[Feature: Mobility in a Depopulating Society] How to Overcome the Crisis of Local Public Transport / Mitsunobu Kojima

2020/07/06

Those of you in major metropolitan areas such as Tokyo, Osaka, and Nagoya may not have much interest in the fact that transportation in rural areas is in trouble, as you spend your time moving around without any inconvenience. However, once you step away from the city center, transportation inconvenience due to the decline of public transport is already becoming a common scene in Japan.

One of the causes, as you know, is the declining birthrate and aging society, which makes it difficult for rural areas to survive. While regional revitalization is being called for, the reality is that there are no major reforms to save the regions, and we are facing a crisis of "regional extinction." In fact, what happens first is the "extinction of local transport," followed by the "extinction of local administration," and then the region perishes.

Another cause of the decline in local transport is the deregulation of transportation in 2000 and 2002. With the abolition of supply-demand adjustment regulations through this deregulation, entry into the transportation business—which had been protected to some extent by the Transportation Act—became easy. The laws changed to protect only user interests, with the attitude of "let failing companies fail" and "stop unprofitable routes or businesses," and the term "public transport" became almost a dead word. As soon as deregulation occurred, over 30 long-established bus and railway companies went bankrupt one after another. However, because they had assets, white knights appeared to revitalize them, and it did not become a major social issue. Nevertheless, even now, around 80% of local transport operators are struggling with deficits, and it can no longer be called a healthy business activity.

To resolve this critical situation, I advocated for a departure from subsidy policies and the adoption of "publicly owned, privately operated" (Kosei-Minei) models. Following deregulation, I conducted a demonstration of this model with the Tsu Airport Line. Based on that scheme, I was involved in the enactment of the Act on Revitalization and Rehabilitation of Local Public Transport (hereinafter the Revitalization Act) and the Basic Act on Transport Policy (hereinafter the Basic Act) to solve problems caused by deregulation through the revitalization of Wakayama Electric Railway, Chugoku Bus, Ikasa Railway, and others.

Until now, local public transport was a "lone struggle" type left entirely to operators. With the enactment of these laws, the national government, local governments, citizens, and operators have come to take responsibility together to maintain and develop public transport as part of community building.

Furthermore, since there was no think tank in the field of local public transport in Japan, I established the Local Public Transport Research Centers and Institutes (hereinafter the Research Institute) to ensure the sustainable development of local transport and solve real-world problems on the ground. The mission of the Research Institute is not just analysis or consulting, but to work as one with truly troubled transport operators and local governments to achieve problem-solving and revitalization.

Now, I would like to specifically analyze and show how to resolve this situation.

I serve as the Representative and CEO of the Ryobi Group, which was founded in 1910 as Saidaiji Railway Co., Ltd. and now comprises 53 companies across five business sectors (cores): Transportation & Travel, ICT, Lifestyle Development, Community Development, and Social Contribution.

When I became president of the former Ryobi Bus, based in Okayama, in 1999—just before the deregulation of route buses in 2002—I was stunned to find that with a 2–3% annual decline in passengers, if Japan's public transport policy continued as it was, even the railway and bus businesses of the Ryobi Group, which had worked hard without subsidies for decades, would fall into the red within about 10 years, and we would have to consider going out of business. This decline in passengers basically remains unchanged for current route buses and local railways; the flight of passengers is progressing at a tremendous speed due to the spread of private cars and the declining birthrate and aging population. The reality is that even in some large cities and regional cities, only the central areas can maintain public transport management, while other areas are barely surviving as deficit-ridden businesses through subsidies from local and national governments.

When I looked into how developed European countries handle this, I found that among advanced nations, Japan is the only one that leaves public transport entirely to the private sector. I believe Japan failed to foresee today's situation—the decline of public transport—when the era of private cars arrived.

Europe knew that the era of private cars would create "transportation-poor" people—children who cannot get licenses, elderly people who cannot drive even if they have a license, and people who cannot drive for economic reasons—and that they would lose their freedom of movement. From this, the concept of the right to guaranteed transport for citizens, namely the "right to mobility/transportation rights," was born, primarily in France and other countries. As a means of guaranteeing those transportation rights, the "publicly owned, privately operated" method is generally adopted, and roles are divided between the administration and the private sector through the separation of infrastructure and operations (vertical separation).

