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The economic slump over the past decade has crushed Japan’s confidence and raised fundamental questions about the government’s ability to turn things around.

But the planned creation of an electronic government is stirring hope that an efficient and transparent administrative system may finally emerge to help revamp the economy.

Expectations of change are running high in the business community, especially among those faced with intensifying competition from powerful foreign rivals backed by IT-savvy governments. Last year, the government pledged to go electronic by the end of March 2004 to bring about gains in efficiency, costs and information access. The plan is the centerpiece of the government’s “e-Japan” strategy, which is aimed at positioning Japan among the world’s elite in information technology.

With knowledge-based industries replacing manufacturing as the new engine of the global economy, the business world is entering an era where only the fastest survive. Quickness in decision-making and the ability to follow through are becoming the decisive factors for success.

Thus the presence of an efficient and expeditious government is becoming a key consideration in many companies’ decisions to invest in Japan, noted Hitoshi Shirai, chief researcher at Hitachi Research Institute.

“Product life spans are becoming shorter and shorter,” he said. “Let’s say you’re developing an electronic appliance whose life span is two years at most. If it takes three to four months just to get government approval, you would naturally move to a country with a more efficient government.”

By going electronic, the government hopes to eliminate red tape and cut down on time-consuming paperwork by making administrative information and services accessible anywhere and at any time of day.

“The goal is to create an environment in which there is a choice between paper-based information and electronic information, in both the private and public sectors,” said Nagaaki Oyama, a professor at Tokyo Institute of Technology. Oyama helped draft the plan that served as the foundation for the e-Japan project.

The government will eventually put 10,541 administrative procedures ranging from business approval procedures to information on public works bids on the Internet, with 9,960 of them — or 94 percent — scheduled to go online by the end of fiscal 2003.

One critical hurdle to launching an e-government — electronic verification — has already been cleared. A new law that took effect last month gives electronic signatures the same weight as their paper-based counterparts, allowing a range of transactions to be confirmed, executed and stored by computer.

As legal systems for an e-government are formulated, many Japanese companies are expected to accelerate the move toward electronic storage, which is more efficient and economical than physically storing multiple copies of paper documents.

The overall cost-effectiveness of having an e-government is difficult to estimate, but the Japan Federation of Economic Organizations (Keidanren), an avid promoter of the project, foresees substantial benefits.

Of the 265 million monetary transactions made by the government annually, Keidanren estimates that nearly 90 percent of revenue transactions and 30 percent of those for expenditures are currently handled on paper.

If all of those procedures go online, the combined savings to consumers, the government and financial institutions could reach 100 billion yen, the influential business lobby has said.

Apart from the gains in efficiency, the creation of an e-government is also being counted on to promote information technology in the private sector, especially among small and midsize firms, many of which are lagging behind and failing to benefit from the ongoing IT wave.

“IT does not spread (among smaller businesses) unless it is actually used in daily business,” said Yoshihito Iwama, a Keidanren official in charge of information and new business. “One way to make it happen is by doing business with big firms that adopt IT. The other is to deal with the government online.”

If e-government is successful, it will also effect an improvement in government’s fiscal health, according to Hitoshi Ikuma, general manager of Japan Research Institute’s Center for the Emergence of Industry.

Many observers have viewed the outstanding long-term debts of the central and local governments — an alarming 642 trillion yen as of the end of March and growing — as an immovable obstacle. But Ikuma expects information technology to help reduce government expenditures and enhance its ability to implement policy.

For instance, online procurement would save time and reduce costs for potential bidders by eliminating the need to physically visit the relevant government agencies. This would attract more participants and result in more competition.

A reduction in costs would also enable the government to pour more financial and human resources into nurturing growing industries, Ikuma said.

While rhetoric on embracing IT has become a familiar cornerstone in any talk of bolstering the ailing economy, the reality is that Japan still lags far behind the United States, Europe and its neighbors in Asia, notably Singapore.

In an annual report released last month, Accenture, a private consulting firm, placed Japan in the lowest of four categories in terms of scope and sophistication of online government services.

The report, which looked at 22 countries, says that Japan, along with Brazil and Malaysia, is still in the midst of developing a coordinated cross-agency Web site.

In contrast, Canada, Singapore and the United States — which form the top group of IT countries — have single-portal sites through which government information can be easily accessed.

“We’re gradually entering the era of competition among governments,” said Shirai of Hitachi Research Institute, noting that Singapore and Hong Kong have been among the fastest in Asia to jump on the e-government bandwagon.

“These (two economies) have a sense of crisis that tells them they must stay ahead of neighboring countries. But Japan thinks that it still has economic resources in spite of a decade-long recession,” he said.

Japan has been taking its time bringing government services into the electronic age.

In December 1994, the Cabinet adopted a five-year plan calling for realizing an efficient government in the early 21st century by “utilizing information technology in various administrative fields.” Talk of an electronic government emerged more frequently in government policies around 1997. Then as momentum increased in October 1999, the late Prime Minister Keizo Obuchi designated the creation of an electronic government as one of Japan’s “millennium projects.”

To date, some 900 government agencies and related organizations have opened Web sites to provide information ranging from white papers and administrative notifications to ministers’ remarks at news conferences.

For the current fiscal year, the government plans to spend 926.9 billion yen on measures related to e-government, but many observers doubt whether any benefits will emerge from this huge expenditure because no changes have actually taken place in the government’s administrative systems.

Pundits agree that the walls separating different government agencies must be taken down before any real benefits emerge.

“We want to see the government change the way administrative procedures are handled,” Keidanren’s Iwama said. “The purpose of utilizing IT is to share information (inside the government) through a network and raise productivity.”

A network to link the central government with its local branches will be built by the end of fiscal 2003 and will be eventually extended to cover local governments, but Keidanren is more interested in a so-called one-stop service that would enable the completion of multiple administrative procedures with different government agencies at once.

Indeed, the lack of coordination among different government agencies with intricately woven jurisdictions has long been cited as a symbol of inefficient administration.

Port procedures for imports, for instance, require that applications be filed with several government agencies, including the Custom House for customs clearance, the Trade Ministry for import application and the Transport Ministry for the use of a port.

While many of the procedures are already online, they remain unlinked, which forces importers to file separate applications with each agency.

The whole procedure, which takes some six hours and 40 minutes, could be completed in just 15 minutes or so if there were an efficient one-stop service in place, Keidanren estimated.

This, however, will require clearing several more hurdles.

Ikuma of Japan Research Institute pointed out that strong labor unions in the public sector and a law guaranteeing job security for public servants are making it difficult to implement the type of drastic restructuring that is being carried out in the private sector.

“At issue is what the government will do with IT, not whether it uses IT or not,” Shirai said. “Our worry is that, come 2003, a great network infrastructure will be completed and each worker in Kasumigaseki (the central government district) will simply be sitting behind a personal computer, and that that will be the end of the story.”

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