The Japanese Cabinet agreed on March 10th on a proposal to amend three laws regulating public procurement set-asides for Small and Medium Enterprises (SME) or kankouju. (‘Public Agency Orders’) The plan will be submitted to the current session of the Diet and in force within three months after passing the Diet. 

The measures are meant to promote the participation of venture businesses in public procurement and help with the revival of ailing local economies.  Companies established less than 10 years ago while be regarded as a special category, and government organisations will have to make concrete plans and set specific goals on how they are going to promote the participation of these companies in public tendering.  They are also expected to make their achievements in this respect public. 

The measures also entail promoting the usage of 'regional industrial resources', forcing government office to take measures to give preferential treatment to companies that source their services and goods locally.  The Small and Medium-sized Enterprise Agency is expected to play an important role in coordinating and supporting efforts by other government entities.

Possible impact for foreign SMEs

Although it is still early to see the actual impact, the measures have the potential to further limit opportunities for foreign businesses. Local public procurement (Kankouju) does not fall under the WTO Agreement of Government Procurement and has proven a challenging part for foreign business to penetrate.  In the ongoing EU-Japan FTA/EPA negotations the EU side has demanded that the Japanese side makes more efforts to open regional and local procurement. 

• Giving special status to venture businesses in determining suitable suppliers will limit opportunities for EU SMEs, and carry the risk of abuse in establishing tender procedures
• More extensive use of 'regional industrial resources' as a precondition for suppliers, will make it harder for EU SMEs to seize opportunities.

JTPP Helpdesk will continue to monitor the developments regarding these new measures.

Sources:

METI, 「中小企業需要創生法案」が閣議決定されました』

Kensetsutsushin Shimbun, 政府/官公需への参入促進/中小調達3法を一括改正