engineering and construction.

Thus the public works undertaken at the time of establishment played an importantrole in shaping and building the city and locating various industries, and helped create

Manuscript received March 8, 1996. Revised November 18,1996.

* Hokkaido University of Education, Japan** Japanese Studies, School of Asian Studies, University of Western Australia, Australia
Asahikawa City Office, Japan

1 The city of Asahikawa is located at 142° 22' E longitude and 43° 46' N latitude, making it slightly
northwest of the centre of Hokkaido (=Douhoku). Douhoku means northern Hokkaido, and Asahikawa
City is one of this region's main urban areas.

The Importance of Public Investment in Relation to the Asahikawa-Douhoku Region of Hokkaido

57

a conducive economic and living environment for the citizens.
The construction of the Heiwa Dori Kaimono Kouen, undertaken under the slogan

of "A Human City" was the first example in Japan of the planning and creation of acity centre area opposite the railway station that centred around the needs ofpedestrians. The creation of this Pedestrian Mall attracted observers from around thecountry, and was a successful example of a slogan being put into practice.
At the same time as acting as a catalyst for stimulating the city's economy throughthe ripple multiplier effects of each investment, these investments also had the longerterm objective of stimulating the continued development of Asahikawa and thesurrounding agricultural areas, even after the initial ripple effect had subsided.
The present Asahikawa Station area development plan is similar to the large-scale

development project at the time of Asahikawa's establishment.
The investment in construction from the public investments required to undertake

the groundwork projects for the station area development project is approximately¥100.4 billion; the economic ripple effects of this investment on Asahikawa and its
surrounding areas is expected to be 1.7 times this.

Furthermore, even after the ripples from the multiplier effect of this public
investment have converged, the aim is the creation of an infrastructure base that willallow for growth and prosperity into the 21st century.

Consequently, the present analysis does not restrict itself to only the short-term
economic impact of the ripple effect arising from this ¥100.4 billion public investment,
but takes into consideration the long-term implications for Asahikawa's development
into the 21st century.

2. Asahikawa Station Area Development
The city of Asahikawa has outlined the following infrastructure developments andimprovements through public investment:

1. Land re-adjustment in the station area and elevation of the rail track.

2. The creation of a "Civic Core" zone accessible to the general public, integrating
government offices.

3. The construction of a multi-functional facility, integrating lifestyles, culture, andindustry needs relevant to northern regions.

4. Creation of park area on the banks of the Chuubetsu River, and protection ofgreen zones in the vicinity of rivers as a means towards preserving the naturalenvironment.

5. Improvement to be carried out on the bridge over the Chuubetsu River, linking
the Kagura area with the central city area.

6. The investment is for the period from 1996 to 2003.

As outlined above, the desired outcome of each of these projects varies incharacteristics; thus, the public investments relating to the Asahikawa Station projectextend beyond the mere construction and maintenance of bridges and roads.
Moreover, in relation to the analysis of the public investment, the question as towhy such a large-scale public investment is necessary for Asahikawa needs to be

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Journal of Applied Input-Output Analysis, Vol. 3, 1996

considered. Discussion of this point will be undertaken based on the material presented
in the following section.

3. The Asahikawa Station Area and Public Investment
In general, the volume of consumption as a determinant of the volume of income is amajor pulling force for an economy. For instance, even for a city where the volume ofincome is large, if consumption in a given period is low, this will adversely affect theincome for the following period, and thus have an impact on the overall economic
growth.

Also, for a city with a high level of private investment, purchases of (intermediate)producer goods by firms will be high.

This purchase of intermediate producer goods by firms as a result of public
investment works towards supporting business activity. Moreover, through thisprocess increases in employment are linked to the expansion of consumption.

In the same way that procurement of intermediate production goods and finishedgoods by the private sector is linked to increases in employment and the expansion of
consumption, public investment also stimulates consumer demand for consumer andproducer goods. However, once the ripples from the multiplier effect generated have
converged, the economic impact becomes nil.

In light of the above, the necessity for public investment in Asahikawa will be
discussed.

The economic impact of public investment for the Station area development
project is particularly important for residents of the Douhoku (northern Hokkaido)
region.

According to Takahata's "Degree of Induced Production through Final Demand"[1], the dependency of induced production on consumption is extremely high for the
Douou (central Hokkaido) and Dounan (southern Hokkaido) regions. The Dououregion in particular depends heavily on consumption.
Furthermore, of all the regions of Hokkaido, Douou's self sufficiency (self-supply)
rate is the highest, with dependence on regions outside Hokkaido being the lowest of
all regions. Added to this, although the Douou region's internal inducement effect isstrong, its impact on other regions is minimal; thus, induced production from the
Douou region cannot be expected to have a significant impact on the Douhoku region.
In other words, the economy of the Douou region may be regarded as, to a large extent,
autonomous.

