Introduction

I visited Australia, following a visit to Europe last year, as part of my tour to countries advanced in the area of administrative reform. Australia has been enjoying economic growth in recent years. That growth is founded on people's efforts to promote structural reform.

The momentum for these reforms was started by the then Finance Minister, Mr Paul Keating (who later became Prime Minister). Mr Keating famously commented in May 1986 that, "Australia will become a banana republic if it does not promote domestic reform now."

This term "banana republic" was not referring to the clothing label, but to a small country in Latin America. The implication was of a developing country that can only produce bananas. This is actually not a complimentary phrase.

However, a sense of crisis in Australia at that time led the then Finance Minister to use this phrase. 20 years have passed since then. I went to have a look at the current situation in Australia.

by Nobuteru Ishihara,
Minister of State for Administrative and Regulatory Reform

My visit to Australia was demanding. In the extremely limited time of only five days, I met nine key interlocutors in five cities. When I left Japan, the air temperature was five degrees. The briefing material said the temperature in Brisbane was 38 degrees. I assumed it was a misprint, and checked with my secretary several times, but he said it was true. When I arrived at Brisbane, in fact, the temperature was actually 43 degrees. Thanks to the low humidity the heat was not unbearable, but the strong sunshine was overwhelming.

On the first day, I visited Brisbane Airport and Energex Ltd.
Run by the Brisbane Airport Corporation, Brisbane Airport is partly owned by a company that operates Amsterdam Airport Schipol, itself a good example of privatisation. As with privatised airports in Europe, Brisbane Airport was filled with vitality.
In particular, the large number of retail shops caught my attention.

You could sense that each staff member at the airport was aware that not only the company's profits, but also their own salary depended on how much custom they could attract.

Energex is an energy company in charge of electricity and gas in Queensland. It was corporatised in 1993, under a law covering the corporatisation of government-owned companies.

I met the Queensland Treasury official responsible for the privatisation of state government assets and, to my surprise, was told that, "The Queensland State Government does not support privatisation." However, I found out later this concept of "privatisation" differed between Australia and Japan.

The definition of privatisation in Japan is to turn an organisation into a stock company. As a matter of course, in many cases, the government will initially hold all of the stock. To differentiate it from an ordinary private company, we refer to such a body as a "special corporation." When the Government sells all the stock, this special corporation is deemed "fully" privatised. In Australia, privatisation means, "to open stock to public sale and totally eliminate government controls." In other words, "privatisation" in Australia is equivalent to "full privatisation" in Japan.

In Australia, "public corporations, that is, state enterprises, are public because they fundamentally require involvement by the state. Thus, public corporations are not suitable for full privatisation (i.e., total loss of involvement by the state).

A typical case is Energex in the energy industry. Given its mission to equitably provide electricity and gas services to every citizen, the company still maintains some government involvement and is not fully privatised. However, in terms of competition, I was told that the company is on an equal footing with other private companies.

After visiting Sydney on Monday, I flew to Adelaide and had a meeting with the Minister for Foreign Affairs, Mr Alexander Downer.

Mr Downer, who was my host during my stay in Australia, has visited Japan many times, and is known as pro-Japanese. He showed strong interest in the outcome of Prime Minister Koizumi's reforms. He said that, although Australia had great expectations of Prime Minister Koizumi's leadership, he understood from his own experience that there would be big hurdles to overcome in carrying out reform.

Mr Downer's comment that, "A nation is a business. It will decline once you stop reforms," was most impressive. However, with a stagnant Japanese economy, Mr Downer was concerned about whether Prime Minister Koizumi would be able to maintain sufficient public support to complete his reform program.

As a politician with considerable knowledge of Japan, Mr Downer candidly expressed Australian Government's current of thought-wavering between expectations of Prime Minister Koizumi and concern over the Japanese economy.

The next day in Adelaide, I met with South Australian Minister for Transport and Urban Planning, Ms Diana Laidlaw.

Ms Laidlaw was a strong advocate of the privatisation of Adelaide's public transport system. When asked about the goal of privatisation, she said, "As long as the bus system remains public transport, we should not ignore it just because it has been privatised. It is important that the government continue to monitor the system appropriately." She also advised that, "To fight against the inherent resistance, you should bring the media on side, and demonstrate to the public the equity of the new system."

The toughest issue appeared to be labour/management relations. However, I was told that the unions were ultimately co-operative, once they understood the government's determination to privatisatise and saw that privatisation would benefit them.

I also met with the representatives of the privatised "Serco" bus company and had the opportunity to ride one of their buses.

