~A
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TheEarlyStageoftheTransformationof
NationalUniversitiesintoExecutiveAgencies:
ASteptowardPrivatizationofJapanese
HigherEducationInstitutions
MasateruBaba
Abstract Thetransformationintoquasi-governmentagenciesofJapanese nationaluniversitiesbecamearealisticissuein1999becauseofstrong publicdemandforreducingbureaucracy.In2004,nearly100national universitieswereformallytransformedintoexecutiveagencies,subjectto reformalongwithothergovernmentalinstitutionssuchashospitalsand researchcenters.ThemovementwasmodeledafterEnglandwhohad madedrasticchangeundertheleadershipofMargaretThatcherinorder toincreaseefficiencyandcutdownbureaucracy.Thisexploratorystudy focusesonthelegal,financialandpersonnelpreparationsneededtodeal withtheramificationsofsuchchange.1.Introduction
Theformationofquasi-governmentagenciesasthelegalframework ofnationaluniversitiesbecameacontroversialissueonthenational agendabybothuniversityprofessorsandpoliticiansin1999.The conceptofexecutiveagenciesdidnotoriginateinJapan,butwasborrowedfromEnglandandemergedasacompromiseforfulland
immediateprivatizationofJapanesenationaluniversities.Theoutcry fromthegeneralpublicforreformingnationaluniversitieswasstrong, butoppositiononthepartofprofessorswasalsostrong,and,asa result,bothpartiessoughtamiddlegroundtomitigatethegapbefore fullimplementationofprivatization.Althoughtheideaofprivatization emergedfordifferentreasonsindifferentcountries,theconceptreceived widespreadattentionthroughouttheworldfromthe1980s.Each countryaddressedthechallengeinitsownway,andvariousformsand structuresofprivatizationemerged. Thecentralargumentforprivatizationofnationaluniversitiesin Japanwasthattheirmissionhadbeenover.Itwasnolongermorally orlegallyvalidtogivespecialadvantagetonationaluniversitieswith taxpayermoneyinthecurrentJapanesehighereducationmilieu. Privateuniversitiesrepresentednearlythree-fourthsoftheoverall nationalenrollmentatthattirneandtheirstandardshadimproved significantly.Infact,someprivateinstitutionswereequaltotoprated nationaluniversitiesintermsofresearchandteaching. Anothernotableargumentwasthatbureaucraticreformmustinvolve nationaluniversitiesbecausetheywereanintegralpartoftheJapanese bureaucraticsystem.Theywereoftenconsideredinneedofreformdue tooutdateduniversitygovernanceandthelackofcollaborationwithTheEarlyStageoftheTransformationofNationalUnlversitiesIntoExecutiveAgencies: ASteptowardPrivatizationofJapaneseHlgherEducationInstitutions industry,whichmanypoliticiansconsideredofvitalimportancetothe futureprosperityofthenation. Inessence,thefollowingthreefundamentalissuesareidentifiedand seriouslydiscussed: 1.Thelegalityofthenationaluniversities 2.Theefficiencyoftheiroperationsasacadernicinstitutions 3.Thequalityofhighereducationinstitutionsbasedonglobalstandards
2.BriefHistoricalReview
InMarch1997,theNationalReformCommissiononBureaucracy officiallyrequestedthattheMinistryofEducationlookintothe reformationofnationaluniversitygovernance,specificallytoexplorethe possibilityoftransferringthejurisdictionofuniversitiesfromthe MinistryofEducationtomunicipalgovernmentsorpossiblytonon-profit privateorganizations.Asexpected,thereactionswerenegativefrom theMinistryitselfandtheAssociationofNationalUniversitieswhich wasformedbytheprofessorsofthenationaluniversities.Theyfelt thattheautonomyandindependenceoftheinstitutionsmightbe jeopardized,andbecauseoftheirreluctance,thereformrequesthad beenleftunaddressedforaconsiderableperiodoftime.Reflectingthis non-committalattitude,thereportcompiledbythecabinetinJanuary, 1999,simplystatedthattheincorporationofnationaluniversities,and possibletransferofuniver.sityjurisdictionwouldbedecidedbytheyear 2003. However,inApril1999,thecabinetcouncildecidedtotakeanother drasticmeasure,inwhichareductionofthenumberofgovernment workerswasdelineated;about25%ofthetotalgovernmentalworkforcewouldbereducedby2010.Theeffectofthisdecisiononnational universitieswouldbecomeeminentprovidedthattheLawpassedin
