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Special Interest Group on Maritime Transport and Ports
a member of the WCTR Society

INTERNATIONAL WORKSHOP
Genoa - June 8-10, 2000

Indice Relazioni


State subsidy system for remote island liner services in Japan


Alfred J. Baird

Director, Maritime Transport Research Unit,
Napier University Business School,
Sighthill Court, Edinburgh EH11 4BN, Scotland, UK

Tel: 00 44 131 455 3459. Fax: 00 44 131 455 3484.
E-mail: a.baird@napier.ac.uk




1. Introduction

Japan has one of the most extensive remote island ferry systems in the world, with services linking several hundred populated islands to the mainland. This paper gives an overview of remote island ferry services in Japan and describes the existing liner services subsidy scheme. The paper explains the background to the subsidy system and relevant laws.

The paper then analyses the structure of the remote island liner industry, and identifies some of the key problems faced by operators. Likely changes to the liner shipping subsidy regime are considered, and recommendations are made as to how services might be improved in future, with particular emphasis on the need to modernise, liberalise and restructure the industry.

Data collection was facilitated through interviews with ferry lines and ports in Japan, and with governmental and statutory organisations responsible for remote islands.


2. Remote islands

2.1 Japanese islands

The four main islands of Japan - Honshu, Kyushu, Shikoku, and Hokkaido - are collectively known as the mainland. All other islands are known as isolated or remote islands.

Excluding the mainland, there are 6,848 islands in Japan. Of these, 433 are inhabited, and 6,415 are uninhabited.

2.2 Island population

The remote island population totalled 814,496 in 1995, equivalent to less than 1% of Japan's population (126 million). There has been almost a halving of remote island population since 1955 when there were 1.44 million island residents. This is in marked contrast to mainland Japan which has seen population increase from 90 million in 1955 to just under 126 million in 1995, a rise of over one third.

The remote island birth rate has fallen by almost half in recent years, from 12,475 births in 1982 to 7,603 in 1994. The islands now have an ageing population and suffer from continued out-migration as younger people move to mainland cities to take advantage of better paid employment and more work opportunities.

Population also appears to be concentrated on relatively few islands. Largest remote island populations can be found on Sadogashima in Niigata Prefecture (74,949) and on Amamioshima in Kagosima Prefecture (73,643).

Just twenty islands account for almost 70% of all remote island population (560,000 people). Almost 300 islands each have a population of fewer than 5,000, with some 240 of these with a population under 1,000. These figures relate to 1995 levels.

2.3 Island Industries

In 1990, primary industries accounted for 31% (125,494 jobs) of remote island employment (7% on the mainland). According to the MoT, and ferry operators, main primary industries on remote islands consist of fishing and agriculture. Secondary services account for 21% of island employment (84,623 jobs) and tertiary 48% (191,300 jobs).

Total remote island employment declined by 18% (38,000) between 1985 and 1990, with the primary and secondary sectors taking the brunt of the fall. Tertiary employment has remained almost static over the period (191,000 jobs) although the overall relative importance of this sector has increased.

2.4 Island problems/trends

Depopulation and a narrow, fragile industrial base are the main problems faced by remote island economies. The National Association for Island Development (NAID) has strongly argued for increased government expenditure to help fund the introduction of modern vessels to expand the tourist market and aid the economy.

Fast ferry services are deemed to be especially attractive for remote island access. A fast ferry service introduced to the island of Awashima (population 450 people), where fishing is the main industry, resulted in the number of tourists increasing from 15,000 to 50,000 per annum. Route length in this instance is 35km.

NAID are arguing strongly that many island routes require investment in faster vessels to help enhance tourism, thereby protecting and creating island employment and reducing depopulation.

Trends cited as important by the Japan Passengerboat Association (JPA) in relation to remote island liner services, and on which action is needed, include:

  • Remote island population is decreasing;
  • Long term liner passenger traffic is in decline;
  • Port facilities are inadequate making it difficult to handle modern ships.


3. Remote island laws

3.1 Liner service subsidy Law

The Remote Island Liner Services Development Law of 1952 prescribed the national government's special subsidisation measures for remote island liner businesses, thereby contributing to stablisation and improvement of people's living standards. Every year, and within the scope of the budget, the government can pay to remote island liner businesses subsidies for maintaining liner services. The Law provides for government to subsidise part of the loss incurred by remote island liner businesses, and to subsidise the cost of modernising vessels.

