Transcript Abenomics: The Missing Arrow: Promoting Growth through ICT

Abenomics:
The Missing Arrow
Jim Foster
Graduate School of Media and Governance
Keio University
Director, Keio International Project for the Internet & Society
What is the Third Arrow, Mr. Abe?
The Promise of Abenomics
• The return of the LDP and the election of PM Abe has raised hopes that
the Japan’s economy is on the mend
• Some encouraging signs: stock market up 57 percent in 2013 fueled by
nearly 25 percent depreciation of the yen
• The three arrows: quantitative easing, expansive fiscal policies and
structural reform
• Two of the three arrows are in play, but what about the third (structural
reform) – without it serious questions as to the sustainability of Abe’s
policies
• Issue is particularly relevant for reform in the ICT sector, because of its
central importance to future economic growth
“The Internet is the driver of future G-20 growth”
Boston Consulting Group 2012
• Internet economy in G-20 countries forecast to grow at an annual rate of
8 percent through 2016
• Globally, Internet users are estimated at 3 billion by 2016 and the
Internet Economy will be worth 4.2 trillion dollars (and probably more)
• Internet will constitute 12 percent of UK GDP, 8 percent of Korea GDP
and nearly 7 percent of Chinese GDP
• Contribution of Internet to Japan GDP forecast to be 5.5 percent, just
slightly above the 5.3 percent average for G-20 countries
• Will Abenomics change this dynamic and make a Japan a leader, not a
follower?
WEF Ranking: A Decade of Steady Decline
WEF Network Readiness Index Rankings
2003
2004
2005
2006
2007
2008
USA
Korea
2009
2010
0
5
10
15
20
25
30
Japan
Singapore
UK
2011
2012
2013
World’s Most Advanced IT Nation?
• Abe administration released its ICT strategy last year; goal is to make
Japan the “world’s most advanced IT nation” by 2020, including the
setting of numerous KPI
• Contains a potpourri of proposals to improve utilization of ICT in disaster
preparedness, government services, agriculture, energy, healthcare,
broadcasting (4K and 8K), energy management, education (one computer
for each student) and work at home.
• The first plan in nearly a decade to seriously address IT governance
issues: strengthening role of CIO, reforms to government procurement
and giving new roles to the IT Headquarters in the Cabinet
• But, will it work and does it go far enough – at just 32 pages, it is rather
“light” reading
Great Competitive Infrastructure
Network Readiness Index
Japan
USA
Korea
Singapore
UK
Mobile Cellular Tariffs
136
52
84
28
91
Fixed Broadband Tariffs
21
23
68
72
18
Households with Internet
Access
15
24
1
11
8
Mobile Broadband
Subscriptions
3
8
1
9
17
Still Vibrant Business Sector
Network Readiness Index
Japan
USA
Korea
Singapore
UK
Firm-level Tech Absorption
4
18
8
10
23
ICT Patents
2
9
6
8
18
B to B Internet Use
7
8
2
20
4
B to C Internet Use
7
3
2
30
1
A Failure of Internet Governance
Network Readiness Index
Japan
USA
Korea
Singapore
UK
ICT for Basic Services
42
29
6
3
17
Internet Access in Schools
43
24
10
6
8
Govt ICT Vision
46
31
15
1
25
Govt Use of Technology
48
15
33
2
45
ICT Legal Framework
42
20
15
2
5
The Problem of Internet Governance
Ten Recommendations to
Improve Japan’s Internet
Governance
1) Deregulation and Convergence of
Telecom and Broadcasting
• Undertake a full-scale rewrite of the telecom and broadcasts law
along the lines taken by other major OECD economies
• Bring to a conclusion to the debate over NTT’s future
• Reform of the legal structure underpinning IT governance has to
be the starting point for the Abe government’s efforts to
strengthen the base of Japan’s emerging Internet Economy.
• Right now, no one is in charge and no one is accountable.
2) National Communications Commission
• Create a National Communications Commission, borrowing from
the experience of the UK’s OpCom and Korea’s KCC to strengthen
transparency and regulatory consistency in administration of the
ICT sector.
• Consolidate ICT promotion authority in a “Ministry for the Digital
Economy”, establishing coherent leadership over the bureaucracy
and bringing strategic accountability to government investment in
ICT; a Japan Nellie Kroes!
• Neither the CIO nor the Cabinet Office has the expertise, the
budget, personnel or the political clout to make the difference
required
3) National ID System
• The requirement for use of a national ID system covering taxes
and pension is now law and is to be implement by 2015.
• Issue is whether the system can be expanded to support other
national and local government services
• Successful implementation will require a fundamental rethinking
of how government services are delivered, running up against
traditional bureaucratic procedures and labor union resistance
• This will be an early test of the Abe government’s commitment to
reform
4) Fully Empower the CIO
• Japan named a new CIO nearly 18 months ago to reform and
consolidate the way the national government procures ICT, based
on a comprehensive strategy for the ICT sector.
• The Abe government has subsequently elevated the CIO to the
status of a deputy cabinet secretary and claims to have reduced
duplication in ministerial budget requests by 10 percent.
• But this is still a long way from the strategic investment programs
in areas like e-government, education and healthcare that Japan
needs
5) Open Up Spectrum Allocation to
Competition
• The Abe government has tabled legislation to introduce spectrum
auction to Japan, leaving it virtually alone among OECD countries
in this regard.
