The government on Tuesday approved two bills that would strengthen support for ailing subcontractors.

One of the bills, which were submitted by the Ministry of Economy, Trade and Industry and approved in a Cabinet meeting, would expand the range of companies eligible for state-backed loans and to receive subsidies for technology development.

To qualify for the loans and subsidies, a parent company and at least two of its subcontractors would have to draft a business plan for joint product development and improvement of transactions. The plan would then have to be approved by the government.

Current law only applies to parent companies in five manufacturing sectors, including shipbuilding and autos, and only to subcontractors belonging to their cooperative business associations.

As a result, loans and subsidies have been approved in only 12 instances since the law was introduced in 1970.

If revised, the law would apply to parent firms in all types of manufacturing and service industries, and to subcontractors beyond parent company-related business groups.

In addition, the maximum loan amount from credit guarantee associations using loan claims as collateral will be doubled to 200 million yen.

At the same time, the guarantee charge to be paid to the associations will be lowered to around 0.7 percent from the current 0.85 percent in a bid to alleviate the burden on companies that apply for loans.

The other bill would revise a law against parent companies delaying payments to their subcontractors.

The law would be extended to include the molding and service industries and increase the maximum fine to 500,000 yen, from the present 30,000 yen.

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