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2016/SMEMM/009 Agenda Item: 3.3.2
Support for Japanese SME Overseas Business Development
Purpose: Information Submitted by: Japan
23rd Small and Medium Enterprises Ministerial Meeting
Lima, Peru9 September 2016
Support for Japanese SME Overseas Business Development
September 9, 2016Parliamentary Vice-Minister of Economy, Trade and Industry
Takumi Ihara
Small and medium-sized enterprises and micro businesses (hereafter SMEs) make up 99.7% ofall domestic enterprises and employ approximately 70% of the domestic workforce.
Therefore, SMEs form the foundation of the Japanese economy.
2
Overview: SMEs and the Japanese Economy
1(0.3%) 55.7
(14.6%)
325.2(85.1%)
Number of enterprises
1,433(29.9%)
2,234(46.6%)
1,127(23.5%)
Number of employees
(Year)
(10,000 parties)
(10,000 parties)
(10,000 people) 0
50
100
150
200
250
300
350
400
450
99 01 04 06 09 12 14
Change in the number of SMEs
Large enterprise
Medium-size enterprise
Micro businesses Medium-size enterprise
Micro businesses
Source: Economic Census for Business Frame, Ministryof Internal Affairs and Communications(MIC)
Source: Recompiled data from Economic Census for Business Frame, Economic Census for Basic Activity, Establishment and Enterprise Census, Ministry of Internal Affairs and Communications (MIC)
Ordinary profits are currently at their highest levels since FY2010, indicating stable growth. The number of companies filing for bankruptcy has been decreasing for seven consecutive years.
3
Overview: SMEs and the Japanese Economy
0
5,000
10,000
15,000
20,000
25,000
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Change in the number ofbankrupted SMEs
0
2
4
6
8
10
12
14
16
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Change in ordinary profits
Medium-size enterprise
Micro businessesSmall and medium enterprises
(Year) (Year)
(Trillion JPY)
(Case)
Source: Bankruptcy Monthly Report, Tokyo Shoko
Research, Ltd.Source: Financial Statements Statistics of Corporations by
Industry, Annually, Ministry of Finance (MOF)
4
The ordinary profits of domestic SMEs are at historical highs. Along with a decrease in thenumber of bankrupted companies, the number of total operators has increased over the pastdecade.
However, the business environment for SMEs faces uncertainty due to a declining birthrate anddeclining labor force.
In part due to these headwinds, the number of domestic SMEs pursuing overseasbusiness development has been increasing, pinning their business growth in internationalmarkets.
SMEs Pursuing Overseas Business Development
1,389 964
1,340 1,253 1,249 1,452 1,699 1,811 1,680 1,628 1,916 1,769 1,801
4,342
3,568
4,603 4,702 4,838 5,348
6,196 6,303 5,937 5,920
6,336 6,302 6,397
0.60.5
0.7 0.7 0.70.8
1.0 1.0 1.1 1.1 1.2 1.3 1.4
1.51.4
1.71.9 1.9
2.3
2.7 2.7 2.8 3.0 3.03.3
3.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
01 02 03 04 05 06 07 08 09 10 11 12 13
Change in the number and percentage of companies involved in direct export based on company size (manufacturing)(Company) (%)
(Year)(Source) Ministry of Economy, Trade and Industry “Census of Manufactures,” Ministry of Internal Affairs and Communications, Ministry of Economy, Trade and Industry “FY2012 Economic Census for Business Activity”; Re-edited
Micro business
Small and medium enterprises
High economic growth is expected in the Asia Pacific region toward 2020. In Japan, the number of SMEs targeting overseas demand has been increasing
through overseas business development. However, the percentage of SMEs that consider overseas business development
“not important” remains high.
5
SME Perceptions of Overseas Business Development
(Year)
(US$)
Source: IMF “World Economic Outlook, October 2015”*Estimated value for 2020.
0
20,000
40,000
60,000
80,000
100,000
120,000
90 00 10 20
OthersEUCentral and South AmericaUSAIndia, NIEs, ASEAN5ChinaJapan
Asian market
Change in net GDP based on region (USD)
19.7%
80.3%
Important
Not important
Perception of SMEs about Importance of overseas business development
(Source) “Questionnaires on growth and investment behavior in small and medium enterprises” commissioned by Small and Medium Enterprise Agency (December 2015, Teikoku Databank Co.)
(n=3675)
The main reasons SMEs consider overseas business development important but do not actuallyconduct it lies in insufficient information or know-how about international operations and deficiencies inhuman resources etc..
