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Main Issues Discussed and The Way Forward
Policy Formulation in Developing CountriesGRIPS Development Forum
Leadership Critical role of top leaders (cannot be out-
sourced!) Providing development vision Organizing technocratic teams Affecting how the system works
Different types of leadership: political, economic and developmental, etc.
Issues Sustainability of “good” (=strong & effective)
leaders?; succession problems Personal leadership vs. organizational leadership?
Types of Leadership and Technocrat Teams
Leadership Type Technocrat Teams
Japan(Late 50s-70s)
Organizational leadership
MOF, EPA, MITI (super-ministry for industrial policy)
S. Korea (60s-70s)
Strong personal leadership
EPB (super-ministry), headed by Deputy PM; reporting directly to the President
Malaysia (80s-90s)
Strong personal leadership
Prime Minister’s Dept. esp., EPU (super-ministry) & ICU
Thailand (80s) Organizational leadership
Four macro core agencies (no super-ministry); but, weak macro-sector links
Technocrats (Central Admin.) Developmental coalition btw. leaders and
technocrats is crucial (b/c leaders alone cannot design & implement policies)
Serving as a strategic core center of development management (not just donor management)
Issues The stability of professional civil services often
threatened Political interference in civil service appointments;
technocrats are held “hostages” by political leaders. Weak inter-agency coordination (within central
admin., central-local admin., private sector, etc.) Problems of monitoring & evaluation
Technocrats (Central Admin.) Limitation in the quality and flow of information,
preventing the govt. from making right policy decisions.
Establishing formal systems & rules does not guarantee their effective functions.
Problems of corruption Capacity constraints: dilemma btw. what should
be done (multitude of development challenges) and what can be done (govt. capacity constraints); need for prioritization
Limited bargaining power against donors; sometimes, donor-driven policy and aid decision
Local Administration Need to respond to local needs (esp. public service
delivery, poverty-focused programs) Importance of “bottom-up” approach, to ensure citizen
participation in the development process
Issues Sequencing? -- decentralization vs. de-concentration Weak capability of local administration
Need for staff training, e.g., budget formulation and execution Need to diversify local revenue sources; design fiscal transfer
formula Need for capacity to work with community organizations
Vertically divided functions, reflecting ministerial fragmentation at the central-level
Role of politicians in local governance Use of “pork barrel” funds, with little attention to local needs
What Can We Do? Influence international opinions toward greater political s
pace (e.g., the definition of democracy, constitutional rules on re-election)?
Build a cadre of elite technocrats, to foster “organizational leadership”? -- e.g., the role of Dr. Ungphakorn, Thailand
Create a “super-ministry” which has strong authority for vision concretization and implementation of priority tasks?
Make the system transparent and rule-based (e.g., design of pork barrel funds)?
What Can We Do? Should we look at alternative approaches to
capacity development & prioritization? For example, how about pursuing “dynamic
capacity development” -- rather than comprehensive “good governance” approach? Phased approach: goal orientation strategy targeted,
concrete action plans Attention to the “positives” rather than the “negatives”
(binding constraints) Reform government to execute targeted policies
effectively
Related Issues How to change culture?
A sense of nationalism, dedication to public services, etc.
How to change “rent-seeking” mindset (overcoming financial incentives)? Identify and foster leaders of motivated & competent
technocrats -- as a role model for others? Reward by “non-financial” incentives (e.g., combining
training with merit-based appointment; prestige)? Political system
Presidential system vs. parliamentary system matter. Does this matter?
Role of External Partners Publicize “good leaders” and promote intellectual debates
on “democratic developmentalism”? Use policy dialogues as an entry point for engaging partn
er countries in “dynamic capacity development”? – although this is effective only when trustful relations exist btw. external partners and countries….
Jointly formulate policies, by sharing external perspectives (e.g., VN-Japan Joint Initiative to Improve Business Environment)?
Provide new ideas and knowledge, when specific problems have been identified by countries (e.g., Ethiopia (kaizen), Cambodia (one-window-service office, ombudsman)?
Role of External Partners Act as a coordinator for large-scale, regional
infrastructure (e.g., development corridors, power pools), where respective countries face different interests?
Act as a watch-dog to ensure transparency of the development process, by assuming “joint responsibility” in development management?
Supplementary Note:Govt.–Business Partnerships Vision sharing and industrial policy
formulation Priority programs
<Organizational arrangements: examples from East Asia> Japan South Korea Malaysia Thailand
Issues on Sector-level Coordination Productive sector (industry, agriculture, etc.) faces differe
nt challenges from social/ infrastructure sectors in vision/plan formation because of: Not public-expenditure intensive Need to work with private agents Importance of incentives, regulatory framework, etc. (different fro
m public service delivery -- costing based) Multi-sector (incl. agriculture, infrastructure, skill development, sc
ience & technology), requiring inter-sectoral coordination
Cf. Mick Foster (2001): difficulty of agricultural SWAP
Experiences from East Asia Govt.-business partnerships around shared vision Large volume of high-quality information flow
btw. govt.-business Govt. initiatives in operational management of
policy networks (and monitoring) Existence of mutual confidence, making
predictions and commitments credible Evolving nature of govt.-business coordination, as
the private sector grows From govt.-led to private-sector led mechanisms for
resolving specific problems
(1) Vision Sharing and Industrial Policy Formulation Not all E. Asian countries formulate industry-wide
policy; but they have instruments for sharing industrial visions.
