Industrial Policy in Africa
Learning Mindset and Methods from East Asia

Kenichi Ohno
National Graduate Institute for Policy Studies (GRIPS),Tokyo, October 2010

Topics
 Need for concrete and pragmatic learningand instruction
 Standard policy menu in East Asia Japanese approach and entry points toAfrican development
 Example: Ethiopia-Japan Industrial Policy
dialogue

Studies in Industrial Policy
Type 1 - Ideological and/or theoretical debate over“industrial policy”: Washington Consensus vs.
J.Stiglitz, D.Rodrik, H.J.Chang, Justin Lin…
Type 2 – Narration of concrete but isolated policy
experiences in particular countries: Japan, Korea,China, Singapore, Malaysia…
Type 3 – Systematic collection and comparative
analysis of past and present industrial policies,
offering raw materials for policy formulation ineach country.

Willing to Learn Practice East Asia generally accepts government’s role inindustrialization and widely practices industrial
policy. Rich experiences, and no allergy.
 In Africa: Ethiopia, Zambia, Rwanda, Uganda,Tanzania, Egypt, Tunisia, Namibia, African Union,
East African Community… are seriouslyinterested in industrial policy or implementing it.
 Ethiopian senior economic advisor: “We wantaction-oriented advice, not academic theories.” Vietnamese economists: “WB’s policy proposals
are too mechanical and not concrete enough forVietnam.”Theory vs. Pragmatic Guidance Validity of industrial policy argument depends on

actual successes on the ground.
 For industrial policy “converts,” pragmatic anddetailed guidance is needed, not theoreticaljustification of industrial policy.
 Japan, Asian Tigers, ASEAN, and China
industrialized through self-study, learning fromneighbors, and trial-and-error.
 Today’s latecomers also face random andfragmented advice. No systematic instruction
exists for effective policy design and execution.

Systematic Instruction on Industrial
Policy Making is NeededFeaturing: Strong country ownership A policy package tailored to each country Policy learning and gradual expansion of policyspace
 A comprehensive policy menu to choose from,based on international comparison of concrete
policy measures Policy dialogue with advanced country experts(coaching and tutoring at initial stage)
Ethiopia: “Please show us how East Asian countries
draft industrial master plans and action plans.”

Current Research at
GRIPS Development Forum
East Asian Industrial Policy Handbook (project in progress).
The Middle Income Trap: Learning to Industrialize in theGlobalization Age (Routledge, in preparation).
Comparative research on industrial policy making in
Singapore, Korea, and Taiwan (ongoing).
“Japanese Approach to Growth Support in Developing
Countries: International Comparison and Case Studies”(JICA, Mar.2010; English translation in progress).
“Backgrounds, Policy Measures and Outcomes forDevelopment of Supporting Industries in ASEAN:
Malaysia and Thailand in comparison with Vietnam”(JICA, Feb.2010).

Proactive Industrial Policy:
Seven Required Features
1. Strong commitment to global integration andprivate sector driven growth
2. A wise and strong government guiding privatesector
3. Securing sufficient policy tools for latecomerindustrialization
4. Constant policy learning through concrete
projects and programs
5. Internalization of knowledge, skills andtechnology as a national goal
6. Effective public-private partnership7. Collection and sharing of sufficient industrial
information between government andbusinesses

Standard Policy Menu forEnhancing Industrial Capability
Policy content & policy organization
Framework

Vision-Plan-Action

Ministries & agencies

Enhancing industrial human andenterprise capability
Software

Policy framework
Finance
Human capital
FDI/cluster policy
Enterprise support
Business linkage
Innovation

Hardware

Infrastructure (power, transport/logistics)

Application(hard+soft)

Comprehensive regional development

Enhancing Industrial Human and Enterprise
Capability: Standard Menu for Latecomers
Main objectives(1) Legal and policy frameworks(2) Local capacity building(industrial human resource andlocal enterprises)

Sub items
Laws and regulations
Ministries/agencies for promoting SMEs, FDI, etc. with sufficient capability and authority
Inter-ministerial coordination mechanisms
Effective public private partnership (PPP)
Mechanism for business-government-academia linkage
Policy system consisting of visions, roadmaps, action plans, and monitoring
Standards for quality, safety, skills, environment, etc.
Mechanisms for protecting and utilizing Intellectual property rights
Strengthening of industrial statistics
Strategic mobilization of international cooperation
Universities of technology and engineering, industrial colleges
Short-term courses for enterpreneurs
Technical support on specialized skills for engineersTechnical and vocational training for new or current workers
Skill certification, competition, and awards
Subsidies and incentives for targeted activities (worker training, technology transfer, die andmold, marketing, ITC, etc)
Management or technical advisory service (by visiting consultants, short-term)Enterprise evaluation and advice system (institutionalized shindan system or technicalextension services) - also related to SME finance
Local enterprise networks