Moreover, in Takahata's analysis, the Douhoku region is second only to the
Doutou (eastern Hokkaido) region in its low rate of dependence on consumption, andof the four regions has the highest rate of dependence on public investment. Thisdependence on public investment, through the consumption (private consumption andprocurement of interim producer goods, etc.) generated by the investment, has a major
influence on the economy.

One of the attributes of public investment is that when the investment has been

The Importance of Public Investment in Relation to the Asahikawa-Douhoku Region of Hokkaido

59

Table 1: Construction Sector Investment (by type of Activity)
Unit: Million yen; %No.

Type of construction activity

Investment amount

Percentage share
5.8

1

Wooden Dwelling

5,855

2

Ferro-Concrete Dwelling

1,169

1.2

3

Factories, etc.

137

0.1

878

0.9

4

Sewerage

5Road Paving

6,416

6.4

6

Street Improvement

16,851

16.8

7

Street Bridge

12,500

12.4

8

Parks

9

Railway-Tracks

1,297

1.3

46,80046.6

10Electrical Facilities

265

0.3

11

Telecommunications Facilities

318

0.3

12

Water Supply

13

Land Reclamation

14

Other Civil Engineering

15

Total

1,019

1.0

733

0.7

6,189

6.2

100,427

100.0(Asahikawa City : 1995)

completed, the multiplier effects generated converge to zero; thus, any increase inproduction and increased employment generated in the period by the interaction with
the investment and the multiplier effects would come to an end, with the possibility ofcontractions in employment and accumulation of production equipment.

One of the aims of the Asahikawa Station investment project is the creation of acomfortable and attractive urban environment in the central city area, which would
facilitate Asahikawa's position as an attractive hub city in Hokkaido, and theinducement of services geared to the needs of residents.

Thus, the project needs to be one that is not merely concerned with simple public
works like the provision of roads and sewerage, but a project that takes into
consideration "soft" social aspects of the investment as well. It is this particular aspectof the project that has attracted the attention and interest of the citizens of Asahikawa.
Given this, there is little doubt that for a city with only a short history of a hundredyears, the project is of prime importance.

4. Induced Import Demand
The classification of the construction sector is presented in Table 1.

1. The Input-Output Analysis uses 1985 (Showa 60) data.

2. The investment pattern is based on the Ministry of Construction's Classificationof Construction.

3. The coefficient of consumption uses the 1993 (Heisei 5) Hokkaido average valueof 0.76 for the Asahikawa figure.

4. The coefficient of employment is based on 1992 (Heisei 4) Survey of Industry

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Journal of Applied Input-Output Analysis, Vol. 3, 1996

(Direct Effect)(Primary Effect)(Secondary Effect)(Total Effect)

Induced Domestic

Induced Domestic

InducedImports 38.9 billion

Imports 14.7 billion

Domesticyen

yenImports 53.6

billion yen

InducedInduced Employment

Employment

Induced Employment

Numbers

Numbers 4,225

Numbers 3,919

InducedEmployment
Numbers

8,845

16,789T

T

T

T

Investment

Local

Induced Production

Induced Production

InducedAmountProduction

38.8 billion yen

30.6 billion yen

Production

100.4

100.4 billion

169.8 billion

billion yen

yen

yen

Induced

Consumption
Demand 32.9 billion
yen

Figure 1: Flow Chart of Induced Domestic Import Effect and Employment
Opportunity Creation Effect (Asahikawa City)

Statistics,

Numberof

Persons

Employed,

andShipment

Volumeof

Manufactured Goods; also 1991 (Heisei 3) Survey of Workplace Statistics,
Volume of Production, and Number of Persons Employed.

5.

Due to availability conditions of materials, price evaluation uses 1985 (Showa*60) base-year prices.

The volume of induced import is depicted in Figure 1, "Flow chart of Induced
Import Effect and Employment Opportunity Creation Effect" [2].
Table 1 is a flow chart showing the overall induced domestic import effect andemployment opportunity creation; Figure 1 shows the employment opportunity.
As can be seen from the flow diagram, the total effect will be ¥53.6 billion. In

other words, as a result of the ¥100.4 billion investment, roughly ¥53.6 billion worthof purchases will be made by Asahikawa from other parts of the Douhoku region, as
well as other regions (including the regions necessary).

In this context, it is perhaps important to consider strategies to optimize theinduced production effects generated by public investment in the Asahikawa Station
area to stimulate businesses that would be strongly responsive, and to create a strongurban identity for the city (this degree of responsiveness — the degree of induced
influence — will be expanded upon below).

