Avoiding an Infrastructure Crisis

The Tip of the Iceberg

The Sasago Tunnel is located on the Chūō Expressway about 80 kilometers west of Tokyo. On December 2, 2012, concrete ceiling panels inside the tunnel collapsed, crushing three vehicles and killing nine people. This accident immediately brought public attention to the issue of infrastructure degradation in Japan. The concrete panels were suspended from the main tunnel structure by metal rods bolted into the ceiling. Investigators believe that years of gradual damage to the aging bolts may have caused the accident. Investigations are still under way, but if it turns out that the maintenance of these parts over the 35-year period since their installation was insufficient, we will have a very serious problem on our hands.

Japan created a great deal of its current infrastructure, including tunnels, following the end of World War II. Documents put together by the Ministry of Land, Infrastructure, Transport, and Tourism’s Council for Social Infrastructure show that the majority of this work was concentrated from the 1960s through the 1980s. Generally speaking, the bulk of the work on roads was done in the late 1960s, bridges in the early 1970s, dams and river gates in the late 1970s and early 1980s, harbors in the early 1980s, public housing in the early 1970s, parks in the late 1970s, and schools and education infrastructure in the late 1970s to early 1980s. In every case, we are looking at infrastructure that has now stood for three to four decades.

All of this infrastructure will eventually collapse without proper maintenance. The Sasago Tunnel accident is no more than the tip of the iceberg. Another example is the Metropolitan Expressway, a network of highways in Tokyo whose first parts opened in 1962. A 2012 investigation found innumerable cracks and faults in the road structures. The conclusion of this research was that at least 25% of the total length of the roads needed prompt repairs.

A raft of similar problems came to light after the Great East Japan Earthquake. The Kantō region where Tokyo is situated saw no tsunami devastation, but the shaking caused damage in inland areas, collapsing the ceiling of a large brick structure and rendering several municipal government buildings unusable. Similar structural damage was widespread. Due to its vulnerability to quakes, Japan has the world’s strictest antiseismic construction standards. Structures do not generally collapse, even after strong shakes. March 2011 was merely the straw that broke the camel’s back—the real reason for these incidents was that the infrastructure had been allowed to deteriorate.

The Coming Mountain

The most effective measure to counter infrastructure deterioration is investment in upgrades and maintenance. If there were a relatively constant level of public investment every year, a portion of that capital could go toward renewing antiquated infrastructure. The reason that this sort of investment has not been a priority around the world is that infrastructure projects are generally rolled out over terms of several decades, meaning that budgets are sufficient at any given time to cover the cost of maintenance and repairs.

In Japan’s case, however, the nation undertook a wave of infrastructure projects around the 1970s and from 2000 onwards there was a sudden decrease in activity. This means that demands to upgrade and maintain existing infrastructure will surge in the near future. The public investment budgets that must fund this, though, will be extremely small.

The one similar case from history that I am aware of took place in the United States. As part of the New Deal in the 1930s, America constructed bridges, dams, and roads all over the country. Their condition deteriorated over a half century and the dilapidation became evident in the 1980s, when, for instance, bridges in New York City began to show serious damage. Acutely aware of the adverse effects of infrastructure degradation, the US government subsequently raised gasoline taxes to secure maintenance funds, enhanced its bridge inspection system, and implemented a number of other measures. There have been other bridge accidents in the United States since then, but if that change in policy in the 1980s had not taken place, I think the situation would have been far worse.

The situation in Japan now closely resembles that of the United States in the 1980s—although not in every respect. Economic growth has stalled and the nation is seeing a shrinking, increasingly elderly population. The cost of social welfare will increase with no scope for greater tax revenues in the future. In short, the problem Japan faces today is far more serious.

The Tōyō University PPP Research Center—which takes its name from its promotion of public-private partnerships—is now developing software that will allow users to easily calculate, for each municipality in Japan, the investment needed for future infrastructure renewal and the budget that can be secured. So far we have calculated the budget surplus/deficit numbers for public infrastructure projects for some 30 municipalities. The results are not encouraging: not a single municipality has a budget sufficient to maintain existing public infrastructure. A mountain of work is fast approaching. The large number of structures that were built 30 to 40 years ago will need to be repaired, rebuilt, and upgraded. Meanwhile, there is a dearth of available funds as the budgets that may be used for these projects shrink.

