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

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 transportation is already becoming a part of Japan's original landscape.

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 transformations to save the regions, and they are in a crisis of "regional extinction." In fact, what happens first is the "extinction of local transportation," followed by the "extinction of local administration," and then the region perishes.

Another cause of the decline in local transportation is the deregulation of transportation in 2000 and 2002. The abolition of supply-demand adjustment regulations through this deregulation made it easier to enter the transportation business, which had been protected to some extent by transportation laws. The laws changed to protect only user interests, with the attitude of "let companies that fail, fail" and "stop routes or businesses that are not profitable," and the term "public transportation" became almost a dead word. As soon as deregulation occurred, more than 30 long-established bus and railway companies went bankrupt one after another, but because they had assets, white knights appeared to revive them, and it did not become a social problem. However, even now, around 80% of local transportation 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 for "publicly-owned, privately-operated" (Kousetsu Minei) systems. Following deregulation, I conducted a demonstration of public-private management with the Tsu Airport Line. Based on that public-private scheme, I was involved in the enactment of the Act on Revitalization and Rehabilitation of Local Public Transportation (hereinafter the Revitalization Act) and the Basic Act on Transport Policy (hereinafter the Basic Act) to solve problems caused by the deregulation of public transportation through the revitalization of Wakayama Electric Railway, Chugoku Bus, Ikasa Railway, and others.

Until now, local public transportation was a "lone struggle" type left entirely to operators, but 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 transportation as part of community building.

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

I would now 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 decrease in passengers and the continuation of Japan's current public transportation policy, even the train and route 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 decrease 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 transportation 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 transportation entirely to the private sector. I believe Japan failed to foresee today's situation—the decline of public transportation—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 guarantee transportation for citizens, namely the "right to mobility/right to transportation," was born, primarily in France and other countries. As a means of guaranteeing that right to transportation, the "publicly-owned, privately-operated" method is generally adopted, and roles are divided between administration and the private sector through the separation of infrastructure and operations (vertical separation).

In Japan, competition policies for transportation were introduced with the deregulation of 2000 and 2002 without politicians or the national government fully understanding that local public transportation does not work as a business. Route bus businesses in rural areas were already in the red, but subsidies decreased significantly, and the introduction of the concepts of freedom of exit and cost-effectiveness led to a reduction in routes and the bankruptcy of public transportation operators. As you know, tour buses, which were once hailed as a model case for deregulation, saw a rapid change in their system 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 kilometers) has been lost. 89% of route bus operators (143 companies) and 72% of railways (69 companies) are in the red (both as of FY2018). The deficit-prone nature of local public transportation businesses has become normalized, and with the decline in earnings following deregulation, wages have lowered. For example, the income of bus drivers has fallen to 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 transportation 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 urban 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 management sense that reducing costs would lead to reduced subsidies, hindering efforts to improve management.

