2.3. Port and Harbor Development System

2.3.4 Development of Port Facilities

1) Overview
The Japanese national government shoulders a portion of the cost for the development of port that significantly affect the national interest (specially designated major ports, major ports and harbors of refuge) based on the characteristics of the port and its benefits to the public. When a particular need is recognized and the national budget allows, the government may assist with the costs of port construction borne by port management bodies, in order to support use by the general public.

In the case of the development of facilities that are neither directly maintained by the national government nor partially subsidized, the Ministry of Land, Infrastructure and Transport provides basic capital to finance the issuing of local bonds by port management bodies.

In addition, certain measures support the development of specially designated facilities by local governments and private entrepreneurs (including the third sector) in the form of finance guarantees for project implementation and tax incentives.

Port Facilities Development System

Project name	Area of development	Financing system
Development of port facilities	Water area and outlying facilities, berthing facilities, port traffic facilities, sites for port facilities	National government works project, subsidy system, etc.
Port environment improvement	Port ecological conservation facilities, waste disposal facilities	Subsidy system
Port projects financed by issued bonds	Cargo handling facilities (warehouses, cargo handling equipment, wharf sites), storage facilities, industrial sites, urban redevelopment sites, etc.	Public financing (local government bonds)
Private sector activities	Construction of passenger facilities, port office facilities, port cultural exchange facilities by private entrepreneurs (including the third sector)	Tax incentives, subsidy system, low interest financing

2) Portion of port development costs borne by the national government and management bodies

	Water area and outlying facilities	Berthing facilities	Port traffic facilities
Specially designated major ports
National government works project	National government 5.5/10 Management body 4.5/t0 The national government, however, bears 2/3 for breakwaters and shipping channels.	National government 5.5/10 Management bodies 4.5/10 The national government, however, bears 2/3 for retrofitting of gateway ports.	National government 2/3 Management bodies 1/3
Subsidized projects	National government 5.5/10 Management bodies 4.5/10 The national government, however, bears 4/10 or less for basin for small crafts and other small facilities.		National government 5/10 or less
Major ports
National government works projects	National government 5.5/10 Management bodies 4.5/10 The national government, however, bears 4/10 or less for basin for small crafts and other small facilities.		National government 5.5/10 Management bodies 4.5/10
Subsidized projects			National government 5/10 or less
Local ports
Subsidized projects	National government 4/10 Management bodies 6/10

Source: Ports Viewed in Terms of Figures 2000

The revision of the Port and Harbor Law in 2000 increased the percentage of costs borne by the national government for the construction of quay walls and shipping channels in major ports deemed to significantly affect the national interest. Conversely, the share of costs borne by the national government for the construction of small-scale facilities has been decreased.

3) Overview of Port-Related Bond-Financed Projects
In the proceeding sections, we outlined the procedures for port development; the following sections provide a basic overview of port- and harbor-related projects.
Port-related projects financed by issued bonds are projects designed to develop ports (to provide basic facilities) and reclaim land that do not fall into the categories of national government works or subsidized projects. Financed through the issuance of local bonds by such local public entities as port management bodies, they are broadly divided into "port facility development projects" and "land reclamation projects in coastal areas."

Both port facility development projects and land reclamation works in coastal areas require massive amounts of capital, and the expedient procurement of funds is needed in order to carry out development according to plan.

Port management bodies and other local public entities acquire most of this capital by issuing local bonds. In order to finance such massive expense, however, it is important to guarantee favorable lending conditions, not only within the local bond framework but in terms of the lending system and bond amortization limit as well.

For that reason, the Ports and Harbors Bureau of the Ministry of Land, Infrastructure and Transport enacted the Port Improvement Promotion Law in 1953, asking the relevant ministries to discuss fund procurement for bond-financed projects related to ports as part of the regional bond issuance system. These ministries provide the basis for capital financing required by port management bodies for their projects.

(1) Port functional facility development projects
These projects are designed to develop such basic facilities as quay walls, which are necessary for efficient functioning of the port, and the land required for wharves, warehouses, cargo handling equipment, tugboats, and timber basins.
(2) Land reclamation projects in coastal areas
These projects focus on the reclamation of coastal land and land that helps improve inhabitants' quality of life and provide efficient solutions for distribution problems, such as the provision of land for distribution and storage facilities. Depending on its designated use, the land may be part of an urban renewal project.

4) Private Sector Activities
Increasing and diverse demands call for Japanese ports to serve as b'ases that support all of the transportation, industrial, civil and recreational activities of the country's population.
In order to develop comprehensive port areas with leading distribution, industrial and daily functions nationwide, Japan has a systematic framework in place to actively tap into the financial reserves and expertise of its private sector.

The support system for private entrepreneurs covers (1) tax incentives, (2) subsidy grants, and (3) low-interest financing. Applicable systems differ according to the nature of the facilities to be developed and the characteristics of the organization managing the project (private entrepreneur or third-sector entity).