Accordingtothecommission,thereductionwouldbe
2000. implementedthroughdecentralization,privatizationandabolishment.The impactofthisseriousproposalwassignificantbecauseallprofessorsof nationaluniversitiesweregovernmentemployeesandweresubjectto theeffectsofdownsizing. Facedwiththissituation,theMinistryofEducationexaminedall possibilitiestoevadetheeffectsofdownsizingincludingmaking exceptionsforuniversityprofessorstosecuretheirpositionswhileall othergovernmentbrancheswouldbeaffectedbydownsizing.Even thoughthepercentageofprofessorsintheoverallgovernmentwork force(16%)wassmall,itwasunlikelythattheywouldbeexemptfrom thenationalagendaofdownsizing.Theyhadtofindotherjustifications forkeepingtheirprivilegeoverothergovernmentbranches. Asaresult,theycameupwiththeideaoftransferringnational universityjurisdictionfromtheMinistryofEducationtoindependentnon-governmentalagenciesasameansofprotectionandcompromise.This conceptwascalledtheexecutiveagency.Theconceptwasintroduced in1997whenapoliticalmissiontraveledtoEnglandtostudythe efficacyofpublicservice,andwasusedbytheministrytoprotect positionsinnationaluniversities.TheMinistryofEducationwasaskedbytheCommissionto
respondbyJuly2000,astowhetherornottheywouldacceptthe
conceptofexecutiveagency.Incidentally,theMinistryofPostsand Telecommunicationswhichconstitutes35.5%ofthegovernmentwork forcehadalreadydecidedtocreatequasi-governmentalagenciestoavoid thereduction.Inaddition,theMinistryofFinanceandtheMinistryofTheEarlyStageoftheTransformatlonofNatlonalUniversitiesIntoExecutiveAgencies: ASteptowardPrivatlzationofJapaneseHigherEducationInstltutions HealthandWelfareemployedasimilarconcepttosecuretheworkplace andintegrityoftheirorganization.Aspredicted,theMinistryof Educationwouldfollowthesamepattern(Fujita,1999).
3.SchemebehindJapaneseBureaucraticReform
Itisusefultoknowthatthedrivingforcebehindthecurrent Japanesebureaucraticreformanditsdirectionwastherulingpoliticalpartyofconservatismandbusinessgroups.Theywereinfull
agreement,andunanimouslysupportedthedownsizingofthe
government,andagoalof25%workforcereductionin10years.Their mainstrategywastodecentralizethegovernmentandtodelegatemore administrativefunctionstolocalgovernments.Also,theystrongly favoredlettingtheprivatesectortakechargeoverthepublicsector. Theproponentsofreformwerewillingtotransfergovernmental authorityandsanctionprivatesectormanagementifnecessary.They alsobelievedthatcompetitionwasbetterthancontrol;prosperitycame withfreeenterprise,andthatitwasnecessarytobecomeaplayerin globalcompetitionbygettingaheadinscienceandtechnology. Therefore,educationandschoolsneededtobemodifiedtoservethis purpose(Association,1999). TheJapanesebureaucraticreformmovementhadalreadygained momentumwithinthepoliticalareabythenandwasabletopassalaw tochangethebasicministerialstructure.ThestructureoftheMinistry ofEducationwasredesignedandresultedinitsunionwiththeScience andTechnologyAgencyasthenewMinistryofEducationandScience whichfocusedonthelinkbetweenuniversitiesandindustriesinthe fieldsofresearchandscienceandtechnology.4.ExecutiveAgencies
Thelawsthatauthorizeexecutiveagenciestotakeontheoperation ofvariousgovernmentalfunctionswaspassedinJuly1999.Thelaws haveabroadscopeandtheymandatethetransformationof89different governmentalbranchesintoexecutiveagencieseffectivefromApril2001 to2004(Fukuie,1999).However,itwasnotdefiniteatthatmoment whethertheoperationofnationaluniversitieswouldbeoneofthem. Thefinaldecisionwasmadeshortlyafter. Thebasicconceptbehindcreatingexecutiveagencieswasthe separationofplanningandimplementation.Inshort,thegovernment wouldcontinuetoholdtheplanningfunctionandtheexecutiveagencies wouldexercisetheimplementation.Accordingtotheguidelinesof executiveagencieswhichmightbeadoptedfortheoperationof universities,thefollowingchangesweretotakeplace(Association, 1999): 1.Presidentsandauditorsofuniversitiesweretobeappointedbythe MinisterofEducationandScience. 