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Prime Minister Yoshihide Suga’s administration is gearing up to establish an agency that will lead the digital transformation of Japan.

But the key to success is for the agency to create a blueprint for Japan’s digitalization — from administrative services to working with the private sector and nurturing engineers — and have the necessary power to work toward that goal.

What needs to be done to prevent the digital agency from being another bureaucratic entity that will simply coordinate policies among relevant ministries?

“The digital agency should become a strong organization which can function as a powerful control tower, with highly talented people gathering from both the public and private sectors, to lead the digitalization of the society as a whole,” Suga said on Sept. 23 at a meeting of ministers involved in digital reform.

The government has created an office to prepare for the establishment of the agency, and unprecedented steps are being made, such as setting up an online platform to solicit opinions from the public.

But the success of the agency depends solely on whether it can indeed serve the role of a “powerful control tower.”

In order to achieve this goal, the agency should make its objective the digitalization of the Japanese society as a whole, and the agency should be positioned above other ministries and become a special zone for civil servants to secure human resources with cutting-edge skills and global perspectives.

Digital transformation

First and foremost, the agency that will serve as the core of national cyberpower should aim at realizing digital transformation of Japanese society as a whole instead of limiting its role to integrating procurement of the ministries’ administrative systems.

Many industrialized nations have organizations similar to the digital agency, but their objectives and authorities differ.

The Government Digital Service, created in the United Kingdom in 2013 under Prime Minister David Cameron’s administration based on lessons learned from past failures regarding the government’s systems procurement, is working progressively to digitalize administrative services under a thoroughly open and user-friendly approach, realizing agile development.

While the GDS can serve as a model for Japan in various aspects, its main role is limited to digitalizing government functions.

Some countries are trying to digitalize the whole society. In Singapore, for instance, the Smart Nation and Digital Government Office under the Prime Minister’s Office works as the brains of the government to formulate policies in building a Smart Nation, including promoting cashless payments and use of digital data.

The Government Technology Agency implements the office’s policies in cooperation with the private sector, as well as nurturing human resources adapting to the digital economy and providing digital tools for administrative services related to individuals and companies.

Putting aside the question of its surveillance society approach, Singapore’s digitalization reform provides a model for Japan in the sense that it is targeted at the whole society.

So what is the goal of Japan’s digital agency?

The Cabinet Secretariat’s National Strategy Office of Information and Communications Technology has been tackling the issue of different ministries operating systems with different specifications procured under different budget allocations.

But what is needed now is not only getting rid of the government’s vertically segmented structure in terms of system designs or budgets, but also introducing meta-level strategic thinking and consolidating digital policies and plans which are currently conducted separately by ministries and agencies, such as the industry ministry working on industrial digitalization and cashless payments, the education ministry on digitalization of education, the internal affairs ministry on the My Number social security and tax number system, local governments on regional digitalization and so forth.

In particular, cybersecurity and data strategy will mean nothing unless they are consistent everywhere.

It is necessary for the government to build the architecture and infrastructure of a fundamental platform that will serve as digital public goods for the private sector to utilize to proceed with the digitalization of the whole society.

Sanjay Anandaram of iSPIRT, a nonprofit organization which has been developing the digital platform India Stack in India, likened digital platforms to roads.

“End users use the services that have been built atop (the government’s) digital platforms by private businesses and public entities,” Sanjay said in an interview with G20 Japan Digital. “Businesses can design and innovate new services for their customers and partners using these platforms.”

“In a sense, the platform is like roads. The state will construct them and anyone can design and deploy any vehicle to run on them following rules,” he said. “The users, the public, can use these vehicles (such services) and go where they want to go.”

In order to strengthen the nation’s cyber power as a pillar of its growth strategy, it is necessary for the government to clearly aim at digitalizing the whole society in a blanket manner and construct strong “roads.”

Control over ministries

Secondly, to realize such goals, the digital agency should be positioned above other ministries.

The National Security Secretariat, established in the Cabinet Secretariat by former Prime Minister Shinzo Abe in 2014, is probably the latest example of a government entity succeeding in breaking down silos and securing effective coordination and planning authorities.

The secretariat has influence over other ministries as it is “dedicated to the planning and coordination of basic direction and important matters of foreign and defense policies concerning Japan’s national security” and because of its close relations with the government leadership, directly providing information to the prime minister and the chief Cabinet secretary.

But how can this be realized by a government agency?

