What Constitutes Sports Industry Promotion Policy?

Senior Fellow, RIETI

Traditionally, policies regarding sports have referred to "physical education administration," while policies to promote "sports" as an industry have been basically nonexistent. Simply put, this can be seen by the fact that no sports industry promotion policies have been hammered out by the Ministry of Economy, Trade and Industry, which is in charge of formulating and pushing industrial promotion policies forward. The issue of "policies for sports industry promotion" first came to be taken up somehow or another in 1990, when Mr. Takeo Hirata, the first deputy head of METI's Service Industries Division, drew up a report titled "Sports Vision 21." (This chance occurrence led to his becoming general secretary of the Japan Football Association two years ago.) However, this report mainly featured the "sports equipment industry" and the "private fitness industry," and discussion regarding "public sports facilities," which are the largest provider of sports services, and "sports entertainment," which is drawing the most attention among sports industries, was restrained. This was probably done out of consideration of the Ministry of Education, Culture, Sports, Science and Technology, which is the main government ministry overseeing sports policy. Whatever the reason, however, a new policy area opened up as a result of that report, but there is probably a need to reconfirm what sports industry promotion policies are in the first place and what the objective of such policies should be.

The question of how sports should be will call "public and private sector involvement" into account

In the first place, the industry promotion policies of the 2000s are greatly different from those of the 1980s. The key word here is "new public management" (NPM). During the postwar period, Japan implemented government-led industrial policies based on a developing country-style of convoy system. However, we have come to a stage at which the private sector has gained sufficient strength for its power to be utilized. The effectiveness of bureaucrat-led industrial promotion is declining. As pointed out in public economics of recent years, the relationship between "public and private" has become very different from what it was in the past within the so-called "mixed economy." The public nature of sports has come to be widely recognized. Therefore, I believe the time has come to review the "involvement of the public and private sectors" in the way sports ought to be.

Of course, I do not mean to say that it is right for the private sector to take the lead in everything or that everything should be entrusted to market forces. A similar factor exists in the argument regarding the "structural reforms" advocated by the Cabinet of Prime Minister Junichiro Koizumi. Structural reforms are a good thing, but "introducing the vitality of the private sector through structural reforms" and "deregulation" do not equal each other a priori. In order to bring out the power of the private sector, the market must function fairly and smoothly. In the game that is the market, a referee is needed for it to function smoothly, and this, ultimately, should be the role of the state. However, the state does not also need to be the manager and the coach. In fact, there are already many areas where the state only needs to be the referee.

Depending on the economic area, it is not wise to leave everything to the vitality of the private sector or up to the market. This is the field called "public economics." It includes areas that have some public element to them such as roads, gas and electricity. In return for maintaining a sort of monopoly, they are asked to play a public role. Universal services must be provided even if they are low in profitability, and prices cannot be raised so easily. Since these areas have a huge impact on the overall national economy, they cannot be fully left to the market.

Putting aside the argument of whether they will do so forever, present-day sports have some sort of public role. Sports in Japan, especially, have developed through physical education administration, and so have a very strong educational element. Would it be right for all of this to be placed in the hands of the private sector? There are some things in sports that should be left to the market, and there are others that should not. For things that should not be left to the market, the state must play the role not only of referee but also of manager and coach. For things that are better left to the market, it need only be the referee. So then, what things should not be left to the market? This question should be considered from the perspective of "public services." In other words, the educational side of sports and the promotion of health are basic constitutional rights guaranteed to all Japanese, so they should be understood to be the minimal services that everyone must be able to enjoy (universal services).

This is where another problem crops up - "should public services only be offered by the public sector?" NPM was born out of such a question. For the time being, the greatest provider of sports as a public service is the public sector - the state and so forth. This is evident from school physical education. Perhaps it would be possible to remove a portion of the "sports" services offered as public services by the public sector from the public sector. Or perhaps, it would be better to remove it. Are there not some areas where doing so would increase efficiency and performance? Such moves are about to begin. This is not just an internal matter concerning one single sport.

The management of public sports facilities can be outsourced

From here on are my own theories and suggestions. Essentially, would it not be possible to outsource the management of public sports facilities? Whether the outside assignee is wholly private or an intermediate corporation, such as a nonprofit organization, can be decided case-by-case. Such a precedent exists in Britain. Privatization has greatly progressed in Britain since the administration of Prime Minister Margaret Thatcher in the late 1970s. This has been grounded on the basic discipline that "the public sector will not do things that it does not need to, even if they are public services," and this includes sports.

