PLC - Government forges ahead with public-private fund for infrastructure projects

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Government forges ahead with public-private fund forinfrastructure projects
Resource type: Legal update: archive
Status: Published on 01-Oct-2010
Jurisdiction: Japan

This article is part of the PLC Global Finance September 2010 e-mail update for Japan.
Atsumi & Partners

Speedread
The Japanese government is under pressure to cut public expenditures while at the same time,
many Japanese banks, companies and investors are building up surplus cash reserves as a buffer
against future market turmoil due to a perceived dearth of attractive investment opportunities in thedomestic market. This article outlines how the public private fund structure will allow thegovernment to reduce budget expenditures on developing and maintaining public infrastructure.

Facing dwindling tax revenues, the Japanese government is under pressure to cut public
expenditures, while at the same time, many Japanese banks, companies and investors arebuilding up surplus cash reserves as a buffer against future market turmoil and also due to aperceived dearth of attractive investment opportunities in the domestic market.
The Nikkei newspaper recently reported that the Cabinet Office in August 2010 began working on
the formation of a new public-private fund for infrastructure projects, to be open to investment fromthe private sector, including banks, as well as the government. The Cabinet Office is also aiming toprepare a bill to revise the PFI (Private Finance Initiative) Act. In May 2010, the Cabinet Officepublished an interim report regarding PFI proposing greater structural flexibility with fund-raising,so the new public-private fund is expected to be included in the bill. It is hoped that a public-private
fund structure will allow the government to reduce budget expenditures on developing andmaintaining public infrastructure while still completing projects, and at the same time be attractive
to private sector investors given the perceived lower risk resulting from government involvement.
Interestingly, there is a possibility that the public-private fund may also target infrastructure projects
overseas. In June 2010, the Cabinet, headed by the new Prime Minister, Naoto Kan, announced its"New Growth Strategies" which include the suggestion of efforts to support Japanese companiesworking on infrastructure overseas. In July 2010, the Ministry of Land, Infrastructure, Transport andTourism launched a committee aimed at supporting PPP (public-private partnership) projects forwater infrastructures overseas.
On August 28, 2010, the Prime Minister then made a public statement regarding the need for thegovernment to introduce a program for promoting domestic investment to help facilitate thereinvestment of large cash reserves stored in private companies back into the domestic economy.
The public-private fund plan is likely to be an important platform for achieving this goal.

Resource informationhttp://uk.practicallaw.com/5-503-4361

2011/03/02

PLC - Government forges ahead with public-private fund for infrastructure projects

Page 2 of 2

Resource ID: 5-503-4361
Published: 01-Oct-2010
Products: PLC Cross-border, PLC Global Finance, PLC US Law Department

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2011/03/02