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SME support policies in the Kansai region
20 Nov, 2023
Japan’s small and medium enterprises (SMEs) account for 99.7% (4.21 million) of the total number of enterprises in the entire economy, employ 70% of the country's workforce (24.7 million workers) and create more than 50% of value added in the manufacturing sector (56,000 billion yen or about $721 billion). Japan considers SMEs as the backbone of the economy. In Japan, the start-up rate tends to increase in recent years, but since the 80's onwards, the rate of enterprises dissolving and withdrawing from the market is still higher than the rate of new enterprises entering the market.
System of SME policy enforcement agencies in Japan
The system of agencies to plan and implement policies for supporting SMEs in Japan is very complete and has a long operating history on the basis of coordination among agencies and under general guidance of the SME Agency.
SME Agency under the Ministry of Economy, Trade and Industry (METI), was established in 1948 as a governmental agency to comprehensively implement SME policies of the Japan Government. There are nine regions in Japan and, in each region, there is a representative office of the Ministry of Economy, Trade and Industry, an office of the SME Development and Regional Innovation of Japan (SMRJ) and a SME University. At local level, in all 47 prefectures over the country, there are SME support divisions and at each district, there are also SME support units.
Main roles of the agencies
1. SME Agency (under METI) is the agency in charge of planning and formulating measures to implement SME policies. It is a steering agency in implementing SME policies.
2. Representative offices of METI
These are the representatives responsible for collecting and providing information, reviewing the implementation of SME policies in each region; implementing SME policies at regional level; adjusting with agencies concerned, etc.
3. Organization for SME Development and Regional Innovation, Japan (SMRJ)
SMRJ has nine regional offices across the country and more than 3000 consultant partners (tax consultants, management consultants, lawyers, etc.).
SMRJ provides consulting services and guidance to SMEs, mutual assistance (emergency loans to prevent chain bankruptcy); general exhibition; selling in industrial areas, etc.
4. Government financial institutions (Japan Policy Credit Fund), the Association of Credit Guarantee
Provide loans to and credit guarantee for SMEs.
5. Japan External Trade Organization (JETRO)
Provide overseas development assistance to SMEs; promote investment in Japan; collect and provide information, etc.
6. SME University
Provide training to SMEs’ managers and employees.
7. Local SME support organizations (Chamber of Commerce and Industry, SME support centers, research institutes, etc.).
Provide management assistance to SMEs; consulting service to SME; SME operation and management (counseling, seminars organization, project coordination); technical support; etc.
SME support activities of several organizations in Kansai region
Kansai region includes six provinces: Osaka, Kyoto, Hyogo, Shiga, Nara and Wakayama. The economic scale of Kansai is nearly 20% of the economic scale of Japan. The region’s contribution to GDP reaches US$840 billion, equivalent to the size of the Korean economy. Many famous Japanese brands such as Sharp, Sanyo, Panasonic, Honda, Hitachi etc. originated from this region. It is also a concentration area of the largest SMEs in manufacturing sector in Japan. Trade and investment relation between Kansai and Vietnam is also rather developed:
- Trade turnover between Kansai and Vietnam tends to increase, accounting for about 30% of the country (of which exports accounts for 27.5%, imports accounts for 22.7%). In 2011, exports from Kansai to Vietnam reached the highest record ever (210.3 billion yen, or about US$ 2.7 billion).
- There are more than 100 enterprises in Kansai investing in Vietnam, which are mainly from Osaka (74 enterprises).
1. Representative Offices of METI in Kansai
It is a Government’s representative office which monitor and enforce SME support policies in the Kansai region. Accordingly, in each period, Japan define the basic philosophy of SME support policies depending on realistic requirements to formulate and perfect the SME support policy system, including financial policy, enterprise development policy, policy on guidance and business organization. In particular, since the earthquake and tsunami disaster in 2011, Japan has implemented a number of policies to support SMEs revolving capital such as: emergency guarantees and special loans for recovery from the earthquake and tsunami disaster.
2. Organization for SME Development and Regional Innovation, Japan (SMRJ) in Kansai
As a government organization which comprehensively enforces SME policies, the regional office of SMRJ is responsible for the development of local SMEs and enrich the local economy. SMRJ implements SME support in a comprehensive, direct and intensive manner which bases on utilization of networks.
Typical support programs and policies of SMRJ:
Providing free business consulting for SMEs on management, internationalization, etc.
Appointing (long term, up to 6 months) specialists to directly and continuously support enterprises to build management and operation strategy, solve complex problems in administration and management, ...
Providing business incubators and industrial lands for SMEs: management and operation of facilities leasing to enterprises, venture businesses, enterprises deploying activities into new business areas; provision of lands in industrial zone to enterprises (presently, SMRJ in Kansai only provide leasing for available industrial lands, not develop new industrial park).