In Japan, competition policies for transport were introduced through deregulation in 2000 and 2002 without politicians or the national government fully understanding that local public transport does not work as a business. Route bus businesses in rural areas were already in the red, but subsidies were significantly reduced, and the introduction of the concepts of free exit and cost-effectiveness led to a decrease in routes and the bankruptcy of public transport operators. As you know, even the "tour buses" that were once hailed as a model case for deregulation quickly underwent structural changes following repeated major accidents involving fatalities.

Since deregulation, 31 route bus operators nationwide have gone bankrupt, and 3.5% of the bus route network (approximately 15,000 km) has been lost. 89% of route bus operators (143 companies) and 72% of railway/tram operators (69 companies) were in the red (both as of FY2018). The deficit-prone nature of the local public transport business has become chronic. Furthermore, with the decline in earnings following deregulation, wages have decreased; for example, the income of bus drivers has fallen about 1 million yen below the average for all industries, making it difficult not only to maintain routes but also to secure human resources.

The reasons for the decline of public transport are generally summarized into the following four points:

1. The loss of 50–60% of users due to population decline along with the arrival of the private car era.

2. The thinning of networks due to the sprawl of regional cities, combined with chronic traffic congestion, causing route buses to lose punctuality.

3. The side effects of subsidy administration, which created a false sense of management where reducing costs led to reduced subsidies, hindering efforts to improve management.

4. Deregulation accelerated the decline.

Few people know that the transport competition policy of the Thatcher administration in the UK in the 1980s, which Japan imitated, is actually considered a massive global failure. In Japan, deregulation also led to the collapse of many local transport operators. Economically speaking, bringing competition principles into a business format where demand continues to decrease invites excessive competition, lowers crew wages, and degrades safety and service levels. This was feared even then, but there was nothing that could be done in the storm of politics and social trends aimed at breaking down vested interests. In reality, many operators fell due to excessive competition, taxi and bus companies multiplied like mushrooms after rain, crew wages dropped, and the safety level of the passenger transport business—which is entrusted with lives—declined.

With the desire to save local transport, I have advocated for the maintenance of public transport through the European-style "publicly owned, privately operated" model since 2000. However, in Japan, maintaining public transport through a subsidy system was the mainstream, and I was completely ignored by the government and the industry, being told it was a "socialist idea and unrealistic." However, the effectiveness of the publicly owned, privately operated model was proposed and adopted for the maritime access to Chubu Centrair International Airport at the request of Tsu City in 2005, and it became socially demonstrated and recognized.

Next, Okayama Electric Tramway Co., Ltd. of the Ryobi Group was pleaded with by a local citizens' group, the "Association to Create the Future of the Kishigawa Line," to reconstruct the Nankai Electric Railway Kishigawa Line, which was a route with an annual deficit of 500 million yen. This was the first time the revitalization of existing public transport was implemented using the concept of publicly owned, privately operated. At that time, the national government predicted that 70 out of 92 local railways would collapse. Based on the judgment of a senior official at the Railway Bureau who said, "It might be a strange thing, but let's let Mr. Kojima try it," the business was revitalized as Wakayama Electric Railway using the "publicly owned, privately operated" model I created. Fortunately, this became the catalyst for a local railway boom, and due to this success, the "publicly owned, privately operated" (Koyu-Minei) model was legalized in the railway sector.

The scheme for local railway revitalization was based on the management pillars of: 1) making it publicly owned and privately operated; 2) making the operating company a 100% single-investment entity rather than a third-sector company; and 3) aiming for convenience improvements through an operating committee established within Wakayama Electric Railway, in which users and the administration also participated. We created a plan to keep the 500 million yen deficit within an annual average of 82 million yen.