3.2 Organisations dealing with Isolated islands

Aside from the Ministry of Transport (MoT), there are a number of organisations with specific concerns and responsibilities for remote islands. The main bodies, all of which are headquartered in Tokyo, are as follows:

  • National Land Agency, formed in 1974 and responsible for remote islands development;
  • Governor's Association for Island Development, a group consisting of governors of public bodies (by prefecture);
  • The National Association for The Development of Japanese Remote Islands, formed in 1952 and consisting of governors of local public bodies (e.g. cities, towns and villages);
  • National Institute for Japanese Islands, also consisting of governors of local public bodies (e.g. cities, towns and villages);
  • Isolated Island Council (IAC), founded in 1966 and comprising island towns and villages.

The Japan Passengerboat Association (JPA), an organisation representing liner operators, is concerned with securing stable marine transport services for islanders. The JPA has established a Sectional Committee on Isolated Islands to improve all aspects of remote island liner services.

JPA has also developed a new insurance system for member companies and has campaigned for compensation to be paid to liner operators adversely affected by the building of new bridges or tunnels between the mainland and remote islands.

3.3 Licensing and tariffs

Under the Maritime Transport Law, a license is required for all liner operators serving isolated island routes. There are several kinds of license, however, all subsidised services require a 'General Passenger Service License'.

Licenses are only issued when a liner route is able to survive as a business, or in other words, 'when supply equals demand', in addition to meeting other criteria (see section 4 below). However, government will not consider the issue of feasibility after the Act is revised if an operator meets the other criteria.

The licensing system was due to be revised in 1999. It is expected that the MoT condition on demand will be abolished together with certain other procedural changes.

Liner service tariffs in respect of each route must be approved by and registered with government. A lifeline service is generally a monopoly provider but an article in law prohibits high pricing.


4. Subsidy system

4.1 Subsidy criteria

According to Japan's MoT, in order to qualify for a liner route subsidy, government considers the following six criteria:

  1. The route must involve liner service to an isolated/remote island;
  2. The service provided must be regular;
  3. The service should incur a financial operating loss;
  4. The route must serve island people and carry essential goods and mail;
  5. The prefecture government must recommend the route for subsidy, and;
  6. Government then applies income/expenditure scale to establish expected loss and gauge the level of subsidy required.

Subsidy for liner services is given under the Remote Island Liner Services Development Law (Law No. 226 of 1952). Covered period is one year from October 1 of the previous fiscal year to September 30 of the current fiscal year.

Aside from meeting these basic conditions, the level of liner service subsidies may also be affected by the relative remoteness of the island in question. According to the Japan Remote Island Center, the concept of remoteness is measured through assessment of a range of specific criteria. The measurement process primarily considers the following factors:

  • Identification of the shortest public transport route between a remote island and its mainland prefectural capital or to major city in the region;
  • Access on the mainland side, and the liner route between mainland and remote island;
  • Time required to make the journey;
  • Transport fare required;
  • Frequency of service;
  • Cancellation rate;
  • Availability of alternative transport routes/methods, and;
  • Comparison with other remote/handicapped areas.

Scope of measurement also takes account of natural barriers such as lengthy peninsula, mountainous areas, and areas with heavy snowfall. The concept of relative remoteness is important in any assessment of the need for national subsidy to help sustain remote island liner services, and can be used to help prioritise subsidy allocation to the most deserving routes.

4.2 Subsidy payment

To estimate likely loss on a given route, government first considers all 350 liner routes, of which 127 currently qualify for subsidy. This leaves 223 services outside subsidy qualification. Of these 223 non-subsidised routes, government takes the upper and lower earning extremes and then works out the average earnings based on route distance.

All 127 services in receipt of subsidy must show operating losses in their accounts. In addition, all subsidised operators must make re-application for subsidy every year.

The budget for fiscal year 1999 amounted to Yen 4,212 million (US$35 million), of which Yen 4,086 million related to liner operating subsidies and Yen 126 million to subsidies for ship construction and modernisation (Table 1). While operating subsidy levels have been maintained at just over Yen 4.0 million for the last three years, the much smaller amount allocated to vessel construction and modernisation has fallen by half.

Table 1: Remote island liner subsidies, 1997-1999
(Yen Million)
FY'97 FY'98FY'99
Liner service operating subsidies4,085 4,0854,086
Subsidies for ship construction and modernisation 215140126
Total4,3004,225 4,212
Source: Ministry of Transport, Tokyo.


According to the JPA, the current subsidy system does not cover all company losses, and local government covers some uncovered losses. JPA is arguing for more government support but recognises there are budget limitations.

In applying for subsidy, liner operators stress the importance of securing an island's mail contract from the Ministry of Postal Communications.

4.3 Ship subsidies

Government provides financial support for new vessels by giving loans up to 80% of the capital cost. Liner operators, most of which are very small one-route outfits, find difficulty in raising the additional 20% on their own.

The 80% loan is obtained via the government's Maritime Credit Corporation, with payback usually allowed up to a maximum of 15 years. NAID is looking for government to move to a 90:10 arrangement thereby making it easier for small operators to raise finance.

