KYOTO -- Take the first step early and make it a big one, former New Zealand Treasurer Sir Roger Douglas advised Japan as the country tackles the problems of deregulation and economic reform.

Speaking before 480 business leaders at the two-day 35th Kansai Zaikai Seminar here Feb. 6, Douglas warned that consensus decision-making and fractured deregulation will doom any reform effort. "The tendency is to seek consensus in advance by compromising the quality of the (reform) decisions, to bring the benefits up front, and either ignore any costs, or push them down the track," said Douglas, who as treasurer between 1984 and 1990 oversaw much of New Zealand's trailblazing economic restructuring.

Such compromises ensure that public dissatisfaction increases over time. Consensus for quality decisions arises after they are implemented, as they deliver satisfactory outcomes to the public, Douglas said. Similarly, trying to reform the economy one step at a time, in the belief that this will give society time to adjust, gives opposing interest groups "time to mobilize and drag you down," Douglas warned in his keynote speech.

When reforms are packaged together, each group loses its privileges, but at the same time is freed from the cost of paying for other groups' privileges, and so genuine structural reform becomes politically feasible, he said. Douglas cited the example of New Zealand's farmers, who lost subsidies equal to one third of their income but saw freight rates drop by a half and port costs drop to a quarter.