East Asian Experience andAfrican DevelopmentHow to Assist Growth in Africa & Elsewhere
Policy Formulation in Developing CountriesGRIPS Development Forum
Cashew nut seller in Mozambique Copper Belt in Zambia Garment workers in Ethiopia
Topics1. The meaning of East Asian lessons2. Desirability vs. feasibility (interaction of
economics and politics)3. Features of Japanese FDI and ODA4. Policy entry points—how the Eastern method
should be transferred to other regions5. Mindset and absorptive capacity of developing
country governments
EAST (esp. Japan) WEST
Goal Dynamism--national pride, industrialization, compete for excellence, graduate from aid
Altruism—poverty reduction, equity & rights; rich must help poor to alleviate pain
Approach Pragmatism--obsession with concrete details & progress; JICA goes to factories & farms
Rule-based--install proper & general framework; leave details to consultants
Time scope
Long-term--some projects take decades to bear fruits; trials & errors are acceptable
Short-term--every project must produce visible results for evaluation after 2-3 years
Democracy
Democracy & markets need time to grow and mature
Democracy as pre-condition of growth at any income level
Typical programs
Infrastructure, industrial HR, SMEs, TVET, industrial master plans, FDI-local firm linkage, productivity, creation of new industry, one-stop service…
General budget support, law, governance, PPP, export marketing, trade negotiation skill, green manufacturing, business matching funds…
Developmental Vision: East & WestAt the risk of oversimplification
Even though PSD and industrial policy have come to be widely accepted, East and West have different views on how growth should be supported.
1. The Meaning of East Asian Lessons It is NOT copying some policies adopted in some
East Asian countries to Africa (or any other place) without critical examination of local context—all countries are different.
Lessons should be about mindset (heart) and methodology (tools) of development policies
What should be learned: Leadership Popular mindset, national movements Policy procedure, organization, documentation General capability to create your own policy
by selecting and modifying other countries’ diverse experiences
Fact Learning & Creative Thinking Must Go Together Confucius (551-479BC), Chapter on Politics, Lun-yu “Learning without thinking is useless; thinking without
learning is insecure.” 「学びて思わざるは罔(くら)し、思いて学ばざるはすなわち殆
(あやう)し」
Friedrich W. Nietzsche, Thus Spoke Zarathustra (1883) Three transformations of the spirit:
1. Camel – “Put a heavy load on me” (learning the world knowledge)
2. Lion – kill a dragon whose name is “Thou Shalt” (emancipation from authority & tradition)
3. Child – A spontaneous actor who has absorbed knowledge but freed oneself from imposed ways
“The child is a self-propelling wheel.”
2. Desirability vs. Feasibility
Development is both a political process and an economic process.
What should be doneHRD & technology
InfrastructureIntegration & competition
Institution building, etc
What can be doneLeadership
politics, foreign relationspopular mindset
administrative capacity
Each country is unique in what needs to be done as well as what can actually be done.
Any policy maker must work simultaneously with economic and political space (content vs. doability).
(mainly economics) (mainly politics)
Desirability vs. Feasibility (cont.)
We need to figure out a policy sequence which is both desirable & feasible in each country’s context.
Policy advice without political or local feasibility cannot be implemented regardless of whether proposed actions are a few or many, common or tailor-made. Examples: IMF’s big-bang liberalization, privatization &
integration WB’s good governance & “international best practices” Growth diagnostics (Harvard economists incl. Rodrik) Recommending a Japanese or Korean model to all
countries
3. Features of Japanese FDIAfrica asks: “China, India, Turkey, Brazil, etc. are already here. Why do Japanese firms not come to Africa?”
The Japanese business model is unique:Manufacturing-centered—investments in property, trade and
mining are relatively small compared with othersMonozukuri (manufacturing) spirit—proud of factory floor;
endless pursuit of quality & customer satisfactionLong-term orientation—last in coming to frontier countries
but once invested, will stay long against difficultiesPartner assistance—providing training to local firms and
engineers because long-term relation & trust are importantLegal compliance—observance of local labor, tax,
environment laws
Japanese manufacturing firms are slow but sincere; developing countries will eventually realize their virtue (cf. Southeast Asia; but not yet in Africa).