The government subsidy scheme also provides for a grant of up to 10% of vessel capital cost, though clearly the budget allocated for this is capped at a very low level, which implies few ships receive any aid. In fiscal year 1998, the Yen 140 million allocation for ship capital subsidy was paid to only 4 ferry routes out of 127 routes receiving subsidy, and 350 routes in total.

The main requirements for vessels to qualify for subsidy are as follows:

  • Vessels to be 'speeded up';
  • Vessel to be built with increased capacity;
  • Vessels to be replaced with ferries;
  • Vessel modernisation must contribute to the island's development (such as through amelioration of disparities in the living and production conditions on the island, and promotion of industries and tourist development).

4.4 Subsidy application

Liner businesses desiring to receive subsidies must apply to the Minister of Transport. Applications must be accompanied by an Operation Plan, Route Profit/Loss Estimate, and other documents prescribed by Ministerial Ordinance concerning the following matters related to the relevant remote island service:

  • The route's starting point, ports of call and destination and the distance between these (to be indicated on a track chart);
  • The details of the passenger liners to be used (including reserve vessels), and;
  • The number of services and departure and arrival schedule.

Subsidised liner services are subject to specific government controls, in particular:

  • The Minister can instruct the operator to improve the remote island service;
  • The Minister's approval is necessary where an operator wishes to modify its operational plan;
  • Subsidised liner operator's must submit to the Minister the Route Profit/Loss Statement and other documents relating to the remote island service as prescribed by Ministerial Ordinance;
  • The subsidised operator must provide the account books and other documents to clarify the calculation of profit and loss for each relevant route;
  • Liner subsidies cannot be used for purposes other than the ones for which they were intended, and;
  • Failure to comply with any of these conditions can result in the Minister ordering repayment of all liner subsidies

Lines suggest the application procedure itself is not complex, but it can be very difficult to get approval.

4.5 Changes in the law

The industry anticipate that the current remote island subsidy scheme and regulations will be altered in October 2000. The main change expected is that the industry will be liberalised in an effort to modernise and improve the level of service. However, lifeline routes will still be designated and there will be specific criteria covering new entrants, for example:

  • A set standard of service must be met, and;
  • Lifeline designated routes can only have one subsidised operator.

The JPA anticipate that some lines may withdraw from the industry as a result of the new law, mainly due to increased competition from new entrants.


5. Remote island liner services

5.1 Management

According to the MoT, some remote island routes are maintained by private operators, some are publicly operated by the relevant municipal or local authority, and others by the '3rd sector', i.e. a joint venture between public and private sector.

In 1998 there were a total of 279 companies offering liner services on the 350 remote island routes, of which 189 were private, 62 public, and 28 3rd sector. Most of remote island liner services are small-scale, with many operating just one service between the mainland and a remote island.

5.2 Traffic flows

Due to factors such as depopulation, passengers transported by remote island liner services in FY 1996 amounted to 69,829,000, down 0.8% from the previous year (see Table 2). Transport km also decreased to 1,740 million person km, down 0.2%.

Figures provided by the JPA suggest ferries carried 7.7 million trucks in 1998, a slight reduction from the 7.8 million trucks carried in 1997 (Table 3). Accompanied car traffic amounted to 15.7 million, up from 15.4 million units in 1997.

Table 2: Passengers transported by remote island liners, 1995-96
(Units: thou. Persons, thou. Persons km, %)
FY
Persons transported
Transport persons km
'95
70,392
-
1,743,540
-
'96
69,829
-0.8%
1,740,844
-0.2%
Source: Maritime Transport Bureau, MoT, Tokyo.


Car km in 1999 amounted to 94.3 million giving an average car/ferry trip distance of 6 km. Truck km amounted to 126.8 million, giving an average truck/ferry trip distance of 16.4 km.

Table 3: Cars and trucks carried by ferry, 1997-99
(Units: thou. units, thou. Vehicle km)
1996
1997
1998
Cars
15,434
15,860
15,711
Car km
95,500
97,500
94,300
Trucks
7,855
7,948
7,728
Truck km
123,900
130,400
126,800
Source: Japan Passengerboat Association


5.3 Service profitability

The majority of subsidised routes, according to the MoT, gain most of their revenue from passengers and accompanied car traffic. However, across the whole liner industry, the MoT maintain that approximately 50% of revenues come from passengers and 50% from freight.

Financial performance of remote island services is described as 'severe'. Reflecting a decrease in passenger ridership, cash flow in 1996 compared with the previous year deteriorated. Operating income fell by around Yen 1 billion, while operating expenses increased by around Yen 0.5 billion.

