Industrial Policy Dialogue inEthiopia
Transferring Mindset and Methods from East Asia

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

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(rather than debating theory)
 East Asia generally accepts government’s role inindustrialization and widely practices industrialpolicy. Rich experiences, and no allergy.
 In Africa: Ethiopia, Zambia, Rwanda, Ghana,Uganda, Tanzania, Egypt, Tunisia, Namibia,African Union, East African Community areinterested in industrial policy or already
implementing it.
 Ethiopian senior economic advisor: “We wantaction-oriented advice, not academic theories.”Pragmatic Policy Making
 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 Needed
Featuring: Strong country ownership A policy package tailored to each country Policy learning and gradual expansion of policyspace
 A broad policy menu to choose from, based oninternational comparison of policy measures Policy dialogue with advanced country experts(individual coaching & tutoring at initial stage)
Ethiopia: “Please show us how East Asian countries
draft industrial master plans and action plans.”

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, policyframeworks

East Asia’s Standard Policy Menu for Enhancing
Industrial Human Resource and Enterprise Capability
Objective(1) Legal and policy framework(2) Industrial human resource(education and training)(3) Enterprise capability(management and technology)

Policy measure
Provision of necessary laws and regulations
Designation or creation of lead ministry/agency for priority policy
Inter-ministerial coordination mechanism
Effective public-private partnership (PPP)
Policy structure consisting of vision, roadmap and action plan
Monitoring and evaluation mechanism
National standards for quality, safety, skills, environment, etc.
Framework for technology transfer and intellectual property rights
Industrial statistics and database
Strategic mobilization of international cooperation
Technology and engineering universities and institutes
Polytechnics and industrial collegesTechnical support in specialized skills for engineers
Technical and vocational training for new and/or current workers
Subsidies and incentives for worker training
Skill certification, competition, and awards
Introduction of kaizen or productivity tools (5S, QC circles, elimination of muri and muda,suggestion box, just-in-time system, etc.)
Benchmarking, business process re-engineering, and other management tools
Management or technical advisory service (by visiting consultants, short-term)Enterprise diagnostic and advisory system (institutionalized shindan or technical extension
services)
Short-term courses and tours for enterpreneurs and managers
Quality standards and certification, testing services and centers
Awards and recognition for business excellence, productivity, competitivenessSubsidies & incentives for upgrading management, technology, marketing, ITC(4) Finance(5) FDI attraction(6) Marketing and businesslinkage(7) Innovation

Development financial institutions
Subsidized commercial bank loans for targeted firms (two-step loans)Special loans and grants for priority products and activities
Credit guarantee system
Equipment leasing
Enterprise credit information system
Linking loans with enterprise diagnostic and advisory system (see (3) above)
Clear announcement of preferred investors, sectors, regions, etc.
Effective investor information package and websiteInvestment promotion seminars, missions and offices abroad
Provision of high-quality infrastructure services (power, transport, land, water, waste waterand solid waste treatment, etc)
One-stop investor support service (both before and after investment)
Development and management of industrial estates including EPZs, SEZs and special
zones for priority sectors, high-tech firms, etc.
Rental factories for local and/or foreign SMEs
Support for labor recruitment, matching, houseing, commuting, healthcare, etc.
Negotiation and provision of special incentives for attracting targeted anchor firms
Support for domestic and export market development
Trade fairs and reverse trade fairs
Enterprise database (SMEs, supporting industries, sectoral)
Incentives and subsidies for FDI-local firm linkage and technology transfer
Official promotion/intermediation of subcontracting
Establishment and strengthening of industry/business associations and local firm networks
Business start-up support
Support for R&D, branding, patenting
Business incubation centers
Venture capital market
Innovation clusters among industry, research institutes and government
Incentives/subsidies for designated activities and products

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

Japan’s Policy Dialogue with Developing Countries
Country

PeriodHead/key playersPurpose and content

Argentina

1985-1987
1994-1996(folow up)

Saburo Okita (former foreignminister)Comperehesive study on agriculture and livestock farming, industry,transport and export promotion

Thailand1999

Shiro Mizutani (former MITIofficial)

Study on the master plan for SME promotion policy

Vietnam

1995-2001

Shigeru Ishikawa (professor)

Large-scale joint study on macroeconomy, industry, agriculture,enterprise reform, crisis management, etc.

VietnamJapanese embassy, JICA, JETRO,
2003-current
JBIC

Indonesia

Bilateral joint initiative to improve business environment andstrengthen competitiveness through 2-year monitoring cycle of actionplans2000

Shujiro Urata (professor)

Policy recommendation for SME promotion

Indonesia

2002-2004

Takashi Shiraishi and Shinji
Asanuma (professors)

Policy support for macroeconomic management, financial sector
reform, SME promotion, private investment promotion,democratization, decentralization and human resource development

Laos2000-2005

Yonosuke Hara (professor)

Study on macroeconomy, finance, state enterprise, FDI and poverty
reduction, etc.

Myanmar1999-2002

Konosuke Odaka (professor)

Study on agriculture, rural development, industry, trade, finance, ITC,etc.

Mongolia

1998-2001

Hiroshi Ueno and Hideo
Hashimoto (World Bankeconomists and professors)

Study on the support for economic transition and development

Ethiopia

2009-2011

GRIPS Development Forum andJICA

Kaizen, basic metals and engineering, productivity movement, policy
procedure and organization, etc.