What surprised me was the "O-BAHN" system, originally from Germany. There are small wheels on the sides of an ordinary shuttle bus, which allow it to move onto a special track. Once on the track, the driver does not have to operate the steering wheel. When I checked the speedometer, we were travelling at 100 kilometres per hour!

Introduced in 1986, the construction cost of this system was half of the cost of building a railroad. It was a very interesting system. With improvements, we may some day be able to drive ordinary cars on highways without using the steering wheel; a childhood fantasy become reality.

To take the bus, it costs AUD two dollars, which is less than 200 yen. Passengers can travel for up to two hours. In addition, if you miss the last bus, a smaller bus will take you back home from the terminal.

Although it is still subsidised by the state government, I was impressed by the fact that the public transport system is run from the standpoint of the users.

I also met with Australia Post Managing Director, Mr Graeme John.

Since becoming a public corporation, Australia Post has recorded large profits, which have contributed to state coffers. The Managing Director asked me: "When Japanese from the Ministry of Posts and Telecommunications came here to study, we exchanged views on privatisation many times. We even held seminars in Japan. Has that achievement been reflected in Japan? Is the Ministry still not yet a public corporation? Why?"

Post offices in town were like fancy convenience stores; they even sold post cards and drinks. Some of the post offices were privatised.

However, postal services in Australia have not been entirely privatised - the ordinary mail service is a virtual monopoly. This is due to the fact that the cost of mail under 250 grams is set at AUD 45 cents for any destination across the nation. If a private company were to undertake the same kind of service, the postage would have to be four times higher.

However, the Managing Director explained with pride that other services are basically open to private companies and making great profit in a competitive market. One of the Japanese users now living in Australia said, "It is very convenient. However, I was surprised when I went to a post office in Japan to use a fax and was told that I could not. Japanese post offices should change."

City Link is a company running what we would call in Japan a metropolitan expressway. It is in charge of 22 kilometres of roads in total, including a beltway in Melbourne, which was constructed using private funds, in addition to roads connecting to suburbs.

To my surprise, these roads are completely computerised toll roads. You cannot use the road unless you have an electronic transponder, equivalent to the ETC system in Japan. Tourists from other states who do not have this electronic system must buy a one-day ticket beforehand, or call City Link within 12 hours after using the expressway to pay the bill. There is no tollbooth-you just drive through a gantry. There is also no bar to block cars as there is in Japan. The number plates of offending cars are scanned automatically and reported to the police. The expressway was opened in 1999 and will be placed under the control of the city after the expiration of a 34-year contract.

The transponders are leased to customers free of charge. However, you must pay toll fees in advance. Customers must pay AUD 50 dollars, then each time the road is used, the toll will be automatically deducted from your 50-dollar account. The maximum toll is AUD 4 dollars and 80 cents, or approximately 300 yen. When an account drops below 25 dollars, a warning buzzer will automatically sound and additional funds can be added to the account.

A member of the public who was actually using the system said, "Since expressways are usually free, I was reluctant to use it at first. However, because it is really convenient and we do not have traffic jams any more, everyone is happier now."

The next day, I went to Sydney to meet the Governor of the Reserve Bank of Australia (RBA), Mr Ian MacFarlane. As soon as the meeting started, Mr MacFarlane fired questions at me concerning the reform of special corporations in Japan.

Especially striking was his strong comment that, "The RBA is actually a public company. However, it is competing on an equal footing with private companies. The problem is not the form of the organization-what is required is competition."

However, I could see that he had been having a rough time. As the Governor of The Bank of England, Mr Eddie George, said, "The job of a person in charge of administrative reform is to take the blows, and the same applies to the Governor of the RBA. We should make an 'international punching bag' club." The situation seems to be the same everywhere.

Although it was a very short stay, my honest impression was: "If they can do it, why can't we?" I felt the same way when I visited Europe.

The steady growth of the Australian economy is without doubt founded on people's efforts to promote structural reform. Structural reform and privatisation are actually nothing new-so Japan cannot say, "We are the first country to do it!" There are many nations and systems around the world that we can look to as role models. As the people I met said, "As long as the government is determined to reform, and the public supports the government, reform will be successful."

Whenever I explained the Japanese situation, everyone in Australia asked me, "why are there politicians and bureaucrats against reform when the Prime Minister is giving a clear, strong message with strong public support?" The situation in Japan seemed difficult for them to understand. In addition, there was a strong expectation that Japan would succeed with reforms and then make an economic recovery.

As I also play a role in the Koizumi-led reform program, throughout my visit I strongly felt a sense of responsibility about the need for reform.