Industrial Policy in Africa
What Africa Can Learn from East Asia

Kenichi Ohno
National Graduate Institute for Policy Studies (GRIPS),Tokyo, Revised February 2011

Topics
 Need for a systematic and pragmatic policy

learning program Study standard policy menu as building blocks for
tailor-made policies
 Japanese aid approach and entry points to
African development
 Example: Ethiopia-Japan Industrial Policy
DialogueLearning from East Asia
 NOT copying some specific policies adopted insome East Asian country to Africa.
 Learning mindset and methodology for designingand implementing industrial strategies. Learn
how to make policies.
 International best practices should be studied
systematically as building blocks for a policy
package suitable for each country.
To be avoided:
 Blind & random copying without local context
 Refusal to learn because “our country is unique”

Research in Industrial Policy
Type 1 – Theoretical: General and often ideologicaldebate over “industrial policy”: Washington Consensus
vs. J.Stiglitz, D.Rodrik, H.J.Chang, Justin Lin, G.Dosi…
Type 2 – Historical: Narration or analysis of concrete
policy experiences in particular countries: Japan,
Korea, China, Singapore, Malaysia…
Type 3 – Pragmatic: Comparative study of international
best practices in policy measures, procedure, andorganization—for improving policy making.

Willing to Learn
 East Asia widely accepts and practices industrial

policy. Latecomers can—and should—learn from
more advanced neighbors.
 In Africa: Ethiopia, Zambia, Rwanda, Uganda,
Tanzania, Egypt, Tunisia, Namibia, African Union,
East African Community… are interested inindustrial policy or already 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 for
Vietnam.”Systematic Instruction on Industrial
Policy Making is Needed For industrial policy “converts,” pragmatic

guidance, not theoretical justification of industrial
policy, is needed.
 Japan, Asian Tigers, ASEAN4, and China
industrialized through self-study, learning fromothers, and trial-and-error.
 Today’s latecomers receive random and not very
helpful advice. No coherent instruction on policy
making exists. Maybe they need a “school.” Basic problems and solutions are generally known
to policy makers in each country. What is missing
is how (details): how to design and implement
priority strategies, how to create supporting
mechanisms, etc.

What Need to Be Learned Strong leadership and mindset- A strong and economically literate leader with clear vision- National mindset for productivity & competitiveness Policy content- Ability to select, combine and modify international bestpolicy practices to create own policy package- Proactive industrial policy—policies must be consistent with
globalization and market orientation

 Policy procedure and organization- Creation of suitable policy system from alternativeinternational models- Constant evolution with shifting weights of state vs. market

At the outset, policy dialogue with experts/practitioners
from advanced economies may be helpful (initial
guidance, private tutoring)Proactive Industrial Policy:
Seven Required Features
1. Strong commitment to global integration andprivate sector driven growth
2. A wise and strong government guiding private
sector
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 in East Asia
(But Contents Are Not Very Well Known in Africa) Kaizen (factory productivity improvement tools)
 Shindan (SME management consultant system) Engineering universities (King Mongkut ITK, Nanyang

Polytechnic, Thai-Nichi Institute of Technology…)
 TVET-business linkage (Singapore, Thailand, Vietnam…)
 SME finance (two-step loans, credit guarantees…)
 Integrated export promotion (Korea)
 Industrial zone development (Taiwan, Korea, Thailand,
Malaysia, Singapore…)
 Strategic FDI marketing (Thai BOI, Malaysia’s MIDA,
Penang, Singapore) Supporting industry development (parts & components;
Thai auto)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 engineers
Technical 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 support
Establishment and enhancement of industry associations

Policy Making Procedure
Necessary steps:
1. Clear vision given by top leader
2. Consensus building (broad goals & directions)- Brainstorming among related ministries and agencies- Collection and analysis of international best practices- Discussion with non-government stakeholders

3. Documentation- Drafters can be officials, academics, or consultants- Participation of all stakeholders in drafting & commenting

Standard Policy Making Procedure
Top leader
1. Vision

2. Consensus
building process

3. Documentation
process

Brainstorming

Studies& surveys

Set broadgoals &
direction

Drafting
work

Finalize& approve(May beoutsourced)

Stakeholder
consultation
Participation
Ministries＆agencies

Comments& revisions

Regions &localities

Participation
Businesses& bus. assoc.

Academics &consultants

Note: the entire process is managed and coordinated by a lead ministry or agency.

Thailand:
Automotive
Industry Master
Plan 2007-2011
Brainstorming;
agreeing on goals& directions“CEO Forum”
FDI & local firms
Exporters
MoI, MoST, MoEdu
Professors’ team
(Chulalornkorn Univ)• The whole process (about 1 year) is managed
by Thailand Automotive Institute (TAI).
• Goals are set by private firms; no government
approval is needed for final M/P.