Effective industrial vision formulation requires: Constructive and continuous contacts with businesses; Mechanism to frequently review and flexibly adjust
policy implementation. Many E. Asian countries used Deliberation
Councils; but their functions & institutional arrangements are diverse. Scope: vision/plan formulation, problem-solving &
performance monitoring, information-sharing, etc.
(2) Priority Programs Some E. Asian countries established Special Task
Forces to plan and monitor the implementation of high-priority programs
Intensive inter-ministerial coordination (due to multi-sector nature) Critical role of leadership and the secretariat; the
secretariat was given the authority to manage Combination of “top-down” and “bottom-up”
approaches Gathering high-quality information; linking it to decision-
making Rapid problem-solving mechanisms
Organizational leadership
No single super-ministry
Govt. formulating MLT economic and physical plans via. deliberation councils
MITI serving as super-ministry for industrial policy Very broad
jurisdiction Working with the
private sector
PrimeMinister
MITIMOFEcon. PlanningAgency, LandAgency, etc.
PM’s Office
- MLT Economic Plans- Comprehensive National Development Plans (physical planning)
DeliberationCouncils
DeliberationCouncils
- Industrial vision- Industry-specific policies- Coordination & support to business activities (e.g., finance, technology)
Participation fromofficials, business,academia, media,labor, consumers.
Japan (late 50s-70s): Development and Industrial Vision Formulation
MITI
Main Bureau Attached Organizationsand External Bureaus
Deliberation Councils
Minister’s Secretariat (incl. Research & Statistics)
Int’l Trade Policy Bureau
Int’l Trade Admin. Bureau
Industrial Policy Bureau
Industrial Location & Environment Protection Bureau
Basic Industries Bureau
Machinery & Information Industries Bureau
Consumer Goods Industries Bureau
Agency of National Resources & Energy
Patient Office
SME Enterprise Agency
Agency of Industrial Science & Technology
Trade & Investment Training
Other
Industrial Structure Int’l Trade TransactionExport Insurance Industrial Location & WaterTextile Product Safety & Household Goods Quality IndicationPetroleum Aircraft & Machinery IndustryElectrical Works Traditional Crafts Industry......... ...................
Minister
Politically appointed VM
Administrative VM
Deputy VMs
Special assistants
Source: Adapted from D.Okimoto (1989)Figure 3.2 p.117
(*) Industrial Structure Council: influential in the 60s (18 special committees): industrial pollution, int’l economy, consumer economy, heavy industry, chemical industry, etc.
MITI junior staffstudy group
Japan: Industrial Vision Formulation and the Deliberation Council
Hearing: Learned individuals Interested parties Overseas employees Local representatives Others
MITI Research group(subcommittee)
Deliberation council
Conduct survey;compile data
Public relations: Publications Explanatory meetings Lectures Others
(Briefings, subcommittees’ reports)
(Prepare draft)
(Report)
(Feedback)
Outside lecturers
Source: Ono (1992)
Direct presidential control over economic policies
EPB as super-ministry
Research institute (KDI, etc.), providing analysis for MLT economic policies
Govt.-business: close and cooperative relations
Performance-based rewards & penalties
(Blue House) Economic
Secretariats
President
FinanceBusiness
EPBDeputy PM
KDI
MTI
Ministries/Agencies
- Development planning- Public investment planning- Budget- Monitoring- Aid management
South Korea (60s-70s): Development Vision and Govt.-Business Partnerships
Five-year plan Economic Minister’sCouncil
State Council
Chaired by Deputy PM
Govt.-BusinessMeetings:
Export promotion Economic briefs- HCI drive, etc.
South Korea : Export Drive (60s-early 80s) Monthly Export Promotion Meetings, as the most
important communication channels Chaired by President Park Members: economic ministries, business association
leaders, governors of financial institutions, major export enterprises
Monitor the achievements of export targets; coordinating measures to eliminate impediments to export growth
Mutual responsibilities: ministries are ordered to take measures and report at the next meeting Business are rewarded, based on export performance
Monthly Economic Briefing Chaired by President Park; managed by EPB Members: President, EPB, business leaders,
representatives of financial institutions
South Korea : HCI Drive (1973-79) High-priority in the Third Five-Year DP (under President Park:
targets set until Fifth Five-Year DP): Heavy and Chemical Industry (HCI): 6 strategic industries
(industrial machinery, shipbuilding, electronics, steel, petrochemicals, etc.)
