Osaka City Plans Subway Operator Initial Offering to Chase Tokyo
Osaka, Japan’s third-biggest
metropolis, plans to sell the city’s 81-year-old subway operator in an initial
public offering to lure private investment after ceding ground to Tokyo.
Osaka plans to privatize the
operations, which could be valued at more than 600 billion yen ($5.9 billion),
in the next few years as part of efforts to become a global metropolis,
prefectural Governor Ichiro Matsui said in an April 8 interview. It may also
weigh a sale to private investors, he said.
Local governments in Osaka
prefecture, near the ancient capital of Kyoto and home to electronics makers
Panasonic Corp. and Sharp Corp., are stepping up sales of public assets to cut
debt. Osaka is privatizing state-run companies and talking to potential
investors including Caesars Entertainment Corp. on a planned $4.9 billion
casino resort as it seeks to overcome a declining population.
“I am ready for the subway
sale any time,” said Matsui, 50, who also is secretary-general of the Japan
Restoration Party. “Osaka city assembly members should all have a sense of
urgency to move this economic stimulus forward, as Osaka needs to bring in
economic revival.”
A proposal to privatize the
metro, which carries 2.24 million passengers daily, was submitted to the city
assembly in February 2013, according to documents posted on the Osaka
government’s website. The proposal, which is under discussion, would have Osaka
transfer the subway operations to a separate government-owned entity and then
fully privatize them, the documents show. It didn’t elaborate on the sale
method or valuation.
Shrinking Population
The Osaka subway, which
started operations in 1933, has nine lines running in the city and totaling 138
kilometers (86 miles). The privatization proposal will need endorsement by
two-thirds of the assembly to be passed.
Osaka prefecture’s economic
output dropped 6.2 percent to 36.6 trillion yen in the year through March 2012
from a decade earlier, according to the latest data compiled by the Cabinet
Office. That compares with a 0.4 percent decline in Tokyo’s output, to 92.4
trillion yen.
The population of Osaka
prefecture fell to 8.85 million as of March 1, down 0.1 percent from a year
earlier. It’s forecast to shrink another 5 percent by 2025, according to a
report compiled last year by the National Institute of Population & Social
Security Research. Tokyo’s population, which rose 0.5 percent to 13.3 million
in the year to March 1, is projected to decrease to 13.2 million by 2025.
“Osaka’s economic revival is
vital to helping Japan avert a default or economic crisis, as Tokyo’s growth
alone won’t be enough to bring momentum to the country’s overall economy,” said
Matsui. “Other prefectures should follow suit.”
Selling Assets
Osaka joins the nation’s
capital in seeking to sell transportation infrastructure. The Tokyo
metropolitan government has been studying a sale of its 46.6 stake in the
city’s subway operator, Governor Yoichi Masuzoe said March 19.
Matsui said in January his
government has been holding talks with global casino operators including
Caesars Entertainment, Genting Singapore Plc and MGM Resorts International on a
plan to build a resort complex in the Osaka Bay area that would cost at least
500 billion yen.
In February, Matsui said the
prefectural government plans to sell Osaka Prefectural Urban Development Co., a
commuter rail operator, to Nankai Electric Railway Co. for 75 billion yen.
State-owned New Kansai International Airport Co. is working with Sumitomo Mitsui
Financial Group Inc. to sell rights to operate two of Japan’s biggest airports,
people familiar with the situation said last month.
“By turning to a small
government from a big one, Osaka is shifting to companies those things that can
be left to the private sector,” Matsui said. “The casino-resort project,
airport privatization and subway sale have great potential to lure private
money into Osaka and its surrounding areas.”
The above article is a repost from Bloomberg
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