Features of Japanese ODA Unlike WB or UN, Japan’s aid policy has been constant since
the 1950s: infrastructure & human resource are two pillars. “ALL JAPAN”—officials, academics, experts and businesses
cooperate to design and implement projects (cf. contract-based consultancy in USAID, Korea’s KSP…)
Institution building and training locals—sustainability after JICA experts leave; graduation from aid is the ultimate goal.
Gemba orientation—working in factories & farms; however, communicative ability (English, report writing) is inferior.
Linkage between FDI and ODA. Some projects are very long-term: Thailand’s King Mongkut
University, Indonesia’s Brantas River Basin development Vietnam’s Cho Ray Hospital, Chile’s salmon industry…
Preference of productive sector projects over general budget support or like-minded donor coordination.
Marketing Japan’s FDI & ODA in Africa Quality, not quantity or speed, should be promoted and
promised in Japanese manufacturing FDI or ODA. Publicize merits of Japanese FDI & ODA to “frontier”
countries; differentiate from China. Enter Africa with small-scale but high-quality:
Add value to exports by safety & quality guarantee, packaging, logistics, etc. (eg. coffee, sesame…)
Produce highly-priced “champion products” by branding and strategic marketing
Manufacturing FDI that uses high-quality local materials (eg. leather products, gems & jewelry…)
Japan is unlikely to create a large export base for electronics or auto in Africa (production base is shifting from China to Thailand, Vietnam, Indonesia, Cambodia, Myanmar… and Ethiopia?)
4. Japan’s Entry Points for Industrial Assistance in Frontier Countries GRIPS Dev. Forum, Proposal for a New African Growth
Support Initiative, Aug.2008.
(1) If the government already has a good strategy, mobilize standard assistance tools to support that strategy.
(2) Engage in policy dialogue (preferably followed by specific aid projects and other assistance).
(3) Build a core infrastructure with additional aid and investments around it for comprehensive regional development.
(4) Provide missing elements (infrastructure, technology, skills, etc.) to entice (Japanese) firms to invest under open access and non-exclusivity principle.
(1) Mobilizing Standard Aid Tools to Support Existing National Vision
Industrial policy menu is common. What is not common is each country’s capability to execute standard policies effectively in the local context.
Japan has many industrial aid tools which are widely practiced in East Asia. Kaizen (quality and productivity improvement) Shindan (SME management consultant system) Engineering universities and colleges TVET-industry linkage Industrial estates & strategic FDI marketing SME assistance package Integrated export promotion (Korea) Strategic creation of new industry through industry-
government-university cooperation Comprehensive regional development with core
infrastructure
(2) Japan’s Policy Dialogue with Developing Countries If policy is weak or if a nation wants to learn the Eastern way,
Japan can engage in policy dialogue for improving policies, building mutual trust & understanding, and targeting aid:
Argentina – Okita Mission, 1985-87; follow-up 1994-96 Vietnam – Ishikawa Project, 1995-2001 Thailand – Mizutani Report for upgrading SMEs and
supporting industries, 1999 Indonesia – Urata Report for SMEs, 2000; Prof. Shiraishi &
Asanuma for financial crises, 2002-04 Mongolia – Ueno, Hashimoto, 1998-2001 Myanmar – Prof. Odaka, 1999 (not successful), 2012- Laos – Prof. Hara for overall dev. strategy, 2000-05 Ethiopia – GRIPS-JICA, 2009- kaizen & policy dialogue Vietnam – Joint Initiative 2003- (investment climate);
supporting industries 2008-10; industrialization strategy 2011-13; Local government industrial support 2015-?
Africa Taskforce Meeting Jul. 2008
Official launch Jun. 2009
Preparation
Industrial Policy Dialogue
Final session May 2011
Kaizen Phase 1(30 pilot companies)
(With Germany)
JICA’s Industrial
CooperationMetal industry
survey
Kaizen Phase 2( Institution & human resource)
Start Jan. 2012
Note: Black boxes indicate three-level policy dialogue in Addis Ababa (PM, ministers, operational level).
