Feasibility of Privatization of Expressway in Japan

Recently, privatization has become very popular worldwide as an efficient means of constructing and operating infrastructure facilities. Like many other countries, Japan also has adopted a policy in favor of privatization, and has privatized several industries. Now, the privatization of expressway projects has become a controversial issue as the Japanese government has begun considering it as one of the next candidates for privatization. The purpose of this thesis is to examine the feasibility of privatizing expressway projects in Japan. With 5,000 km in operation and 6,500 km in various stage of planning, design or construction, the provision of an efficient expressway network is a national priority. Currently, because a public corporation, which is fully sponsored by the Japanese government, is the sole provider of the expressway network as toll roads, privatization may improve economic efficiency by bringing private parties into the projects. However, not all privatization schemes have been successful. In particular, when competition is very limited as in expressway projects, the critical issues for successful privatization are to increase the competitive environment by dropping artificial barriers to entry into the market, and to adopt a regulatory framework which does not distort the private firm's incentive to reduce operation costs and increase usage of expressways. In addition, appropriate risk sharing by the public sector may be necessary to reduce the high risk of a new construction project, and to secure new entrants into the expressway projects. Thesis Supervisor: Fred Moavenzadeh Title: Professor of Civil and Environmental Engineering Director, Center for Construction Research and Education