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3. The High Growth Period, the Second Stage (1963~1972)

1) Enactment of Small and Medium Enterprise Basic Law

In 1960 and thereafter, measures to open the market for trading and foreign investors proceeded. Under such circumstances, promotion of SMEs was considered as the minimum bar to clear before achieving a balanced development of the national economy, by upgrading the industrial structure and strengthening international competitiveness. So the Small and Medium Enterprise Basic Law (the SME Basic Law) was promulgated in 1963.

The SME Basic Law was designed to (a) eliminate SMEs disadvantages derived from economical and social restrictions, (b) support their self-help efforts, (c) improve their productivity and trading conditions to rectify the dual-structured gap, and (d) serve to improve the social status of their employees.

The government measures, in the meantime, had so far categorized SMEs measure by measure. Now the SME Basic Law stipulates general descriptions of SMEs overruling the precedents. The SME Basic Law shows a basic idea of measures for SMEs. And then specific measures are decided and implemented under the SME Basic Law.

2) Enactment of the Small and Medium Enterprise Modernization Promotion Law (the Promotion Law) and Measures for Upgrading by Industry

The Promotion Law was promulgated in 1963 in order to promote upgrading of the industrial structure by improving the productivity of SMEs. The Promotion Law is designed to exercise measures through projecting a modernizing plan by industry and combining various measures in an overview. Under the Promotion Law, some measures are taken in the industry so appointed when such industry involves SMEs in a higher percentage. And such measures are taken when upgrading the productivity of those SMEs results in important measures for upgrading its industrial structure as a whole, and for strengthening the international competitiveness of the industry.

The Law on Financial and Other Assistance for Small Business Modernization was promulgated in 1963 in order to promote upgrading of SME structure and modernization of their equipment. This law facilitates the promotion of upgrading industrial structure (joint business, grouping of factories or stores) when such business is carried out in the form of a cooperative. In particularly, a loan for upgrading expenditure was extended by the Japan Small Business Promotion Corporation established in 1967 with government investment.

3) Strengthening of Measures for Correcting Disadvantages

As the recession developed in 1964, claims that purchase by the government and municipal governments should be kept for SMEs (official demands priority) became stronger. Under these circumstances, the Law on Ensuring the Receipt of Orders from the Government and Other Public Agencies by Small and Medium Enterprises was enacted in 1966 in order to correct the business disadvantages of SMEs. Under this law, the government is obliged to set a target amount of orders for SMEs year by year.

As for protecting subcontracting enterprises, cumulative amendments of the Law on the Prevention of Delay in the Payment of Subcontracting Charges and Related Matters strengthened regulations. While international competitiveness became more important due to the deregulation in capital transactions in 1970, the Law on the Promotion of Subcontracting Small and Medium Enterprises was enacted in order to promote the modernization of subcontracting enterprises.

4) Development of Measures for Small-Scale Enterprises

The SME Basic Law recommends socio-political measures to be taken for small-scale enterprises, with the purpose of their achieving modernization gradually by “improvement and development of management skills” and a level equal to that of other enterprises. Based on the said recommendation, the programs for spreading improved management skills started with the management consultant system. And the small enterprise mutual relief system (retirement money for small enterprise entrepreneur) started, based on the Small Enterprise Mutual Relief Projects Law of 1965.

5) Development of Measures for Strengthening Proprietary Capital

In response to the needs for a system to assist small and medium enterprises which faced difficulty in obtaining funds from the open stock market by injecting long-term public capital, the Small Business Investment Company Limited Law was enacted in 1963.


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