Editorial Notes

Is the maglev Shinkansen project a hotbed of misconduct? The Yomiuri Shimbun

In its editorial notes on Dec 14, the paper calls for a probe into the dubious contracts for the construction of Japan's next generation bullet trains.

The logo of Obayashi Corp is seen at a construction site in Tokyo, on Dec 11, 2017. PHOTO: REUTERS

TOKYO (THE YOMIURI SHIMBUN/ASIA NEWS NETWORK) - The special investigative squad of the Tokyo District Public Prosecutors Office has searched the head office of Obayashi Corp., a major general construction contractor.

The company is suspected of fraudulent obstruction of business in connection with construction work for the Linear Chuo Shinkansen line, currently under construction.

It is alleged that Obayashi interfered in the business operation of Central Japan Railway Co. (JR Tokai), which had placed an order for the project, through bid-rigging arrangements.

The allegation focuses on tenders for the construction of emergency exits along the maglev (magnetic levitation) railway in Nagoya.

A joint venture formed by three corporations, including Obayashi, accepted the order at about ¥9 billion (S$107 million). Obayashi is said to have approached other companies participating in the bidding, saying, "Could you see to it that we will make a successful bid?"

It is believed that some participant corporations dared to offer high estimates, thereby helping Obayashi win the bid.

If that is true, Obayashi's conduct deviates from corporate ethics.

The company is said to have denied the allegation, despite having acknowledged telling other participating firms that it wanted to receive the order.

"We did not go so far as to make arrangements for winning the order," Obayashi is quoted as saying.

The special investigation department should thoroughly probe the case to uncover the whole truth behind it.

The project to build the Linear Chuo Shinkansen line is designed to link Tokyo with Osaka in somewhat more than one hour.

Total construction costs will run up to ¥9 trillion.

JR Tokai is seeking to start services along the Tokyo-Nagoya section in 2027, ahead of operations on the rest of the entire route.

Construction contracts tied to the project have been signed between JR Tokai and construction companies.

The special investigation division's search of Obayashi's main office was to investigate the company's alleged fraudulent obstruction of business, not the obstruction of public auction-bidding procedures pertinent to contracts.

This was because the order in question had been received as a private-sector contract.

Unfair arrangements for the acceptance of a construction work order - even if not an order for a public works project - should not be permitted from the standpoint of legal compliance.

If fair competition is prevented, it will sharply increase construction costs. That could eventually lead to a rise in the burden on users in the form of higher passenger fees.

In 2007, there were a succession of misconduct cases involving Obayashi, including one in which an adviser and others were indicted on suspicion of obstructing auction-bidding procedures related to a construction work order placed by the Hirakata city government in Osaka Prefecture.

This resulted in the resignation of the company's then president.

Acting on the lesson learned from that affair, Obayashi included in its statutes a rule barring itself from engaging in any deeds conducive to hindering the justness and fairness of tenders.

Was this fully observed?

Of the 22 projects whose contracts have already been signed for the maglev railway construction project, joint ventures led by four major general contractors, including Obayashi, have received a total of 15 contracts.

It appears to be unnatural that each joint venture has received three to four orders.

Even after construction demand tied to the 2020 Tokyo Olympics subsides, the maglev railway construction work will continue.

There is no doubt that the project is attractive to each general contractor.

The ongoing investigation can be described as a warning regarding contracts that will be signed in the future.

Suspicion has also arisen that a JR Tokai employee in charge may have leaked information about construction costs.

The railway company has set up an in-house committee tasked with examining whether the contract in question was properly signed.

It should also proactively cooperate in the investigation as the primary entity involved in the construction project.

The Yomiuri Shimbun is a member of The Straits Times media partner Asia News Network, an alliance of 23 news media entities.

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