Set up formal
committee fordrafting M/P
M/P Steering
Committee
Organized by MOI

Subcommittees
study identified
issuesHuman resource

Productivity

M/P
Drafting
By TAI staff

Businesses
Officials
Experts

MarketingEngineering

Business
Gov’t

Experts(Informal)

Business
Gov’t

Experts(Formal)Investment& linkage

Comment &dissemination

Implementation

Malaysia: 3rdIndustrial Master
Plan 2006-2020

Industrial Planning
Committee (IPC)
Steering Committee (SC)Grand total 338+advisors

1st draft
brainstorming

SC

Review and inputs byprivate sector & MITI
TRGs are called
and start work

(25)

Services

Mar.2005

Business Business

SectoralDevelopment

IPC

SC

Logistics

Sep.2004

Headed by MITI Official; members from MITI,
EPU, econ. agencies, businesses (23)Marketing/branding

Enabling
technologies & ICT

Human resource
development

SME
development

Investments

External tradeMacroframework

Advisor/
Coordinator

MITI MATRADE MIDA SMIDEC MEF/
MDC
business
(38)
(19)
(23)
(19)
(34)
(25)

Headed by MITI Minister; members from
MITI, EPU, economic agencies (27)MITI

MIDA :Head of TRG(39)(26) (=>Total 288)

(40)

Technical
Resource
GroupsAug.2006

SC

IPC

MITI
More fine-tuningwith TRGs

Further work by TRGs

Source: MITI website, and VDF mission to Kuala Lumpur, Jan.2006.
Note: Numbers in parentheses indicate the number of members in each committee or group.

MITI

FinishFinal adjustments
in data & words
within MITI

Common Mistakes
Practices that do not lead to policy learning:
1.
2.
3.

4.

Lack of clear vision or directive from top leader
Policy making within a narrow circle of officials
without deep involvement of other stakeholders
Outsourcing of entire policy drafting to outsideacademics or consultants, with policy makers
only making comments & revisions (Marunage)
Bottom-up collection of ideas drafted by various
ministries which ends up in unconnected
chapters and too many priorities

Policy Organization
There are several alternative models to realize
proper policy procedure discussed above: Elite technocrat group under PM/President todesign policies as nation’s brain National Councils or Committees
 Super-ministry (eg. Japanese MITI, 1960s)
 Sector/issue-specific institute acting as a hub(eg. Thai auto policy)
 Strong national leader as a policy making hub
without institutionalization (eg. Ethiopia)
These approaches are not mutually exclusive.
Some countries adopt more than one.

Technocrat Group Approach- Elite technocrat groupwith full planning authority
given by top leader- Members are selected
officials, business leaders& experts with goodeducation & experience

Prime Minister
Direction, fullauthority forpolicy making

Technocrat Group(Policy Maker)
Policy,guidance andmonitoring

Korea – Econ. Planning Board
Malaysia – Econ. Planning Unit
Thailand – NESDB
Taiwan – Kuomintang Elites
Indonesia – “Berkeley Mafia”
Chile – “Chicago Boys”

Faithful
execution andreportingBusinesses
Academics
Experts

Faithful
executionand reporting

Ministries (Policy Implementers)National Council/Committee
Approach
Typicalconfiguration:

Businesses
Academics
Experts

PM orPresident
Chair, give mandate

National Councilor Committee

Plan

Supportworking groups or task forces
for specific issues and sectors

Ministries and agencies

Implement

Comparing the Two Approaches
Technocrat groupserving top leader

National councils/
committees

NumberOnly one

Up to several

Tasks

Multiple and variable

Single task

Time
scope

Semi-permanent(until this system is nolonger needed)

Temporary(until the assigned task iscompleted)

Relationwithministries

A planning body above all Ministers and officials
ministries; the latter are
participate in policy making
implementing bodies
as members

Commenton
Ethiopia

PM’s advisors—supporting
PM individually but notworking together as one
autonomous body; no
official planning function

Monthly Export Steering
Committee—executing andmonitoring agreed export
policy rather than policy
makingKorea 1960s-70s: Economic Planning Board

President(Blue House)Economic
SecretariatsState Council

Five-year plan

Korea Dev.
Institute

Economic Minister’sCouncil (chaired by DPM)

EPB

Deputy PM- Development planning- Public inv’t planning- Budget- Monitoring- Aid management

MTI

Ministries/Agencies

Gov’t-BusinessMeetings:- Export promotion- Economic briefs- HCI drive, etc.

