Online Extra: Q&A with Japan's Masahiro Horie

The country's ombudsman is putting the government's famously wasteful projects under a microscope

Masahiro Horie doesn't look like a muckraker. The diminutive 53-year-old is dwarfed by his spacious office in Tokyo's Kasumigaseki, the heart of the country's bureaucracy. Yet Horie is quietly using his powers as Japan's ombudsman to change the way the government spends money -- and none too soon. Japan's national debt has grown to crisis proportions, and Prime Minister Junichiro Koizumi is trying to cut as much fat out of the budget as possible.

That's music to Horie's ears, whose writings borrow heavily from Al Gore's "reinventing government" campaign. For years, government inspectors evaluated public-works projects individually, failing to establish consistent guidelines or a database to compare cases. Horie, who earned a Masters in public administration from Syracuse University, changed that when he took over the Administrative Inspection Division of the Public Management Ministry in April, 2000. He asked his team of more than 1,000 inspectors nationwide to use quantitative tools to track the usefulness of public-works projects, which have long been notorious for squandering public funds. By systematically comparing forecasts, spending plans, and actual needs, Horie exposed wasteful plans to lengthen airport runways and collusive bidding practices for defense contracts.

BusinessWeek Tokyo Correspondent Ken Belson met Horie in his office, another model of efficiency: Boxes stacked neatly in the corner, a clean desk except for a small Japanese flag and a nameplate. They discussed the challenges of Horie's job. Following are edited excerpts of the interview:

Q: Why did you start using quantitative techniques to investigate government spending?

A: When I studied at Syracuse University, I was introduced to concepts like zero-based budgeting, cost-benefit analysis, and other tools used by [former U.S. Defense Secretary] Robert McNamara. I wanted to introduce systematic evaluation into the government after I returned from Syracuse so that the general public could clearly see the final results of government projects and analyze the data used.

Q: Before you started establishing quantitative benchmarks for spending projects, how did investigators do their jobs?

A: They used to be done on a case-by-case basis. The inspectors judged whether a project was in violation of existing policies but didn't look to see how many similar cases there were and how they were resolved.

But for effective evaluations, we need broader, more objective data that can become the basis for discussion. We use quantitative analysis for projects that stretch across multiple agencies, not just one Ministry. We want to establish benchmarks since there's no comparable data on public spending. We assess the cost performance of projects and examine their necessity and priorities. We also push other agencies to use quantitative data. There are a lot of programs without any quantitative surveys [to back them up].

Q: How do you decide whether a project is worth investigating?

A: Some ideas for investigations come from citizens. We base our decisions to investigate on the amount of work it will take and the number of complaints we get. Local residents who complain about government services are referred to one of the 5,000 experts who are commissioned to do field work for us. There are about 3,000 towns in Japan, so every town has at least one expert -- usually Buddhist priests, teachers, or government inspectors. These people are more adept at counseling and translating government language into colloquial language. But we also accept complaints in writing and, starting two years ago, by e-mail.

Q: The scope of your investigations is huge. How many people work for you?

A: In Tokyo, there are 161 administrative counselors and investigators, and in the regional-evaluation bureaus, there are 961 people, or about 10 to 70 per office. Each team in Tokyo has three to four people and can complete two to three projects per year. They look at regional-development programs, resort developments, local governments, welfare programs, and projects for the disabled. In all, we can work through 20 to 30 projects a year.

Q: Why has it taken so long for Japan to systematically analyze the money it spends?

A: [The] Japanese love to set goals and work hard to meet them, but they rarely evaluate the cost. In Japan, we evaluate group behavior and don't assign individual blame. Japanese bureaucrats also aren't used to setting practical goals. They set goals like "no more traffic accidents" even though they're unattainable. It's better to set achievable goals. We want to get rid of roads to nowhere and useless "make-work" projects. That will result in less spending and better efficiency, performance, and customer satisfaction.

We have to start asking: "What's the benefit?" And to do that, we need objective data. Then, politicians will need justification before giving the green light to projects. It will make them more accountable. A lot of highly political decisions go into budgets, but that doesn't mean we shouldn't make rational estimates [of their impact].

Q: What happens with your investigative findings?

A: The most difficult thing to reform is a Ministry. You have to tell the bureaucrats there to change rules or regulations. But for them to do so, they will have to admit they made a mistake and will likely be criticized. Also, starting in April, 2001, citizens gained greater access to government information because of new disclosure rules, so Japanese can use the data for their own needs. Our evaluations can also be used in budget or parliamentary debates.

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