Regulatory Developments The international supply chain provides the vehicle for globalisation and thus facilitates the development of vast new opportunities for countries, companies and consumers. To maintain its position as one of the largest economies in the world, Japan needs to remain part of this supply chain by offering competitive and efficient port and harbour facilities. Costs associated with the provision of shipping services and port operations in Japan are amongst the highest in the world. Foreign shipping companies account for 70-75% of all containerised traffic in and out of Japan. Its European members offer considerable experience of operating in Japan and internationally, including in the global containerisation business. They would be pleased to share their experience and insights in a regular dialogue with the Ministry of Land, Infrastructure and Transport (MLIT), aiming to identify opportunities where mutual efforts could lead to increased productivity and efficiency gains at Japanese ports. Reforms aimed at improving Japan's overall business infrastructure have not done more to remedy the challenges to shipping services. The Super Core Port initiative, announced by the MLIT in November 2002, has yet to yield tangible improvements to the high cost structure of Japan ports. The development of Japanese container ports and terminals is being initiated by local authorities rather than by the central government so that the anticipated economies of scale and efficiencies will remain difficult to achieve. Recently the Japanese Government has begun promoting local Japan ports as part of the 'Asia Gateway' program striving to enhance shipments to and from Japan to other Asian countries. Usually smaller sized vessels are being employed on these routes and such smaller vessels have more port and terminal alternatives in Japan. These alternatives also create competition and thus terminal costs for the 'Asia gateway' are much more competitive than costs for major trunk line shipping operators. Initiatives such as the 'Asia gateway' could be the first genuine step towards creating competition if it were extended to larger terminals. Offering a wide array of ports for shipping lines to foster competition is almost critical at this point, because cargo will continue to shift away from direct Japan services to transhipment services through other Asian countries if low cost and efficient alternatives are not provided. Therefore, Japan risks becoming more dependent on services and reliability in other countries for the handling of its own exports and imports rather than direct connections from its own ports. Such a situation would significantly undermine the international trading interests in Japan and the economy of Japan as a whole. Competition on the Japanese waterfront is stalled by the current system of "prior consultation". Under this system, all changes to shipping line operations that might possibly reduce employment or adversely affect working conditions require prior approval from the Japan Harbour Transportation Association (JHTA), an organisation comprised of all major waterfront businesses except shipping lines. The JHTA reviews applications for changes (from the extremely minor to the potentially significant) and, after consulting with labour unions and other relevant parties, hands down a decision that shipping lines are effectively bound to accept. The system lacks transparency and effectively gives the JHTA and its members the means to inhibit shipping lines from seeking competitive bids for waterfront services. Key Issues and Recommendations ■ Port costs and development Yearly status report: limited progress. Port costs in Japan are exceptionally high in comparison to other advanced economic nations. High costs not only hinder European companies from operating to their maximum potential in Japan, but also drive many Japanese companies to switch production overseas and ship lower volumes through Japanese ports. High port costs also undermine the competitive position of Japanese ports in Asia, for example in the provision of trans-shipping services, as Korea and China offer far more competitive services. Furthermore foreign shipping lines are still not allowed to trans-ship their own overseas cargo on their own vessels in Japan, thus encouraging them to trans-ship such cargo in other countries, further reducing business at Japanese ports. Whilst this applies to shipments within a European country as well, it is possible for a Japanese carrier to transport cargo within the EU e.g. from Germany to France, which meets geographical and environmental requirements. Recommendation:
■ Transparency in supervision of port operations Yearly status report: limited progress. The Japan Harbour Transport Association (JHTA) still wields enormous discretionary power on the waterfront. Shipping lines wishing to make changes to their operations require prior approval from the JHTA. The process lacks transparency and effectively prevents shipping lines from seeking alternative, competitive services on the waterfront. Recommendation:
■ Terminal operations Yearly status report: limited progress. Shipping lines still have to apply for a license to operate a terminal and whilst MLIT has committed to processing applications within two months of receipt, requirements such as minimum employment levels prevent the development of a competitive market for port services in Japan. It is not yet possible for a foreign company to set up its own terminal handling operations in Japan. Recommendation:
■ Competitive bidding for stevedore services Yearly status report: no progress. While changes to the Harbour Transport Law implemented in November 2000 enables shipping lines to subcontract with multiple stevedore firms at confidential rates, in reality the concept of independent and systematic competitive bidding has yet to be implemented. Recommendation:
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