4. Deregulation accelerated the decline.

Few people know that the transportation competition policy of the Thatcher administration in the UK in the 1980s, which Japan imitated, is actually considered a major global failure. In Japan, deregulation also led to the bankruptcy of many local transportation operators. Economically speaking, it was feared even then that bringing the principle of competition into a business format where demand continues to decrease would invite excessive competition, lower crew wages, and drop safety and service levels. However, in the storm of politics and social trends aimed at breaking down vested interests, there was nothing that could be done. In reality, many operators fell due to excessive competition, taxi and bus companies increased 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 somehow save local transportation, I have advocated for the maintenance of public transportation through the European-style publicly-owned, privately-operated model since 2000. However, the mainstream in Japan was maintaining public transportation through a subsidy system, and I was completely ignored by the government and the industry, being told it was "socialist thinking and unrealistic." However, the effectiveness of that public-private model was proposed and adopted for maritime access to Chubu Centrair International Airport at the request of Tsu City in 2005, and it came to be 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 deficit route of 500 million yen per year. For the first time, we implemented the revitalization of existing public transportation using the concept of public ownership and private operation. At that time, the national government predicted that 70 out of 92 local railways would fail. Based on the judgment of a senior official at the Railway Bureau who said, "It might be an oddity, but let's let Mr. Kojima try it," the business was revived as Wakayama Electric Railway using the "publicly-owned, privately-operated" model I created. Fortunately, this became the catalyst for creating a local railway boom, and this success led to the legalization of "public ownership and private operation" 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 rather than a third-sector company; and 3. improving convenience through an operating committee established within Wakayama Electric Railway, in which users and the administration 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 revived 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 active under the slogan "Ride the Kishigawa Line to Save It" at their own expense. Second, the cooperation system of the administrations of Wakayama Prefecture, Wakayama City, and Kinokawa City (then Kishigawa Town) was solid. These can be said to be the factors that, along with internal management efforts, allowed Wakayama Electric Railway to be revived through the public-private 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, along with the presence of the calico cat Stationmaster Tama. 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 public-private model in railways, we implemented the reconstruction of Chugoku Bus in Hiroshima Prefecture, which had fallen into management difficulties in 2006. We clarified that the side effects of the subsidy system and discordant labor-management relations were the main reasons for the loss of customers. 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 changed into "words of praise."

By reconstructing Chugoku Bus, we elucidated the inefficient subsidy problem of local route buses. Because I raised the issue of local public transportation 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 after deliberations in the Diet. Since the Ryobi Group operated without receiving subsidies, I didn't quite understand why deficit-ridden companies didn't make management efforts, but through these revitalizations, I realized that maintaining local public transportation 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 transportation to then-Parliamentary Secretary Mikazuki of the Ministry of Land, Infrastructure, Transport and Tourism (now Governor of Shiga Prefecture), which led to the deliberation of the "Basic Act on Transport" by the national government. Through a three-party agreement between the DPJ, the Liberal Democratic Party (LDP), and Komeito, a budget of 100 billion yen was secured by cabinet decision. However, the LDP returned to power, and because it was deemed not so urgent, the matter was shelved, although it remained under continuous deliberation.

Just when I thought it was hopeless, in 2012, the sudden announcement of the bankruptcy of Ikasa Railway occurred in my home prefecture of Okayama, an incident where public transportation 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 transportation in 19 days. It was only after this case of Ikasa Railway's bankruptcy that the difficulty of maintaining local public transportation was understood. This case became the catalyst for starting essential discussions on how to take fundamental measures for local public transportation. I also testified as a witness at the House of Representatives Committee on Land, Infrastructure, Transport and Tourism in November 2013, and the Basic Act on Transport Policy was enacted in December of the same year.

As shown in the diagram, future management styles for public transportation will largely consist of four types: "publicly-owned, publicly-operated" (Kousetsu Kouei); its opposite, "privately-owned, privately-operated" (Minsetsu Minei); "publicly-owned, privately-operated" (Kousetsu Minei), which solves the cost and service problems of the public-public model; and "publicly-owned, privately-commissioned" (Kousetsu Mintaku), where overall operations are commissioned. Additionally, due to past circumstances and administrative ease of handling, there will be types such as "quasi-publicly-owned, privately-operated" and "quasi-publicly-owned, privately-commissioned." For the reconstruction scheme of Ikasa Railway, we revitalized it using the "quasi-publicly-owned, privately-operated" method, which combines the functions of public-private operation and public-private commissioning, as the optimal choice.

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 public-private model, the public sector installs the transport and transportation equipment—just as it builds roads—but leaves the operation to the private sector, thereby clarifying the location of public and private responsibilities. Subsidies for covering deficits are for the purpose of life extension, and neither private nor public responsibility is clear. Private companies have no incentive to improve management because reducing the deficit only reduces the subsidy; they end up focusing on how much they can receive, and subsidies tend to increase. To make normal management efforts to increase users by improving safety and service, the "publicly-owned, privately-operated" model is superior, as it allows for the "dream" that efforts will lead to increased profits for the operator and higher wages.

