Resurgence of growth agenda in the international aid community Western donors (that had focused on narrow poverty agenda) are changing Eg., Growth diagnostics, Doing Business surveys, The Growth Report, etc. Now, the point of global debates is no longer the choice between growth and poverty reduction, but the content and methodology for formulating and implementing country-specific growth strategies. Rising interest in the East Asian development experiences, from Africa and those countries that are not familiar with the East Asian way TICAD IV (May 2008), JICA/JBIC report Request from African leaders (incl. Ethiopia) Importance of providing assistance based on comparative advantages of respective donors (in light of aid effectiveness debates, DoL) The importance for Japan to disseminate features its growth support and complementarity to the support of other donors Need for deeper understanding and dissemination of different approaches to growth support
Long-term, open-ended policy dialogue. Japan has been doing it in various countries—mostly in Asia. But, the origin is Saburo Okita, former Foreign Minister (president of ex-OECF, JBIC). He is the God Father of Japan’s development policy dialogue. He was a key economic technocrat that made Japan’s postwar reconstruction possible, and with this experience, later he led a number of ODA policy missions, representing the government. -Argentina the first ODA systemic ODA. -Ishikawa project in Vietnam (which I will explain subsequently). -Thailand -Indonesia, Prof. Urata and Prof. Asanuma -Laos -Myanmar, failed, but not Prof. Odaka’s fault. Because the government was not seriously engaged in policy dialogue.
Policy Dialogue is a three-layered series of dialogue sessions between Ethiopia and Japan. The highest layer is the direct dialogue with Prime Minister Meles. The 2nd layer is the HLF which invites Ministers, State Ministers and the other high ranking officials. The Third layer is numerous meetings with operational levels of the ministries concerned. The Policy Dialogue deals with a broad set of important policy issues on industrial development, such as Policy vision, 5-Year Development Plans , Sector Policies as well as cross-cutting issues and action plans. The discussion started with the policy visions such as ADLI and democratic developmentalism, which are the guiding principle that the Ethiopian government has been adhering to. Then the discussion moved toward the review of the PASDEP and was culminated into the debate over the new 5 Year Plan namely, GTP 2010/11-2014/15. Sector Policies such as basic metals and engineering industry and the policy direction of industrial development were debated. JICA conducted the supplementary firm-level study of basic metal and engineering industry and provided useful reference for designing industrial master plans. MSE (Micro and Small Enterprises) Development Strategy was also debated. Cross-cutting issues include effective policy making procedures and organization. As mentioned earlier, in parallel with the policy dialogue, the Kaizen project started in October 2009. The concept of KAIZEN and its institutionalization in Ethiopia are also discussed in the Policy Dialogue. The discussion was further activated by the introduction of issue of National Productivity Movement in international comparison. Japan International Cooperation Agency (JICA)
Professor Izumi Ohno, GRIPS
Private Investment and Development in Africa for British and JapanesePrivate SectorsEastern and Western Ideasfor African Growth:Ingredients vs. Framework Approachesto Industrial Development October 18, 2012, London Izumi Ohno National Graduate Institute for Policy Studies (GRIPS)
Background Resurgence of growth agenda in the international aid community Shifting from “charity” to “growth and development investment” (Saidi and Wolf 2011) Private business becoming a major player in development (e.g., inclusive/BoP biz) Japan has been practicing public-private partnership (PPP) for decades, supporting Asian development “ODA Trinity” hypothesis (Japan ODA Model, METI 2005) Japanese aid as a vanguard of FDI (Kimura and Todo 2010) The point of debates is no longer the choice between poverty reduction and growth Greater attention should be paid to different approaches to growth support among donor countries, to fully utilize respective comparative advantages
Main Points1. Key features of Japanese approach to growth support Dynamic capacity development1. Comparison of the Western and Japanese (East Asian) approaches Framework vs. ingredients approaches1. Examples and entry points for Japan’s engagement in African growth
Key Features of Japanese Approach to Growth SupportPragmatism with real sector concern Goal orientation—striving for concrete vision, targets, roadmaps, and actions instead of general capability improvements. Field (gemba) orientation—working on factory floor or crop field to solve concrete problems. Joint work—transferring skills and knowledge to developing countries by working together (OJT); no parallel mechanisms.Dynamic capacity development—step-by-step learning through concrete, hands-on-experience; and expectation of graduation from aid (Ohno & Ohno 2012).
Toru Yanagihara“Framework” vs. “Ingredients” Approaches There are two contrasting ways of understanding and analyzing economic development. In the “framework approach,” the central task of policy and institutional reforms is correcting distortions in the incentive scheme, defined by the policy environment and institutional arrangements. By contrast, in the “ingredients approach,” policies and institutions are viewed as tangible inputs, like conventional factors of production, that shape the process of economic change.Source: Toru Yanagihara (1998). Development and Dynamic Efficiency: “Framework Approach versus“Ingredients Approach”, Chapter 4, Ohno & Ohno (1998).
