EDITORIAL:Joint venture mess
Asahi
The decisions of Osaka city defy logic.
The city of Osaka has become ``a graveyard of joint public-private ventures'' thanks to a series of collapses of enterprises co-financed by the municipal government and private businesses.
Of the 23 joint ventures in which the city has at least a 25-percent stake, three, including the Osaka World Trade Center Building (WTC), are now trying to turn themselves around under a court-brokered rehabilitation agreement with creditors. Two others, including the operator of the Osaka Dome stadium, have entered negotiations for a similar reconstruction process. Most of the others are also losing money.
The troubles of these joint ventures have common roots. Their unrealistic business plans were based on overly optimistic demand projections, and their operations were expanded before they started to make any money. They have run up a crippling amount of debt and procrastinated on tackling their problems under irresponsible management characteristic of such joint businesses. These problems are shared more or less by many semipublic corporations around the nation, but are especially pronounced in Osaka.
The WTC, for instance, was originally planned as a 150-meter office building, but it eventually expanded into a 256-meter skyscraper at a cost of 120 billion yen, a 2.3-fold jump from the initial estimate. Of that money, 100 billion yen was borrowed.