2.Agencieswererequiredtopresentamediumrangeplan(3-5year plan)totheMinistry,andtheformatoftheplanistobeapproved bytheministry. 3.Evaluationsofschooloperationweretobemadebytheevaluation committeeestablishedbytheministry. 4.Universitiesweretoadoptstandardbusinessaccountingprocedures, whichincludeabalancesheettoshowtheprofitandlossofthe agenciesasindependentaccountingunits. 5.Universitiesweretoreceivemoneyfrornthegovernmentbasedupon theirbudgetplanwhichisdirectlylinkedtotheirmediumrangeTheEarlyStageoftheTransformatlonofNatlonalUnlversitiesintoExecutiveAgencies: ASteptowardPrivatizationofJapaneseHigherEducationInstltutions plan. 6.Thestatusofprofessorswasexpectedtobechanged,buttheywould remainpublicemployeesforthetimebeing. Asstatedearlier,theconceptofexecutiveagencywasborrowed fromEngland,buttheJapanesegoalsandrealityweredifferentinthat thereformersweremoreinterestedindownsizingthegovernmentand reducingtheworkforceofgovernmentemployeesthanimprovingthe qualityofservice,whichwasthecaseforEngland.However,there weresomecommonelementssuchasefficiencyanddiscretion.For example,theEnglishagenciesweregivenmorefreedomandauthority inexercisingtheiradministrationtoimprovetheefficiencyofoperations. ThissituationwasthesameforJapanesetotheextentthatmore freedomandoptionsweregiventotheinstitutionsbyshiftingtheir jurisdictionfromdirectgovernmentcontrol(Fujita,1999;Sakakibara, 1998a).Inotherwords,onceuniversitieswereincorporated,they wouldthenbeabletoabidebytheirownprinciplesandguidelinesand wouldnotbesubjecttostringentgovernmentalcontrol.Therewasto benochangeintheemploymentstatusofJapaneseprofessorsforthe timebeing;butchangemightoccurinthefuture,andnobodyknewfor surewhatwouldhappeninthenextfiveyears.Butitwascertainthat thedirectiontocreateexecutiveagencieswasset,anditwouldbecorne reality.
5.ControVersies
Fromtheverybeginningofthereformmovement,alargenumber ofquestionswereraisedbyopponentsaswellasproponentsregarding theautonomyofuniversitygovernance.OnSeptember20,1999,Mr.H.Nakasone,theMinisterofEducation,summarizedhispositiononthe executiveagencies,whichheenthusiasticallypromoted:"Inorderfor universitiestohavesufficientautonomyandself-governingability,they mustbeincorporatedandhavediscretionarypowerwithintheirown legaliramework.Traditionally,nationaluniversitiesweregranteda broadrangeoffreedomandresponsibilities,buttheyneededmoreif theyweretoexercisetheiroptionsandworkunderadiversifiedplan, andforthatpurpose,beingincorporatedasexecutiveagencieswouldbe appropriate(MinistryofEducation,1999a)." Anotherareaofcontroversywasthepromotionofdiversityand individualityoftheinstitutions.Theproponentsoftheagenciesasserted thatthemorediscretionarypowertheyhad,themoreindividualitythey woulddemonstratebecausetheycoulddesignandexpresstheirideas withoutthefearofoversightandrejectionbygovernmentalauthority. Theseargumentswereabstractandcontainedmanyopenquestions. Thechanceofreachingaccordamongdissidentswassrnall,andmost likelytheargumentswouldcontinue.Therealcontroversieslayinthe followingconcreteissues: 1.Employmentstatusofprofessors Legislaturepassedtheexecutiveagenciesproposaltomaintainthe currentstatusofprofessorswhichmeansthattheprofessorswill continuetobepublicemployees.Manyreformproponentsthoughtit wasanunfavorablepoliticalcompromise,andthatitwoulddiminishthe valueofthereformitselfbecauseprofessorsshouldnotbepublic
employeesbutbenon-publiconesintheoryasoneoftheaimsof
