Crisis in Japan

Rebuilding Japan, Without the Graft


At the end of World War II, the Japanese had a saying that, thanks to American bombers, a person could roll a bowling ball from Tokyo all the way to Yokohama. The half-century that followed was an almost uninterrupted construction binge. Japanese firms built factories and office buildings, apartment blocks and highways, dams and bridges, bullet trains and airports—the links in the nation's vast, intricate, just-in-time supply chains. The outside world thinks of Japan's rise from smoldering wreck to the world's second-largest economy as being built on cars and electronics. But a good portion of it was built on building.

The beneficiaries of all that spending were the so-called zenekon, large construction companies such as Kajima, Shimizu, Obayashi, and Taisei. The strength of the zenekon ensures that Japan is ready to rebuild quickly in the wake of its latest—and still unfolding—catastrophe, just as it did after the 1995 Kobe earthquake. But the sector, while a point of pride catered to by the nation's elected leaders and bureaucrats, isn't always a force for good. Proof lies all over Japan—in mammoth tunnels and bridges to nowhere, dams built against the advice of engineers, and seawalls raised over the objections of those they were purported to protect.

The ruling Democratic Party of Japan came to power in 2009 promising an end to wasteful public works projects and the cozy relationships between zenekon and politicians. The rebuilding of northeastern Japan following the Mar. 11 earthquake and the resulting tsunami and nuclear crisis will test that commitment. "They're going to have to contract out these projects in quick order, and that means companies with really tight ties to the contracting agency get the project," says Brian Woodall, a political scientist at Georgia Tech and author of Japan Under Construction. "It may be an opportunity for interested and powerful politicians to get involved, and that to me is not a good thing."

With search parties still trying to locate the missing, and the nation's attention focused on the damaged Fukushima Dai-Ichi Nuclear Power Station, it's too soon to know who will be building what. Highways and railroads are already being repaired, however, and other infrastructure projects are likely to be underway in a matter of weeks—experts predict that Japan's land and infrastructure ministry and its prefectural and local governments are likely to shorten the traditional bidding process to get work started quickly.

The zenekon have traditionally been Japan's political kingmakers. From the 1970s until the 1990s, the companies donated generously to Liberal Democratic Party candidates, supporting the party's half-century reign. In a 1992 case that exposed the role the yakuza crime syndicates played in Japan's trucking and construction industries, testimony revealed that the nation's biggest firms had each donated some 20 million yen a year to a single LDP politician. In his book, Woodall describes a construction minister from the 1960s, Kono Ichiro, who would only meet with executives at his home after they paid a kutsunugidai ("shoe removal fee"), a zabutondai ("floor cushion fee"), and a nantokadai ("something-or-other fee"). In return, Japanese administrators and legislators steered public-works contracts to favored companies. And legislators did their best to grow the pot of money set aside for public works projects, especially in their home districts.

The result of all that cronyism and graft: projects like the Joetsu Shinkansen railway, a high-speed line built in the 1970s at the behest of former prime minister Kakuei Tanaka through one of the least populated areas in the country; the Isahaya Bay Project, a controversial series of dikes built by Kajima, Obayashi, and others, to turn a bay into farmland; and the Tokyo Aqua-Line, a nine-mile bridge-tunnel spanning Tokyo Bay, built at a cost of $12 billion by Kajima, and today only lightly used.

Prosecutors have periodically taken on the big firms, most recently in 2007, when the government won convictions against nearly all the zenekon—Obayashi CEO Takeo Obayashi, a descendant of the company's founder, resigned over the investigation, and the nation's farm minister, Toshikatsu Matsuoka, hanged himself. The Democratic Party of Japan's 2009 decision to freeze construction on an immense dam in Naganohara was seen as an attempt to follow through on its reformist campaign rhetoric.

It may seem like quibbling in the wake of tragedy to worry about a little corner-cutting—even potential graft. But there are important decisions to be made as Japan rebuilds. Just as in the U.S. after Hurricane Katrina, some are questioning whether it makes sense to build back the destroyed towns exactly as they were, or, more to the point, exactly where they were. "There was much more of a foundation to rebuild on in New Orleans compared with these towns and villages," says Andrew Gordon, a Harvard University historian of modern Japan. It might make more sense to concentrate the region's mostly elderly population in fewer, more densely populated communities farther from the ocean, where they'd be better protected from future calamities. These are difficult conversations, and it seems best to have them without giving undue weight to those parties with a vested interest—and a track record—of building big things just for the sake of it.

The bottom line: Despite efforts to rein them in, Japan's zenekon may determine how the country is rebuilt—and reap a windfall doing it.

Bennett_190
Bennett is a staff writer for Bloomberg Businessweek in New York.

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