Kazuaki Tanaka

Professor, Faculty of Political Science

and Economy, Takushoku University

　

Every time administrative reform is put on the agenda, reassessment and reorganization of the government-affiliated corporations becomes a major issue. This is because the government, despite its strained fiscal situation, continues to pump trillions of yen into these bodies: special public corporations and "authorized"public corporations together receive an annual total of 5.3 trillion yen in the form of subsidies and other assistance, as well as a total of 24.4 trillion yen from the fiscal investment and loan program (known as zaito). Other reasons include their inefficient operation, the much-censured practice of amakudari that provides jobs to extend the careers-and influence-of high-ranking government officials, lack of management transparency, and the resultant accumulation of enormous debts that will have to be paid by Japanese of later generatiohs. Awareness is gradually building, in fact, that reform of these special bodies is the key to treating deeply rooted weaknesses in the social and economic structure of the nation.

In principle, public corporations exist in order to implement government policies. While streamlining of their management is clearly important, the basic approach in reforming these bodies ought to begin with determining whether or not such implementation should be undertaken by the public sector in the first place. Relations between the public and private sectors and between the national and local governments must be reviewed before anything else. In other words, national policies themselves should be called into question, and therefore, the reform of government-affiliated corporations is essentially structural reform of the governrnent.

　Another reason for prompt action this time is that the Cabinet is headed by Junichiro Koizumi, who is an ardent advocate of reform. Without a tough-just plain stubborn-stance on reform like Koizumi's it would be impossible to change these government-run entities. Meanwhile, the reform of these corporations is a final step of the reorganization of central government ministries and agencies, which was enforced last year. The recent establishment of a new system of independent administrative institutions on the basis of critical assessment of existing special public corporations naturally prompts a drastic reorganization of such corporations.

In December 2000, the Mori Cabinet adopted the Administrative Reform Outline, took up the public corporations issue as a key item on its agenda, decided what items were to be examined, and established a timetable. The Outline called for a thorough review of all 163 special and "authorized" public corporations.(In December 2001, the Cabinet approved reform plans to scrap 17 special public corporations, privatize 45 others, and reorganize 38 others into independent administrative institutions.)

　The government is following an orthodox approach of first reviewing the projects of each public corporation first and then deciding what to do about the organization itself. At each juncture a report is published comparing the opinions of ministries and agencies with which the corporations are affiliated and those of the Administrative Reform Promotion Secretariat. Such an effort to maintain the transparency of the reform process is laudable. But considering that the review of public corporations projects means the review of government policies, the Administrative Reform Outline blatantly lacked a mechanism for assessment by a third party of the review process.

　We at the Tokyo Foundation keenly felt this lack, and judged it necessary to conduct research and present policy proposals from the standpoint of the private sector. We launched a project for that purpose and started organizing and analyzing materials, and gathered perspectives from opinion leaders, businesspeople, lawmakers, and executives of major corporations, among others. In the meantime, the government's August 10 announcement of its position concerning "the review of individual projects of public corporations" prompted the Foundation to publish an interim report on "the approach to reform" on August 14. We summed up the results of our research in the form of a "Policy Proposal: Tentative Plan for the Review of Individual Public Corporations", and briefed opinion leaders and representatives of the media on November 21 .

The main points of the Tokyo Foundation's interim report of August 14 are outlined here, for these were the points used as specific guides in the review of the public corporations.

　1) In principle there are two options, privatize or scrap. What can be done in the private sector should not be done by the public sector. What the local government can undertake should not be undertaken by the central government. The first criterion of the reform process is to ask whether the central government should be involved or not. Those projects that the central government should not undertake should be eliminated, or privatized, or left to the discretion of local government. Criterion two, even projects the central government should undertake, if there are alternative measures, should be eliminated, privatized, entrusted to the private sector, or left to the discretion of local government.

　Criterion three, if there are no alternative measures, they should be scrapped if the cost is higher than the benefit. And criterion four, if the benefit is higher than the cost, public corporations in charge of these projects should be either merged with independent administrative institutions that handle similar projects or reorganized into new independent administrative institutions, if there is no such institution.

　2) Necessary measures (legal and financial measures, job placement of former staff and employees, etc.), procedures, and so forth,that will accompany the elimination and privatization of public corporations should be specified.

　3) Only with the support of citizens can the reform be realized, so the reform process should always be kept transparent and the government should thoroughly fulfill the accountability to citizens.

　4) A "Public Corporation Management Agency" will be set up within the Cabinet Office, to supervise and support independent administrative institutions, public-interest corporations, etc. In Japan all special and other public corporations are affiliated with particular ministries and agencies. They have served as an instrument for implementing the work of their ministries and agencies. While that has been considered the rational approach, the arrangement has caused many problems, such as collusive management of work resulting from the influence exercised by retired government officials who are re-employed in public corporation executive or honorary positions.

　The November 21 policy proposal, "Tentative Plan for the Review of Individual Public Corporations," lists all the 163 special and other public corporations, giving their names, major projects, our assessment of these projects, our suggestion for abolition, privatization, etc., of each corporation, as well as remarks. We screened each corporation using the four criteria of the reform process described in the August 14 interim report, and made judgments not colored by political factors. The proposed direction for the reform was to scrap or privatize most of the public corporations. (For details, see the Tokyo Foundation website, http://www.tkfd.or.jp/jp/research/index.html)

　Needless to say, this proposal faced stiff opposition from the public corporations in question, the ministries and agencies with which they are affiliated, the industries concerned, and the "tribe" politicians who act as protectors and benefactors of specific industries. The general public itself has been skeptical of the proposal, a tendency that we also anticipated. People are accustomed to the existing system and the Foundation's proposal meant starting something totally new, so their concern is quite natural. This apprehension is largely due to lack of full and updated information about the real conditions of public corporations and the orientation of the reform.

What became ever clearer when the proposal was presented was that the public corporations in question and their ministries and agencies and "tribe" politicians blindly believed that their projects could be entrusted to private enterprise or local government. They were and still are persuaded the work is something only the central government can properly handle. They also are opposed to the Tentative Plan's call for elimination or privatization of governmental financial institutions. They argue that because private financial institutions will not lend money to small and mediumsized enterprises, government-run financial institutions must be preserved, and they point out that, in fact, such institutions are playing a vigorous role at a time when business is sluggish.

　That is a result, however, of the fact that all the ministries and agencies have relied on their own financial institutions, refusing the business of private banks. If they argue for the necessity of long-term, low-interest, and fixed loans as the reason for the continuation of governmental financial institutions, this could be done in the private sector. We would propose-at the expense of a considerable compromise-that the target of loans should be clearly defined and that the job be handled by private institutions while the government provides guarantees and subsidizes interest payments.

　The crux of the reform is reaffirmation of basic principles. The existing public corporations system has been one in which demands are always overestimated, expenses are always underestimated, and the repayment of debts from borrowing enormous funds from the zaito and other governmental loan programs is put off several years, or several decades, which means that later generations will be the ones stuck with the bill. Those currently in charge of such corporations should be called on to take responsibility. These corporations are not being run as business-like entities. The reform this time targets this system.