bureaucraticreformwastoreducethesizeofpublicemployees. Nonetheless,thelawswerepassedlargelyduetothesupportand mitigatingeffortsbytheMinistryofEducation.TheEarlyStageoftheTransformatlonofNationalUnlversitlesintoExecutiveAgencies: ASteptowardPrivatizationofJapaneseHigherEducationInstitutions 2.Structureofmanagement Executiveagenciesclearlyintendedtochangetheorganizational structureoftheuniversitiesfromanacademictoabusinesshierarchyin thattheusualflatstructurewastobereplacedbyafunctionalvertical
structure.Theproposalgavemoreauthorityandpowertothe
presidentoftheuniversityandestablishedaboardoftrusteesasanessentialpartofthemanagementbody.Inthereformplan,the
presidentwasnotchosenbytheprofessors,butbytheboard,andthe boardmemberswerebasicallychosenfrombroadsegmentsofthe society,notjustuniversities.Consequently,themainqualificationofa boardmemberwasshiftedfromacademictomanagerialskills.Inturn, theboardtendedtoseekcandidatesfromothersectorsthanacademia. Obviously,theprofessorsdidnotlikethispractice. 3.SeparationofplanningfromimplementationThedivisionofuniversitygovernanceintoplanningand
implementationwasnotpopularwithprofessorsbecausetherewas ambiguityinregardtotheboundarylinethatseparatedplanningfrom implementation.Althoughtheoutlinesof.theagenciesstipulatedthatthemediumrangeplanwastobegeneratedbytheuniversityand
submittedtotheministryforreviewandapproval,itleftmanyquestions astowhohadtheauthoritytomakefinaldecisionswhendisputes arose,andtheavailabilityofrecourseincasesofdiscrepancy. 4.Evaluationcommittee TheinstallationofaneutralevaluationcommitteeofuniversitieswithintheMinistrywaswellintendedbutnotwellacceptedby
professors.Thelaw-makers'intentionwastovitalizetheacademic communitiesbybringinginmorecompetitionandprovidingmore incentivesandrewardsforacademicaccomplishments.Theevaluatio~lcouncilwaslaunchedinApril2000.Professorsclaimthatacademic achievementsarenoteasilymeasuredintheshortterm.Theyalso claimedthatbasicresearchsuccess,whichwastheprimaryobjectiveof universities,wasdifficulttomeasureintermsofefficiencyand productivity.Theunderlyingconcernbytheprofessorswasthatthe evaluationitselftendstofocusonquantifiableaspectsandneglectsthe fieldsofliteratureandhumanities,wheresuccessismuchmoredifficult tomeasurethaninscienceandtechnology. 5.Financialplan Thereformcommission'sdecisiontoadoptstandardbusiness accountingproceduresandtoreplacethepublicsector'saccounting practicesgeneratedanapprehensiveresponsearnongadministratorsof
universities.Mostofthepeoplewhowereinchargeofschool
accountingwerenotfamiliarwitheventheconceptofdepreciationand didnotknowhowtocreateabalancesheet.Accountingatnational universitieswasvastlydifferentfromthebusinesssectorinthatit lackedaccountability.Therevenuesoftheuniversitycamefromthe nationalbudgetandfundswereallocatedbytheMinistryofEducation. Asaresult,universityadministratorswereonlyconcernedwiththe expendituresideofaccountingandhadverylittletodowithbudget planningorraisingmoney.Althoughthedesignersoftheexecutive agenciesdidnotintendtoimposeaself-sustainingfinancialoperation fromthebeginning,itwastheirultimategoalthateveryuniversity wouldhavefinancialindependenceandbeaccountableforitsown financialoperations. Therewasanadvantageassociatedwiththeagencies'financialplan. Universitieswouldhavemoreflexiblediscretionaryfundsavailableto usefortheirownagendas.Therefore,oncethebusinessaccountingTheEarlyStageoftheTransformationofNationalUniversitlesIntoExecutiveAgencies: ASteptowardPrivatizationofJapaneseHigherEducationInstitutions systemwasestablishedtheywouldnothavetogothroughdetailed auditingorgovernmentinspections.Forexample,thesalaryscalesset foragencyemployeeswereuniqueandtheywereexemptfromstandard governmentregulation,whichmeanttheycouldcreatetheirown incentivesandgiverewardstopeoplewhodemonstratedexcellent performance.Thefinancialplanoftheexecutiveagencieswaspivotalin thatitwastransitionalandresponsibleformanyfutureimplications.It wasachangefromprocess-orientedaccountingtoresult-oriented accounting,andmostacademicsandadministratorswereskepticalabout thenewaccountingsystemslinkedtoreform.
