Chapter 1

Introduction

The GRIPS Development Forum (GDF) is a policy research unit of the National
Graduate Institute for Policy Studies (GRIPS) in Tokyo.

Established in 2002, GDF

works closely with frontline policy makers in Japan, Southeast Asia, and Africa toimprove the design and implementation of concrete development policies.

The

main areas of its policy research and involvement include Japan’s development
cooperation strategy, Vietnam’s industrialization, best policy practices of East Asian
high-performing economies, and African development.

Transferability of East

Asian experience to Africa and other developing regions is a particularly importantresearch agenda for GDF.

Apart from conducting policy studies and supporting

policy actions, GDF also serves as a hub of intellectual networks of domestic andforeign policy makers, development partners, research institutes, privateorganizations, and Nonprofit Organizations (NPOs).
The Japan International Cooperation Agency (JICA), established in 1974, is theintegrated agency for the implementation of Japan’s official development assistance(ODA).

After the merger in 2008 with the overseas economic cooperation sectionof the Japan Bank for International Cooperation (JBIC), JICA has become the “onestop shop” of Japan’s ODA providing technical assistance, concessionary loans andgrant aid as well as dispatching Japanese young and senior volunteers to developing
countries.

While Asia has historically been the primary regional focus of Japan’sinternational cooperation, the scope of JICA’s activities also covers global issues,
shared growth, poverty reduction, governance and human security.

Africa is an

important region for Japan’s international cooperation, and the sharing of East Asiandevelopment knowledge and experience with today’s developing countries is also
important for Japan.
In July 2008, GDF and JICA were invited by Prime Minister Meles Zenawi to
initiate a two-track cooperation project consisting of policy dialogue and concrete1CHAPTER 1

industrial support for Ethiopia (kaizen project).

After a preparation period, atwo-year project between Ethiopia and Japan was conducted from June 2009 to May
2011 with JICA support.

The project was also part of the development cooperation

package for Africa to which Japan committed in the Yokohama Declaration and the
Yokohama Action Plan at the Fourth Tokyo International Conference on African
Development (TICAD IV) in May 2008.

The two components of bilateral

cooperation—policy dialogue and the kaizen project—were interlinked andimplemented in regular and close consultation.
conducting industrial policy dialogue.1

GDF was mainly responsible forThis report contains materials prepared by

GDF and JICA for Ethiopian leaders and policy makers in the two years ofindustrial policy dialogue, from June 2009 to May 2011, in eight sessions.

1-1. Learning East Asian lessons
Learning lessons from East Asia does not mean copying policies adopted
somewhere in East Asia randomly without critical examination of feasibility anddesirability of applying them to an African country.

The postal saving system ofJapan, the New Village Movement of South Korea, the National small and medium
enterprise (SME) Development Council of Malaysia, or any other specific policy of
East Asia, can hardly be introduced directly to any of the developing countries oftoday, be it in Africa or elsewhere, because internal and external situations aredifferent from one country to another as well as from one age to another.
Moreover, industrial strategies in East Asia have also been diverse.

Singapore’s

state-led approach to human capital development had little similarity with Hong
Kong’slaissez-faire

approachtocommerce

andfinance.

Malaysia’s

well-structured policy coordination does not resemble Thailand’s more flexible
industrial promotion.

In fact, East Asia is a region where a variety of approaches

to development have been tried.

1

For this reason, there is no single East Asian

Policy dialogue is one of the key tools used widely in Japanese development cooperation as
explained below. Although it can cover any topics related to development, our policy dialogue with
Ethiopia focused mainly on industrial issues. The prime minister initially asked JICA to conduct
the kaizen project and GDF to engage in policy dialogue. In reality, the two components wereintertwined and implemented jointly by JICA and GDF.

2

Introduction

model to be emulated at the level of concrete policies.
If there is a lesson Africa can learn from East Asia, it should be how policy isformulated and executed, not what particular countries in East Asia did at certain
moments of their history.

The lesson is about mindset and methodology that can

instruct an African country to produce a policy package with appropriate contents
and sequencing for that country, and ensure its implementation.

For collecting

specimens of concrete policy models, the search should cover the entire globe andnot just East Asia.

