Messages from Monthly Keidanren, November 1998

Hopes for Administrative Reform

Josei Itoh
Vice Chairman, Keidanren
Chairman, Nippon Life Insurance Company

The Headquarters for the Administrative Reform of the Central Government has begun its operations, and work on the reorganization of government ministries and agencies is moving forward. The top policy priority for the government is definitely the achievement of an economic recovery, but over the medium to long term this administrative reform program holds the key to whether it will be possible to build a self-directed society led by the private sector.

In the period of economic recovery after World War II and the subsequent high-growth years, the government's role was expanded as moves to improve the social security system and other programs gave rise to increased demand for public services. Now that Japanese society has matured and we have entered a period of stable growth, however, the overgrown, rigid administrative organizations, along with their inefficient services, have led to the swelling of the fiscal deficit and delayed adjustment to global standards, acting as obstacles to Japan's further development.

Administrative reform aimed at revising this sort of big government should focus on three points. First, the basic role of the public sector must be fundamentally reexamined in keeping with the concept of "small government." The role of the state should be limited to such areas as public safety, disaster prevention, defense, and education; other areas should be entrusted to the vigor of the private sector to the fullest extent possible. Looking abroad, we find that in New Zealand's case, for example, through the reorganization of the central government apparatus many of the activities and administrative operations of the state were turned into public corporations or were privatized, and the economy as a whole was invigorated.

Second, the path to privatization should be laid out clearly. The current round of reorganization of ministries and agencies foresees the establishment of a number of independent administrative corporations. It is essential that these independent administrative corporations be made the pillar of a program of efficiency raising and privatization of administrative services, as in the case of Britain's agencies, and that these moves be extended to a review and revamping of the entire existing set of special-status corporations.

Third, the administrative reorganization process must not be turned into a hollow exercise. There is a danger that the current reorganization program may end up being no more than a reshuffling of names and juggling of numbers. The question is whether it will be accompanied by a qualitative conversion of government operations so as to achieve streamlining and greater efficiency and to break away from discretionary administration. Our hopes are riding on the forthcoming process of fleshing out the reorganization plan, which should include elements like a meaningful review of the laws setting up the various ministries and agencies and cuts in the assigned numbers of civil servants.

Private-sector companies are now sweating blood in their efforts to restructure themselves so as to achieve greater business efficiency. The public sector must not delay a moment in its own program of bold restructuring, including a review of the proper role of the state.

Home Page in English