Working Toward Japanese Adoption of Private Finance Initiatives

ABSTRACT

In the time of May 1998, it is reported that Liberal Democratic Party has made a draft of basiclegislation for "PFI Promotion" and aims at passing it during the current Diet. The movementstoward implementing PFI in Japan are rapidly progressing.

The characteristics of PFI in the United Kingdom are the following:(1) PFI is to fully exploitprivate expertise in the provision of public services,(2)private suppliers design, build, finance,and operate, (3)public sector purchases services provided,not assets constructed, by private suppliers,(4)public sector focuses on planning projects.

Key concepts and elements in PFI are value for money, competition among private companies,risk transfer to private sector, and performance-based payment mechanisms.

Although Japanese government is likely to take assisting policies including non-interest loaningand debt guarantees for promoting PFI in Japan, these assisting measures are against one of keyelements in PFI, risk transfer to private sector. It is important that objectives of PFI andsignificance of value for money are reconfirmed. It is also very important that mechanisms forpursuing value for money in PFI projects are established, and that "market testing" is conductedfor every conventional public service projects.

Introduction

Conclusion