The reason I judged that it could be revitalized if it were publicly owned and privately operated was, first, because I felt the citizens' movement was genuine. Simultaneously with the announcement of the abolition in 2003, the "Association to Create the Future of the Kishigawa Line" was launched as a movement to preserve the route, and about 6,000 enthusiastic members were working voluntarily under the slogan "Let's ride and save the Kishigawa Line." Second, the cooperation system of the administrations of Wakayama Prefecture, Wakayama City, and Kinokawa City (then Kishigawa Town) was solid. These factors, along with internal management efforts, can be said to be the reasons why Wakayama Electric Railway was revitalized through the publicly owned, privately operated model.

We succeeded in the revitalization by holding 80 events a year and introducing attractive trains one after another, such as the Strawberry Train, Toy Train, and Tama Train, as well as the presence of Tama the Calico Cat Stationmaster. The cat stationmaster attracted attention from all over the world, was made into a movie in Europe, and became the spark for the global "cat boom."

Following the success of the publicly owned, privately operated model in railways, we implemented the reconstruction of Chugoku Bus in Hiroshima Prefecture in 2006, which had fallen into management difficulties. We clarified that the side effects of the subsidy system and poor labor-management relations were the main causes of customer loss. Through revitalization, we succeeded in reducing subsidies by more than 100 million yen (FY2008) and drastically reducing accidents to less than one-tenth. Through education, complaints also decreased by 40%, and complaints turned into "words of praise."

By revitalizing Chugoku Bus, we elucidated the problem of inefficient subsidies for local route buses. After raising the issue of local public transport to Yoichi Miyazawa, a member of the House of Representatives (now a member of the House of Councillors) elected from the local area, the Revitalization Act was enacted following deliberations in the Diet. Since the Ryobi Group operated without receiving subsidies, we didn't quite understand why deficit-ridden companies didn't make management efforts. However, through these revitalizations, we realized that maintaining local public transport through the subsidy system only has the effect of life-prolonging treatment.

When the Democratic Party of Japan (DPJ) took power in 2009, I appealed the critical state of local public transport to then-Parliamentary Secretary Mikazuki (now Governor of Shiga Prefecture) of the Ministry of Land, Infrastructure, Transport and Tourism, and the "Basic Act on Transport" began to be deliberated by the national government. Just as a budget of 100 billion yen was secured through a three-party agreement between the DPJ, the Liberal Democratic Party (LDP), and Komeito via a cabinet decision, the LDP returned to power. It was deemed not so urgent and, although it remained under continuous deliberation, it was put on hold.

Just when I thought it was over, in 2012, Ikasa Railway in my home prefecture of Okayama suddenly announced its management failure, and an incident occurred where public transport disappeared from the region. Receiving requests from the national and local governments, I immediately decided on emergency alternative operations as an emergency evacuation measure and was miraculously able to maintain the region's means of transport in 19 days. It was only after this case of Ikasa Railway's management failure that the difficulty of maintaining local public transport was understood. This case became the catalyst for the start of essential discussions on how to take fundamental measures for local public transport. In November 2013, I testified as a witness before the House of Representatives Committee on Land, Infrastructure, Transport and Tourism, and the Basic Act on Transport Policy was enacted in December of the same year.

Future management styles for public transport will likely fall into four major categories, as shown in the diagram: "publicly owned, publicly operated" (Kosei-Koei); its opposite, "privately owned, privately operated" (Minsei-Minei); "publicly owned, privately operated" (Kosei-Minei), which solves the cost and service problems of the former; and "publicly owned, privately entrusted" (Kosei-Mintaku), where overall operation is entrusted. Additionally, due to past history and administrative ease of handling, there will be "quasi-publicly owned, privately operated" and "quasi-publicly owned, privately entrusted" models. As a reconstruction scheme for Ikasa Railway, we revitalized it using the "quasi-publicly owned, privately operated" method, which combines the functions of both publicly owned/privately operated and publicly owned/privately entrusted.