Supporting market promotion and business matching: organizing fairs for SMEs (SME Expo), organizing many events for SMEs to access markets; program of business matching between small enterprises and larger ones (n & N program).
The local resource utilization program: local resources are defined as those technologies relating to manufacture and exploitation of local-featured industrial products, or the region’s special cultural relics. Each locality will find several economic sectors and recognize them as "local resources", which can be a technology that produce specialities, traditional handicrafts, agricultural-forest-aquacultural resources, tourism resources, etc. On this basis, SMRJ will support enterprises in those industries to develop business through grants or soft loans.
A typical example: Kansai region is the birthplace of a rare mandarin which fruits in one season per year and is harvested in only one month. This is the mandarin with high vitamin level. To preserve this special mandarin and to promote its advantages on people’s health, SMRJ supported the local community to apply biotechnology and new technology to extract from this mandarin and make a beverage for the consumption market.
Another example: Okayama Kougei company in Kyoto was founded in 1968 and has made traditional kimono. When newly established, the company was a subcontractor which received kimono production orders from other enterprises. All of the company’s kimono production stages are entirely manual and take much time. The time to complete a kimono can be up to 2 months and the price of a kimono can be up to 1 million yen.
With the weaving technique of Yuzen which is regarded as a local treasure, the company has received support from METI (through SMRJ) since 2004 through non-refundable sponsorship worth 2/3 of the company’s total operating cost. The total support package since 2004 up to now worth more than 100 million yen.
The new affiliate program: develop new areas of business activities by binding different areas. SMRJ support the efforts of many SMEs having the advantage of "determination", "technology", "initiative", bringing "strength" to develop new products and services.
Agriculture - Industry - Trade affiliate program: creating new business activities based on agriculture, forestry and fisheries combining with industry and trade. For example, black garlic is a rare kind of drug, SMRJ supports enterprises associating with black-garlic raising farmers to have a stable supply of garlic for functional food production enterprises.
SMRJ Kansai implements specific support activities to address issues of local communities and SMEs in six prefectures in the Kansai region.
3. Invest Japan Business Support Center (IBSC) in JETRO Kansai
This is a support center for Kansai-based enterprises investing overseas and foreign enterprises investing in Kansai. The center’s services include: temporary office leasing; provision of conference rooms for enterprises to meet business partners; provision of consulting services for enterprises; library for enterprises to search information; …
- Office leasing: JETRO has 5 working offices for foreign enterprises who want to invest in Kansai can have temporary rental for a maximum period of 50 days, in which companies are provided with free services such as internet, office equipments, …
- Library for searching information: with around of 150,000 publications relating to international business, individuals and enterprises can come and look up necessary information for research and business.
- Consulting service: JETRO provides consulting services for business establishment, recruitment, location of office and industrial parks, information about preferentials and policies of the government and local authorities, …
4. Osaka Chamber of Commerce and Industry
The Osaka Chamber of Commerce and Industry (OCCI) was established in 1878, and is the oldest and largest chamber in Western Japan. Currently, the Chamber is implementing strategic projects including: the tourism and recreation city (supporting tourism programs at home and abroad), life science (in cooperation with industry sector, research institutes and government to create new business activities for the pharmaceutical industry and equipments/medical devices), exporting water sector’s infrastructure, researching and developing environment / new energy sectors, seeking new markets abroad.
Osaka Business and Investment Center (O-BIC) belongs to OCCI, was established in 2001, and is a non-profit organization and has only 3 specialized officials from Osaka prefecture government, Osaka city government and OCCI. O-BIC signs contracts with approximately 100 specialists in several areas to provide free support to foreign enterprises for setting up business in Osaka. From 2001 until now, O-BIC has successfully supported 280 foreign enterprises to set up in Osaka.
The broad-based supporting services of O-BIC includes: registration procedure and procedure applied for business activities in Osaka; providing information on office space, staffs and specialists, incentives of local governments,…
OCCI also built Osaka Entrepreneurial Museum of Challenge and Innovation to introduce the life and achievements of (107) Osaka-based entrepreneurs and exhibit some inventions, famous products associated with each entrepreneur, for example: the first washing machine of Sanyo, the first television of Sharp,…
5. Monodzukuri Business Information Center Osaka (MOBIO)
Osaka has the largest number of factories in Japan (41,059). The value of products of SMEs in Osaka is 11 trillion yen, ranking the first throughout Japan. The current trend of manufacturing SMEs in Osaka is to form groups of companies; the number of manufacturing factories gradually reduces annually, especially small-scale factories; …
MOBIO is an agency supporting SME manufacturers in Osaka, which was established in 2009, MOBIO’s officials are from 3 agencies: the prefecture government of Osaka, prefecture authorities of Osaka and private organizations in the prefecture. The operational cost of MOBIO is from the local government’s budget. In 2012, the Osaka budget for MOBIO is nearly 61 million yen, or about $786,000. The supporting services of MOBIO include:
- Supporting enterprise incubation: MOBIO has 10 incubator’s rooms for start-ups.
