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Tuesday, April 13, 2010
Screeners set to take on costly public-funded entities
With a sagging approval rating, Prime Minister Yukio Hatoyama and his Democratic Party of Japan may be hoping for a turnaround with the second round of screening of costly government-backed entities that starts April 23.
When the first project screening took place last November, it attracted tremendous public attention because each step of the process was publicized for the first time. The goal was to weed out costly, publicly funded entities and projects deemed excessive or outright unnecessary.
The second round will target independent administrative institutions ("dokuritsu gyosei hojin") and public interest corporations ("koeki hojin") — organizations about which the general public has little knowledge. Many such bodies allegedly serve as lucrative job havens for retired bureaucrats, can be monopolistic in nature and thus exempt from any price competition, and are sometimes even a source of corruption.
Together they number in the thousands and tap more than ¥3 trillion in taxpayer funds annually.
Followings are basic questions and answers about independent administrative bodies and public interest corporations:
What are independent administrative institutions?
The purpose of these bodies is to perform tasks deemed necessary for the public benefit that are outside the purview of either the government or corporations.
Even the concept of public benefit is not narrowly defined.
These organizations trace their origins to the 1997 administrative reforms of Prime Minister Ryutaro Hashimoto's Cabinet, which sought to streamline the government and entrust certain official tasks to outside organizations.
It was also a time when semigovernmental, special corporate bodies ("tokushu hojin") faced criticism for lacking transparency, responsibility and independence in their management. Members of the then ruling Liberal Democratic Party planned new groups, to be called independent administrative institutions, modeled after British government agencies.
Many special corporate bodies, as a result of the reform, became independent administrative institutions. To ensure transparency, independent administrative institutions are required to disclose their balance sheets and management plans and are under constant review by a third party.
For example, the National Printing Bureau is an independent administrative institution that prints money, securities and stamps. Public universities are also categorized as independent administrative institutions.
What are public interest corporations?
In general, these organizations contribute to the public's benefit and are not supposed to engage in activities for their own reward.
The establishment of most public interest corporations fell under the Civil Law created during the Meiji Era. The rule under which they were established changed in December 2008.
The creation of public interest corporations must be approved by the government ministries within whose jurisdictions their tasks fall.
The ministry-permission process drew criticism, however, because the decisions to establish these corporations were left to the discretion of each ministry, rather than the "public interest."
Under the new rule introduced in 2008, the process for creating these corporations was simplified, and they no longer require ministry approval. New corporations can now be created after a simple registration process or after screening by a third party.
Yet, public interest corporations are still overseen either by the central government or prefectures.
Many industry-related associations are categorized as public interest corporations, including the Japan Medical Association, which is made up of 160,000 doctors. The association aims to contribute to the development of medicine and promotion of medical education.
How many organizations are there?
There were 98 independent administrative institutions as of last Oct. 1 and 24,648 public interest corporations as of Oct. 1, 2007.
There were 6,720 public interest corporations overseen by the central government, and some of them are being targeted for the screening.
How much money is allocated for independent administrative institutions and public interest corporations?
For the fiscal 2010 budget, ¥3.1 trillion is allocated for independent administrative institutions and ¥204 billion for public interest corporations.
Why is the DPJ-led government bent on screening the two types of organizations?
During a Feb. 16 news conference, Yukio Edano, minister in charge of administrative reform and the screening, said ever since last year's budget screening, people have become more concerned about how their tax money is used by independent administrative institutions and public interest corporations.
A major criticism about these organizations is that many have been established to secure posts for retired bureaucrats. Under the practice called "amakudari" (descent from heaven), retiring top bureaucrats land lucrative jobs at these government-related organizations and private firms.
Research by the internal affairs ministry shows that 39 directors of 100 independent administrative institutions were former bureaucrats, and 153 executive members out of 505 were former bureaucrats as of October 2008.
The number has decreased in the past few years, but Edano said it is wrong to have former bureaucrats at semigovernment bodies handling government-related tasks.
"If those tasks should be handled by former bureaucrats, they should be taken care of directly by the government," he said. "But the government asks outside bodies to do it, so tasks should be handled by people other than bureaucrats or former bureaucrats."
What are other problems?
Sakae Kitazawa, a journalist who has written books about problems involving semigovernment bodies, categorized the problematic nature of public interest corporations in his book "Public Interest Corporation."
For instance, there are "tunnel-type" public interest corporations that receive subsidies or commissions from the government, and then pass those funds on to other organizations, such as a research center.
Kitazawa writes that there is no need for public interest corporations to be in the middle, as it creates extra costs.
Other recipient organizations include those that operate tests or lectures for people to receive government-certified skills. These organizations are often given government mandates as the sole entity able to authorize national certificates, making them effective monopolies. Without market competition, fees for such tests or lectures can be expensive.
"I opposed the idea of creating independent administrative institutions," said Kenji Eda, secretary general of Your Party and a former aide to Hashimoto.
Eda said independent administrations have been utilized by bureaucrats for their benefit, adding that all of the independent administrations should be "abolished or privatized."
Are all organizations targeted for screening?
No. The exact number has yet to be determined, but the screening team will reportedly review around 50 independent administrative institutions.
Edano earlier revealed that 50 public interest corporations previously drew criticism from the Diet or the Board of Audit, including the Economic Research Association, the Association of Radio Industries and Business, and the Japan Trucking Association.
Journalist Kitazawa has been vocal against the Association of Radio Industries and Business, which is designated by law as the only center to promote efficient use of the radio spectrum.
This legal mandate lets the company monopolize its business, including offering consulting services to telecommunications and broadcast firms, Kitazawa said.
For public interest corporations, Edano prepared seven criteria, including those receiving more than ¥10 million in subsidies from either the government or independent administrative bodies and having former bureaucrats as their executives.
There are 290 corporations falling under more than one criterion. The screening team will further trim down the number for the actual session.