Phase 1 (2009-11) Phase 2 (2012-15)
Champion Products
PM Meles PM Hailemariam
Final session Aug. or Oct. 2015
Kaizen Phase 3(Advanced level)
Branding &promotion
2008 20102009 201320122011 2014 2015
PM Abe visit
2016
Malaysia mission
TICAD V
Ethiopia-Japan Industrial Policy Dialogue
With Former PM Meles at PM Office
Senior Economic Advisor NewaiPresenting JICA’s Kaizen Report
High Level Forum (Aug. 2014)
Lecture at Civil Service University (Economic Development of Japan)
At MOFED
(3) Japanese Assistance for Regional Development around Core Infrastructure Greater Mekong – East-West and North-South
Corridors for development of Indochina Region Thailand - Eastern Seaboard: industrial cities
around port infrastructure (Ms. Shimamura) Indonesia - Brantas River Basin Development Vietnam - Highway No.5 and FDI attraction Cambodia - Port, industrial park, FDI attraction El Salvador - La Union Port and comprehensive
regional development (Dr. Hosono) India - Delhi-Mumbai Industrial Corridor Mozambique - Nacala Port and Nacala Corridor,
agriculture and industrial parks
Pacific Ocean
Road (US aid) Bridge
(Japanese aid)
(Japanese aid)Regional development (Japanese aid)
Honduras
Components of Japan’s ODA in El Salvador
- Construction of La Union Port- Rebuilding an old bridge (Honduras border)- Digital map technology for efficient planning- Urban development planning for La Union City
KEY INFRASTRUCTURE
- MEGATEC La Union (training center)- Primary schools & math- Clean water- Rural electrification- Solid waste control
Social & Human RD
- SME promotion- Aquaculture- Small-scale agriculture- Reservoirs & irrigation- Small-scale livestock
- La Union Port- Plan Puebla Panama- CAFTA & other FTAs- Cent. Amer. integration- M/P for Eastern Region
Support forProductive Sectors
Eastern Region Development
Source: Summarized from Prof. Hosono’s presentation
(Map source: JBIC)
- Mozambique is Japan’s target country in Africa for regional development approach: Nacala Corridor, Nacala City planning, Pro Savanna agriculture (with Brazil), etc.
- However, Japan has not built effective policy channels with Mozambican Gov’t.
- WB supports implementation of multiple corridors development.
(Map source: World Bank)
- Brazil, India, etc. interested in Mozambican resources (coal, natural gas).
5. Mindset & Absorptive Capacity of Developing Country GovernmentsEven though Japan teaches & transfers the same skills & technology in a similar way, developing country governments are all different.Example: productivity movement
Singapore—fully mastered it and started teaching to other countries
Thailand—MOI & private NPO have made great effort to learn kaizen & shindan for partial success
Indonesia, Vietnam & India—Japan & private sector make effort, but gov’t does not promote productivity
Mauritius & Burkina Faso—kaizen was once learned but now nearly forgotten.
How should Japan teach different governments?
Willingness to learn
Policy ownership
Current industrial
knowledge
Stability of leader &
government
Capability of top
leader(s) & ministers
Capability of mid/low
officials
Thailand High Moderate High Low Moderate Moderate
Vietnam Low High Low High Low Low
Indonesia Low High Low Moderate Moderate Low
Cambodia High?Low to
moderate?Low High
Moderate to high?
Low
Mauritius High High High High High High?
Rwanda High High Moderate High? High ?
Ethiopia Very high Very high Moderate High High Low
Mozambique Low Low Low High? Low Low
Comparing Mindset & Absorptive CapacityFor the purpose of transferring industrial skills & knowledge
(preliminary grading, subject to revision)
1/ Japan’s resource is limited while industrialization is difficult; support should be given to most promising students.2/ Patience is required if Japan has to teach an important country with low mindset & capacity.3/ Willingness to learn is more important than current knowledge or political stability.