• While the merits of spectrum auctions might be contested, there
is no argument that Japan needs more competition and
transparency in the allocation of spectrum.
• A more proactive policy with respect to the use of unlicensed
spectrum is also desirable. Current efforts to reallocate "white
space" are stalled by resistance from license holders and
bureaucratic inertia.
6) Revise the Personal Information Law
• An advisory committee on privacy reform has been meeting since September
and will issue a report in June; legislation is expected by 2015
• Report is that the group is considering a proposal to establish a “new
supervisory authority” and create guidelines for privacy administration along
the lines recommended by the OECD
• But nobody knows for sure – the deliberations of the group remain private and
there is strong resistance from the bureaucracy against the creation of a privacy
czar or commission
• So for now, Japan continues to operate under a personal information act that
has ill-defined guidelines and is only rarely enforced
• Japan is significantly behind the US and the EU in this area – and the lack of a
domestic privacy framework is undercutting the ability of its companies to offer
cloud services internationally.
7) Get More Japanese Content Online
• Apart from some recent modest revisions to the Copyright Law to allow
short-term “caching” of copyrighted material by search engines, etc.,
there are still significant gaps in Japan’s copyright framework for the
Internet, e.g. cloud storage by individuals of music and other content.
• Additionally, TV and the production companies continue to drag their
feet on licensing local content to (largely foreign) distributors and
aggregators; this is a competition policy problem as much as it is an
intellectual property issue.
• At the same time, Japan passed in October 2012 perhaps the toughest
penalties against illegal downloads (2 years in jail and up to $20,000 in
fines); but so far no major prosecutions
• Since content is key driver of Internet, efforts at enforcement must be
balanced by promoting greater availability of content online
8) Facilitate Cross-Border Data Transfers
• Japanese government supports the principle of non-discrimination
between data services in and out of Japan
• Keidanren joined with the ACCJ last year in urging government ministries
to clarify administrative guidelines in line with this principle
• Yet lack of an agreed privacy framework and consistent security
standards across government and industry creates business uncertainty
and slows the migration of consumers to the cloud
• Fundamentally, Japan has to be the regional leader on this – otherwise,
Chinese firms and others will set the standards and dominate the market
9) Invest in Capacity Building
• Japan’s ageing population and restrictions on immigration set physical
limits on the potential for growth of the domestic Internet Economy,
where “scale” is a key driver of growth
• Abe administration strategy focuses on ICT education in the schools and
efforts to encourage more women to enter and stay in the work force
through “remote work” is only a part of the answer
• Changes in the immigration law to allow more skilled engineers and
researchers into Japan are clearly required
• Revisions to the labor law to promote more inter-firm job mobility and
permit more flexible internal HR management also must be addressed
10) Collaboration not Closed Competition
• Japan-only standards don’t work for the global Internet – but
there are still only tentative efforts in Japan to make
international harmonization a priority
• The “Galapagos Island” syndrome remains a challenge for the
future of Japan's Internet Economy.
• Current policy is still skewed to supporting Japanese company
efforts to be more “competitive”, rather than focusing on how
they might be more “collaborative”
• True measure of success is their record in partnering with foreign
companies in and out of Japan
Whither Japan: Three Scenarios
• Stalemate
• Piecemeal Reform
• Open Convergence
Stalemate
• Existing players oppose reform and defend their
business, stagnating growth
• A ‘wait and see’ attitude to new services becomes
dominant
• Infrastructure utilization remains low; new valueadded services are few.
• Foreign firms disinvest as growth stagnates and
regulatory impediments slow uptake
Piecemeal Reform
• Limited reforms with a domestic focus feed
protectionist inclinations
• Emphasis on domestic markets and existing assets fuels
local competition and strips value as companies struggle
to hold on to their slice of the buy
• Companies that can move offshore, innovation
dependence grows, revenue declines rapidly
• Foreign firms eventually move in to pick up remaining
opportunities
Open Convergence
• Regulatory barriers to converged services removed;
competition promotes new entrants
• New framework encourages domestic partnerships
and regional expansion
• Converged services in telecom and broadcasting
opens door to new services elsewhere
• Japan emerges as regional hub; domestic and
foreign firms collaborate on ‘cloud’ services
Japan and Internet Governance
• Open convergence is the preferred scenario for Japan and the Asia region;
national economic arguments in Asia undermine the global utility of the Internet
• A strong Japanese voice supports greater diversity and autonomy in the region
and balances calls for “cyber sovereignty”
• Influence based on strong economy and ability to articulate a shared vision for
the future – a strong test for Abenomics and Abe’s policies generally
• Key principles include a right to access, respect for privacy, protections against
cyber threats, an appropriate balance between protecting and sharing content
online and support for international norms and standards for the Internet
• Japan should be a model and example for Internet governance – and it starts at
home. This is the real “third arrow.”
Where To Go for More Information?
• Keio International Project for the Internet & Society (KIPIS)
• Interdisciplinary research group based on the Shonan Fujisawa
Campus of Keio University focusing on Internet policy issues in the
Asia region and globally
• A catalyst and a platform for brokering an interactive exchange
between Asia and Internet policy researchers and advocates
around the world
• See our website at http://kipis.sfc.keio.ac.jp