Third-sector Governance and Regional Revitalization

The central and local governments are joining forces to address rural depopulation and revitalize regional economies under the newly-enacted Act on the Vitalization of Towns, People, and Jobs (Act No. 136 of 2014) by eliminating bureaucratic sectionalism. The smaller the population and the more rapid the pace of depopulation, the greater is the significance of third-sector organizations as providers of full-time job opportunities. Thus, rural municipalities place high expectations on third-sector organizations to take on a leading role in revitalizing local economies. Meanwhile, there exist two sets of relevant laws and regulations, resulting in the coexistence of two types of third-sector organizations, i.e., those referred to as "general incorporated associations" or "general incorporated foundations" that are governed by general laws and those others that are incorporated under various sorts of special laws enforced by specific government agencies. In order to revitalize rural economies, it is crucially important for local governments to implement revitalization measures tailored to their respective needs and build relationships with third-sector organizations in accordance with such needs so as to enable them to fulfill their role as major players in this endeavor. Based on these observations, this paper analyzes the structures of third-sector governance. Key findings include the following: 1) there exists a governance trap or a situation where the imposition of stricter discipline by government authorities does not necessarily lead to stronger internal controls in third-sector organizations; 2) local regulations for third-sector organizations established under special laws enforced by specific central government agencies tend to be uniform across the country; and 3) enhanced internal controls in third-sector organizations contribute to the creation of local employment opportunities.