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Monday, Feb. 18, 2008

The afterlife for bureaucrats

For years the phrase "from the public sector to the private sector" has been used in the context of politics and the economy. In April 1985, Nippon Telegraph and Telephone Public Corp. and Japan Monopoly Corp. were privatized, becoming NTT and Japan Tobacco respectively. In April 1987, Japanese National Railways was privatized and split into six JR passenger service companies and one JR freight transport company.

Prime Minister Yasuhiro Nakasone's Cabinet oversaw the privatization of the these three public corporations as part of administrative reform.

Under the initiative of Prime Minister Junichiro Koizumi's Cabinet, Japan Highway Public Corp. and the three-division postal services were privatized. National universities were reorganized as independent administrative corporations and their teaching staff lost their public-servant status, as did the employees of research institutes and various public organizations belonging to government ministries after they became independent administrative corporations.

Government-backed financial institutions are the only public corporations that have yet to be privatized, but steady progress is being made toward that end. Thus bureaucrats have much less chance of finding cushy post-retirement jobs as a result of their traditional "descent from heaven." Only former education ministry bureaucrats have a better chance than before of landing such jobs. Former secretariat councilor-class officials of the ministry hold an executive post at each of the 87 national universities that have become independent administrative corporations. They receive much higher pay than university professors the same age.

Cases of retired bureaucrats taking on well-paid private-sector positions have sharply decreased. Private companies used to hire, with annual pay of tens of millions of yen, retired senior bureaucrats from ministries that oversee their industries. This practice gave companies certain advantages that offset the pay for the retired bureaucrats.

The banking, securities and insurance industries were under the tight control of the Ministry of Finance's "convoy system," designed to protect the whole industry. All companies used to assign officials to the MOF for daily information-gathering. They all benefited from a system that limited industry competition. MOF officials, on the other hand, enjoyed sumptuous wining and dining, courtesy of industry officials.

However, financial deregulation completely changed the situation. Benefits that private companies would get from hiring retired bureaucrats as conduits of information with the government have significantly decreased.

Bureaucrats in Tokyo's Kasumigaseki used to joke that they should go home "while it is dark" — or before daybreak. Even after midnight, lights shone bright in government offices. Proud bureaucrats enjoyed working for the public interest and had a sense of mission.

Even though their pay was not high, they enjoyed wining and dining at high-class Japanese restaurants, golf and mahjong, and limousine service paid for from companies' expense accounts — perks unfamiliar to ordinary workers. After they retired, they would take on a "second career" with high pay. Thus a bureaucrat's job was considered highly attractive.

However, things have changed dramatically. The national servant ethics law implemented in August 1999 prohibits bureaucrats from having dinner with officials of industries under their supervision, even when their partner is a college classmate. In the near future, legislation banning "descent from heaven" may be enacted. The occupational appeal of being a bureaucrat has sharply declined.

Perhaps it is unavoidable that bureaucrats will lose much of the influence they used to wield, but I have serious doubts about the widespread perception that former officials of private companies are more capable than ex-bureaucrats. Many bureaucrats studied abroad at government expense when they were young and have rich experience in overseas assignments, international negotiations and other matters. So, it seems to me that bureaucrats, on average, are a cut above private company officials in ability.

Nevertheless, private-sector officials have been appointed to top posts at government-backed financial and other corporations, independent administrative corporations and the four new companies created as a result of the privatization of Japan Post.

The opinion has apparently come into vogue that longtime service as a bureaucrat is synonymous with lack of management skill while executives of private companies are considered excellent managers regardless of the industry. I seriously doubt that public service work invariably indicates weaker management skills.

In my opinion, people either have or do not have aptitudes for certain jobs. People develop their management skills on the basis of their character, personality, insight and experience — rather than job experience after graduation from university. My fellow university professors, for example, include people with excellent management skills comparable to those of top executives of large corporations. Some, though, are pure scholars with little interest in management.

People have different abilities. It seems unreasonable to discriminate against people or rank them on the basis of their occupational background.

Takamitsu Sawa is a professor at Ritsumeikan University's Graduate School of Policy Science and a specially appointed professor at Kyoto University's Institute of Economic Research.

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