According to the JPA, in fiscal year 1996, the 350 liner routes recorded a combined operating loss of over Yen 6.1 billion. With government subsidy amounting to only Yen 4.0 billion, this left a shortfall of more than Yen 2.0 billion. The JPA claim that only 90 of the 350 liner routes (26%) are profitable.

Lines state that central government are trying to place more responsibility for liner subsidies on the shoulders of local government. Although central government claims it pays for 75% of liner subsidies, local government 25%, lines claim the reality is more like 50:50. Indeed, some lines only receive local government support (e.g. Tokai Kisen). Japanese liner operators point to much greater subsidy levels paid to liner operators in Korea and argue that the government should do more to ensure adequate service provision.

5.4 Service pricing

Table 4 illustrates that single trip Second Class passenger fees for car ferry services range from Yen 1,689 on a typical High Sea route (average distance 59.1 km) to Yen 519 on Inland Sea routes (average distance 14.5 km). Passenger fees charged by fast ferry services are Yen 2,971 on a typical High Sea route (58.4 km) and Yen 827 for Inland Sea routes (24.7 km).

Table 4: Average fee for High Sea/Inland Sea routes, 1995
  (Yen)
Ship TypeFee Type
High/Inland Sea
Ave. Distance km
Ave. Fee
Fee/km
General Pass. Ship2nd Class Passenger Fee High Sea31.91,012 31.72
Inland Sea 12.349940.57
Fast Ferry2nd Class Passenger Fee High Sea58.42,971 50.87
Inland Sea 24.782733.48
Car Ferry2nd Class Passenger Fee High Sea59.11,689 28.58
Inland Sea 14.551935.79
Passenger Car FeeHigh Sea 64.411,088172.17
Inland Sea 14.52,740188.96
8m/4tonne truck Fee High Sea64.421,711 337.12
Inland Sea 12.94,996387.29
Source: Remote Island Statistics (based on 1995 survey of 122 remote island routes, 106 of which eligible for national subsidy, 16 not eligible).


The fee for a car on High Sea routes is estimated to be Yen 11,088 (average distance 64.4 km) and Yen 2,740 for shorter Inland Sea routes (14.5 km). Fee for 8m/4 tonne trucks is Yen 21,711 for Inland Sea routes (64.4 km average) and Yen 4,996 for Inland Sea routes (12.9 km average). These rates are based on averages taken from a survey of 122 remote island routes, 106 of which were receiving subsidy.


6. Vessels and routes

6.1 Vessels

The MoT state that 187 regular vessels are employed on the 127 subsidised routes, of which 53 are ferries, 30 are 'fastships' (e.g. over 24 knots), and the remaining 104 are 'general passenger ships'.

Figures provided by the JPA for all 350 remote island routes suggest there are an estimated 450 passenger/car ferries employed. Some 25% of these vessels are estimated to be over 15 years old, and almost half the fleet are over 10 years old.

However, the JPA estimate appears to include only association members as fleet figures provided by the MoT Maritime Transport Bureau suggest a far larger number of vessels employed on remote island trades (Table 5).

According to MoT data, there were a total of 700 ships serving remote island routes in 1996, down from 829 ships in 1986. While the number of ships has fallen over the period, gross tonnage has increased from 248,610 grt to 315,781 grt, a rise of over 20%.

Table 5: Tonnage and number of ships on remote island routes, 1986/96
FY 1986
FY 1996
FerryNo. of ships277 33.4%26237.4%
Gross tonnage168,123 67.6%246,80978.2%
Ave. Gross tonnage606.9 -942.0-
FastshipNo. of ships 10712.9%137 19.6%
Gross tonnage9,058 3.6%10,1393.2%
Ave. Gross tonnage84.7 -74.0-
Other shipsNo. of ships 44553.7%301 43.0%
Gross tonnage71,429 28.7%58,83318.6%
Ave. Gross tonnage160.5 -195.5-
Total RI fleetNo. of ships 829100.0%700 100.0%
Gross tonnage248,610 100.0%315,781100.0%
Ave. Gross tonnage299.9 -451.1-
Source: Maritime Transport Bureau, MoT.


Fleet composition has also markedly altered. Ferries now account for over 78% of the fleet by gross tonnage, compared with 67% in 1986. The number of fastships (i.e. vessels over 24 knots) has increased from 107 in 1986 to 137 in 1996, although gross tonnage represents only 3.2% of the overall fleet (less than in 1986). Ferry capacity has increased at the expense of other vessel types, mainly general liner vessels, the latter accounting for less than 20% of the remote island fleet in terms of gross tonnage.

Most vessels offer relatively moderate passenger carrying capacity. Some 85% of car ferries in service are under 500 passenger capacity. Almost 95% of fastships carry under 300 passengers, while 88% of other general liner vessels also offer passenger capacity below 300.