From an administrative perspective, one might think that both the subsidy system and the public-private model involve spending money, but the public-private model is a commission of the operational part, which creates an incentive to make management efforts to become profitable through efforts to reduce expenses. With deficit coverage, management efforts are not worth the trouble.

Public transportation can be said to be one of the tools for revitalizing 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 community building" involves "community building that is fun to walk in using public transportation," absorbing wide-area suburbs that have sprawled into the center, a network connecting the hubs of the expanded region will be necessary.

Specific examples of regional revitalization through public transportation 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 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-and-bus-ride, bus location systems, and IC cards.

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

5. Challenging the creation of the world's best community 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 transportation vehicles from mere means of transportation into fun vehicles for wandering, we are changing public transportation—which was once a burden full of deficits—into a leader of regional revitalization.

Having acquired know-how through these efforts in management revitalization and legalization, I began to receive many requests for consultations and lectures from administrations, operators, and citizens' groups facing numerous problems with public transportation 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," but rather to create execution plans, assist on the ground, and provide support until revitalization is achieved.

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

1. Local Railways
(1) Yokkaichi City: Utsube Line, Hachioji Line → Revived as Yokkaichi Asunarou Railway / (2) Yoro Railway: Realization of public ownership and private operation / (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 public ownership and private operation to maintain maritime access to the Hinase Islands in Bizen City / (2) Cooperation for the public ownership and private operation of maritime access in Etajima City

3. Bus Sector
(1) Guidance on public-private commissioning after the bankruptcy of Ikasa Railway and implementation of business revitalization by Ikasa Bus Company / (2) Guidance on public ownership and private operation following the abolition of Bizen Bus

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

In rural areas, the "benefit of users" under the transportation law has already changed 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 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." As a result, 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 transportation 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 timetables where local public transportation competes for passengers during peak times can also be resolved through cooperation.

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

1. Legal Preparation
Regarding the Road Transport Act, it is necessary to amend the law to firmly look at supply and demand, based on the idea that "user benefits exist 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 transportation-specific taxes on par with other developed 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 transportation for the health of their citizens.

3. Promoting Usage
No matter how many systems are created and financial resources are secured, it is difficult to continue maintaining public transportation that people do not ride. It is necessary to work on public transportation use as a "National Movement to Ride and Save Public Transportation" involving both the region 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, and in May, a route bus operator in Saitama Prefecture, where passengers had plummeted, went bankrupt. Since public transportation must maintain lifestyle routes even during self-restraint, it is not eligible for employment adjustment subsidies, cannot significantly reduce service, cannot cover deficits, and is facing management difficulties. It is important not only to rescue immediate local public transportation but also to move away from the current life-prolonging maintenance methods, solve the three challenges, and transition to a public transportation system with dreams 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, the country will become one where regions continue to fight a losing battle due to the declining birthrate and aging population. However, if we change our perspective, we can develop it into a country of a highly capable few, a country where people can enjoy longevity.

The maintenance and revitalization of local public transportation require management efforts through new management methods such as public ownership and private operation, as well as various initiatives to increase users. More than that, however, it is important to actively utilize public transportation to socially create demand. Unless we create a new public transportation-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 transportation is not only the greatest tool for guaranteeing the mobility of the transportation-poor and keeping international pledges 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 as a social tool.

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

3. Publicly-owned (or possessed), privately-operated models and public-private commissioning can be said to be effective for the fundamental reform of local public transportation.

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

5. By realizing the "Eco-Public Transportation Superpower Concept," where local public transportation is also environmentally friendly, barrier-free, and highly IT-enabled, and by developing it into an export industry that complements automobile exports as a public transportation 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 transportation 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 known as local public transportation, making no mistakes for the future.