24
COVIMDER · 1970
Small Enterprise Finance Public Fund to individual businesses.
Tax benefits are also planned: 1) refunds of corpora- tion or income taxes; 2) special depreciation rates; 3) a system of special reserve allowance; and 4) special abatement of local taxes. In particular, the application of special depreciation rates is being strongly recommended in so far as such action is not without precedent.
Action for coping with the effects of preferences through modernization is being seriously studied by the threatened industries. The plywood manufacturers' re- presentative says: "While the bigger operators such as Asahi Vencer and Adachi Vencer are anxious to start up in Taiwan, they will have to be content with only technical assistance since the Taiwan Government will not allow financial participation. American interests have taken over South Korea. So this market is closed to us. Consequently, the logical approach for coping with the preferences situation appears rather to development of log resources in such places as Borneo in conjunction with modernization of our facilities and operations at home in Japan."
Efforts are also being made to upgrade product quality, and to win brand names acceptance. Japan's metal flatware is of 16-8-chrome stainless steel of considerably better quality than the 12-chrome goods of the developing countries; while designs are generally superior. Competing by means of better quality is the aim. Desirable, of course, is general acceptance of the Tsubame name in the way that West Germany's Solingen has become synonymous with high-quality cutlery. But the selling of Tsubame products is controlled by the American distributors, and there is strong resistance to the use of "Tsubame” as a brand namet
Counter-Attack by Venturing Overseas
Another more positive approach, earnestly considered by Japanese manufacturers, is that of counter-attack by production in the developing countries, as successfully undertaken by American and other interests.
With toys, our biggest manufacturer, Tommy, has established a company in Hong Kong, to which technical assistance is being extended. The aim, under this artango, ment, is to be able, whenever any of Tommy's new products is imitated, to produce the original in Hong Kong under conditions of equality. In this way a better. footing is secured for export to the American market as well as to the former Commonwealth markets for reduc- tion of the high dependence on sales to the United States.
In the case of umbrellas. Okuda of Osaka moved into Taiwan several years ago to expand its United States Ephefioone, and it be aliended test the kukan moda jitroliticu may be marketed in Japan.
With textile products, Renown has knitwear and dye processing companies in Taiwan, and is ready to accept
their products for the home market. Kashimura, this year, has sent a team of about ten technicians to South Korea for the guidance and development of suppliers and subcontractors. Wacoal, too, appears likely to set up. operations in South Korea.
Electrical home appliances manufacturing is being undertaken in Taiwan by as many as 43 Japanese firms, while eight companies are out in Hong Kong. The migra tion to Taiwan has swelled notably since the establish- ment of the Kaohsiung “free-trade” industrial zone.
Business Posture on Trial
All these moves notwithstanding, the attempts to cope with the non-reciprocal preferences situation are as yet restricted to a relatively small number of progressive firms. The majority of even the threatened operations continue a hand-to-mouth existence with no positive effort for self-improvement. Japan's light industrial opera- tions, especially those in the manufacture of sundry goods and low-grade items, are already non-competitive inter- nationally, and are on a steady decline.
If the uptrend of industrial wages continues at the present rate, their products will be priced out of the market in two or three years, and they will suffer the same fate as they would much sooner with the preferences system in effect. It is only a matter of difference in clapsed time. If no remedial action is taken, the backward operations are destined for oblivion.
Consequently, the wise thing to do would be for them to undertake drastic self-improvement with the aid which government plans to provide when preferences are granted for trade with the LDC. This would go a long way toward modernization of the economy as a whole, and would result in Japan's truly becoming one of the advanced countries.
Non-reciprocal preferences will undoubtedly aid steady Industrialization of the developing nations, and as their balance-of-payments position improves, their importance as markets will be enhanced, contributing not only to expansion of world trade, but also to increase of Japanese exports of heavy industrial items and capital goods, the type of products in which Japan is fast gaining competi- tive strength.
After the United Nations General Assembly formally approves the non-reciprocal preferences system, the ad- vanced nations must take the necessary actions for implementation. In Japan, the proposal will be submitted to the National Diet, and if all goes well the system will become effective in April 1971.
Adoption of the preferences systems means the coming inte play of one of the ways of solving the "north-south"
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Jupad's industry will be constitutionally capable of taking the situation in its stride. It is no exaggeration to say that the posture of our industries and enterprises is on trial.
THE ORIENTAL ECONOMIST