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Table 2: Ranked by Order of Industry
Rank

Industry

Industry

Industry

Production Million yen

Influencing Power Coefficient

Sensibility Coefficient2

Civil Engineering

1,616

Furniture & Fixture

1.142

Transport

L878

3Construction

1,326

Construction

1.098

Private Service

1.469

4

Private Service

1,181

Mining1.052

Finance & Insurance

L.322

5

Transportation

1,085

Ceramics, Stone & Clay

1.037

Electric & gas

L.202

6

Public Service

1,067

Water & Waste

1.035

Lumber & Wood

1.126

1.073

7

Real Estate

782

Pulp & Paper

1.034

Land & Buildings

8

Public Administration

721

Electric Machine

1.027

Agriculture

1.038

9

Pulp & Paper

705

Food

1.011

Construction(3.998

10

Food

570

Civil Engineering

0.994

Pulp & Paper().957(Asahikawa City: 1991)

Hence, the public investment project needs to be one where the impact spills over

into various non-public arenas as well. The inclusion of plans for an integrated
northern lifestyle / culture / industry facility, and the creation of a new commercial
zone, would be part of such an aim.

In this way, the development of the Asahikawa Station area project, merely bycreating a stable base for the longterm vitality of the private sector and the creation of
a comfortable living environment, would be important in stemming the movement ofimports always come from elsewhere into Asahikawa.

5. Influencing Power Coefficient & Sensibility Coefficient
The "Sensibility Coefficient" refers to when the growth of another industry has an
influence on one's own industry, if 0, there is no influence, above 0, particularly if itcrosses 1, there is a strong degree of sensibility.

According to Table 2 (ranked by order of industry), in the case of the Asahikawa
Station area public investment project, the industries involved are construction, water,electrical machinery, lumber & wood products, furniture & fixtures, and ceramics,
stone & clay products.
With the exception of civil engineering, all of these have an influencing power

coefficient greater than one; hence, the demand for these industries generated by public
investment would have an impact on other sectors. Of these industries, since lumber &wood products' sensibility coefficient is also high, it would be strongly influenced by

the growth of other industries. Moreover, as lumber & wood products, furniture &fixtures, and construction represent some of the major local industries of the Douhoku
region, the Asahikawa Station investment project would benefit local industry.

In addition, commercial business and transport & communications stand out asindustries in Asahikawa whose sensibility coefficients are particularly high. It may be
assumed, from this, that once the basis for the development of Asahikawa as a nucleus
for Hokkaido has been completed through public investment in the Asahikawa Station

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Journal of Applied Input-Output Analysis, Vol. 3, 1996

project, sectors with a high sensibility coefficient, such as business and transport &communications, will respond positively and be able to grow.
The business sector, in particular retail trade, with its high degree of sensibility

and being a sector which is closely linked to the city's infrastructure and attractiveness,would automatically benefit from the improvements and re-vitalization of the station
area carried out under the public investment project, even without intervention frompublic authorities.

Thus, the provision of a comfortable and attractive cultural, lifestyle and naturalenvironment in the Asahikawa Station area would be linked through the prosperity ofbusinesses to the overall prosperity and growth of the economy.
Furthermore, as can be seen from the ranking by industry of the influencing power

coefficient, public investment and construction are important driving forces for the
economy in Asahikawa. This, coupled with the fact (as pointed out earlier) that within

Hokkaido, the power of consumption in Asahikawa's economy is weak, makes theimportance of public investment significant for the region.

The mere fact that it is closely linked to urban renewal and prosperity of industry
makes this public investment an especially important one.

6. Asahikawa in the Japanese Economy
In recent years, due to the recession resulting from the appreciation in the value of theyen, firms which in the past would consider re-locating to regional centres, are moving

their production centres off-shore, largely to Asia, leading to the "hollowing out" of theJapanese economy.

Under such conditions, regional cities have been considering strategies to attract
industry through the creation of industrial parks.
In this context, the creation of a new, higher-quality urban environment throughimprovements to infrastructure and development projects, such as the elevation of therail tracks in the station vicinity, the creation of a "Civic Core", integrating
government offices, and the construction of a northern lifestyle/culture/industry"theme zone" complex, would improve the quality of life and strengthen the provisionof social welfare and government services. The successful creation of these projects
through public investment at Asahikawa Station would provide a base for thedevelopment of industry. Thus, the improvement to social welfare, lifestyle, andculture would, by offering attractive conditions to industry, be linked to stableeconomic growth, and would work as a means of avoiding a further "hollowing out" ofthe economy.

In conclusion, if the investment project can improve the quality of life of citizens,create better medical and social welfare infrastructures, develop infrastructure to copewith the future aging of society, and stimulate industry, it would be a project thatwould contribute to the city's prosperity into the next century.

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63

References[1]

Takahata, Y. (1992), "Interregional Input-Output Table of Hokkaido Prefecture" (inJapnese), Innovation &I-0 Technique, Vol. 3 No.3, pp.24-29, Pan Pacific Associationof Input-Output Studies, Tokyo.

[2]Report on the Economic Effect of the Asahikawa Station Area Public Works Project.