But once collected, East Asian experiences may illustrate howthese models should be selected, combined, modified, and implemented understrong country ownership.
Opening its ports to the mighty West in 1859, Japan was the first country in East
Asia to modernize and industrialize its economy to compete on a par with theWestern powers.

Its colonial policies in the pre-Second World War (WW2) period

and its trade, investment and aid policies in the post-WW2 period significantly
influenced the development paths and strategies of the rest of East Asia.

While

Japan’s current approach to development assistance shares many commonalities
with the Western approach, it also exhibits distinct features derived from Japan’s
own past as a latecomer country.

The following four related aspects of Japan’s

approach are particularly noteworthy.
(i)Target orientation—industrial policy has a layered structure in which visions,roadmaps, and action plans define relation between objectives and means.
Policies are formulated backwards from future goals to the present withlong-term goals, intermediate points, and current tools arranged consistently
to show the trajectory from here to the destination. Concrete targets, suchas construction of a trunk road from point A to point B or promotion of acertain industry within 10 years, are preferred over general improvements
in governance or private sector capability.

(ii) Field orientation—Japanese development officials are more concerned withconcrete facts and actions at production sites than with crafting policy
frameworks or writing reports in the capital city.
3

Gemba (pronounced

CHAPTER 1

gain-bah) is the Japanese term for a place of actual operation such as thefactory floor or the crop field.

The most important work for Japaneseexperts is visiting or staying at the gemba for diagnostics and advice.
They are usually obsessed with location, physical dimensions and technologyof the project.

Problem-solving starts and ends at the gemba and not at

conferences or donor forums.
(iii) Joint work—development occurs when a developing country learns how
to make and execute policies effectively.

Policy learning for government

and technology absorption for local enterprises are essential.

Japaneseexperts work side-by-side with developing country counterparts at the gemba
so that local officials, engineers, workers and farmers can learn skills andknowledge through on-the-job training (OJT).

Patience is required whenthe mindset and capacity of the counterparts are weak, but such patience isconsidered necessary and inevitable. Japan does not wish to set up a parallelmechanism for implementing aid projects offering high salaries; it instead
wants to utilize and strengthen the local mechanism even if it is initiallyslow and inefficient.
(iv) Dynamic capacity development—Japanese cooperation is based on thepremise that developing countries will not stay underdeveloped forever.
Through policy learning and accumulation of experience, they are expected
to take off economically and eventually graduate from aid.

Assistance isgiven for a time to accelerate the day of graduation and not as permanentcharity for the poor (Ohno and Ohno, 2008).

Many East Asian countries,

such as Korea, China, Malaysia, and Thailand, that received large amountsof Japanese ODA previously, are now Japan’s industrial partners as wellas competitors.

Aid is not meaningful unless the recipient is determined

to graduate from it. Political will, national pride, and upward mobility are
required for this.
In sum, the Japanese approach emphasizes hands-on effort on the ground rather thanthe creation of general principles and frameworks.
through joint work.

It also stresses policy learning

These features are expected to enhance policy ownership and4Introduction

capability of aid-receiving countries toward graduation.

It is important to note that

this “ingredients” approach should be regarded as complementary to the“framework” approach of the Western donors.2

Although the two approaches areoften contrasted as alternatives and the Eastern way is sometimes supported todiscredit the Western way, it is evident that both general frameworks and concrete
ingredients are necessary for successful development.

In countries where too

many frameworks have been imposed, injection of concrete actions at the gemba
can help regain balance between theory and practice.

1-2. Entry points for Japan’s industrial cooperation in
AfricaUnlike in East Asia where Japanese trade, investment and aid are dominant, Japan isa small donor and a small investor in Africa.

In many African countries, Japanranks below tenth in the disbursement of ODA and Japanese manufacturing foreign
direct investment (FDI) is miniscule or even nonexistent.

Meanwhile, recent years

have seen rising interest in East Asian experiences among African countries as well
as a resurgence of growth agenda in the donor community.