The maintenance will need to be funded through debt issuance, then. But Japan’s total public debt now totals over 200% of nominal gross domestic product. There are a number of reasons for this. When the bubble burst in the early 1990s, the government sought to support the economy by expanding public projects while tax revenues were decreasing. Additionally, from the year 2000 onward, an aging population has brought about increased social welfare expenditures. It is Japanese government bonds that have financed all of this.

Japan’s debt-to-GDP ratio is now more than twice the average among nations in the Organization for Economic Cooperation and Development; even Greece has a smaller figure. Taking things further, and issuing yet more debt, would surely cause nations around the world to lose even more confidence in Japan.

Three Measures to Combat the Problem

Japan finds itself in quite a predicament. There is an effective strategy to deal with it, though.

Firstly, investment in maintaining, managing, and renewing existing infrastructure should take priority over investment in new infrastructure. Fully 90% of public infrastructure is owned by municipalities, not the national government. Conditions should be attached to national grants and subsidies to ensure that the focus is shifted appropriately.

In the past, promising new investment was a winning move for politicians competing in local or national elections. But voters would not be so likely to demand new roads or public facilities if they knew that the existing infrastructure could not be maintained properly. I have helped five municipalities organize surveys of their residents to seek public input. The results clearly show that given proper explanations of infrastructure deterioration and the state of public finances, over 80% of residents support a curtailment of new investment.

Secondly, public education facilities should be built as multifunction spaces with local schools at their core. Until now, facilities like schools, nurseries, kindergartens, community centers, assembly halls, district libraries, and day-care centers have all been built separately. Consequently, each building has its own parking lot, entrance hall, office space, toilets, stairs, corridors, and so on, incurring increased costs for building elements that could be shared. When schools need to be rebuilt, they should be restructured to accommodate other facilities as well, thus saving money on construction of the common building elements. Flexible designs will be key to ensuring that the space for each facility in the building can be adjusted, based on the future needs of and demographic shifts in local populations. The skeleton construction approach, a well-established technique in which a structure’s load-bearing framework can support a wide range of interior configurations, would be ideal.

Thirdly, for roads, bridges, tunnels, water services, and drainage systems, preventive maintenance management will be most effective. This kind of infrastructure is usually owned by regional municipalities. Currently, the prevailing practice is corrective maintenance—holes in the roads and other instances of damage are fixed as they are discovered. Japan should instead be pursuing preventive maintenance that keeps holes from forming in the roads in the first place. Shifting to this approach will require funding, of course, but the costs of corrective maintenance should fall substantially, thus reducing the burden over the long run. Regular maintenance work is an important part of this approach and should be outsourced to private companies with expertise in the field. Comprehensive management of infrastructure across broad regions is another way to ensure maximum economies of scale. And the authorities should be receptive to new methods that can make the job of preventive maintenance easier, such as a recently developed technology allowing easier detection of underground cavities that could trigger future sinkhole-style collapses.

If Japan implements these proposals, it will be able to maintain the quality of existing public facilities at a cost 30%–40% lower than today’s budget requirements. During the nation’s years of high growth and into the bubble years, the public generally believed that more infrastructure meant greater prosperity, even if the financial burden of constructing that infrastructure was massive. This thinking needs to be revised. The wiser course is to spend less on carefully planned, high quality, smart infrastructure. This is in line with the modest virtues that the Japanese people have traditionally held. I am confident that Japan can cope with the problems that lie before it.

The problem of infrastructure deterioration is not unique to Japan. Developing nations throughout Asia and Africa are confronting this same challenge—which is ironically more severe the faster economic development has occured. If we can craft effective means of addressing the challenge in Japan, we can provide an answer to issues that the world will find increasingly serious in the future.

(Originally written in Japanese on January 14, 2013.)