The fundamental difference from the past subsidy system is that subsidies are strictly for covering deficits and do not lead to normal profitable management. On the other hand, in the publicly owned, privately operated model, the public sector installs the transport and traffic facilities—just as they build roads—but leaves the operation to the private sector, thereby clarifying the location of public and private responsibility. Subsidies for covering deficits are for the purpose of prolonging life, and neither private nor public responsibility is clear. The private sector loses the incentive to improve management because reducing the deficit only reduces the subsidy, leading them to focus on how much they can receive, which tends to increase the total subsidy. To make normal management efforts to increase users by improving safety and service, the "publicly owned, privately operated" model is superior because it allows for the "dream" that efforts will lead to increased profits and wages for the operator.

From an administrative perspective, one might think that both the subsidy system and the publicly owned, privately operated model involve spending money. However, the latter is an entrustment of the operational part, which creates an incentive to make management efforts to become profitable through cost-saving efforts. With deficit coverage, management efforts are not worth the trouble.

Public transport can be said to be one of the tools for activating regions where the birthrate is declining and the population is aging. There is a concern that as the number of elderly people who can no longer drive private cars increases, regions where children cannot commute to school will lose their appeal, causing young people to outflow even more and accelerating the extinction of the region. The keywords for the "Grand Design of National Land 2050" (Ministry of Land, Infrastructure, Transport and Tourism) are "compact" and "network." Since this compact "21st-century urban planning" involves "town planning that is fun to walk in using public transport," absorbing the sprawling wide-area suburbs into the center, a network connecting the hubs of the expanded region will be necessary.

Specific examples of regional activation through public transport that I have implemented include:

1. Introduction of the futuristic LRT "MOMO" (100% ultra-low-floor tram: Okayama Electric Tramway) in 2002 (received the Japan Railway Award).

2. Construction of two 108m ultra-high-rise condominium towers (Ryobi Grace Tower) in 2004 to encourage living in the center of Okayama City.

3. Attraction of JCDecaux's free-to-install bus stops, and the introduction and implementation of Park & Bus Ride, bus location systems, and IC cards.

4. Attracting tourists from all over the world with fun vehicles like the Strawberry Train, Toy Train, and Tama Train, and "Tama the Cat Stationmaster" (Wakayama Electric Railway).

5. Challenging the creation of the world's best town where cute and interesting vehicles—including the Tama Train, Tama Bus, KURO, and actual vehicles from the popular British animation "Chuggington"—run through the city (Okayama Electric Tramway).

6. Proposing a Seto Inland Sea-style cruise that links the sea, islands, and ferries by introducing the cruise ferry "Olympia Dream Seto" on the Shodoshima route.

By evolving public transport vehicles from mere means of movement into fun vehicles for wandering around, we are changing public transport—which was once a burden full of deficits—into a leader of regional revitalization.

As I acquired know-how through these efforts in management revitalization and legislation, I began to receive many requests for consultations and lectures from administrations, operators, and citizens' groups facing numerous problems with public transport after deregulation. I established the Research Institute together with researchers and practitioners who are well-versed in these issues.

Our Research Institute aims to avoid being a "talk-only consultant" and instead creates execution plans, assists on-site, and provides support until revitalization is realized.

The activities of the Research Institute to date are as follows:

1. Local Railways
(1) Yokkaichi City: Utsube Line, Hachioji Line → Revitalized as Yokkaichi Asunarou Railway / (2) Yoro Railway: Realization of publicly owned, privately operated model / (3) Private organizations along the Kobe Electric Railway: Diagnosis and lectures / (4) Management improvement of Heisei Chikuho Railway / (5) Revitalization and regional support for Ohmi Railway

2. Maritime Access
(1) Creating a scheme for the publicly owned, privately operated model to maintain maritime access to the Hinase Islands in Bizen City / (2) Cooperation for the publicly owned, privately operated model for maritime access in Etajima City

3. Bus Sector
(1) Guidance on publicly owned, privately entrusted models after the collapse of Ikasa Railway and implementation of business revitalization by Ikasa Bus Company / (2) Guidance on the publicly owned, privately operated model following the abolition of Bizen Bus

While I was working hard to revitalize collapsed public transport, an application targeting only the so-called "profitable routes" was submitted by a competing company in my local Okayama City.