Take for example the case of the city of Edinburgh. The city transferred all management staff at its municipal sports facilities to the NPO that was selected to take charge of those facilities. Of greatest note here was the inclusion of a "special return clause" that said these staff "can return as city employees if the NPO fails." While this may seem illogical at first glance, sports services must continue to be provided to citizens even if the NPO fails. Since the city is responsible for providing those services, it is logical for it to rehire the former employees so as to continue offering them. Fortunately, in Edinburgh's case, the quality of service has improved, the number of users has increased, the rate at which the facilities are in use has risen, the profitability of the business has grown and as a result, the salaries of the staff are higher. All the stakeholders are still happy and the "special return clause" has yet to be implemented.

Let us consider how such a case might work in Japan. It would be natural to think that the assignee might be Konami Corp., which is involved in the fitness business, but if we were to look at the services side of the project, it could be the Hotel New Otani. Or, from the viewpoint of nursing care services, it could be Comsn Inc., and in entertainment, it could be Disney Enterprises Inc. There is also the possibility that Club Med K.K. might send out feelers as there may be synergy with its main business. It could also be a medical corporation, which may want to offer services that include healthcare. So long as the Japan Medical Association, which is said to be obstructing the advance of preventive medicine, does not interfere, I sense great potential in the medical corporation scenario. I would like to begin studying some specific scenarios based on which parties might handle such sports services and what sort of services would be offered as a result.

Simulations of privatization by each municipality

Outsourcing need not be expanded "simultaneously nationwide." However, it would be necessary to first make trial calculations of how many facilities there are in the country, how many people are employed there, what would happen to those jobs by outsourcing, how it would affect the budget allocation structures of the state and the municipalities involved and how it would be linked to GDP. That is the basis of "sports industry promotion policies." (Please recall the GDSP I mentioned in my column "The Significance of Establishing Statistics for the Sports Industry").

Realistically speaking, the answer would probably be to allow municipalities to make their own decisions. The most likely scenario would be to have a total of 30 cities - 20 in the Kanto region and 10 in the Kansai region - undertake such outsourcing efforts in the first year, with this expanding to 80% of all facilities across the country in a decade.

It is well known that the city of Shiki, Saitama Prefecture, is undertaking a privatization project of sorts to reduce the number of municipal employees. Its efforts to change public services so that there is more citizen participation (for example, through volunteer work) are succeeding. If the idea of privatizing sports facilities was introduced in Shiki and the effects it would have on a city of that scale were then simulated, it may provide a reference point for other municipalities in Japan that are of a similar size. What would happen in a city the size of Yokohama, and would it be similarly effective in cities with a population of less than 100,000? It would be necessary to investigate the situation from many different angles. However, simulations are, in the end, only armchair theories. Even if we were to show this simulation to Shiki, it is highly possible that city officials may reject it as impossible. But the barebones of policies can be put into place if we then find out why the city finds it impossible and structure what needs to be solved through the policies. During this process, would it not be possible for the Sports and Youth Bureau of the Ministry of Education, Culture, Sports, Science and Technology and METI's Service Industries Division to join in setting up a policy examination committee? Sports is a very multifaceted intangible, and it would be difficult to expect effective policies if government ministries were to only work vertically, with little exchange with other ministries.

The need to clarify "skill standards" for management of public facilities

When outsourcing management of public sports facilities, it goes without saying that the assignee must have the minimum skills to operate them. If outsourcing is to become a major trend, then "skill standards" need to be established that clarify the standards of assignees' qualifications. As for what they are, hearings could be used to grasp what sorts of skills are currently utilized to manage such facilities. We should then add whatever is necessary from the viewpoint of "improving service quality," in other words, "customer satisfaction." For example, being good at sports is different from being good at teaching sports. The ability to manage customer data is also needed to make users repeatedly come back to the facilities. "Marketing ability," which tends to be lacking in the traditional management of public facilities is a requisite and "management ability," which is needed to secure profitability, is indispensable. In addition, not only those on the receiving end of these abilities should benefit from them but also to those who provide them, and wages should be scaled depending on the degree of standardized skills a person has.

The above is just one part of policies to promote the sports industry. From a comprehensive point of view, measures such as tax incentives are probably also worth consideration.

March 16, 2004

March 16, 2004