Therefore, factors contributing to concerns about overseas business development are largelyconsidered to be “within enterprise” reasons.
6
Why do SMEs not Conduct Overseas Business Development?
19.4
29.0
32.3
45.2
50.5 Lack of knowledge/information/know-how about international operations
Cannot secure human resources that can address international operations
Cannot secure partners/trading companies in recipient country
Too occupied with domestic operation to consider it
Cannot predict/evaluate the effects of investment
Main Reasons SMEs consider overseas business development important but actually do not conduct it (Top 5)
(Blue indicates enterprise-related reasons, and red recipient country-related reasons.)
(n=93, multiple answers allowed)
Source: Teikoku Databank, Small and Medium Enterprise and Micro Business Development and Investment Activities Questionnaire Survey(December 2015), commissioned by SME Agency
The challenges for SMEs (manufacturers) actually conducting overseas business developmentlie primarily in issues concerning human resources/labor management, local legal systems andcommercial practices, and quality control/delivery management etc..
These are considered to be mainly “within country”-related factors.
7
Challenges Facing SME Overseas Business Development
39.8
45.5
46.9
51.2
52.6 Assurance of foreign human resources and labor management
Response to local legal systems and commercial practices
Quality assurance/delivery management
Risk associated with fluctuations in foreign exchange rates
Assurance and development of Japanese human resources that take initiative in overseas development
Challenges for SMEs (manufacturers) with overseas business development (Top 5)(Blue indicates enterprise-related factors, red indicates country-related factors, and gray factors related to neither.) (n=211, multiple answers
allowed)
Source: Teikoku Databank, Small and Medium Enterprise and Micro Business Development and Investment Activities Questionnaire Survey(December 2015), commissioned by SME Agency
8
The Government of Japan (GOJ) is implementing elaborate, multi-layered, and seamlesssupport for SMEs planning overseas business development in each of the followingphases: (1) Research, (2) Planning/Preparation, (3) Overseas Business Development, and(4) Business Stabilization/Expansion.
More concretely, the GOJ sets a series of support measures such as collectinginformation on overseas business development, consultation/advice, F/S support,exhibitions/business meetings, and human resource development to address challengesfacing SMEs.
Moreover, the GOJ utilizes a holistic approach based on close cooperation with public andprivate support organizations, including the Consortium for New Export Nation and theSME Overseas Business Support Platform.
Support for Japanese SMEs toward Overseas Business Development
Targets by Japan The Government of Japan has placed a high priority on supporting SME growth and
overseas business development, and set a target of realizing 10,000 new entrant SMEsfrom FY2013 to FY2017 under the “Japan Revitalization Strategy” (Cabinet Decision onJune 14, 2013).
(*) Between FY2013 and FY2015 about 6,500 cumulative new entrants have beenrealized.
Japan’s Support
9
Collecting Information / ResearchClarifying objectives of overseas development
Gathering informationfor overseas development
Formulating business planConsultation with experts
Business discussions/contract negotiationsContract closure/corporate registration
Sales channel expansion
Overseas investmentFinding overseas partners(agencies, buyers, etc.)
Overseas DevelopmentFinding overseas trading/business partners, etc.
■ Web matching (SME Support, JETRO)
■ Participation in overseas exhibitions (SME Support, JETRO)
■ Business meetings with overseas buyers (SME Support, JETRO)
Product development
Fund procurement
STEP1
STEP2
■ Support to F/S(SME Support)
■ Consortium for New Export Nation (JETRO, etc.)
Planning/PreparationDomestic planning/preparation
■ Information collection (consultation on trading investment, etc.)(SME Support, JETRO)
■ Individual advice by overseas business experts (SME Support, JETRO)■ Consulting before contract closure (JETRO)
■ Product development/formulation of strategies, etc. (The Small and Medium Enterprise Agency)
■ Subsidies for continuation(The Small and Medium Enterprise Agency)
■ Subsidies for manufacturing, commerce, and services (The Small and Medium Enterprise Agency)
■ Fostering global human resources
(HIDA, SME Support)■ Overseas internship for young workers
(HIDA, JETRO)
■ Consultation for overseas development
■ Seminars(SME Support,
JETRO)
Business Stabilization/ExpansionExpanding overseas sales channels, establishing bases in recipient country
STEP3
STEP4
■ Advices on intellectual properties (Japan Patent Office, INPIT, etc.)