Various new agencies were established following the restructuring and streamlining of government ministries and agencies conducted in the 1990s under Prime Minister Ryutaro Hashimoto’s administration.

For instance, the Consumer Affairs Agency was created in 2009 as an organ affiliated with the Cabinet Office in order to focus on consumer issues which could not have been dealt with appropriately because they involved a number of ministries, such as choking accidents caused by mini-cup konjac jelly and food poisoning cases caused by frozen dumplings shipped from China.

The agency was regarded as a sweeping reform that would go down in history, launched by transferring related authorities and personnel from eight ministries and a commission — the Cabinet Office, the Fair Trade Commission, the National Police Agency, the Financial Services Agency, the Internal Affairs and Communications Ministry, the Justice Ministry, the Health, Labor and Welfare Ministry, the Economy, Trade and Industry Ministry, and the Land, Infrastructure, Transport and Tourism Ministry.

The Japan Tourism Agency, set up in 2008, also has as one of its goals the abolition of vertically-divided administrative functions to strengthen the government’s tourism-boosting efforts under the leadership of the commissioner.

These agencies are positioned as affiliated organs of ministries.

Japan’s administrative system is structured in a way that ministries are positioned under the Cabinet Office, with agencies such as the Financial Services Agency, the Japan Sports Agency and the Japan Tourism Agency coming under different ministries.

However, there is one exception. The Reconstruction Agency is ranked as being the same as a ministry.

This is because the agency was not created as an affiliated organ of a ministry, but as a body under the direct control of the Cabinet on the basis of a law to establish such an agency, having an authority to plan and coordinate policies from a position above ministries.

The digital agency should be in a similar position. It could start small and grow big, but there is a danger of the agency remaining too compact.

In 2007, when the Defense Agency, which had been a subordinate body under the Cabinet Office, was given a ministry status, the government explained that the agency had already been working in the same way as government ministries, with its tasks expanding from management of the Self-Defense Forces to getting involved in policy planning for a variety of issues.

The digital agency should be engaged not only in the management of administrative systems but also in policy making, and should be positioned to demonstrate leadership over ministries from the beginning, with the potential to become a ministry in the future.

Talented human resources

It is of course important where the digital agency will be positioned in the government, but more important is the people who will breathe life into the agency.

How should the agency be organized so that it can gather talented people from the private sector who will put their heart into digitalizing the nation for the coming era?

Prime Minister Yoshihide Suga (left) and digital reform minister Takuya Hirai launched an office established by the Cabinet Office and tasked with creating a digital agency, on Sept. 30. | POOL / VIA KYODO
Prime Minister Yoshihide Suga (left) and digital reform minister Takuya Hirai launched an office established by the Cabinet Office and tasked with creating a digital agency, on Sept. 30. | POOL / VIA KYODO

Making the agency a special zone for civil servants so that people from the private sector can work there free from bureaucratic restraints is one idea.

In Japan, around 70% of the people working for the information technology industry are hired by IT vendors and the rest employed by IT user firms.

While roughly 60% of such people in Western countries including the United States and Germany are working for user companies, human resources in Japan are concentrated in companies that are entrusted with developing systems.

The number of university students specializing in data science is also relatively small in Japan, meaning the nation lacks a sufficient environment to nurture globally competitive specialists who can create added value on their own initiative.

When I conducted an interview survey on the IT industry in Japan for a year up to August, many pointed out that the seniority system of companies is resulting in few people experiencing project management when they are young.

At this moment, there are very few people in Japan who can design world-class IT architecture.

The digital agency should invite such people and provide them with an environment in which they can work to achieve their goals without feeling constrained to follow the rules and practices of bureaucrats.

The government should take the establishment of the agency as a golden opportunity to broaden the base of human resources in the IT industry and give such people the chance to work on the nation’s biggest project by utilizing cutting-edge technology in a free development environment.

By having a team of people who can develop and operate systems within the agency and eventually being able to send out talented people to the private sector, the digital agency can create a growth factor for the nation and for human resources development in the long term.

The digital agency should not be pie in the sky. Now is the time to establish an effective digital control tower with clear objectives, think of how to organize it and who to hire without compromising, so that Japan won’t lose again in the global competition in an era of cyberpower.

Jun Mukoyama is a fellow at API. API Geoeconomic Briefing, provided by the Asia Pacific Initiative, an independent think tank based in Tokyo, is a series that looks into geopolitical and economic trends in the post-COVID-19 world, with a particular focus on technology and innovation, global supply chains, international rule-making and climate change.

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