(Cont.)(3) Finance

Development financial institutions
Subsidized commercial bank loans for targeted firms (two-step loans)
Credit guarantee system
Equipment leasing
Venture capitalEnterprise credit information system
Enterprise evaluation and advice system (same as in (2))(4) FDI marketing
List of priority products and activities and a system of investment incentives
Investment promotion seminars and missions
Effective investor information package and website
Investment promotion offices abroad
One-stop services and enteprise support (before and after investment)
Upgrading infrastructure service quality (power, transport, water, etc)
Environmental control and facilities (incl. waste water treatment)
Industrial estates with sufficient infrastructure services and administrative services (incl.
specialized industrial parks)
Labor support (training, recruiting & matching, housing/domitories, commuting, health care,etc.)
Prioritized and targeted FDI marketing
Inviting individual target company ("anchor firm") and provision of required conditions(5) Linkage (learning by working Trade fairs and reverse trade fairs
with global standard firms; market Enterprise databases (SMEs, supporting industries, sectoral)
development)
Official intermediation/promotion of subcontracting
Incentives/subsidies for FDI-local firm linkage
Domestic and export market development supportEstablishment and enhancement of industry associations

Learning from East Asia
 NOT copying some specific policies adopted insome East Asian country to Africa.
 Learning mindset and methodology of designingand implementing industrial strategies.
 There is a standard industrial policy menu, but
selectivity and adjustment are needed to adapt tounique conditions of each country.
 The Eastern approach should be complementary
to the Western approach – benchmarking, SWOT,
PSD, business climate, good governance, policy
frameworks…

Features of Japanese Approach toDevelopment
Pragmatism and concern with specific industries: Target orientation—striving for concrete vision,

targets, roadmaps, and actions instead of generalcapability improvements.
 Field (gemba) orientation—working on factory
floor or crop field to solve concrete problems.
 Joint work—transferring skills and knowledge todeveloping countries by working together (OJT);
no parallel mechanisms.
 Dynamic capacity development—policy
learning and expectation of graduation from aid.

Entry Points for Japan’s Industrial
Cooperation in Africa
Japan, a small investor and donor in Africa, butwith East Asian experience, can offer the following:
1.

2.
3.

4.

For a country with reasonable visions and plans,
standard policy tools (training, QC, kaizen, SME
promotion, etc.) can be provided.
Policy dialogue for making and strengthening
visions and strategies.
Comprehensive regional development with core
infrastructure, supported by HRD, regionalplanning, industrial support, rural development,etc.
Creating enabling environment for Japanese
investment under the principle of open access andnon-excludability.

Bilateral Policy Dialogue between
Ethiopia and Japan
 May 2008: the 4th Tokyo International

Conference on African Development (TICAD IV):
Japan’s commitment to increase cooperation inAfrica.
 July 2008: PM Meles’ request for two-partcooperation: (i) kaizen (factory improvement) byJICA; and (ii) policy dialogue with GRIPS. Actually,
two components are implemented jointly by
GRIPS and JICA.
 July 2008-: Preparation
 June 2009: Official launch of the 2-year project.

Purposes ofPolicy Dialogue with Ethiopia
 Transferring mindset and methodology of East Asianpolicy making through concrete issues and projects.
 Establishing linkage between policy dialogue andJapan’s industrial projects in Ethiopia.
 Cooperation and networking with other projects,donors, and academic institutions.
 Creating pilot projects which should be scaled up byEthiopian effort.
 Promoting industrial policy dialogue in the rest ofAfrica (if successful).
 Providing specific information upon request(Japanese TVET system, kaizen, metals, rural life
improvement movement, etc).

GRIPS-JICA Industrial Policy Dialogue
with Ethiopia (2009-2011)
IPD conference
Jul.2008

Preparation

Official launch
Jun.2009

Industrial policy dialogue

Topics: development regime, kaizen, policy documents,
five-year plan, metal processing, import substitution, etc.

InterimReport

Spring2011

Final
ReportNote: black squares indicate policy dialogue
in Addis Ababa with (i) Prime Minister, (ii)concerned Ministers, and (iii) operationallevels.

Kaizen (30 pilot firms)

Industrial support
projects

Basic metal & engineering industries study(With ECBP)

Institutionalization of kaizen
Other?