Bilateral Policy Dialogue between
Ethiopia and Japan
 May 2008: 4th Tokyo International Conferenceon African Development (TICAD IV): Japan’scommitment to increase cooperation in Africa.
 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 (2 sessions) June 2009-May 2011: Eight quarterly sessionsof industrial policy dialogue were conducted.
 Jan. 2012-: 2nd phase of policy dialogue will
start together with continued JICA support forkaizen.

GRIPS-JICA Industrial Policy Dialogue
and Industrial Support Projects (2009-2011)
IPD conference
Official launch
July 2008 Preparation June 2009

Industrial policy dialogue

Black square ■ indicates policy dialogue session in Addis
Ababa with (i) prime minister, (ii) concerned ministers
and state ministers, and (iii) operational levels.

May 2011

InterimReport

FinalReport

Kaizen pilot project (30 firms)

Industrial support
projects

Institutionalizationof kaizen(To be continued)

Basic metal &engineering study(With ECBP)

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 by
Ethiopian effort.
 Promoting industrial policy dialogue in the rest ofAfrica (if Ethiopian dialogue is successful).
 Providing specific information upon request(Japanese TVET system, kaizen, metals, rural life
improvement movement, etc).

Participants ofIndustrial Policy Dialogue
Ethiopian side (3 levels)
Prime Minister Meles Zenawi
 High-level policy makers headed by Mr. Newai (Senior
Economic Advisor to PM), Mr. Mekonnen (IndustryMinister), Mr. Tadesse (Industry State Minister) andothers Operational levels

Japanese sideGRIPS researchers
 JICA officials and experts
Supported by Japanese Embassy in Addis Ababa

Note: the Japanese team visited Ethiopia every three months
for policy dialogue. Additional visits by Japanese experts andproject teams. Ethiopian visits to Japan and other countries
were also organized. Ethiopian PhD students were trained atGRIPS.

At the Prime Minister’s Office
Meeting with Senior Economic Advisor to PM

Presenting JICA’s Kaizen Report to PM

High Level Forum (minister & state minister level)

Meeting with Industry Minister

At the Ministry of Finance,
Economy and Development

Main Topics ofIndustrial Policy Dialogue Democratic Developmentalism (DD) andAgricultural Development Led Industrialization(ADLI), with PM.
 Policy formulation and implementation
mechanism from East Asian perspective.
 Structure of master plans and action plans fromEast Asian perspective.
 Advice on the next five-year plan (Growth andTransformation Plan).
 Concept, practice and institutionalization ofkaizen (productivity improvement)—global
practice and Ethiopian context.
 Basic metal and engineering industries—local
survey and review of international experience.

Key Comments fromJapanese Experts and Officials
 Ethiopia’s strong policy ownership, clear visionand eagerness to learn are highly admirable.
 Policy vision must be backed by effective
implementation at operational levels. Capabilities
of ministries and agencies are still weak.
 Coordination mechanism among different
ministries must be set up without relying on one
powerful leader (cf. alternative E. Asian models).
 Development planning, MSE policy, and kaizen
institutionalization must be greatly enhanced as
the focal points of industrial policy learning.
 Quality over speed: policy is made too hastily
without sufficient interaction with stakeholders.

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

2nd HLF(Sep. 2009)

3rd HLF(Nov. 2009)

4th HLF(Mar. 2010)

5th HLF

Presentations by Japanese side

Presentations by Ethiopian side(1) “JICA’s plan to policy dialogue anddevelopment study” (Masafumi Kuroki)(2) “ADLI and future directions for industrialdevelopment” (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” (ToruHomma)(1) “Result of basic metal and engineering(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 PASDEP
II” (HE Tadesse Haile)(2) “Overview, contents of PASDEP II draft ofchemical subsector” (Shimelis Wolde)(1) “Report of kaizen training for capacity

5th HLF(Jul. 2010)(1) “Result of basic metal and engineering
industries firm-level study – parts
conducted by MPDC and JICA” (ToruHomma)

6th HLF(Oct. 2009)(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 ofpolicy procedure and organization” (KenichiOhno)(1) “Ethiopia's industrialization drive under theGrowth and Transformation Plan” (KenichiOhno)(2) “Achievements in the Quality andProductivity Improvement (Kaizen) Project”(Go Shimada)(3) “Overview of national movement for quality
and productivity improvement: experiencesof selected countries in Asia and Africa”(Izumi Ohno)(4) “Taiwan: policy drive for innovation” (KenichiOhno)

8th HLF(May 2011)(1) “Report of kaizen training for capacity
building of Kaizen Unit and pilot projectcompanies in Osaka, Japan” (Tola Beyene)(2) “Report of kaizen training for capacity
building of Kaizen Unit and pilot projectcompanies in Chubu, Japan” (BekeleMekuria)(3) “Current status of kaizen project andinstitutionalization of kaizen” (GetahunTadesse)(1) “Contents of industry sector in Growth andTransformation Plan” (HE Tadesse Haile)(2) “Singapore’s productivity movement andlessons learned” (Daniel Kitaw)(1) “Organizational structure of Ministry ofIndustry and linkage with other ministries”(Ahmed Nuru)(1) “MSE development strategy of Ethiopia”(Gabremeskel Challa)(2) “Kaizen dissemination plan andinstitutionalization plan” (Getahun Tadesse)(3) “Botswana's productivity movement and its
Implication to Ethiopia” (Daniel Kitaw)

Some Related Research at
GRIPS Development Forum
Learning to Industrialize: From Given Growth to Policyaided Value Creation (Routledge, coming soon).
East Asian Industrial Policy Handbook (project in progress).
Comparative research on industrial policy making inSingapore, Korea, and Taiwan (2010-2011).
“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).