Liner operators are seeking to introduce more modern and especially faster vessels, but adequate government support is not forthcoming for capital investments in ships and shoreside facilities. With regard to the latter, volcanic islands surrounded by deep water means it is very expensive to create breakwaters and this can prevent the use of ferries in some instances (e.g. Ogasawara Islands).

6.2 Routes

The table in Appendix I provides details of all 127 subsidised remote island liner routes in Japan. Only four of these routes appear to be maintained with fast craft, all others being served either by conventional ferry or by general liner.

Excluding fastship routes, 4 routes over 250 km length, and 25 other routes for which information is unavailable, average subsidised remote island route distance (based on 98 Routes) is 25.6 km. Some 81 of these 98 routes involve distances under 30 km.

Average vessel speed in respect of all subsidised routes for which information is available (excluding fastship routes) is 13 knots. This suggests that relatively slow vessels serve a majority of routes.

Additional information provided by the MoT suggests most remote island liner routes (i.e. over 80%) involve a voyage time of under 2 hours. Fastships serving Inland Sea routes all offer trip times of between 30-60 minutes.


7. Ports

7.1 Port development

Isolated island ports come under the jurisdiction of the MoT Ports and Harbors Bureau. National and local government finance is used to develop and/or modernise port facilities. There are several approaches to port development, the main ones being:

  • Ports developed by central government and maintained by local government;
  • Ports developed by local government alone;
  • Port facilities developed by operators themselves.

Out of 257 remote island ports, 135 are administered by municipalities', 106 by the relevant prefecture, and 16 by other entities. National and/or local government administers mainland ports.

7.2 Port charges

There is limited information available concerning port facility cost recovery. Remote island ports are deemed to serve a vital function, and are not intended to be profitable enterprises in their own right.

Liner operators pay port fees, and other charges are negotiated separately in each instance. The JPA say that certain terminal development costs can be paid for by operators, but there is no information available on the extent of liner operator investment in ports.

Liner operators suggest port costs on remote islands can amount to under half port costs incurred on the mainland. But liner operators do receive negotiated discounts on standard port fees, in some cases 40% or more.

Lines do not appear to enter into a lease or contractual arrangement to use specific port facilities. Generally, however, there will be an understanding between liner and port operators' concerning priority berth usage in respect of a dedicated wharf area.


8. Competition

8.1 Concept of competition

According to the MoT, the concept of competition is not permitted in respect of remote island liner services. Government take the view that competition cannot exist where services are already making losses. On routes served by more than one operator, then no subsidy is paid to any.

JPA maintains a role as coordinator between the state and liner operators. The JPA's basic philosophy is that liner supply and demand is best grasped by local government, not national government. Local government is closer than central government. Moreover, without local government support an operator cannot continue to serve a remote island route.

8.2 Liberalisation

Ferry routes are licensed to prevent competition from arising, according to the JPA. However, the liner sector is expected to be liberalised in 2000 and, so long as a company can satisfy safety criteria, then permission may be granted to operate a service.

Currently government issues liner licenses based on demand. Under the new system it is expected that safety and financial soundness will be the overriding criteria. However, on routes that have a large economic impact, criteria will be severer, resulting in some limitation on competition.

Until now the JPA has taken the view that competition on a given route can be damaging, lowering prices and resulting in withdrawal of operators.


9. Liner service difficulties

9.1 Nature of remote island trades

Most remote island liner services suffer from rather similar endemic problems such as imbalanced traffic flows, traffic seasonality, and low levels of vessel utilisation. Lines' state inbound freight to remote islands accounts for over 70% of traffic, outbound 30% or less. Tourists account for 90-95% of passenger traffic, which mostly occurs during summer months. Over the whole year, passenger utilisation levels can be as low as 10-15%. Freight utilisation differs, with high inbound levels, much lower outbound.

Other operating difficulties relate to service downtime, which can reach over 7% a year on longer routes, less on short routes. This is due to adverse weather conditions, especially in winter. Liners will generally not sail in seas with a significant wave height of 3 metres or above. In winter, tidal waves of 5 metres plus can be experienced on some routes.

9.2 Budget constraints

There are now severe budget pressures to reduce state subsidy for isolated island liner services. The financial reform law is expected to reduce the budget, and the future role of central and local government is still to be decided.

Tokyo-based National Institute for Japanese Islands (NIJI) assert the best approach to retain and improve route quality would be for government to change the subsidy system from 'operational' to 'capital'. This would mean allocating resources for new vessel construction and for modernisation, instead of simply trying to cover the industry's worsening operating losses. In covering operating losses for liner services, the existing scheme provides little incentive for carriers to invest in new technology, thereby improving service and increasing traffic levels and revenue.