Business FinanceDirect control by
President
Korea Dev. Inst.
offering analysis
for long/medium
term economic
policies
Gov’t-business
relations werevery close &cooperative
Performancebased rewards &penalties

Korea Now: Presidential Committees
Vision & Priority
AgendaPresident of the Republic of Korea

Chairman
Co-chaired byPrime Minister

Chairman

Chairman

ChairmanPC.
Green Growth

PC.
Future & Vision

PC. National
CompetitivenessPC. Nation
Branding(Feb. 2009)(May 2008)(Feb. 2008)(Jan. 2009)

Secretariat

Secretariat

Secretariat

Secretariat

about 60 staff(seconded officials
from various govt.
agencies

about 30 staff(seconded officials
from various govt.
agencies)

PolicyMinistry A

Staffing

Drafting, Inter-ministerial coordination, etc.

Ministry B

Ministry C

Ministry D

Implementation

Ministry E

Ministry FSingapore Now: New Productivity Drive
Economic
Strategies
Committee: Report

Chaired by Deputy PM
Members from ministries/agencies,
business, unions
Joint secretariat: MTI, MOM(ministers)

National Productivity andContinuing Education Council (NPCEC)
Review & submit

Oversight
Review & approval

Led by MTI, MOM (PS level)
Inter-agency coordination

Working Committee for Productivity andContinuing Education (WCPCE)
Sectoral “Productivity Roadmap”
for the next 10 years
Draft & propose

Financial Incentives
Scrutiny

National
Productivity
Fund

Productivity& Innovation
CreditF&B
SPRING
UnionsIndustry

Retails
SPRING
UnionsIndustry

Sector working groups (12 priority sectors)
Construction
BCA
UnionsIndustry

Electronics
EDB
UnionsIndustry

Cross-cutting issues
Low wage workers
Research & benchmarking
Infocomm and logistics

Precision Eng. Transport Eng. General Mfg.
EDB
EDB
SPRING
UnionsUnionsUnionsIndustry
Industry
Industry

Skills Dvt. Fund
Lifelong Learning
E.F.

Malaysia Now: National SME Dev. Council

Features of Japanese Approach to
Development
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 eventual graduationfrom aid. Patience is needed.

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, regional
planning, industrial support, rural development,
etc.
Creating enabling environment for Japanese
investment under the principle of open access andnon-excludability.

Policy Dialogues by Japan and Korea
 Japan’s long engagement in policy dialogues
Argentina – Okita Mission, 1985-87
Vietnam – Ishikawa Project, 1995-2001
Thailand – Mizutani Report for SMEs & SI, 1999
Indonesia –Urata Report for SMEs, 2000; Shiraishi & Asanuma
mission for financial crises, 2002-04
Laos – Prof. Hara’s Project for overall dev. strategy, 2000-05
Ethiopia – GRIPS-JICA, 2009-11
 Korea’s Knowledge Sharing Program (2004-)
Policy dialogue (KDI/KOICA: sectoral and cross-cutting issues;
mutual visits, seminars & reports) Dom. Republic, Vietnam,
Uzbekistan, Cambodia, Indonesia, Algeria, Libya…
Policy modules (>100 modules to be created, 40-50pp. each)

Korea is a new comer but makes greater effort to standardize& institutionalize policy dialogue than Japan (case-by-case).

Example: Industrial Policy Dialogue
between Ethiopia and Japan
 May 2008: the 4th Tokyo International

Conference on African Development (TICAD IV):
Japan’s commitment to increase cooperation in
Africa.
 July 2008: PM Meles’ request for two-partcooperation: (i) kaizen (factory improvement) by
JICA; and (ii) policy dialogue with GRIPS.
Actually, two components are implemented jointly
by GRIPS and JICA.
 July 2008-: Preparation (2 sessions).
 June 2009-Spring 2011: Industrial Policy
Dialogue in Addis Ababa (8 sessions).

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

Preparation

Official launch
Jun.2009

Industrial policy dialogue

Note: black squares indicate policy dialogue
in Addis Ababa with (i) Prime Minister, (ii)concerned Ministers and State Ministers,and (iii) operational levels.

