Opinion on the Cabinet’s Industrial Competitiveness Bill

 On November 12, Eiji HARA, President of our company, Public Policy

Planning and Consulting Co., attended a meeting of the Diet’s Economy,

Trade and Industry Committee in the Lower House and stated his opinion

regarding the Cabinet’s Industrial Competitiveness bill on which

deliberations are taken place in the Committee.

 Following is a translation of the document distributed in the Committee.

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On the Industrial Competitiveness Bill (November 12, 2013)

Eiji Hara

1.Overall Framework

・It is sound in that the bill is pillared on ‘regulatory reform’

  and ‘industrial metabolism’ as well as that the bill limits the

  time span for intensive efforts.

2.Regulatory Reform

<Past Efforts on Regulatory Reform>

・National level: Regulatory Reform Committee (1998-), Panel for Total

  Reform on Regulations (2001-), Committee on Regulatory Reform and

  Market Opening (2004-), commission for regulatory and institutional

  reforms in Government Revitalization Unit (2010-), Regulatory Reform

  Council (2013-)

・Special Zones: Special Zones for Structural Reform (2002-),

  Comprehensive Special Zones (2011-)

・Every administration in the past showed the stance of generally

  accepting such ideas.

  However, the common challenge has been how to get into the

  ‘particulars’ after the ‘generals’ soon and to what extent.

○Exceptional measures to corporate evidence

①Will it really achieve the regulatory reform effectively?

・Past efforts (either national or in special zones) left the final

  coordination to the Cabinet, a highest-ranked decision-making body.

・National Strategic Special Zones: because such efforts did not make

  visible achievements, the Working Group attempted to elaborate a

  framework on that purpose (e.g., Advisory Council on Special Zones

  and the HQs in each Special Zones, the arrangement that relevant

  ministers so not even attend the meeting.)

・‘Exceptional measures on records with corporate evidence’ => is it

  only that a supervisory government authority over an industry will

  request the regulatory authority of that same industry to ‘request

  for taking measures’?

②Selection of reform menu appropriate?

・Past efforts and the National Strategic Special Zones: transparent

  process of soliciting proposals and selection of them

・Exceptional Measures on Records with Corporate Evidence (?)

③Specific Images of Reform Menu and Sense of Speed?

・Past ‘Zones’ and National Strategic Special Zones: Reform menus

  were shown at the initial stage (=> in case of National Strategic

  Special Zones, specific deregulatory measures will likely be taken

  in next spring).

・‘Exceptional measures on records with corporate evidence’ => no

  release of the initial menu

  (items requiring legislative amendments will be arranged after the

  ordinary Diet session, implementation of the arrangement will be

  further later…?)

④Relation with National Strategic Special Zones

　Even in the National Strategic Special Zones, there discussed an

　idea of virtual special zones which is not restricted by locational

　boundary.

・There is an aspect that the regulations are in fact newly enhanced

  behind the discussion of deregulations (e.g., loan business,

  internet sales of medicines, etc.)

3.Industrial Metabolism

・There were such discussions to boost metabolism of the industries in

  the government panels including the Industrial Competitiveness

  Council as the following:

・Enhancement of corporate governance: highly independent outside

  executives, introduction of Japanese version of Stewardship Code,

  etc.

・Labor Market Reform: Reform of Hello Work, Specification of

  Dismissal Rule, etc.

→The urgent tasks include, in addition to the government’s

　“promotion of industrial reorganization” and “stimulation of

　investments in venture businesses”, these measures mentioned in the

　paper above.

(FYI)

<excerpt from LDP interim report by Japan Revitalization HQ, May 2013>

 Enhancement of corporate governance, especially through introduction,

proactive nomination and appointment, of outside executive directors.

 Compared to other leading economies, it has been pointed that Japan

has been losing in the international competition due to the excessive

domestic competition because there are too many competitors in a same

industry. Nonetheless, seemingly, the more problematic is the presence

of managers, stockholders and financial institutions that have

accepted the low profit-rates.

 Normally, executive directors should bear responsibility to renew

administration and cause metabolism by giving critical comments

concerning corporate insolvency or industrial reorganization as

representative of the stockholders in case that the managers of the

company continued low-profit-making businesses.

 This is to say, that, a steady introduction of autonomous, external

directors, will be a step toward realizing industrial reorganization 

and metabolism in an autonomous manner.