The NAID claim current national government subsidy levels only cover 50% of liner service losses, resulting in major hidden losses throughout the industry that materially affect the financial soundness of operators.

9.3 Industry structure

With 279 lines serving 350 routes, the NIJI maintain that the remote island liner industry is excessively fragmented, with too many small operators involved, and very few able to benefit from scale economies. The only way to strengthen the liner system, according to NIJI, is to merge more routes into one.

With so many small operators, liner management is regarded as weak and lacking advanced technology that could be used to help boost traffic and improve financial performance. There therefore appears to be a clear need to improve scope for the industry to restructure, enabling carriers to benefit from economies of scale and to modernise the fleet.


10. Conclusions

Remote islands in Japan are suffering from depopulation and a narrow, fragile economic base. This affects lifeline liner services in a number of ways, for example:

  • Long-term decline in passenger traffic;
  • Traffic seasonality, and;
  • Traffic imbalance.

Japan's 350 remote island liner routes lost an estimated Yen 6.1 billion in 1996. National subsidies amounting to Yen 4.0 billion were paid to 127 routes. As only 90 routes are believed to be profitable, this means that 260 routes (74%) are making losses, only half of which receive national subsidy. Some loss-making routes not subsidised by national government are understood to be supported by the local government concerned.

Capital subsidies in respect of vessel replacement and modernisation appear to be wholly inadequate. The remote island liner industry needs to modernise in order to improve the overall level of service and increase tourist passenger volumes. This will require investments in new ships and port facilities.

Given national budget constraints, the prognosis for the remote island liner industry (e.g. declining traffic, persistent losses, outdated fleet etc.) is not good. Yet some of the industry's problems could be overcome through well-planned policy actions. On the basis of findings from this research study, policy actions are suggested along the following lines:

  • Existing operating subsidies offer no incentive for operators to modernise services, therefore, to overcome the lack of modern, fast ferries which can improve service levels and help expand the tourist market, greater capital subsidies need to be made available for fleet modernisation;
  • National government support should therefore move away from provision of operating subsidies to a focus on provision of capital support, with local government providing reduced levels of operating support as appropriate, and;
  • Given the current financial weakness and fragmentation of the industry, there is a need for major operator consolidation, with merging of routes, to enable carriers to benefit from scale economies and improve efficiency (e.g. in terms of management, training, ticketing, vessel operations and maintenance, purchasing, marketing etc.).

New liberalisation laws proposed for remote island liner services planned for late 2000 could incorporate mechanisms whereby these recommendations can be implemented. Any policy intended to liberalise the industry might also consider the possibility of introducing some form of privatisation of route networks to help facilitate consolidation, thereby bringing about improved operating performance.


Acknowledgements

The author extends his thanks to the Carnegie Trust for the Universities of Scotland, Dunfermline, as sponsors of this research study. Support was also received from Napier University Business School, Edinburgh. The study greatly benefited from assistance and support provided by the WAVE Research Center in Tokyo during the course of data collection in Japan.

The gratitude of the author is also extended to organisations who assisted in the study, namely: Ports and Harbors Bureau, Ministry of Transport; Japan Passengerboat Association; National Association for Island Development; National Institute for Japanese Islands; and various shipping lines and ports.


References

National Institute for Japanese Islands, (1998) Japanese Islands. NIJI: Tokyo.

Japan Passengerboat Association, (1998) Japan's Passenger Boats. JPA: Tokyo.

Japan Remote Island Center, (1998) Annual Remote Island Statistics. JRIC: Tokyo.



APPENDIX 1: REMOTE ISLAND FERRY SERVICES RECEIVING NATIONAL SUBSIDY, 1998
PERFECTURE
COMPANY
ROUTE & PORTS
DISTANCE (km)
NAVIGATION MINUTES
AVERAGE SPEED (KNOTS)
Hokkaido Haboro Coastal Ferry Inc.Haboro - Teujri
35
75
15.2
AomoriShimokita Liner Inc. Aomori - Sai
79.9
140
19.5
MiyagiMarunaka Kinkazan Liner Inc. Onagawa - Izushima    
 Enoshima Liner Inc. Onagawa - Enoshima
13.8
25
14.0
 Ojika TownAyukawa - Futawatashi - Aji - Kinkazan
7.5
25
8.0
 Shiogama CityHoujima - Shiogama
15.4
52
9.4
 Karakuwa Liner Inc. Shibitachi - Kesennuma
11.8
35
10.9
 Ajijima Line Inc.Ishinomaki - Futawatashi
33
   
YamagataSakata City Sakata - Katsuura
39.3
90
14.0
NiigataAwashima Line Inc. Awashima - Iwafune
35
90 (55: high speed)
 