Interim
ReportSpring2011

Final
ReportKaizen Pilot Project (30 firms)

JICA’s Industrial
support projects

Metal & engineering study(With ECBP/Germany)

Institutionalizationof kaizen

Preparation
DesignParticipants ofIndustrial Policy Dialogue
Ethiopian side (3 levels)
Prime Minister Meles Zenawi
 High-level policy makers headed by HE Newai (Senior
Economic Advisor to PM) and HE Mekonnen and HE
Tadesse (Minister & State Minister, MOI) 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
 Ethiopia’s key developmental principles (DD &ADLI), with PM.
 Possibilities of agricultural breakthrough andrural life improvement movement, with PM.
 Desirable structure of policy documents andpolicy organization from East Asian perspective.
 Industrial chapter of the new 5-year plan.
 Concept and institutionalization of kaizen.
 Productivity movement of Singapore.
 Basic metal and engineering industries frominternational perspective and survey results.

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

2nd HLF(Sep. 2009)

3rd HLF(Nov. 2009)

4th HLF(Mar. 2010)

Japanese side

Ethiopian side(1) “JICA’s plan to policy dialogue anddevelopment study” (Masafumi Kuroki)(2) “ADLI and future directions for industrial
development” (Kenichi Ohno)(1) “Cross-cutting issues on industrializationand policy menu under the age ofglobalization: examples from East Asia”(Kenichi Ohno)(2) “Organizational arrangements for industrial
policy formulation and implementation:
examples from East Asia” (Izumi Ohno)(3) “Planning and decision-making process for
SME policies in Japan” (Go Shimada)(1) “Designing industrial master plans:international comparison of content andstructure” (Kenichi Ohno)(2) “Industrial policy direction of Ethiopia:
suggestions for PASDEP II and the next
five years” (Izumi Ohno)(1) “Basic metals and engineering industries:
international comparison of policy
framework and Ethiopia’s approach” (Toru
Homma)(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 of
PASDEP II and the formulation plan” (HETadesse Haile)(1) “Draft plan of industry sector for PASDEP
II” (HE Tadesse Haile)(2) “Overview, contents of PASDEP II draft ofchemical subsector” (Shimelis Wolde)

Issues Discussed (Cont.)
Japanese side
5th HLF(Jul. 2010

(1) “Result of basic metal and engineering
industries firm-level study – parts
conducted by MPDC and JICA” (Toru
Homma)

6th HLF(Oct. 2010)(1) “Singapore’s Experience with Productivity
Development: Internalization, Scaling-up,
and International Cooperation” (Izumi
Ohno)

7th HLF(Jan. 2011)(1) “The Making of High Priority Development
Strategies: International Comparison of
Policy Procedure and Organization”(Kenichi Ohno)

Ethiopian side(1) “Concept of kaizen institutionalization andestablishment of Ethiopian Kaizen Institute”(Getahun Tadesse)(2) “Report of kaizen training for capacity
building of Kaizen Unit and Pilot Projectcompanies in Japan” (Tola Beyene)(1) “Contents of Industry Sector in Growth andTransformation Plan (GTP)” (HE Tadesse
Haile)(2) “Singapore’s Productivity Movement andLessons Learned” (Prof. Daniel Kitaw,
Addis Ababa University)(1) “Ministry of Industry’s GTP, Organizational
Structure and Linkage with Other Ministries”(Ahmed Nuru)

Note: One more session is scheduled in April or May 2011. The Ethiopian Government requests continuationof Industrial Policy dialogue into the second phase.

Features of
Ethiopian Industrial Strategy
 Strong ownership, top-down decision, aggressive

speed State guiding private sector, interest in East Asia
 Expanding policy scope as policy is learned

Last several years (2003-): limited export promotion
with incentives and donor support; learning BPR,
benchmarking, scaling up of pilot projects, institutional
twinning, public-private dialogue, kaizen…
 Next five years (2010/11-2014/15): ambitious
RGDP (11-15% per year) and sectoral growth targets;
structural transformation from agri-led to industry-led;addition of import substitution, kaizen institutionalization,
revamping SME policy, industrial clusters…
Our Comments
 We welcome Ethiopia’s proactive policy stance, andgradual policy expansion as policy is learned.
 Ambitious growth targets are acceptable, but hasty
actions and macro overheating are two major risks.
 Policy making mechanism must be greatly improved(inter-ministerial coordination and stakeholder
involvement).
 Japan will continue to support Ethiopian industrial
effort with concrete information and studies, andhands-on technical cooperation.
 Japan (small donor) will work closely with traditionaland new donors, including Germany, WB and East
Asian emerging donors, in Ethiopia.

Materials for Policy Learning
Selected Research at GRIPS Development Forum
East Asian Industrial Policy Handbook (project in progress).
Learning to Industrialize: Catch-up Strategies for Twentyfirst Latecomers (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).
Diversity and Complementarity in Development Aid: East
Asian Lessons for African Growth (GDF, 2008).
“Proposal for a New African Growth Support Initiative”(GDF, Aug.2008)