Risk Management and Governance for PFI Project ... - Title Page - MIT

strongly between contracting parties, the country must prepare a final judicial binding, such as
arbitration, to achieve a faithful relationship of rights and obligations of the contract, which produce
transaction costs, such as proof cost and judicial cost. However, in the case where it is guaranteed
that both contracting parties adhere to the “fair and equitable principle”, the country can save
significant transaction costs to run the relationship of rights and obligations of the contract, and an
efficient contract can be carried out. (Onishi 2005)
Response to Globalization
As seen above, by creating a closed society to avoid competition, Japan has created a society that
does not require judicial costs that pertain to disputes by nurturing a long-term “ambiguous trust
relationship”. This mechanism has been quite convenient in an era when the country has been able
to grow domestically.
However, we cannot ignore the flow of globalization. With respect to the response to globalization,
there is an opinion that Japan had fallen into a long period of low growth since the collapse of the
bubble and a citizen’s major idea became conservative and introverted; as a result, Japan did not
obtain the benefits of globalization. For the Japanese economy and companies to take advantage of
the growth opportunities brought by globalization, it is essential to carry out necessary policies,
such as the structural reform and market openness, and respond appropriately to the resistance
against dramatically changing the current policy (Urata, 2009).
The biggest problem with the globalization of the construction market would be the disputes
between the domestic orderers and foreign national contractors that are derived from cultural and
institutional differences between countries, as stated above. Resolving such disputes efficiently
would depend on whether the orderers could build a trust with the foreign enterprises as they do
with domestic enterprises. To ensure the efficiency of dispute resolution, disclosing information on
the claim arbitration processes and strengthening the system for conflict resolution will be needed.
In addition, it would also be required to introduce rigorous contract methods such as FIDIC’s
standard. In fact, the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) has recently
conducted a mock trial using terms and conditions based on the FIDIC as the country's first trial 27 .
However, this is still a modeling stage, and an accumulation of knowledge would be required for
the future popularization. In the long term, we also might have to address the contract-based society
and the expansion of the judicial system.
27 MLIT conducted the auction of the "No. 129 lamp bridge superstructure work for Sagamihara IC on Sagami
Expressway" in accordance with the terms and conditions of FIDIC. Ohmoto Gumi Co., Ltd. has made a successful bid in
February 2011. In this trial, the mock role of a third party engineer was played by a committee composed of staff of the
Kanto Regional Development Bureau of MLIT.
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