Japan May Control Military Money

Japan may control buildup money
By Gerardo R. Partido
Variety News Staff
August 24, 2007

JAPAN may end up controlling how the bulk of the money used for the military buildup on Guam is used.

This became apparent during yesterday’s Guam Industry Forum as one of the speakers indicated that Japan’s portion of the Marine relocation funding may not be subject to U.S. regulations.

Robert Little, assistant counsel of the Naval Facilities Engineering Command, said that while the $4 billion committed by the American government will be subject to normal U.S. procurement rules, the special purpose entities that the Japanese will be forming to handle the Marine relocation may be exempted.

For instance, the bid preference for U.S. firms only applies to U.S. military construction appropriations. This means that the Japanese government could very well buy most of the materials and contract out the majority of the relocation work to Japanese companies.

Of the $10 billion price tag for the relocation of the Marines from Okinawa, the Japanese government will be shouldering 60 percent or about $6 billion.
This is unprecedented and marks the first time the Japanese government has agreed to share the costs of building and improving facilities at a U.S. base overseas.

Because of this, fears have been raised that only Japanese contractors may be tapped to handle the mammoth job of relocating the 8,000 Marines and their families to Guam.

According to Variety sources, many Japanese companies, most notably the giant Mitsubishi Heavy Industries, have already been quietly inspecting Guam and CNMI facilities.

The Guam Contractors Association has expressed concerns over the role Japanese firms may assume in the design and construction of facilities funded by the Japanese government and Japanese financial institutions.

One concern is whether Japanese standards may be substituted for U.S. standards where Japanese funds are used.

Some contractors also want to find out more details on the type of management structure expected to be put in place if Japan insists on using Japanese companies to manage the large and complex task of relocating the Marines and their families from Okinawa.

Okinawan politicians have likewise been lobbying to have displaced Okinawan workers used in the relocation of the Marines but GCA said this may not be the most cost effective source for labor.

Under the financing plan approved by the Japanese parliament, the state-run Japan Bank for International Cooperation has been designated as the bank that will give loans to contractors hired to help relocate the Marines to Guam.

JBIC is the arm of the Japanese government that undertakes lending and other operations for the promotion of Japanese economic activities overseas and it has demonstrated in the past a preference for Japanese companies, analysts say.
However, the Japanese Defense Ministry has said that JBIC will also give loans and investments to U.S. companies, with the U.S. firms paying back the money.

Local contractors interviewed by Variety also believe that while Japanese companies may get the major contracts, U.S. and Guam companies will still not lose out as they will surely be subcontracted by the Japanese.

The government of Guam likewise feels confident that the Japanese special purpose entities will tie up with U.S. and local firms to perform the many tasks connected with the Marine relocation.

During the recent House Subcommittee on Insular Affairs field oversight hearing, Gov. Felix P. Camacho pointed out that Guam already has a good relationship with the Japanese business community, noting that one of the island’s independent power producers is now run by a Japanese company.

Under the Marine relocation financing plan, Japan will provide $2.8 billion in grants, $1.5 billion in investments and another $1.79 billion in loans, with the investments and loans to be paid back.