In rural areas, the "user interest" in the Transportation Act has already shifted from fares and frequency to how to maintain the regional route network. However, in February 2018, to raise an issue regarding the low-fare operation application by a competing company targeting the profitable routes that support deficit routes, and the movement of the national and local governments to approve it, I submitted a "notice of abolition for 31 routes." Minister Keiichi Ishii of the Ministry of Land, Infrastructure, Transport and Tourism and Prime Minister Abe, who took the matter seriously, stated, "We understand that it is difficult to balance local competition and route maintenance under the current system." Consequently, they decided to grasp the actual situation as an issue not only for Okayama but for the entire country, and to support efforts to maintain public transport in regions using the Revitalization Act. Furthermore, through this raising of the issue, the Revitalization Act will be amended (hereinafter the Amended Act). Entry into competing routes that ignores regional intentions will now be discussed in the light of day, and with the amendment of the Antimonopoly Act, problems such as fares and timetables where local public transport competes for passengers during peak times can also be resolved.

However, this does not mean that the problems of local public transport will be solved. It is necessary to resolve three challenges toward the sustainable maintenance and development of local public transport: legal development, securing financial resources, and promoting usage.

1. Legal Development
Regarding the Road Transport Act, it is necessary to amend the law to focus on supply and demand, based on the idea that "user interest exists only when there are healthy operators," and to ensure consistency between the Basic Act and the Amended Act.

2. Securing Financial Resources
It is necessary to institutionalize a transport-specific tax on par with other advanced nations. Advanced countries around the world are reducing CO2 through environmental taxes and other means, and are operating their nations with a focus on public transport for the health of their citizens.

3. Promoting Usage
No matter how many systems are created and financial resources secured, it is difficult to continue maintaining public transport that people do not ride. It is necessary to work on public transport usage as a "National Movement to Ride and Save Public Transport," involving both the regions and the nation.

Due to the spread of the new coronavirus, in April 2020, income for local railways, route buses, ferries, etc., decreased by 65% for the first time in history. In May, a route bus operator in Saitama Prefecture, where passengers had plummeted, went bankrupt. Since public transport must maintain lifestyle routes even during self-restraint, it is not eligible for employment adjustment subsidies, cannot significantly reduce service, and cannot cover deficits, leading to management difficulties. It is important not only to rescue local public transport in the short term but also to move away from the current life-prolonging treatment type of maintenance, solve the three challenges, and transition to a public transport system with a future in line with the Basic Act and the Amended Act.

As is clear from the "Grand Design of National Land 2050," if we view this era negatively, Japan will become a country that continues to fight a losing battle in its regions due to the declining birthrate and aging population. However, if we change our perspective, we can develop it into a wealthy country of highly capable individuals where people can enjoy longevity.

The maintenance and revitalization of local public transport require management efforts through new management methods such as the publicly owned, privately operated model, as well as various efforts to increase users. More than that, it is important to actively utilize public transport to socially create demand. Unless we create a new public transport-using society that coexists with private cars, it can hardly be called an advanced nation.

In other words, the following points are important:

1. Public transport is not only the greatest tool for guaranteeing the mobility of the transportation-poor and keeping international commitments for an environmental society, but also a major tool for national comprehensive welfare policy that brings a sense of purpose to an aging society and improves welfare finances.

2. There is an urgent need to transition from life-prolonging local public transport policies to policies that create regional dreams.

3. Publicly owned (Kosei/Koyu), privately operated models and publicly owned, privately entrusted models can be said to be effective for the fundamental reform of local public transport.

4. New financial resources called transport-specific taxes must be covered by turning fossil fuel taxes into environmental taxes.

5. By realizing the "Eco-Public Transport Superpower Concept," where local public transport is also environmentally friendly, barrier-free, and highly IT-integrated, and by developing it into an export industry that complements automobile exports as a public transport system Japan can be proud of, we can also contribute as a global environmental solution.

If left as is, there is a concern that about 30% of the local public transport network will be lost within 10 years.

Now is the last chance to ensure that the elderly and children in rural areas can move freely and live with peace of mind. I hope to pass on the baton of the social tool called local public transport correctly to the future.