II. Description of the Policies
To achieve the goals of developing a new turn for the free trade zone in Okinawa under new industrial promotion policies, enhancing integration of the information and communication industries, and promoting destination-type resort formation, the policies shall include the following:
1. Expansion and Reinforcement of Free Trade Zone System
The expansion and reinforcement of the free trade zone system will focus on the reinforcement of production businesses and include the vitalization of Naha areas and the expansion of the district. Based on the goals, the proposal is made as described below. The proposed expansion of the free trade zone includes the Nakagusuku Bay District as well as the Tomishiro District, and the existing factories shall be qualified for the introduction of the system if designated so.
The concept of an All Okinawa Free Trade Zone will be introduced by 2005 or sooner, when the necessary conditions for the introduction are established.
(1) Abolition of Trade Tariffs
The trade tariffs (including surcharges on imports) on foreign goods imported into Okinawa such as raw materials, parts, and partially completed products which will be processed, manufactured, or used at factories in the free trade zone or similarly designated factories shall be abolished.
(2) Abolition of Tariffs on Imports Which Are Used or Consumed Within the District, and Free Domestic Consumption Tax
The trade tariffs and domestic consumption tax on certain foreign goods that are used or consumed within the district (including machines and facilities installed at the factories and the fuels consumed at the factories) shall be abolished.
(3) Liberalization of Importation Including Exclusion from Import Quotas
Foreign goods which are processed or used for manufacturing goods and listed as items with import quotas shall be excluded from the list with certain exceptions.
(4) Trade Tariffs on Products Made in the District for Domestic Distribution
Special measures should be introduced to ensure that trade tariffs are not imposed on any products manufactured within the free trade zone using foreign goods for domestic distribution.
(5) Tax-Free Shops
Tax-free shops (including restaurants) should be installed at the airport, the seaport, and other facilities which satisfy certain criteria so that tourists visiting Okinawa can purchase tax-free goods (no trade tariffs, no domestic consumption tax) thereby attracting more tourists and further promoting tourism.
(6) Special Corporation
It is necessary to establish a special corporation to improve the land of the free trade zone, improve the facilities, manage the facilities so that the free trade zone, which exists only in Okinawa, will attract enterprises and businesses, and stimulate their investment. This special corporation shall be entitled to make investments in order to fully support the business activities of the enterprises within the district.
(7) Expediting and Simplifying the Formalities for Entry
The formalities for entry of goods should be simplified to expedite the custom's clearance. The required measures include forming a unified authority to grant permission and approval of imports and exports and a system to permit imports to enter upon their arrival at the port of entry. Under the provision of the Okinawa Promotion and Development Special Measures Act, the existing free trade zone is regarded as a district where trade tariffs on imports are suspended. Thus, the expansion and reinforcement of the system require the introduction of certain measures to allow the FTZ district to be distinguished from such a district.
2. Preferential Treatment Under the Tax System
The system of investment tax reduction should be introduced in order to attract domestic as well as foreign industrial companies and stimulate economic activities in Okinawa. The proposed system will benefit industries with intensive investment and short facility renewal periods. The investment tax reduction will also benefit modern high tech businesses by reducing their investment risk and costs. The tax reduction should attract many modern technology industries with intensive investment, and an industrial frontier for Japan is expected to be created. These core industries will attract other middle-sized industries and research institutes to Okinawa.
The corporation tax system should be reviewed in relation with the international harmony for changes. If the high level of Japan's corporation tax rate persists, Japanese industrial migration to foreign lands will continue to increase. Thus, the corporation tax cut is proposed to be introduced to Okinawa before any other parts of Japan. If the Prefecture and municipal governments implemented cuts or reduction in local taxes, the difference would be made up by the central government's tax allocated to local governments.
