- The Washington Times - Thursday, January 9, 2003

TOKYO, Jan. 8 (UPI) — Construction companies have been badly hurt by Japan's continued economic doldrums, and some have been forced to make political contributions to ensure their survival during turbulent times, Japanese media reports said Thursday.

According to the daily Asahi Shimbun, general contractors Hazama Corp. and Fujita Corp. contributed a total of $58,333 (700,000 yen) to the ruling Liberal Democratic Party's Nagasaki office, even after they had pleaded for government intervention to keep them afloat.

While the amount donated to the party was well within the legal bounds of corporate contributions to political parties, particularly when contributions were made over a staggered period of time, the problem remains as to why the contributions were made when the companies were facing such dire internal financial problems, and why the LDP accepted the donations in spite of it.

Hazama and Fujita were both hit hard by the Japanese real estate crash and the subsequent ballooning of non-performing loans. The companies had to file for what is effectively a chapter 11-type bankruptcy protection program so that the government could waive some of their debts.

Specifically, Fujita had pleaded in March 1999 for the waiver of $1 billion (120 billion yen) of its debts due to financial institutions, however it still continues to find difficulty getting back on track.

Meanwhile, Hazama had reached a similar arrangement with its lenders to the tune of $875 million (105 billion yen) in September 2000.

The LDP's Nagasaki office revealed that Fujita had not only contributed $8,333 (1 million yen) in 1997, but had also contributed twice that amount each year between 1998 and 2001.

The company has acknowledged that it made those contributions after it had faced considerable financial strains, and sought government intervention to keep its operations afloat.

But Hazama has denied the LDP office's report that it had contributed $8,333 in December 2001, after it filed for government protection, having contributed similar amounts to the party each year since 1997.

Political analysts have often criticized the close ties between politicians and general contractors, particularly with the continued decline of construction works within Japan since the bursting of the bubble economy.

Politicians in rural areas in particular have often held on to their power base by promising to secure government funding to build public works in their constituencies, which in turn would provide jobs to those in the area.

It is estimated that about 10 percent of Japanese workers are employed in the construction sector, either directly or indirectly, and with the steady decline in private sector investments, public projects have been the largest single source of revenue for most contractors, especially in the provinces.

While specific details have yet to be uncovered, Japanese media reports that the contractors continued to make their political contributions despite their shaky finances as a means to secure more public works from the government.

Meanwhile, Asahi Shimbun reported that the LDP's Nagasaki office put forward a request in November 2001 for the 50-strong members of the regional contractors' association to make political contributions to the party, including to those companies teetering on the verge of bankruptcy.

Contractor Kumagai-gumi Corp. is facing legal action by shareholders for making the political donations.

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