OSAKA -- One-quarter of Osaka's high-profile, third-sector projects are now 668 billion yen in the red, but city officials are still pumping money into them in the hopes they will eventually turn a profit.Third-sector projects, which are corporations jointly established by Osaka and private businesses, are worrying local business leaders because total losses from 21 of the 79 government-private projects could total 1 trillion yen by next year and force the most troubled of them to declare bankruptcy.About 481 billion yen of the total is attributable to three projects: the Asian Trade Center (290 billion) yen, the World Trade Center (114 billion yen) and the Osaka City Air Terminal (77 billion) yen.The ATC, opened in spring 1994, has had problems from the very beginning. The original concept behind the center was to provide a place that combined a shopping plaza, exhibition hall and office buildings for international companies in Japan, particularly those from Asia. But poor promotion, astronomically high rental costs, lack of backup services, and a location nearly 45 minutes from central Osaka have kept tenants away.While ATC officials say the occupancy rate is "around 65 percent," several tenants have disputed this claim. Retail shop managers on the first floor estimate that, for office space, the true figure is probably closer to 30 percent.In addition to a lack of tenants, the ATC has failed to attract a large share of the international convention business. ATC and city officials say this is due to the collapse of the bubble economy seven years ago and current macroeconomic factors beyond their control.But over the past year, local foreign consulates and chambers of commerce say the main problem is that ATC officials don't listen to their ideas or offer practical, inexpensive suggestions for accommodating the needs of overseas businesses. Only one major international trade fair, "The International Design Exhibition," took place in the ATC complex last year.Another major project, the Osaka City Air Terminal, which opened in the spring of 1996, was designed to provide quick and comfortable direct connections from the airport to the Namba district of south-central Osaka. The terminal contains bookstores, fast-food restaurants and fashion boutiques, as well as the offices of several major airlines.It is a success in one respect -- no one can complain of crowds or long lines. Airport limousine buses carry on average of only four passengers each way, while the international check-in counter, which serves over a dozen airlines, handles just 200 passengers a day. One of the smaller fashion boutiques in the arcade said there have been days when no sales have been made."We're looking at ways to cut costs, including reducing the number of airport buses. Only an average of 180 people a day use the buses, far too few to make them profitable. So we may have to cut back on the service," said Hitoshi Handa of OCAT's general affairs department.In return for cutting staff, OCAT is expecting an infusion of cash from the city, which has a 51 percent investment in the project, for fiscal 1998. "We've submitted a request for funds to help cover our losses. But we have to take action to reduce costs, including cutting personnel," Handa said. "Down the road, perhaps in 10 years, after the surrounding neighborhoods are rebuilt, we should be able to see a profit."Yet with the economy sluggish and banks unable to offer loans, local business leaders who have invested in these projects are worried. Pointing out that the city has indulged in the same kinds of third-sector plans as Osaka Prefecture, which is now effectively bankrupt, some predict the city will soon find itself in the same situation.