(1) Introduction of Investment Tax Reduction System
The system of investment tax reduction shall be introduced in order to attract industries with intensive investment and short facility renewal periods and modern high tech industries (which find it difficult to predict market changes and foresee technological development or changes), and to assist Okinawa in strengthening competitiveness. Under the proposed system, 50/100 of the invested amount shall be subtracted from the corporation tax for a maximum of 10 years, and the reduction ceiling shall be 40/100 of the corporation tax.
a. The corporation tax cuts shall be granted to: the manufacturing industry, the land shipping industry, warehouse businesses, packing businesses, wholesalers, telecommunication services, broadcasting services, software companies, information services, certain tourism facilities, the energy industry, and other industries in Okinawa that are admitted by the Governor as necessary for Okinawa's industrial promotion.
b. Investment shall include: New businesses, transferring factories, extensive expansion businesses, introduction of new technology, investment in research activities (including buildings, structures, machinery, facilities, and portion of land)
(2) Corporation Tax Reduction
The corporation tax rate in Okinawa should be reduced to 30.0% from the present rate of 37.5%. By introducing the corporation tax reduction exclusively to Okinawa, attraction of industries from mainland Japan and foreign countries will be promoted and economic activities in Okinawa will be stimulated. The industries qualified for the corporation tax reduction will be listed under the investment tax cuts.
(3)Compensation for the Reduced Local Tax
A reduction in local tax for the Prefecture and municipal governments will be the result of corporation tax cuts when cuts in corporation tax, real estate sales tax, and fixed asset tax are introduced. The difference shall be compensated with the government's tax allocated to local governments.
3. Promoting Deregulation of Transportation
The Cabinet conference meeting held in May 1997 decided to raise the service level (including costs) of the transportation by sea, port, and air by 2001 and to implement required measures to reach this goal under the "Action Plan for the Reform and Creation of Economical Structure." The changes in the transportation system in Okinawa, which consists of many relatively small islands, will have a great impact upon the industrial activities as well as the people's living in general. The measures including introduction of lower transportation costs will be vital to expand exchanges of people and goods between Okinawa and mainland Japan or foreign countries. Therefore, paying attention to the trends of the national policies, the following proposal is made to lower transportation costs and expand traffic as well as a distribution network.
(1) Transportation by Sea
The infrastructure of harbors including the necessary facilities to maintain their proper function shall be improved in order to increase the volume of cargo which enters and exits Okinawa. The transportation costs are expected to be reduced by introducing necessary deregulation measures to encourage businessmen to join transportation businesses at the port, set unrestricted charging system, reduce port charges, and lower transportation costs to distribute petroleum products.
(2) Transportation by Air
It is proposed to give priority to Naha Airport in designating the airport under the mutual Agreement between two nations which, accompanied by the establishment of commercial air routes to other nations, grant the beyond rights with transportation rights to Naha Airport, and approve any changes of aircraft construction materials. It is also proposed to reduce the airport landing charges for international airlines arriving at Naha Airport.
4. Simplification or Omission of Formalities for Entry
Today, entry visas are required for visitors from many Asian countries for various reasons, creating an obstacle for Okinawa in attracting tourists from neighboring nations. The formalities for entry into Okinawa from foreign countries including the neighboring nations should be simplified or omitted in order to encourage the flow of people to Okinawa and increase the number of tourists from foreign countries.
(1) Simplification or Omission of Entry Visas
The formalities for entry visa of group travelers should be simplified, and the period of stay for multiple visa holders should be extended to 90 days and the validity to 5 years respectively.
(2) Enlargement of Approval Provision of Exceptional Landing
The boundaries of movement for people arriving in at Okinawa under the provision of Article 14 of Immigration Control and Refugee Recognition Act (landing at the port of call) should be enlarged to all areas in Okinawa, although the Act prescribes the restriction to "the port of entry/exit and the vicinity." The 15th Article of the above Act prescribes that visitors on sightseeing or in transit, whose entry has been approved, must leave Japan from another port. However, they should be permitted stay anywhere in Okinawa and depart from their original port of entry.
5.Improvement of Fundamental Infrastructure
The formation of a multi-faced network which incorporates the expansion of exchange and cooperation of people, goods, and information. Therefore, the improvement of seaports and airports as international gateways, access roads, and the information and communication infrastructure, such as optical fiber cables should be promoted. Feasibility studies for infrastructure construction have been conducted by the government's Okinawa Policy Review Council. It is vital to implement a project based on a long- term prospective to create a facility capable of functioning at a level that meets international standards. Although the government is in financially critical condition and changes in public investment are proposed, the above improvements are necessary and vital. The integration of the National Treasury subsidy and the introduction of a detailed description of the usage may have to be studied. Furthermore, it is necessary to review the possibility of introducing the BOT method, which involves the private sector as seen in foreign social fund improvement, in order to improve seaports and airports in Okinawa.
