Pittsburgh of Japan moves on

By Ritsuko Ando

WHERE steel mills once helped power the economy of Kita Kyushu, formerly a bustling port city that still calls itself the Pittsburgh of Japan, derelict warehouses and swathes of vacant land dot the landscape. 

But local planners believe they have the key to revive past glories. 

After watching a stream of workers and firms leave in the last few decades as a decline in traditional industries shut down steel plants, they aim to kick-start growth in the southern city by making it a test site for a government deregulation programme. 

The changes may appear tame, with policymakers hoping for a cut in the price of electricity by allowing factories to generate and trade it freely, and letting the port open around the clock. 

They reckon, though, that the move will create a regional shipping hub and manufacturing centre. 

“We’ve been trying for years to revive the city and this is the best opportunity,” said Kazunori Ataka, a manager at the Kita Kyushu city hall whose team successfully led the city’s efforts to win government approval as a “special deregulation zone”. 

By their estimates, the scheme will bring 35 firms over the next decade and create more than 10,000 jobs in this city of just over one million people. 

Shipping traffic will more than double and help it compete with other ports such as Yokohama, near Tokyo, and South Korea's Pusan, they say. The overall economic impact is expected to be worth more than 400 billion yen (US$3.37 billion) a year. 

Kita Kyushu mayor Koichi Sueyoshi has said the plan would help the city emulate the success of Pittsburgh, Pennsylvania, a former world leader in steel production that transformed itself into one of North America's main high-tech manufacturing centres. 

Relaxing regulations on electricity provision will make it cheaper for manufacturers to keep factories running longer, although it could mean less money for the local power company. 

The Japanese government had previously been wary of allowing such moves, citing inequities and confusion in having “one country, two policies”. 

But Prime Minister Junichiro Koizumi has been trying to push through the regional deregulation scheme, saying it could spur economic activity without fiscal spending. 

Ataka says the cheaper electricity will likely be most attractive to manufacturers of large-scale industrial items such as automobile-making equipment that use steel still produced locally. 

Kita Kyushu’s most obvious advantage is its proximity to China, which allows it to take advantage of burgeoning trade between the two countries. 

The city’s prime target will be firms using China’s cheap labour that want to add finishing touches domestically – even if it’s just for a “made in Japan” sticker. 

For manufacturers that need to ship goods to or from the city, the 24-hour port offers the combined benefit of cheaper electricity and customs without an overnight wait, the city says. 

Those heading for North America from Singapore or Shanghai may find stopping over in Kita Kyushu and travelling through the Sea of China up to two days faster than using the Pacific route and stopping by Yokohama, it says. 

But for all his confidence in the plan, Ataka acknowledges there are limits when fiscal spending is not an option. 

Unlike the generous tax breaks given to special economic zones in other countries such as China, the scheme is not backed by generous grants or tax benefits, which is one key reason Koizumi has been so eager to promote it. 

Tax incentives for foreign investment have been a key force behind the rapid growth of such zones in China, like Shenzhen. 

“Of course we might be able to do more if generous fiscal spending were an option, but that’s not the case,” Ataka says.  

“We have to be that much more creative.” 

Japan has spent the past decade trying to boost its economy through generous public spending, much of it for building bridges and roads in the countryside – Kita Kyushu being no exception. 

With the government’s public debt already the highest among industrial nations at around 140% of gross domestic product, Koizumi has pledged to cut back wherever possible. 

To that end, the government is set to approve applications by dozens of other cities to set up special deregulation zones over the next year. 

Local residents say they’re honoured their city was chosen first, although they harbour some reservations. 

“I guess it shows things are that bad here, even though the rest of the country hasn’t been doing so well either recently,” said Taizo Nishida, a pensioner. 

“I hope it works, but even if it doesn’t, things can’t get that much worse.” – Reuters  

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