Western vs. Eastern Approaches ：“ Framework vs. Ingredients” Framework-oriented Ingredients-oriented (West) （ Japan and East Asia ） Emphasis on the framework of Emphasis on an economy as the an economic system and its sum of component parts management Tangible organizational units Rules of the game according to such as firms, official bureaus, which economic agents make industrial projects and their decisions and take action in a aggregations such as industries, given economy sectors and regions 【 Examples 】 Functions of the market 【 Examples 】 Technologies; factors of mechanism; the principles of government production; demand of trends, products and intervention, budgets and public commodities; industrial structures; investment; monitoring and evaluation; marketing and logistics efficiency in administrative efficiency and accountability, individual industries and regions, etc. etc.Source: Toru Yanagihara (1998). Development and Dynamic Efficiency: “Framework Approach versus“Ingredients Approach”, Chapter 4, Ohno & Ohno (1998).
(Examples) UK vs. Japan “Infrastructure” Innovation in infrastructure financing (UK) -- local currency guarantee, project development facility for privately-financed infrastructure, reaching the poor, etc. Building roads & bridges (Japan) -- location, design & technology, durability, etc. “Industrial promotion” Challenge funds (UK) -- matching grants for innovative business models, designing architecture for public- private partnerships, etc. Concrete industrial support (Japan) -- Master Plan for specific industries, factory diagnosis, industrial human resource training, etc.
JICA-JBIC Report (May 2008)Econ. Dev. in Africa and the Asian Growth ExperienceEstablish “Industrialization Strategy” as aprocess, not just a document. Identify desired vision, economic structure, and positioning in global value chain. Through public-private dialogue, discover growth- leading industries for future. Identify their constraints (infra, HRD, etc). Devise measures to remove constraints and promote targeted industries.Measures must be consistent with the country’s institutionalcapability and executed under discipline and competition.
Japan’s Entry Points in Africa(and Elsewhere)GRIPS Dev. Forum, Proposal for a New African Growth SupportInitiative, Aug.2008.Japan, a small investor and donor in Africa, but withEast Asian perspectives, can offer the following:(1) For a country with reasonable visions and plans, standard policy tools (training, QC, kaizen, SME promotion, etc.) can be provided.(2) Policy dialogue for making and strengthening visions and strategies (preferably followed by specific aid projects and other assistance).(3) Comprehensive regional development with core infrastructure, supported by HRD, regional planning, industrial support, rural development, etc.(4) Creating enabling environment for Japanese investment under the principle of open access and non-excludability.
(1) Mobilizing Aid to SupportExisting National VisionMenu for industrial support is common. But, selectivity andadjustment are needed to adapt to unique conditions ofeach country. Japan has many aid tools for industrialsupport: Production and technology management (e.g., kaizen, QC) Industrial human resource training Efficient logistics and marketing Infrastructure (esp. transport and power) Regional development planning Creating necessary laws, standards, institutions Removing negative impacts of industrialization
(2) Policy Dialogue with a View toFuture ActionsIf the national vision is still weak or unclear, Japan canengage in policy dialogue for formulating a proper visionand building mutual trust and understanding Argentina – Okita Mission 1985-87; 1994-96 (follow up) Vietnam – Continuous government-business policy dialogue (e.g., Japan-Vietnam Joint Initiative); Ishikawa Project 1995-2001 Thailand – Mizutani Report for upgrading SMEs and supporting industries, 1999 Indonesia – Continuous government-business policy dialogue; Urata Report for SMEs, 2000; Prof. Shiraishi & Asanuma, 2002-04 (post- Asian crisis) Laos – Prof. Hara for overall development strategy, 2000-05 Mongolia – Ueno, Hashimoto, 1998-2001 Ethiopia – JICA-GRIPS, 2009- (ongoing) for policy methods & Kaizen
Japan-Ethiopia Industrial Policy Dialogue, coupled with Technical Cooperation Project (now, phase 2 ongoing) Three Layers of JapanDialogue with Ethiopia Policy Dialogue (phase 1: Jun.09-2011) 1. Policy Visions Dialogue with Democratic Developmentalism, Agriculture Prime Minister EOJ Development-led Industrialization (ADLI) 2. Five Year Development Plans G High Level Forum J PASDEP(05/06-09/10), GTP (10/11-14/15) R with Ministers and I 3. Sector Policies I State Ministers Basic Metal & Engineering Industry C P Industrial Development Strategy A Operational Level S MSE Development Strategy MoFED, MoARD, MoE, MoI, MoUDC, etc. 4. Cross-cutting Issues Professors Policy Making Process and Organizations Kenichi Ohno & National Movement of Productivity Izumi Ohno Supplementary Firm-Level MoI, Metal Products Study of Basic Metal and JICA Development Center Engineering Industry(2010) MoI, KAIZEN Unit Study Project on KAIZEN JICA (Oct.09-Jun.2011)PASDEP: Plan for Accelerated and Sustained Development to End Poverty, GTP: Growth and Transformation Plan, IDS: IndustrialDevelopment Strategy, MoFED: Ministry of Finance and Economic Development, MoARD: Ministry of Agriculture and RuralDevelopment, MoE: Ministry of Education, MoI: Ministry of Industry, MoUDC: Ministry of Urban Development and Construction
JICA-GRIPS Industrial Policy Dialogue and Industrial Support Projects with Ethiopia (2009- ) Preparation Industrial policy dialogue Second phaseIPD conference Official launch Final session LaunchJuly 2008 June 2009 May 2011 Jan. 2012 Kaizen pilot project (30 firms) Industrial support Institutionalization of kaizen: second phase projects Basic metal & engineering study (With ECBP)Note: Black squares indicate policy dialogue sessions in Addis Ababa with the prime minister, concerned ministers and state ministers, and officials and experts atoperational levels. IPD stands for the Initiative for Policy Dialogue, policy oriented meetings on various topics hosted by J. Stiglitz of Columbia University. ECBPstands for the Engineering Capacity Building Program, a large-scale program run jointly by Ethiopia and Germany.