6.ConcludingRemarks
Themajordrivingforcebehindtheexecutiveagenciesfornational universitieswasundoubtedlytheNationalReformCommissionon Bureaucracy.Theirobjectivesweretwofold:onewastomakeclearthat thegovernmentwasresponsibleforpublicservicessuchasdiplomacy, maintainingpublicpeace,nationaldefenseanddevelopmentofnew energysources.Theotherwastoreduceresponsibilityofgovernment bytransferringvariouspublicfunctionstothehandsoftheprivate sectorintheinterestsofefficiencyandbetterservice.Theyoriginally aimedtofulfillthelatterobjectivebyprivatization.Iftheycouldnot achieveprivatization,thentheywouldresorttotheirsecondbest alternativeofexecutiveagencies. Plannersoftheagenciesbelievedthatthiswasarealisticstep towardprivatizationofnationaluniversitiesandthatitwouldenhance collaborationbetweenuniversitiesandindustry.TheNationalEconomic StrategyCouncilwhichwasformedundertheprimeministerstronglyassertedthatcooperationbetweenacademicinstitutionsandindustrywas essentialforthefutureprosperityofthenation.Theycontendedthat makingnationaluniversitiesmoreflexibleandefficientbyremoving bureaucracythroughthischangeofjurisdictionwasworthwhile. Theauthorofthispaperagreesthatprivatizationwillcertainly precipitatemorecollaborativeworkwithindustriesespeciallyinthefield ofinformationtechnologywherecreativethinkingandinitiativearemost neededinordertokeepupwithworld-wideinnovations.Theauthor alsobelievesthatprivatizationofuniversitiesisalogicalextensionof whatishappeninginthecurrentmarketplace.Thebenefitsand rewardsaregivendirectlybacktotheindividualswhocontributetothe improvementofprojectsandenvironment,andthisistheareawhere mostprofessorsareconcerned. Theinstallationofthirdpartyevaluationteamswasoneofthevital functionsoftheagenciesandinturn,theallocationofmoneywouldbe
basedupontheoutcomeoftheevaluations.Thiswaswhatmost
professorsdidnotlikeandshowedtheirreluctancebecausetheyhad somedoubtsaboutaspectsofresearchandteachingassessmentand foresawsomeincreaseofcontrolbythenewframeworkofagencies, whichwasalegitimateconcern. Atthesametime,publicsupportofnationaluniversitieswas erodingasseenbytheincreaseinpublicsentimentforprovidingless taxmoneytonationaluniversities.Itillustratedthechangingroleof thenationintermsofprovidinghighereducationforitscitizens.It wasanewrelationshipinwhichtheroleofgovernmenthadchanged fromplayerinthearenatofacilitatorofthegame.Itwassomewhat ironicthatinthepast,governmentsupportedhigherinstitutionsby beingmoreinvolved,butnowithadbecomelessinvolvedinordertoTheEarlyStageoftheTransformationofNationalUniversitiesIntoExecutiveAgencies: ASteptowardPrivatizationofJapaneseHigherEducationInstitutions promotemoreefficiencyattheuniversities.Neavedescribedthis changeofgovernmentasatransferfromthebureaucraticstatetothe evaluativestate(Neave,1988).Thisdoesnotmeanthatthecentral governmenthasloststrengthinitspower,rather,itmaintainsthe strongleadershiptoplanandexecutewithoutdirectinvolvement.This
changecanbesummarizedasadepartureiromabureaucratic
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