Note: The BOT method enables the government to ask private enterprises to implement the government's projects including contractual construction and management. The completed facilities will be transferred to the government after the collection of the development cost.
The goal of seaport improvement includes the construction of seawalls and wharves, highly sophisticated seaport facilities for specific harbors located near industrial parks, terminals for containers, facilities with gantry cranes to reinforce the function of the seaports for further advancing the formation of an international hub. The improvement of marinas in Okinawa should be conducted in harmony with each other based on studies of suitable oceanic recreation facilities and the concept of cosmopolitan city Formation.
The improvement of Naha Airport to create a hub for international exchanges will be vital to realize the concept of cosmopolitan city formation in Okinawa. The expansion of the air transportation network will require the formation of an international hub, international air commuter services, and other services as well as integrated improvement of a terminal building for both passengers and cargo. Surveys including a feasibility study, will be required in order to see if offshore runway construction is possible or not.
Land transportation in Okinawa is solely dependent on roads since there is no railway. The improvement of roads has a great impact on industrial activities in Okinawa. Thus, the construction of express highways that are connected with improved seaports/airports and access roads to sightseeing sites/resort areas should be promoted. The establishment of road traffic networks after the U.S. military bases withdrawal and the extension of the urban monorail system, whose construction has already begun, should be reviewed.
(4) Information and Communication Foundation
Okinawa is expected to play a role as an information and communication hub for the Asian Pacific region due to its geographical advantages including being the international underwater cable's landing base and a key place for communication and broadcasting satellite system. Thus, it is necessary to promote the formation of an optical fiber network which will be connected to the international information and communication network in order to enhance the above role and create new industries in Okinawa. Furthermore, the network to connect Okinawa to mainland Japan and foreign regions with high speed, large capacity, and low costs will be established.
6. Improvement of Major Facilities
(1) Core Facility for Industrial Promotion and Creation of Businesses
In assisting industrial promotion, it is vital to help parties concerned and various policies work in harmony and cooperation so that synergism will be generated. Thus, it is necessary to attract businesses and industries that are related to the core industry or assist such industry by providing needed services and establish a network connecting these businesses. It is also necessary to provide core facilities in order to attract strategic industries or venture businesses and promote modernization and employment of high technology by the existing industries.
(2) Tourism Facility
Integrated and well-planned projects for the formation of large-scale tourism and resort facilities are required in order to establish the tourism industry and resort areas as superior in comparison with other resorts in mainland Japan and foreign regions. One matter of great concern for Okinawa is the creation of attractive tourism resources such as diversified accommodation and recreation facilities that meet the diversified needs and demands of visitors including those who want to stay for long periods or at high grade resorts. Thus, the creation of new facilities such as shopping malls will be promoted based on the factors including the result of the "studies on the development of tourism resources and integrated improvement of tourism facilities" which will be conducted by the government's Okinawa Policy Review Council.
7. The Nurture of Human Resources
The creation of new industries will require talented people who are willing to start new businesses, able to set goals, and become independent. It is very important for them to be able to cope with high-level information technology and diversified knowledge, and have a good sense of internationalization as well as communication capacity and language ability. Volunteer activities and regional commitment will be highly valued. An appropriate system needs to be established to expand, tie, and support educational institutions such as universities as well as vocational skills and trade schools in order to educate, train, and upgrade techniques and expertise. Furthermore, it is also necessary to establish unique educational institutions that offer diversified curriculums and provide opportunities for exchange students to go to foreign countries. Besides, diversified human resources, including people from various foreign countries, need to be employed and their children should be able to attend local educational institutions if necessary.
(1) Development of Vocational Ability and Nurture of Researchers for the Information Age
In order to attract and stimulate the information and communication industries, it is necessary to increase the number of personnel who have basic information processing and utilization abilities. Besides, technicians and researchers who have high educational backgrounds need to be nurtured and maintained. Thus, educational institutions that have graduate schools are necessary in order to provide opportunities for researchers from other parts of Japan and foreign countries to cooperate and further develop or advance the theory as well as technology. It is also necessary to establish a national technical high school to provide practical and professional education to cope with changes in the information society. It is also necessary to transfer vocational ability development schools into universities or colleges to upgrade the level of vocational training.