Malaysia-Zambia Cooperation:Triangle of Hope (TOH) JICA implemented “Triangle of Hope” Project during 2006-09 to support the improvement of business environment in Zambia Dato Jegathesan was Deputy DG of the Malaysia Industrial Development Authority (MIDA), under ex-Prime Minister Mahathir. TOH project formulated 12 concrete policy recommendations, and catalyzed Malaysian investment in Zambia (a cedular company). Currently, JICA is supporting capacity development of Zambia Development Authority (ZDA).
(3) Regional Development with Core Infrastructure Large infrastructure such as roads, ports and power has broad effects. Policies and aid should be organized around core infrastructure for maximum impact. Service delivery Rural Micro financeRemote area development Trainingor another EPZ Truckcountry New Highway Large terminal Port city IZ Commerce improve- ment One stop service FDI marketing Traffic safety Tourism Feeder roads Housing
Regional Development with CoreInfrastructure (Examples) Greater Mekong Subregion – East-West and North-South Corridors for development of Indochina Thailand – Eastern Seaboard: creation of industrial zones around a port infrastructure Indonesia – Brantas River Basin development Vietnam – Highway No.5 (Hanoi – Haiphong Port) for FDI attraction (industrial clusters) Cambodia – Sihanoukville Port, power and telecom networks, special economic zone El Salvador – La Union Port + regional development India – Delhi-Mumbai Industrial Corridor for FDI attraction (industrial zone, PPP infrastructure) Mozambique – Nacala Corridor for regional development
Nacala Development Corridor The Case of Mozambique (Ongoing)Nacala Development Corridor (Source: CPI, Govt. of Mozambique) a Mozambique is JICA’s target country in Africa for regional development approach: Nacala Corridor, agriculture development (with Brazil), productive sector support, road maintenance, etc.
(4) Mobilize ODA to ProvideConditions for Concrete FDI Using ODA to mitigate risks for private sector investments in Africa (e.g., infrastructure, HRD) New initiative, based on TICAD IV commitment to promote public-private partnerships (PPP) in Africa Public-private joint missions to promote trade & investment in Africa; efforts are underway by MOFA, METI, JICA, JETRO, etc. to concretize PPP support JICA (Office for Private Sector Partnership), supporting PPP infrastructure, inclusive/BoP biz, local SME development (with the involvement of Japanese firms)
UK-Japan Partnership for AfricanGrowthBased on Diversity and Complementarity There are differences btw. the Western and the East Asian approaches to development. Good potential exists for UK-Japan partnership, based on respective comparative advantages. Guided by the principle of diversity and complementarity UK’s strengths: Policy framework; designing international & financial architecture; communication strategy and stakeholder engagement; knowledge and experiences in Africa, etc. Japan’s strengths: Concrete, process-oriented support; field-based expertise; infrastructure development; knowledge and experiences in Asia (incl. a possibility of engaging emerging donors), etc.
ReferencesGRIPS Development Forum (2008). Diversity and Complementarity in Development aid: EastAsian Lessons for African Growth.GRIPS Development Forum (2008). “Proposal for a New African Growth Support Initiative”,Policy Note No.5.JICA and JBIC (2008). Report of the Stocktaking Work in the Economic Development in Africaand the Asian Experience.Ministry of Economy, Trade and Industry (2005). “Promotion of ‘Japan ODA Model’ based onIts Experience of Successful Economic Cooperation.”Ohno, Izumi and Kenichi Ohno (2012). “Dynamic Capacity Development: What Africa CanLearn from Industrial Policy Formulation in East Asia”, Ch. 7, in Good Growth and Governancein Africa: Rethinking Development Strategies, eds. Norman and Stigliz et al., Oxford UniversityPress.Ohno, Kenichi, and Izumi Ohno, eds. (1998). Japanese Views on Economic Development:Diverse Paths to the Market, Routledge.Saidi, Myriam Dahman and Cristina Wolf (2011) “Recalibrating Development Co-operation:How Can African Countries Benefit from Emerging Partners?” OECD Development CentreWorking Paper, no. 302.Todo and Kimura (2010), “Is Foreign Aid a Vanguard of Foreign Direct Investment? A Gravity-Equation Approach”, World Development, Vol.38 Issue 4, April 2010.Yanagihara, Toru (1998). “Development and Dynamic Efficiency: ‘Framework Approach versusIngredients Approach’”, Ch. 4, in Ohno & Ohno (1998).