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'98	FY'99
Liner service operating subsidies	4,085	4,085	4,086
Subsidies for ship construction and modernisation	215	140	126
Total	4,300	4,225	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 '3^rd 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 3^rd 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 Type	Fee Type	High/Inland Sea	Ave. Distance km	Ave. Fee	Fee/km
General Pass. Ship	2nd Class Passenger Fee	High Sea	31.9	1,012	31.72
		Inland Sea	12.3	499	40.57
Fast Ferry	2nd Class Passenger Fee	High Sea	58.4	2,971	50.87
		Inland Sea	24.7	827	33.48
Car Ferry	2nd Class Passenger Fee	High Sea	59.1	1,689	28.58
		Inland Sea	14.5	519	35.79
	Passenger Car Fee	High Sea	64.4	11,088	172.17
		Inland Sea	14.5	2,740	188.96
	8m/4tonne truck Fee	High Sea	64.4	21,711	337.12
		Inland Sea	12.9	4,996	387.29
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
Ferry	No. of ships	277	33.4%	262	37.4%
	Gross tonnage	168,123	67.6%	246,809	78.2%
	Ave. Gross tonnage	606.9	-	942.0	-
Fastship	No. of ships	107	12.9%	137	19.6%
	Gross tonnage	9,058	3.6%	10,139	3.2%
	Ave. Gross tonnage	84.7	-	74.0	-
Other ships	No. of ships	445	53.7%	301	43.0%
	Gross tonnage	71,429	28.7%	58,833	18.6%
	Ave. Gross tonnage	160.5	-	195.5	-
Total RI fleet	No. of ships	829	100.0%	700	100.0%
	Gross tonnage	248,610	100.0%	315,781	100.0%
	Ave. Gross tonnage	299.9	-	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 Aomori Shimokita Liner Inc. Aomori - Sai 79.9 140 19.5 Miyagi Marunaka Kinkazan Liner Inc. Onagawa - Izushima         Enoshima Liner Inc. Onagawa - Enoshima 13.8 25 14.0   Ojika Town Ayukawa - Futawatashi - Aji - Kinkazan 7.5 25 8.0   Shiogama City Houjima - Shiogama 15.4 52 9.4   Karakuwa Liner Inc. Shibitachi - Kesennuma 11.8 35 10.9   Ajijima Line Inc. Ishinomaki - Futawatashi 33     Yamagata Sakata City Sakata - Katsuura 39.3 90 14.0 Niigata Awashima Line Inc. Awashima - Iwafune 35 90 (55: high speed)   Tokyo Ogasawara 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       Aichi Isshiki Town Isshiki - Sakushima 14.4 60 (30: high speed)   Ishikam Hegura Line Inc. Wajima - Hegurajima 50 90 18.0 Mie Toba City Toba - Kamijima   63   Kyoto Maizuru Line Ltd. Nishmaizuru - Oonyu - Higashimaizuru       Hyogo Numashima 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 Okayama Toyoura Line Inc. Hishma - Kasaoka 28.6 73 12.5   Mushima Line Ltd. Mushima - Manabe - Kasaoka 28.4 75 13.0 Hiroshima Hashirijma Liner Ltd. Hashirijima - Tomo 7 30 8.0   Itsukijima Line Inc. Itsukijima - Kubi         Atadajima Line Ltd. Atada - Ogata 9.5 35 10.0   Higashino Town Shiromizu - Chikirishma 5.5 35 6.0   Bingo Merchan Ship Inc. Tuneishi - Onomichi 11.8 30 13.0   Yutaka Town Mikado - Kubi 1.25 10 7.0   Innoshima City Nishihama - Hosojima 2.7 15 5.0 Yamaguchi Kaminoseki Town Yashima - Kaminoseki 13.5 35 14.0   Tachibana Town Tarumi - 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 Town Nasakejima - 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 Town Sagoujima - Saga 2.1 10 10.0   Tabu Town Umashima - Marifu 2.6 10 12.5   Kuka Town Kuka - Maejima 6.05 20 12.0 Kagawa Honjima Liner Inc. Honjima (Tomari) - Marugame 11.8 30 14.0   Kanonji City Ibuli - 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 Ethime Uoshima Village Uoshima - Yuge 21.6 