[Opinion] Advice From Heizo Takenaka

In the 1980s, OECD member countries pushed for privatization of state-run enterprises. This is to cut off support to state-owned organizations, which siphoned off taxpayers’ money, and to revive the capital market. Privatization drives slowed down in the 2000s, but Japan’s privatization initiative did not lose steam. Rather it relentlessly revamped state-controlled organizations. In effect, privatization runs in Japan’s history. The “spirit of privatization,” which underlies the modern-day privatization movement, began in the 1880s when Japan was in the mid-Meiji era. This spirit lived on a “small government” philosophy advocated by Yasuhiro Nakasone who was elected Japan’s prime minister twice and served from 1982 through 1987. Former Prime Minster Junichiro Koizumi, who was in office from 2001 to 2006 as two-term prime minister, also inherited the spirit with his slogan “from the government to the private sector.”

When Koizumi came into office, Japan’s economy was in its worst. As Japan suffered from a sustained economic recession, widely known as the “lost decade,” some economists even presented a grim forecast that Japan would at last trigger another Great Depression. In this unfavorable situation, then “queer” Prime Minister Koizumi, who was at the fore of reform drives, made a splash by appointing Keio University economist Heizo Takenaka as minister of state for financial services.

When Koizumi gave a letter of appointment to Takenaka, he said, “A big battle will occur, won’t it?” The battle was the privatization of Japan Post. Takenaka successfully spearheaded the privatization process and also won battles in restructuring the government, which included deregulation and reduction in the number of public officials.

What is the key to this success? “In achieving reforms, a national leader’s role is most important. Quick decisions and prompt enforcement are needed,” said professor Takenaka who left office along with Koizumi and returned to Keio University. He added that opposition from the officialdom is inevitable, so the government should inform the public of the needs for reform and elicit public support.

President Lee Myung-bak made the public sector reform one of his top agendas. But even before setting the reform program in motion, he bogged down. Lee asked advice from Takenaka, who also serves as an international advisor to the president, on Wednesday, saying, “I am having a hard time because Korean people do not welcome reforms.” To this, the Japanese professor answered, “In implementing policies, there is something to be done first. When Japan pushed privatization, the government made public all the procedures.” As he said, the key lies in getting understanding and consensus from the public. The Lee administration must learn its lesson from his advice.

Editorial Writer Hong Kwon-hee (konihong@donga.com)