HCI Promotion Committee (73) Chaired by President Park; equivalent to State Council Members: Prime minister, Presidential Secretary for Economic
Affairs, 6 ministers (EPB, MTI, MOF, MOE, MOST, MOC) HCI Planning Team (Special Task Force):
Managed by the Blue House (headed by Presidential Secretary for Economic Affairs)
Members: economic secretariats of the Blue House, MTI, EPB, MOF, MTI, MOC
Financial and fiscal incentives: National Investment Fund (74); tax incentives, tariff reduction, etc.
Macroeconomic implications? -- driven by the Blue House and MTI (rather than EPB and MOF)
Leadership Vision and Technocratic Arm: Malaysia (80s-90s)
PM Mahathir’s initiative to renovate direction for economic policies and institutional arrangements (pro-Malay to strategic partnership with business)
Learning from the “Look East Policy” (1981) The Vision 2020, announced by PM at the first Malaysian
Business Council (1991) Institutionalized the Malaysia Inc. Vision
Industrial Master Plan (IMP) 2 (1996-2005) to implement the Vision 2020
Various initiatives to implement IMP2
Although PM provided LT vision and direction for changes, policy formulation and implementation were conducted via. multi-layered, inter-coordination mechanism.
Prime Minister & PM’s Dept.
Ministry of Industry & Trade
Malaysia (90s): Malaysia Incorporated Malaysian Business Council (MBC) (91)
Chaired by PM Mahathir; organized by PM’s Dept. Members: 10 ministers, 10 officials, 55 business
representatives Modeled on the Korean Monthly Export Promotion Meetings Shared the Vision 2020; facilitated direct communication
among big business, labor and the PM Malaysia Inc. Officials’ Committee (93)
Chaired by the Chief Cabinet Secretary of PM’s Dept. Members: govt. officials, business associations and business
leaders All govt. branches, federal states were requested
to establish govt.- business councils and annual forums MOF: Annual budget dialogue METI: Annual trade and industry dialogue (88-)
Malaysia (90s): Industrial Master Plan 2 IMP2: industry-wide master plan to attain the Vision 2020 (tog
ether with Malaysia Inc.). Its implementation was supported by:
Industrial Coordination Council (ICC), chaired by Minister of MOI Members: 8 officials from MOI, EPU, MOF, CB, related economic ministri
es (PS levels), 15 business representatives (Chamber of Commerce, FMM, major industrial associations)
Monitor the progress of IMP2 and examine problems suggested by IPIC, CWGs
Industrial Policy and Incentive Committee (IPIC): Members: officials only (8 ministries/agencies)
Public-Private Cluster WG (18 CWGs) and Strategic Thrust and Initiative Task Force (STITF) Participation of private sector
MOF
PMDeputy PM
EPU(planning)
ICU(monitoring)
MITI
Industry Coordination Council (ICC)
Industry Policy and IncentiveCommittee (IPIC)
Industry Cluster Working Groups (18 CWGs)
Malaysociety
Chinesesociety
Indiansociety
Chambers of Commerce
Source: Adapted from Takashi Torii, “Mahathir’s Developmentalism and Implementation Mechanism:Malaysia Incorporated Policy and BCIC,” ch.4, Higashi (2000), pp. 166, Figure 2.
Budgetdialogue
Annualdialogue
CentralBank
Industrygroups
Individual firms
PM’s Dept.Malaysia: Mechanismsfor Industrial Policy Coordination (1991-)
Political Parties
NPC NEAC
Chaired by MOTI Minister, Govt & business.
Govt. only (8 ministries/agencies)
Govt.& business
Vision 2020Malaysia Plan (Five-Year DP)
IMP2
Thailand (late 90s): Public-Private Partnership for Industrial Restructuring Need for industrial restructuring, after the
financial crisis National Committee on Industrial Development,
chaired by Deputy PM Sub-committee on National Industrial
Restructuring, chaired by Deputy Minister, MOI IRP drafting
Used SAL financing (WB, ADB), but with Thailand’s ownership
Master Plans for 13 industries formulated Institutes (6 industries; 4 thematic)
Operated and financed jointly by public & business Each institute acts as a hub of information &
consultations, drafting industry / issue-specific MP, etc.
Prime MinisterCabinet
NESDB
JPPCC
Financial Sector Reform
Industrial Restructuring
Social Infrastructure
Others
National Committee on Industrial Development
Sub-committee on National Industrial Restructuring
Economic Cabinet Meeting
InstitutesTextile, Food, Automobile, Iron & Steel, SME,
Productivity, Mgt. System Certificate, etc.
Source: Shigeki Higashi “Industry: Business and Government in a Changing Economic Structure”ch.3, Suehiro & Higashi (2000), p.166. Figure 3
Public-Private Partnership for Industrial Restructuring(Thailand after 1997)
Line Ministries Thai EXIM BankIFCTSICGC
Federation of Thai IndustriesIndustry AssociationsChamber of Commerce
CommercialBanks
Examine & discuss basicpolicy & direction
Examine & discuss detailedmeasures & actions
Information sharing; Specific MP formulation, etc.
Chaired by Deputy PM
Chaired by Deputy Minister, MOI
Operated jointly by public & privatesectors
Govt.-business consultation body, established in the early 80s.