Participants ofIndustrial Policy Dialogue
Ethiopian side (3 levels)
Prime Minister Meles Zenawi
 High-level policy makers headed by Ato Newai (Senior
Economic Advisor to PM) and Ato Tadesse (State Ministerof Industry, MOTI) Operational levels
Japanese side
GRIPS researchers
 JICA officials and experts
Supported by Japanese Embassy in Addis Ababa

Note: the Japanese team visits Ethiopia every three months forpolicy dialogue. Additional visits by Japanese experts andproject teams. Ethiopian visits to Japan and other countries
as needed.

Topics of Policy Dialogue in theFirst Year Democratic Developmentalism (DD) andAgricultural Development Led Industrialization(ADLI), with PM.
 Possibilities of agricultural breakthrough andrural life improvement movement, with PM.
 Desirable structure of policy documents andpolicy organization from East Asian perspective.
 Advice on the industrial chapter of PASDEP II.
 Pitfalls of import substitution.
 Differences and complementarity between kaizen
and benchmarking; institutionalization of kaizen.
 Basic metal and engineering industries frominternational perspective.

Issues Discussed at High Level Forums
Japanese side
1st HLF(Jun. 2009)

(1)
(2)

2nd HLF(Sep. 2009)

(1)

(2)

(3)
3rd HLF(Nov. 2009)

(1)

(2)

4th HLF(Mar. 2010)

5th HLF(Jul. 2010)

(1)

(1)

“JICA’s plan to policy dialogue anddevelopment study” (Masafumi Kuroki)“ADLI and future directions for industrialdevelopment” (Kenichi Ohno)“Cross-cutting issues on industrializationand policy menu under the age ofglobalization: examples from East Asia”(Kenichi Ohno)“Organizational arrangements for industrial
policy formulation and implementation:
examples from East Asia” (Izumi Ohno)“Planning and decision-making process for
SME policies in Japan” (Go Shimada)“Designing industrial master plans:international comparison of content andstructure” (Kenichi Ohno)“Industrial policy direction of Ethiopia:
suggestions for PASDEP II and the next
five years” (Izumi Ohno)“Basic metals and engineering industries:
international comparison of policy
framework and Ethiopia’s approach” (ToruHomma)“Result of basic metal and engineering
industries firm-level study – parts
conducted by MPDC and JICA” (ToruHomma)

Ethiopian side(1)

“Evaluation of current PASDEP focusing on
industrial development and related sectors”(HE Tadesse Haile)(1)“Comments and feedback by the Policy
Dialogue Steering Committee on thepresentations by GRIPS and JICA” (HETadesse Haile)(1)“Concept for the industrial chapter ofPASDEP II and the formulation plan” (HETadesse Haile)(1)“Draft plan of industry sector for PASDEPII” (HE Tadesse Haile)“Overview, contents of PASDEP II draft ofchemical subsector” (Shimelis Wolde)“Report of kaizen training for capacity
building of Kaizen Unit and Pilot Projectcompanies in Japan, Osaka Team” (TolaBeyene)“Report of kaizen training for capacity
building of Kaizen Unit and Pilot Projectcompanies in Japan: Chubu Team” (BekeleMekuria)“Concept of kaizen institutionalization andestablishment of Ethiopian Kaizen Institute”(Getahun Tadesse)

(2)
(1)

(2)

(3)

Draft Interim Report (June 2010)
A collection of documents prepared by GRIPS Development
Forum for bilateral policy dialogue.

Ch.1 – Introduction
Ch.2 – Democratic Developmentalism (DD) andAgricultural Dev. Led Industrialization (ADLI)
Ch.3 – Broadening the policy scope: cross-cutting
issuesCh.4 – Broadening the policy scope: organizationalarrangements
Ch.5 – Policy direction for the next five years
Ch.6 – An international comparison of industrial
master plans

Features of
Ethiopian Industrial Strategy
 Democratic Developmentalism (DD) & AgriculturalDevelopment Led Industrialization (ADLI) State guiding private sector, interest in East Asia
 Expanding policy scope as policy is learned
 Around 2003-now: limited export promotion
with incentives and donor support; learning BPR,
benchmarking, scaling up of pilots, twinning,
public-private dialogue, kaizen…
 Next five years: ambitious growth target (1115%/year), structural transformation from agriled to industry-led, import substitution, kaizen
institutionalization, revamping SME policy,
industrial cluster strategy…

Our Approach and Comments
 We welcome Ethiopia’s proactive policy stance, andmatching the speed of policy learning with policy scopeexpansion.
 Ambitious growth target is appropriate but carries risks.
Discussions are needed to avoid policy mistakes (esp.
macro overheating and crisis) and political capture.
 Japan will continue to support Ethiopian effort withconcrete information and studies, and hands-on
technical cooperation.
 Japan will work closely with traditional and new donors,
including Germany, WB, etc. and East Asian emerging
donors, in Ethiopia.