55 12.0   Sekizen Village Okamura - 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 Town Mitsuhama - 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 Tokushima Ishima Conn. Tran. Enter. Ltd. Ishima - Kotajima 15.6 35 18.0   Tebajima Conn. Enter. Ltd. Mugi - Tebajima 4 15 8.00 Kouchi Suzaki City Sakauchi - Umetate 18.8 79 8.0   Sukumo City Okinoshima - Katashima 31.2     Yamaguchi Houhoku Town Tsunoshima - Kottoi         Shimonoseki City Takeshma - Mutsurejima       Yamaguchi Shimonoseki City Futaoijima - Yoshimi       Fukuoka Genkai Town Chinoshima - Kanezaki 6.5 30 8.0   Shima Town Himeshima - Kishi 7 15 13.0   Ooshima Village Ooshima - Kounominato 8.5 25 10.0   Fukuoka City Genkaijima - Hakata 18.5 30 20.0   Fukuoka City Oroshima - Meihama 40.7 85 14.7   Shinguu Town Ainoshima - Shinguu 7.5 17 11.4 Saga Yuuseimaru 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 Nagasaki Kyushi Mail Steamer Inc. Kokura - Tsushima 161 5 hours and 50 mins 15.0   Toyotawa Town Tarugahama - Nii         Gounoura Town Ooshima - Gounoura 10 50 7.0   Ooshima Village Ooshika - 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 Town Kounoura - Terashima - Yanagi 12.3       Goto Passenger Boat Inc. Gounokubi - Fukue 49.8       Naru Town Ura - Maeshima 4.4 15 15.0   Kiguchi Liner Ltd. Hisaka - Fukue 11.5 & 6.5       Kijima Shipping Kijima - Fukue 17.5 65 9.0   Tomie Town Tomie - Kuroshima 7.2 15 20.0   Kuwahara Shipping Ltd. Kabashima - Fukue 22 25 24.0   Takeyama Transport Ltd. Takishima - Hirado         Tamanoura Town Tamanoura - 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 Town Fuefuki - Ooshima - Nozaki         Ochika Town Noushima - Yangi       Nagasaki Wakamatsu Town Unose - Arifuku         Wakamatsu Town Oohira - Wakamatsu       Nagasaki Saganoshima Passenger Boat Line Inc. Sagashima - Kaitsu       Oita Himeshima Village Himeshima - Kunimi 6 25 6.0   Yamamaru Ltd. Tsukumi - Hotojima 29 25 3.2   Toyoshima Ltd Ooshima - Saiki 20 32 22.0   Kamae Transport Inc. Kamae - Fukajima       Miyazaki Nippou Liner Inc. Shimaura - Urashiro       Kagoshima Koshikijima Merchant ship Inc. Kushikino - Koshikijima 85.2 270 ferry, 75 hs craft     Amami Shipping Inc. Kagoshima - Kikai - China 694 21 Hours     Toshima Village Kagoshima - Toshima - Naze         Mishima Village Kagoshima - Mishima 153 315 15.0   Kamiyaku Town Miyanoura - Kuchinoerabu - shimama 73 250 10.0   Setonai Town Yoro - Koniya 32 105 18.0 Okinawa Iheya Village Iheya - Unten 41.1 80 17.0   Izena Village Izena - Unten 27.8 75 12.5   Ie Village Ie - Motobu 10.8 30 12.0   Tokashiki Village Tomari - Tokashiki 32.1 70 15.0   Zamami Village Tomari - Zamami 49.3       Agni Village Tomari - Aguni 59.6 150 13.0   Hateruma Shipping Ishigaki - Hateruma 52 120 ferry, 60 hs craft.     Fukuyama Shipping Ishigaki - Yonaguni 127.4 240 17.5   Kouri Shipping Kouri - Unten 2.3 15 5.0   Kumejima Ferry Inc. Tomari - Tonaki - Madomari - Kanegusuku         Katsuren Shipping Tsuken - Heshikiya 8.5 25 11.0   Tarama Shipping Taram - Hirara 58.7 140 14.0   Oogami Shipping Oogami - Shimajiri 5.5 10 16.0   Minna Shipping Ninna - Tokuchi 7.5 15 20.0   Kudaka Shipping Kudaka - Baten 13.8 50 9.0   Funauki Ltd Funauki - Shirahama - Amitori         Daitou Shipping Ltd. Tomari - Minamidaitou - Tomari - Kitadaitou 405     Indice Relazioni