Significance of Special Public Institutions Reform

Special public institutions are legal entities established by special laws in order to carry out public matters related to administration. From the mid-1950s to the mid-1960s in particular, many special public institutions were established, and since then, they have responded to the diversification and upgrading of administrative needs and have carried out various policy implementation functions in broad areas such as public works projects, policy finance and research and development with the close collaboration of the concerned ministries and agencies.

On the other hand, it has been pointed out by people in diverse fields that, there are some special public institutions that have met the social needs for which they were established and, with the changing times, their role has changed and declined, while for others, the necessity of Government involvement has declined due to the fact that private sector corporations are carrying out similar services. As such, various reforms have been carried out over time. However, many issues still remain unresolved, and in the Final Report of the Administrative Council that was compiled in December 1997, severe criticism was outlined regarding (1) vagueness of management responsibility, (2) inefficiency and lack of transparency in business management, (3) organization and processes to increase on their own, and (4) lack of autonomy in management.

Furthermore, there is an enormous amount of fiscal expenditures and lending from the Government for subsidies, such as approximately 5.28 trillion yen in the FY2001 initial budget (excluding subsidies from the Federation of National Public Service Personnel Mutual Aid Associations) and approximately 24.41 trillion yen from the Fiscal Investment and Loan Program. Therefore, a fundamental review is called for from the perspective of reducing and improving efficiency of fiscal expenditures in the medium to long-term and in relation to the reform of the Fiscal Investment and Loan Program as well.

Given these circumstances, special public institutions reform is a part of administrative structural reforms that aims to realize simple, efficient and transparent government which is suitable for effectively executing essential public functions.

Modalities for Advancing Reform

This reform targets 163 special public and certified institutions and is being advanced based on the "General Principles of Administrative Reform" decided by the Cabinet in December 2001 and the "Basic Law on Special Public Institutions" established in the previous ordinary session of the Diet.

Namely, this reform should not be limited only to revising the organizational structure of institutions as a "framework." Rather, bearing in mind that a thorough review of the work done by special public institutions, in other words, the "contents," included in the framework, are extremely important, based on standards such as (1) whether the significance of the work is declining, (2) whether it is notably unprofitable and (3) whether privatization would be more efficient, first of all, the work of all corporations will be thoroughly reviewed. While severely implementing a retroactive assessment of the content of work, its framework and the methods in which it was implemented including the involvement of subsidiaries, affiliates and others, based on the results of that assessment, a review will be conducted with a view to the abolition and privatization of the organizational structure of special public institutions.

Furthermore, in order to advance reform, the "Special Public Institutions Reform Promotion Headquarters," with the Prime Minister as the Chief of Headquarters, will be established. Moreover, the "Reorganization and Rationalization Plan for Special Public Institutions," which stipulates measures that should be implemented for the work and the organizational structures of various special public institutions, will be formulated, and in order to implement this plan, it has been determined that legal and other necessary measures will be taken during the "intensive reform period" to be completed at the latest by the end of FY2005.

Details Leading up to the Development of the Reorganization and Rationalization Plan

The Basic Law on Special Public Institutions Reform was established in June 2001 and the first meeting of the Special Public Institutions Reform Promotion Headquarters was held on June 22, 2001. At the second meeting, held on August 10, 2001, the approach to be taken to reviewing the individual projects of special public institutions was announced. Furthermore, at the third meeting, held on October 5, 2001, in line with the approach to be taken to reviewing individual projects, announcement was made of the results of examinations of the FY2004 budget requests, and the direction for organizational reviews of various corporations.

At the fourth meeting, held on November 27, 2001, from the viewpoint of driving overall reform, the direction of reforms were indicated for seven special public institutions in advance of other special public institutions: Japan Highway Public Corporation, Metropolitan Expressway Public Corporation, Hanshin Expressway Public Corporation, Honshu-Shikoku Bridge Authority, Urban Development Corporation, Government Housing Loan Corporation and Japan National Oil Corporation, for which fiscal expenditures by the Government are large and public interest is high.

In compilation of the Reorganization and Rationalization Plan, while carrying out the above work, reference was made to opinions expressed by participants at the Forum for Ceaseless Administrative Reform held in four different locations around the nation and by those who submitted comments via the Internet. The opinions of the various experts were also reflected.

Reorganization and Rationalization Plan and its Implementation

This plan targets 163 special public institutions and certified corporations and establishes individual reform agendas for each project and organizational structure. Furthermore, it specifies reform items to be implemented in a common approach for all special public institutions.

Through the realization of this plan, a sweeping reorganization will be made of the 163 special public institutions, and excluding the 45 mutual aid associations that should be organized as special public institutions distinct from policy implementation institutions of the Government, of the remaining 118 special public institutions, 17 will be abolished, 45 will be privatized and 38 will integrated into 36 independent administrative institutions.

In addition, in light of the character of each organizational structure, efforts will be made to bring the salaries of directors and retirement allowances to more appropriate levels and to ensure greater disclosure.

In the future, in special public institutions reform, this "Reorganization and Rationalization Plan" will move toward implementation. Respective ministries and agencies will respond by taking responsibility for implementation, and it goes without saying that efforts will be made to bring more detail to measures that should be taken for projects in FY2002. Furthermore, regarding organizational structures, in principle, legal and other necessary measures will be taken by the end of FY2002 and will be laid out in more detail in FY2003.

Regarding fiscal expenditures, to the fullest extent possible, the content of the review of the "Reorganization and Rationalization Plan" will be reflected into the FY2002 budget and efforts will be made toward bold reductions thereof, while also making efforts to enhance budgetary transparency through a review of capital injection and others. The "Reorganization and Rationalization Plan," under the Headquarters, a new organization will be established to assess and monitor subsequent progress, and to appropriately implement follow-up.

Furthermore, the "Reorganization and Rationalization Plan" stipulates the details of a review of special public institutions that must be conducted during the intensive reform period. However, this does not mean that during the interim, special public institutions may not fulfill a temporary or provisional role in the event that they are required to do so due to economic, social and other emergency factors.

Moreover, in the promotion of special public institutions reform, as stipulated in the accompanying resolutions to the Basic Law on Special Public Institutions Reform, there is a need to consider measures to ensure employment stability for current employees of special public institutions.