- Renting 200 booths to manufacturers for displaying their technologies and products.
- One stop consulting service.
- Business matching service: referring customers among the business registration system; B2B center (referring customers through customers of credit institutions); supporting consumption-market exploitation in the form of high-tech innovation, bilateral cooperation,…
- Supporting linkage between enterprises - government agencies (government, local government)
- Universities (Manufacturing - Observing - Studying program)
- Exchange Program: to hold MOBIO-Café once - twice per week on certain topics.
6. Kyoto Industrial Support Organization 21 (KI21)
Kyoto Industrial Support Organization 21 is a SME supporting agency in Kyoto prefecture. KI21 was established in 2001 as a merger of three organizations: SME Development Company, Kyoto Industrial Information Center, Kyoto Industrial Development Organization. As similar to MOBIO in Osaka, KI21’s officials are appointed from three agencies: the prefecture government of Kyoto, prefecture’s agencies of Kyoto and private sector.
KI21 provides useful services for SMEs’ activities, including:
- General consulting (one-stop consulting service)
- Supporting the development of consumption market (transaction intermediates): matching manufacturers through enterprise introductions, ordering enterprises to look for new customers,…
- Supporting the development of new business activities (Manufacturing - Observing - Studying, business matching, fostering the development of new business sectors, etc.).
- Supporting equipments investment (equipment leasing and instalment sale): KI21 purchases the equipments and machines that enterprises desire from manufacturers and provides to them with instalment sale or leasing.
- Supporting technology development: Technology Development Fund under the form of enterprises connecting, Technology Development Supporting Fund under the form of Manufacturing - Observing - Studying.
7. Technology Research Institute of Osaka Prefecture
The Institute was established aiming at encouraging the development of Osaka industry and is an independent administrative entity of Osaka. The Institute’s total area of offices, functional areas and campus is 81,000 m2. Currently, there are 148 employees and 120 researchers in the Institute. Most of operational cost of the Institute is from Osaka Prefecture’s budget; in 2012, the Institute’s total operating budget is over 2.283 billion yen, of which 84% (1.92 billion yen) is from the prefecture’s budget. The Institute’s activities are as follows:
- Providing free technical advices
- Providing on-demand testings: implement experiments, analysis, measurement, processing; exclusive experiments upon request. The machines used for product testings are through X-ray analysis, 3D analysis, component analysis, technical specifications, etc. Although the cost for these services is huge because of modern machines investment, SMEs are lowly charged to be supported. These services are very essential to improve the quality of products, as well as to protect domestic consumers.
- Opening the facilities and equipments for clients to use equipments, machines to analyze, measure and fabricate samples (equipments renting); enterprises can rent the Institute’s rooms for practices, displays (offices renting); individuals and SMEs that intend to develop their products and implement new business activities can use open-studying offices for long-term.
- Conducting research as requested by enterprises.
- Disseminating technical information.
- Providing human resource training: technical training, workshops, technical lectures.
From the operation of the SME supporting agencies at central and local in Japan, we can see that:
1. In Japan, the system of SME supporting policies enforcement agencies is comprehensive from central to local level; and the state budget always gives a priority to SME supporting activities.
Financing for SME supporting activities is mainly from the state budget (METI) and local budgets. The state budget for SME supporting in 2012-2013 alone is 180 billion yen, equivalent to 45,000 billion dong.
2. Legal system relating to SMEs and SME support activities is comprehensive.
The SME Basic Law of Japan was promulgated in 1963 with many SME development policies when many Japanese started up their businesses, which helped Japan recover after the World War 2. The Law was to improve SMEs’ productivity and their trading condition (that was inferior to big enterprises).
In 1999, the Law was amended in which support policies are divided into three main categories: (i) to support the ambitious SMEs, (ii) to strengthen the business foundation for SMEs: human resource, technology, (iii) to support SMEs to cope with the changing social environment and economic environment.
In addition, a series of laws relating to SMEs are legislated: Law on supporting equipment-investment capital for small enterprises, Law on developing SME subcontractors, Law on SMEs modernization, Law on new business activities promotion, Law on promoting SMEs’ utilization of local resources, etc.
3. In Japan, it is very popular to support SMEs through an associated network, which is one agency cooperating with many different others to support SMEs like the Manufacturing - Observing - Studying program, prefecture government - prefecture’s authorities - private sector, government - region - locality,...
Although the state budget for SMEs supporting is quite huge, the Japanese government has still encouraged the trend to associate to together support SMEs in order to improve the efficiency of support activities.
4. Data on SMEs in 47 prefectures is relatively synchronized and updated for the process of analyzing enterprises’ behaviors in both terms of macroeconomics and microeconomics to enable the formulation of the most appropriate policies for each development stage.
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