Comments on
Industrial Development Report 2018

Akio Hosono
JICA Research Institute(I) “Demand-driven industrial policies” focusing
on latent demand of BOP• IDR 2018 focuses on the "virtuous circle" created by industrial
development and demand.
• The challenge for the demand side of industrial development is theenormous base of the pyramid (BOP) that falls outside the virtuous
circle, and how to incorporate this tier. Specifically, the problem isthe lack of products that truly satisfy the needs of, and areaffordable for, the poor in developing countries.
• Actionable variables (IDR: p.21-22): (a) information provider and/or
awareness raiser; (b) enabler/ co-generator of innovation; (c) public
procurement and so forth.
• An example of policies for “socially inclusiveness goals” (IDR: p.23):
Health reform in Mexico and regional efforts to reduce the cost of
essential medicines in Latin America through pooled procurement.
• These policies are closely related to inclusive businesses and BOPbusinesses.

Examples of “inclusive demand-driven
industrial strategies”• In these strategies, some of the “inclusive
demand-driven industrial policies” facilitate
development of industries that respond to latentdemands of BOP• Demands of BOP remain latent due to lack ofaffordability (price), lack of awareness, lack ofaccess to distribution (delivery) networks, and soforth.
• “Inclusive demand-driven industrial strategies
and policies” could address these challenges.

Case of Olyset net• For details, see Kato, Hiroshi, and Akio Hosono“Meeting the Demand of the Poor: Two Casesof Business-led Scaling Up at the Base of thePyramid”

Innovation of products that satisfy
latent demand• Long-lasting insecticide-treated mosquito nets (LLINs)
with following features:• (1) Long lasting (at least five years)• (2) Wide Mesh size (allowing good airflow)• (3) Durable• (4) Safe
• Sumitomo Chemical played a pioneering and central
role in promoting the scaling up of LLIN distribution, byinventing an LLIN with the brand name of the “Olysetnet,” which later was authorized as the firstrecommendable LLIN by WHO in 2001. The invention
was selected as one of the “Coolest Inventions of2004” by the TIME magazine.

Affordability of products• Company “A to Z” in Tanzania was already producing 6 million
conventional insecticidal nets annually and was a major supplier ofbednets to UNICEF.
• In 2007, a company named Vector Health International wasestablished by the joint venture by Sumitomo and “A to Z.” Thefactory commenced production in 2007, with an initial target
production of 300,000 nets per year.
• As of 2012, their annual production has reached 30 million. Thecompany now provides products in 23 kinds and sizes, priced at $8
to $13 per piece. (This contrasts to an initial cost of around $ 30 to40 per unit in the early 2000s.) It hires around 7,000 employees,
85% of whom are women. The company has 180 trucks to deliver
the products to 7,000 delivery points around the country.
• This project was financially supported by the Japan Bank forInternational Cooperation. (JBIC)

Facilitation of awareness and delivery• 7 public and private organizations established
Olyset consortium (created by WHO) : A to Z
Textile Mills, Sumitomo Chemical, Acumen Fund,
Exxon Mobil, UNICEF, Population ServiceInternational and WHO. (Example: UNICEF
purchased nets from A to Z for distribution; Exxon
mobile agreed to sell nets through Mobile Mart
service stations)Olyset net: A model of scale up to makethe product affordable and available
Japan Bank of International
Cooperation

Technology and Financefor production at scale

Olyset net consortium(created by WHO)

Awareness, andavailability (delivery) ofproducts
Sumitomo ChemicalIndustries

Innovation of productswith attributes requiredby potential consumers

Partnershipat scale• In short:• Innovation of products to address the latentdemand• Affordability through production at scale byfinance and other means• Accessibility through expedite distribution anddelivery system• Partnership (coordination) at scale

(II) Kaizen, TQM, and related approaches andvirtual circle of industrial development• What matters for consumers is the creation ofnew manufactures that become better andcheaper overtime• Interactions between demand and supply enable
the diffusion of new, better and ever cheaper
goods for consumers: Virtuous circle of industrialdevelopment (IDR: p.3, p.4)
• An effective approach to achieve the virtual circle
could be: Kaizen, Total Quality Management(TQM) and related tools, method, process, andsystems

Interactions between consumers (demand)and manufacturing firms (supply)• Toyota’s TQM consists of the integration of three main
points that must be present in order for the company
to succeed:• (1) focus on customers,• (2) continual improvement, and• (3) participation by all employees.
• (DBJ and JERI 2003: 8)• TQM includes a number of management practices,philosophies and methods to improve the way anorganization does business, makes its products, andinteracts with its employees and customers. Kaizen is
one of those philosophies” (DBJ and JERI 2003, vii).

Demand-led inclusive and sustainable
development: TQM (with Kaizen and QCC andother methods) could be an effective approach• IDR 2018 refers to “comprehensive qualitymanagement,” and ISO 9001 and ISO 22000 (p.
39) regarding food products and medicines
respectively (p. 41)• One of the major points in common between ISO
9001 and QC Circle activities is the requirement
for continual improvement. This requirement
evaluates whether a company’s quality systems
have met a certain level and met standards interms of defects. (DBJ and JERI 2003: 54).

Kaizen from inclusive and sustainable
development perspective• Kaizen: Japan’s approach towards improved quality andproductivity. The driving force of Japan’s rapid growth.
• ‘KAIZEN’ is a management philosophy and know-how thatbrings about continuous improvement of productivity andquality. It is a philosophy.
• KAIZEN is a human centered approach, which fosters teamwork, self-reliance, creativity, and ingenuity.
• (Cited from JICA’s brochure on Kaizen)

(Cited from JICA’s brochure on Kaizen)

(III) Kaizen, TQM and sustainable growth:
Kaizen save energy and materials
by eliminating muda, mura, and muri
• The core concept of kaizen is to eliminate muri (overloading), muda(waste), and mura (inconsistency) from the worksite throughefficient utilization of labor, materials, and equipment.
• One of the significant impacts of Japanese TQC is often explainedby describing the development of the car industry during the oilcrises in the 1970s. During this period, TQC was extended toactivities for energy conservation and measures for resource
maintenance. It greatly impacted various industries and became
more securely established as a valuable quality framework forJapanese industrial development.
• At least a part of very high energy efficiency of Japan could owe toenergy saving efforts by TQC.
• Resource management and energy management could be effectivewith TQC/TQM approach. (Related remarks: IDR 2018: p. 117;p.120; p. 132)

References• Kato, Hiroshi, and Akio Hosono. 2013. “Meeting the Demand of the Poor:
Two Cases of Business-led Scaling Up at the Base of the Pyramid” inChandy, L., A. Hosono, H. Kharas, and J. Linn (eds.) Getting to Scale: How toBring Development Solutions to Millions of Poor People. Washington DC.:Brookings Institution.
• DBJ (Development Bank of Japan) and JERI (Japan Economic ResearchInstitute). 2003. Handbook for TQM and QCC. Washington, DC: InterAmerican Development Bank (IDB).

Thank your very much
• This presentation is preliminary and personal• Not to be cited• Comments welcome