A Proposal for the Restoration of Kobe's Economy

Abstract

The Great Hanshin-Awaji Earthquake, which occurred at dawn on January 17, 1995, caused unprecedented damage, due mainly to the closeness of its epicenter to urban areas. In Kobe city alone, the disaster claimed the lives of as many as 4, 512 people (as of January 8), and destroyed industrial facilities and urban infrastructure, including port facilities. The total cost of the damage is estimated at approximately 6, 900 billion yen.The damage to facilities has adversely affected facility operation and production. In addition, distribution capacity has greatly decreased, due to damage to the Port of Kobe, a major distribution center in Western Japan and one of the major international trade ports in Japan. Ultimately, the slowdown in economic activities in Kobe has adversely affected Japan's economy and industries nationwide.To restore the daily life of citizens, we must first restore economic activities, an essential element of urban life. At the same time, it is important to consider various structural problems revealed by the earthquake. To name a few, structural challenges faced by Kobe include inner city problems, growing competition with other cities in Japan and abroad, and problems caused by economic globalization and the high appreciation of the yen. We cannot separate such structural problems from other problems caused by the earthquake. Through our efforts in restoring Kobe, we must also address these kinds of structural problems; in other words, it will not suffice merely to restore the city as it was before the earthquake.In the city of Kobe, in addition to carrying out urgent restoration measures, we intend to revitalize enterprise activities and to create jobs, as part of measures to address structural problems. For this purpose, we plan to designate a “Kobe Business Start-up Zone”, which will include an “Enterprise Zone”, where deregulationa and tax incentives will be provided.This report explains the earthquake damage to Kobe's economy, and discusses the concept and potential effect of the “Kobe Business Start-up Zone”, with reference to the United Kingdom's Enterprise Zone as an example.