(2) Establishment of National Tourism University (Draft)
Some of the colleges and high schools such as Meio College, Okinawa College, some high schools and vocational schools offer classes or curriculums that teach about tourism, resorts, and related subjects. However, major industrial promotion will require the establishment of a higher educational institution which offers a higher level of expertise in various fields such as Hotel Management and Financial Administration. The Japanese government is reviewing the establishment of a national tourism university in order to nurture talented people for future industrial promotion and establish tourism. It is requested to review a possibility of establishing the tourism university in Okinawa.
(3) Improvement of Higher Educational Institutions
The education and training of the people of Okinawa who will support and lead Japan, the country of high technology and science, is vital to industrial promotion in Okinawa. This will require further improvement of higher educational institutions including universities. Measures for such improvement need to be reviewed to carry out well-planned improvement of facilities and equipment as well as to provide educational and research programs. Based on the increased needs and the significance of adult schooling at universities, a system should be implemented to develop a curriculum to provide post-graduate schooling for adults.
(4) The Nurture of People in the Next Generation
Talented people for the coming generation should be nurtured so that they can cope with future information technology and globalization. They are required to have a solid command of foreign languages and a high level of technique and knowledge of information processing and the like. Thus, it is vital to introduce a new education system or implement deregulation in education at an early stage so that students in primary and secondary schools are provided with opportunities to receive basic education needed for changes in the times. In other words, by introducing measures, including a flexible application of designated courses of study at schools, the educational policies described in the report of the Central Education Council may be introduced to Okinawa earlier than mainland Japan in order to promote international understanding and cope with the changing needs of the information age.
8. Other Related Policies
In addition to the industrial promotion policies proposed in the above paragraphs, it is vital to establish a high standard of living and to improve urban functions in order to realize truly prosperous communities. Furthermore, it is necessary to promote an integrated foundation for the smooth flow of goods and people crossing various regions and nations, and promote international exchange and cooperation through volunteer activities as well as the NGO movement.
The following suggestions should be incorporated into the policies.
(1) Integrated Improvement of the Released U.S. Military Land
The comprehensive development and improvement of the vast former U.S. military land for appropriate creation of industries and residential environment in harmony with the international city formation concept is a major issue for the government of Okinawa Prefecture. The problems associated with the above issue include financial source and the selection of a body to conduct the improvement and the method. Thus, it is necessary to make it a national project conducted under the national government's leadership. The above issue is presently on the discussion table of the government's Okinawa Policy Review Council under the title of the "Review of Systems and Methods Regarding Improvement of U.S. Military Installations and Land Upon Their Release." The conclusion of the Council will be reported and applied to the development and improvement of the released base land.
(2) Utilization of the Government's Development Aids
The ODA White Paper (official government report) specifies local or municipal governments as acting bodies of characteristic international cooperation in promoting "help by people's participation" by the national and local governments, however the local governments find it difficult to secure the necessary funds and the implemented programs are usually limited to personnel contribution such as training and sending specialists to needed regions. Okinawa proposes to flexibly utilize government development aid for exchanges with other Asian countries. For example, Okinawa has already established a friendly relation with Fuchien in China. Thus, based on this, industrial development and improvement of transportation structures can be promoted by utilizing the government's development aid so that trade between Fuchien and Okinawa will be stimulated, which is expected to result in economic success in both regions. Another way of flexibly utilizing the aid is to construct a storage facility base for imported rice required by the minimum access concept so that economic exchanges with rice exporting nations will be stimulated and industrial promotion in Okinawa will be further promoted.
(3) International Cooperation and Contribution Hub Formation
In addition to industrial and economical promotion, diversified exchanges and cooperation including exchanges related to peace and culture as well as technological cooperation will need to be promoted so that a hub for environmental, medical, agricultural, and energy related international cooperation & contribution will be formed in Okinawa, which will assist Okinawa to maintain self-supportive development and help Asian countries develop continuously. Thus, the establishment of a national research center such as a semi-tropical research institute should be reviewed, and positive activities of volunteers and NGO's will be supported.
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