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News Release

Results of a Survey on the Revitalization of the Third Sector and Utilization of the Organization for the Restoration of Local Vitality (provisional name)

April 11, 2008

In recent years, attention has been drawn to the growth of inter-regional disparities, and the establishment of social and economic structures that will promote regional self-sufficiency has become a matter of nationwide concern. At the same time, the introduction of fiscal indicators inclusive of the "third sector" in conjunction with the coming into force of the Law for the Restoration of Fiscal Soundness makes it likely that the financial position of third-sector corporations will have a major impact on the fiscal management of local governments in the future. In this context, the government has presented a bill, during the current session of the Diet, relating to the establishment of an "Organization for the Restoration of Local Vitality (provisional name)" (hereafter referred to as "Organization for the Restoration of Local Vitality") and has indicated its intention of supporting the efforts of third-sector corporations and medium-sized local enterprises to improve their financial position.
The Japan Research Institute has conducted a survey among local governments and third-sector corporations (corporations under the Commercial Code only), on local government perceptions of the financial position of the third sector, on the future stance of local governments vis-à-vis the third sector, and on expectations of the Organization for the Restoration of Local Vitality, and has drawn up a number of proposals on policy measures for the future.

Outline of Survey Results

♦ Less than 20% of local governments evaluated and inspected the third-sector corporations in which they invested. Around half said they were waiting to receive the criteria from the Ministry of Internal Affairs and Communications and more than 20% said they had "no plans" to carry out evaluations or inspections.
♦ More than 40% of local governments are involved in "third-sector corporations under the Commercial Code whose financial position needs improving". Although around 30% of local governments thought the framework of the Organization for the Restoration of Local Vitality would be effective in improving the financial position of third-party corporations, the majority responded, "Don't know".
♦ Of 112 third-sector corporations that were planning to use or considering the use of the Organization for the Restoration of Local Vitality, by business field, approximately half were in "tourism and leisure", and by geographical location, approximately 30% were in "Hokkaido and the Tohoku Region".
♦ Among local governments, the main expectations of the Organization for the Restoration of Local Vitality were "the provision of experts in improving financial positions", "the provision of financial support for business regeneration" and "support in the drafting of plans for business regeneration".
♦ When respondents were asked what measures were required to improve the financial position of third-sector corporations, the most responses were "cost-cutting" and "marketing reform". Points that were of concern in relation to the improvement of financial position were "protecting employment" and "ensuring a satisfactory level of service to local residents".

For more information on the content of this report, please contact Tsuneko Kameyama , the Japan Research Institute, Limited.

Tel: 03-3288-4597
E-mail:kameyama.tsuneko@jri.co.jp

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