■ Advice by coordinators through SME Overseas Business Support Platform (JETRO)
■ Positive use of funds (Shoko Chukin Bank, Japan Finance Corporation)■ Trade insurance (Nippon Export and Investment Insurance [NEXI])
Business reorganization
■ Support for businessreorganization (SME Support)
Support Measures for SMEs toward Overseas Business Development
Support by experts (hands-on)
Supporting organizations formulate and share plans for embodiment, including the setting of specific numerical goals on activity policies and main emphasis.
Supporting organizations consider various possibilities and deepen mutual cooperation by examining how they can collaborate in main focus items.
Review additional export promotion policies to be implemented.
JETRO
NEXI
JICA
SME support
Japanese Standards
Association
Society of Commerce and Industry
Chamber of Commerce and Industry
Other organizations
Local authorities
NEDO
Close tie-ups among supporting organizations (one-stop contact point)
How to promote closer tie-ups in the future
Meetings of Participants ofConsortium for New Export Nation
Support overseas development of SMEs with the cooperation of supporting organizations
Support by experts in overseas businesses in various steps from technology development to market expansion 10
Example of Support 1: for SMEs Planning Overseas Business Development
The Government of Japan established the Consortium for New Export Nation tofacilitate close “tie-ups” between the public and private sectors to realize support fromexperts for overseas business.
11
To support SMEs that have decided to conduct overseas business development, theGovernment of Japan established the SME Overseas Business Support Platform incooperation with public and private support organizations in recipient countries where highlevels of interest are expected for business expansion.
This platform provides comprehensive consultation services by arranging for and linkingcoordinators with knowledge of local markets and networks with local authorities and localcompanies.
Example of Support 2: for SMEs Involved in Overseas Business Development
Germany(Dusseldorf)
Indonesia(Jakarta, Surabaya)
Philippines (Manila)Vietnam (Ho Chi Minh)
Vietnam (Hanoi)
India(Mumbai)
Thailand (Bangkok)
India (Chennai)
Western China(Chongqing, Chengdu)
Myanmar(Yangon)
Brazil(São Paulo)
US(San Francisco)
China (Hong Kong)
Eastern China(Shanghai)
Cambodia(Phnom Penh)
Bangladesh(Dhaka)
Northern China(Beijing, Tianjin)
Southern China(Guangzhou, Shenzhen, Xiamen)
Malaysia(Kuala Lumpur)
Taiwan (Taipei)
Mexico(Bajio, Mexico City)
JETROInternational
offices
Consultants
Japanese chambers of commerce
Diplomatic missions
Legal/accounting firms Financial institutions
HIDA
Local government offices
PF Coordinator
Temping agency
Platform image diagram
JICA
12
Case 1: Green SME Involved in Overseas Business Development
Manufacturer of various food industry-related paper products such as paper napkins and kitchenpaper. contributes to protecting forestry resources by using residue of sugar cane (bagasse)
generated in high volume in the process of sugar production and proactively using reeds thatare widely grown in the recipient countries,
uses bagasse, which is softer than timbers, realizes energy saving during the paper-makingprocess,
produces paper products by using recycled materials (e.g. milk cartons), while 3 billion milkcarton sheets are produced annually in Japan,
has built seven factories in China and one office in Korea, and is planning to establish aregistered corporation in Thailand, and
developed and operates EC websites internally for selling industry-related products.
13
A developer and manufacturer of special-purpose papers with diverse functions, including insulationproperties produces paper products with excellent materials in line with the trend of seeking weight
reduction and economic efficiency of components and tools, so there has beendevelopment/production of special-purpose paper for diverse applications,
has adopted a traditional Japanese paper manufacturing method called “nagashi-suki”, succeeded in manufacturing paper with synthetic fibers for the first time in the world in 1958, developed and commercialized in functional paper through the proactive use of characteristics
of non-timber fiber "Kenaf“, and established the first Japanese paper mill in China and developed borderless overseas
strategies to address contemporary needs such as technical partnership with US companies.
Case 2: Green SME Involved in Overseas Business Development
14
Amidst expanding international business markets, it isnecessary for SMEs to create favorable business cyclesthrough conducting proactive overseas development andinvesting their profits for future growth.
It is also important for each APEC economy to promote activeSME participation in the global value chain (GVC) through aseries of measures aimed at alleviating challenges facing SMEsconducting overseas business development, such as improvinginfrastructure, legal systems and business practices, protectingintellectual property, and preventing technology outflow.
Conclusion: for SMEs’ Participation into the Global Value Chain
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