TokyoOgasawara Shipping Inc. Tokyo - Chichijima
1000
One day and 90 mins
 
 Izu Islands Develop. Inc. Aogashima - Ogurajima    
 Izu Islands Develop. Inc. Chichijima - Hahajima
59
120
16.0
 Tokai Line Inc.Tokyo - Hachijyoima    
 Shishin Line Inc.Kouzujjima - Shimoda    
AichiIsshiki Town Isshiki - Sakushima
14.4
60 (30: high speed)
 
IshikamHegura Line Inc. Wajima - Hegurajima
50
90
18.0
MieToba City Toba - Kamijima 
63
 
KyotoMaizuru Line Ltd. Nishmaizuru - Oonyu - Higashimaizuru    
HyogoNumashima Line Inc. Sumoto - Numashima - Fukura    
 Ieshima line Inc.Himeji -Ieshima
20
65
11.0
 Mushima Line Inc.Mushima - Manabe - Kasaoka
28.4
75
13.0
OkayamaToyoura Line Inc. Hishma - Kasaoka
28.6
73
12.5
 Mushima Line Ltd.Mushima - Manabe - Kasaoka
28.4
75
13.0
HiroshimaHashirijma Liner Ltd. Hashirijima - Tomo
7
30
8.0
 Itsukijima Line Inc. Itsukijima - Kubi    
 Atadajima Line Ltd. Atada - Ogata
9.5
35
10.0
 Higashino TownShiromizu - Chikirishma
5.5
35
6.0
 Bingo Merchan Ship Inc. Tuneishi - Onomichi
11.8
30
13.0
 Yutaka TownMikado - Kubi
1.25
10
7.0
 Innoshima CityNishihama - Hosojima
2.7
15
5.0
YamaguchiKaminoseki Town Yashima - Kaminoseki
13.5
35
14.0
 Tachibana TownTarumi - Doi
7.4
19
17.0
 Nojima Shipping Ltd. Nojima - Mitajiri
14.8
35
16.0
 Ushijima Shipping Ltd. Ushijima - Murozumi
8.4
25
10.0
 Hagi Shipping Ltd.Mishima - Hagi    
 Ootsujima Cruise Inc. Otsujima - Tokuyama
14
45
10.6
 Towa TownNasakejima - Ihota
5
15
12.0
 Iwakuni Hashirajima Shipping Iwakuni - Hashirajima
36.6
59
20.0
 Heigun Line Ltd.Yanai - Heigun
34.1
105
11.0
 Hirao TownSagoujima - Saga
2.1
10
10.0
 Tabu TownUmashima - Marifu
2.6
10
12.5
 Kuka TownKuka - Maejima
6.05
20
12.0
KagawaHonjima Liner Inc. Honjima (Tomari) - Marugame
11.8
30
14.0
 Kanonji CityIbuli - Kanonji
12
25
15.0
 Shiyujima Shipping Inc. Ogi - Takamatsu
10.6
40
10.0
 Sanyou Liner Inc.Tadotu - Sanagi
53.3
   
 Awashima Liner Inc. Suda - Awashima - Miyanoshita
16.3
70
8.0
 Shoudoshima Ferry Inc. Uno - Tonoshou
26
80
11.0
EthimeUoshima Village Uoshima - Yuge
21.6
55
12.0
 Sekizen VillageOkamura - Imabari
25.2
85
10.0
 Nagshima Teisou Ltd. Yasuijima - Houjyou
13.5
40
12.0
 Aoshima Shipping Ltd. Aoshima - Nagahama
13.5
45
11.0
 Tanaka Transport Ltd. Oshima - Yawataham
14
30
16.0
 Seiun Liner Inc.Hiburi - Uwajima
63
   
 Nakajima TownMitsuhama - Nakajima    
 Sea-Seven Ltd.Ooura - Miyakubo
4
20
6.0
 Tsushma Ferry Ltd.Tsushima - Imabari
12
30
14.0
 Kurushima Ltd.Umashima - Hashihama
3.8
25
5.0
TokushimaIshima Conn. Tran. Enter. Ltd. Ishima - Kotajima
15.6
35
18.0
 Tebajima Conn. Enter. Ltd. Mugi - Tebajima
4
15
8.00
KouchiSuzaki City Sakauchi - Umetate
18.8
79
8.0
 Sukumo CityOkinoshima - Katashima
31.2
   
