Special corporation reform proves elusive

In the nine-month period to January 1996, the government doled out investment funds of 27.59 trillion yen and state loans and subsidies totaling 37.62 trillion yen to 92 institutions and 528,500 workers nationwide.The size of the funds accumulated by these firms indicates the degree to which the government’s streamlining of organizations it funds has failed — even amid growing calls for administrative reform. While many analysts claim these institutions are the greatest symbol of the nontransparency and inefficiency of state expenditures, the government still maintains that these entities — known as special corporations — are necessary because they offer the same quality of service and infrastructure nationwide.The Liberal Democratic Party’s reform promotion headquarters is expected to streamline special corporations, but one of its officials said no discussions to this end have started. “The current effort to streamline special corporations has little meaning, and it is unlikely to win public support because its purpose is not clear to the public,” says Shino Namikawa, secretary general of the Citizens Forum for Renewal. “It would be relatively easy for bureaucrats to rebut calls for streamlining, if such assertions are made only for the sake of bureaucrat-bashing,” Namikawa says.The important thing is to stop wrapping all special corporations in one cloth, because they differ in terms of function and their ability to make decisions. Special corporations are those set up by law to pursue specific objectives, such as highway building and low-interest loan brokering to small firms. The government decided that such functions could be done more efficiently by separate bodies. Their number declined in the early ’80s from a peak of 113 in 1967, as many were privatized in the first major wave of reforms carried out to cope with a ballooning fiscal deficit. But 92 were still in place as of 1988.Calls to streamline the special corporations surfaced again in 1994 under then Prime Minister Tomiichi Murayama’s administration, but his controversial move only reduced the number of special corporations to 88 as of last year, with a few more mergers expected over the coming years. The results, many analysts said, were meaningless, because the government only focused on the number of corporations instead of reform of their funding system — the fiscal investment and loan program — the world’s largest publicly run financial institution.The program, which had outstanding funds of 356 trillion yen as of last March distributes postal funds and public pension funds collected by the Finance Ministry to governmental institutions offering loans and investments. Out of 87 special corporations that will exist as of April, 39 will receive funds from the program. In October, the Japan Productivity Center for Socioeconomic Development, a group of business leaders and scholars, released a report calling for a drastic reform of the program.It suggested turning all special corporations financed by the program into stock-issuing entities and privatizing the postal deposit business and dividing it into 12 regional companies. “The problem with special corporations is that they monopolize certain business projects by utilizing funds collected by the government,” says Kazuyoshi Kurokawa, a professor of public economics at Hosei University who chaired the expert committee to compile the report.”The corporations do not have the ability to make decisions by themselves because their scope of business is limited by law,” Kurokawa says.