The Journal The Authority on Global Business in Japan

Consistent application of principles of transparency are central to the success of American Chamber of Commerce in Japan (ACCJ) member companies in Japan and elsewhere in the region.

Transparency is a key element of the rule of law. Transparency distinguishes rule of law from rule by law. When I worked in Southeast Asia, some businesspeople joked that they violated three laws an hour—and didn’t even know what two of them were. That is rule by law. Someone in the government makes the rules and—when an economic actor inadvertently steps out of line—another official lets you know about the rule, sometimes offering a non-compliant way out.

In a transparent system, the government conducts business so that individuals and companies have access to clear information about rules, data, and process, with safeguards for privacy and security. It is easy for companies to understand how the system works and to compete fairly.

Transparency includes fair process or due process, equal access to information and decision makers, equal opportunity for similarly situated people and companies, and an absence of corruption.

Corruption includes not only what Americans think of as violations of the Foreign Corrupt Practices Act (e.g. an under-the-table payment to an official deciding which project sponsors are prequalified), but also political favoritism or mutual back-scratching. It may be that no money changes hands, at least as a quid pro quo, but corruption can be evident when no foreign company ever wins, or when it seems several competitors take turns winning bids for similar RFPs to the exclusion of other credible companies.

Putting this into the ACCJ context, the ACCJ has long advocated for full access to Japanese government-sponsored shingikai and other types of study groups where important policy positions are formed and legal and regulatory changes are developed by all interested stakeholders, including foreign-invested member companies.

The ACCJ has also advocated that Japan consistently follow international best practices in its public comment process. In a transparent process, relevant stakeholders—including foreign invested companies in Japan—have access to the policy and regulatory formulation process on the same basis as Japanese companies, and regulators must consider and take account of their views and interests.

Japan has an uneven history in bidding and procurement, but the trend is positive. Transparency and antitrust enforcement have led to procurement systems that provide access on a level playing field in areas such as healthcare, while in infrastructure, 2016 saw an experienced foreign operator team with a Japanese company in the privatization of the Kansai International Airport. The US and Japanese governments hope that their engineering firms and equipment manufacturers will work together on infrastructure projects outside Japan.

Taking into account the standards of its two largest shareholders, in late 2016, the Asian Development Bank (ADB) published a User’s Guide to the Procurement of Goods, together with two types of Standard Bidding Documents, in order to regularize the bidding procedures for goods and services procured by project sponsors borrowing from the ADB. Requiring that borrowers follow the procedures will reduce the likelihood that the procurement process will be affected by favoritism or unlawful payments.

Similarly, the Trans-Pacific Partnership (TPP) agreement would require that its members adhere to high standards of transparency, and adopt criminal laws that prohibit and sanction both the payment to and receipt by officials of an “undue advantage” in the course of exercising their discretionary functions. TPP would also limit the ability of governmental entities to favor wholly locally owned entities over foreign-invested entities in relation to government procurement.

While US ratification of the TPP is on hold, Asia–Pacific governments are committing to ever higher standards of transparency in their bilateral and multilateral trade and investment agreements. The rule of law will improve the competitiveness of compliant market participants.

Eric Sedlak is ACCJ special advisor and co-chair of the External Affairs Advisory Council, and a cross-border financial and corporate transactions lawyer with more than 20 years of experience practicing in Japan. The views and opinions set forth herein are the personal views or opinions of the author; they do not necessarily reflect views or opinions of the law firm with which he is associated.