YamaguchiHouhoku Town Tsunoshima - Kottoi    
 Shimonoseki CityTakeshma - Mutsurejima    
YamaguchiShimonoseki City Futaoijima - Yoshimi    
FukuokaGenkai Town Chinoshima - Kanezaki
6.5
30
8.0
 Shima TownHimeshima - Kishi
7
15
13.0
 Ooshima VillageOoshima - Kounominato
8.5
25
10.0
 Fukuoka CityGenkaijima - Hakata
18.5
30
20.0
 Fukuoka CityOroshima - Meihama
40.7
85
14.7
 Shinguu TownAinoshima - Shinguu
7.5
17
11.4
SagaYuuseimaru Ltd. Madarashima - Yobuko
20.5
45
16.0
 Kawaguchi Liner Ltd Ogawashima - Yobuko
6.8
20
12.0
 Kakarajima Liner Ltd. Kakarajima - Yobuko
7
20
12.0
NagasakiKyushi Mail Steamer Inc. Kokura - Tsushima
161
5 hours and 50 mins
15.0
 Toyotawa TownTarugahama - Nii    
 Gounoura TownOoshima - Gounoura
10
50
7.0
 Ooshima VillageOoshika - Hirado
12
35
14.0
 Kuroshima Passenger Boat Ltd. Kuroshima - Takashima - Ainoura
17
50
10.0
 Sakito Maerchant Ship Inc. Tomosumi Sasebo
71.7
197
13.0
 Kyushu Merchant Ship Inc. Sasebo - Kamingoto    
 Nagasaki Liner Inc. Nagasaki - Ioujima - Takashima
20.1
34
22.0
 Nbo Merchant ship Inc. Fukue - Aokata - Hakata
249.3
9 Hours
15.0
 Uku TownKounoura - Terashima - Yanagi
12.3
   
 Goto Passenger Boat Inc. Gounokubi - Fukue
49.8
  
 Naru TownUra - Maeshima
4.4
15
15.0
 Kiguchi Liner Ltd.Hisaka - Fukue
11.5 & 6.5
   
 Kijima ShippingKijima - Fukue
17.5
65
9.0
 Tomie TownTomie - Kuroshima
7.2
15
20.0
 Kuwahara Shipping Ltd. Kabashima - Fukue
22
25
24.0
 Takeyama Transport Ltd. Takishima - Hirado    
 Tamanoura TownTamanoura - Arakawa
8.2
18
15.0
 Takashima Liner Ltd. Aou - Mikuriya
23.5
90
9.0
 Tsuyoshi Merchant Ship Inc. Tsuyoshi - Ainoura
24
45
17.3
 Ojika TownFuefuki - Ooshima - Nozaki    
 Ochika TownNoushima - Yangi    
NagasakiWakamatsu Town Unose - Arifuku    
 Wakamatsu TownOohira - Wakamatsu    
NagasakiSaganoshima Passenger Boat Line Inc. Sagashima - Kaitsu    
OitaHimeshima Village Himeshima - Kunimi
6
25
6.0
 Yamamaru Ltd.Tsukumi - Hotojima
29
25
3.2
 Toyoshima LtdOoshima - Saiki
20
32
22.0
 Kamae Transport Inc. Kamae - Fukajima    
MiyazakiNippou Liner Inc. Shimaura - Urashiro    
KagoshimaKoshikijima Merchant ship Inc. Kushikino - Koshikijima
85.2
270 ferry, 75 hs craft
 
 Amami Shipping Inc. Kagoshima - Kikai - China
694
21 Hours
 
 Toshima VillageKagoshima - Toshima - Naze    
 Mishima VillageKagoshima - Mishima
153
315
15.0
 Kamiyaku TownMiyanoura - Kuchinoerabu - shimama
73
250
10.0
 Setonai TownYoro - Koniya
32
105
18.0
OkinawaIheya Village Iheya - Unten
41.1
80
17.0
 Izena VillageIzena - Unten
27.8
75
12.5
 Ie VillageIe - Motobu
10.8
30
12.0
 Tokashiki VillageTomari - Tokashiki
32.1
70
15.0
 Zamami VillageTomari - Zamami
49.3
   
 Agni VillageTomari - Aguni
59.6
150
13.0
 Hateruma ShippingIshigaki - Hateruma
52
120 ferry, 60 hs craft.
 
 Fukuyama ShippingIshigaki - Yonaguni
127.4
240
17.5
 Kouri ShippingKouri - Unten
2.3
15
5.0
 Kumejima Ferry Inc. Tomari - Tonaki - Madomari - Kanegusuku    
 Katsuren ShippingTsuken - Heshikiya
8.5
25
11.0
 Tarama ShippingTaram - Hirara
58.7
140
14.0
 Oogami ShippingOogami - Shimajiri
5.5
10
16.0
 Minna ShippingNinna - Tokuchi
7.5
15
20.0
 Kudaka ShippingKudaka - Baten
13.8
50
9.0
 Funauki LtdFunauki - Shirahama - Amitori    
 Daitou Shipping Ltd. Tomari - Minamidaitou - Tomari - Kitadaitou
405
  


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