Moreover, the rise of

emerging donors and investors such as China, India, Turkey, Korea, Saudi Arabia,
South Africa, Brazil, and so on, which do not follow the Western standards ofinternational cooperation is rapidly changing the developmental landscape of Africa.
How can Japan, a non-Western industrial country and a long-term provider ofindustrial support in East Asia, contribute to African development?
In 2008, GDF organized a series of informal meetings in Tokyo among Japanese
officials, experts, businesses and NPOs interested in African development as well as
experts from Africa. Based on the views expressed in these meetings, GDF proposedfour entry points for Japan’s growth support in Africa (GDF, 2008).

2

Yanagihara (1998) distinguishes the “framework” approach of the West and the “ingredients”
approach of the East in development assistance. See Ohno and Ohno (1998) for a collection of
papers by Japanese officials and economists on the Japanese and East Asian approaches todevelopment.

5

CHAPTER 1(i)Standard policy tools—if an African country already possesses reasonable
development visions and strategies, Japan should offer industrial support
measures from its usual toolbox to align with and realize these visions andstrategies.

They include, for example, technical education and trainingof various types and duration, shindan (SME diagnostics and advice),
kaizen (quality and productivity improvement at factories), and the draftingof plans based on industrial expertise and firm surveys.

Table 1-1 lists

standard measures for enhancing industrial human resource and enterprisecapability regularly seen in East Asia.

Some of the measures are globallycommon while others may not be well known in Africa.

Some measuresexist worldwide but may be implemented differently between East and West.

6

Introduction

Table 1-1. Policy Menu for Enhancing Industrial Human Resource andEnterprise Capability
Objective

Policy measure(1) Legal and policy framework

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(2) Industrial human resource Technology and engineering universities and institutes(education and training)
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(3) Enterprise capability
Introduction of kaizen or productivity tools (5S, QC circles, elimination of muri and muda,(management andsuggestion box, just-in-time system, etc.)
technology)
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
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)(5) FDI attraction
Clear announcement of preferred investors, sectors, regions, etc.
Effective investor information package and website
Investment promotion seminars, missions and offices abroad
Provision of high-quality infrastructure services (power, transport, land, water, waste water andsolid 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 forpriority sectors, high-tech firms, etc.
Rental factories for local and/or foreign SMEs
Support for labor recruitment, matching, housing, commuting, healthcare, etc.
Negotiation and provision of special incentives for attracting targeted anchor firms(6) Marketing and businessSupport for domestic and export market development
linkage
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(7) Innovation
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

Note:

These are a subset of industrial support measures aimed at enhancing human and enterprise capabilities.
Measures concerning infrastructure, logistics and distribution, social and environmental issues, and regional
development are not included.

7

CHAPTER 1(ii) Policy dialogue—if development visions and strategies need strengthening,or if the host country wishes to study the East Asian way seriously, Japan
can engage in bilateral policy dialogue to inform East Asian development
experiences, evaluate existing policies and organizations of the country,
and assist in the drafting of key policy documents.

Policy dialogue must

be flexible and order-made to reflect the capability and needs of thedeveloping country in question.

It should not impose Japan’s methods

but study policies and experiences of other high-performing economies as
well.

Japan has conducted policy dialogue with a number of countries in

Asia as well as with a few developing countries in other regions (Table
1-2).

Ideally, policy dialogue should be linked with concrete cooperation

projects of Japan or other developing partners.
Table 1-2. Japan: Policy Dialogue with Developing Countries(Selected List)
Country
Argentina

Period1985-1987
1994-1996(follow up)

Thailand

1999

Vietnam

1995-2001

Indonesia

2000

Myanmar1999-2002

Mongolia

1998-2001

Indonesia
Laos
Vietnam
Ethiopia

Head/key players
Purpose and content
study on agriculture andSaburo Okita (former foreign Comprehensive
livestock farming, industry, transport and export
minister) etc, JICA
promotion
Shiro Mizutani (former MITI Study on the master plan for SME promotion
official), JICA
policyLarge-scale joint study on macroeconomy,
Shigeru Ishikawa
industry, agriculture, enterprise reform, crisis(professor) etc, JICA
management, etc.
Shujiro Urata (professor),
JICA
Konosuke Odaka (professor) etc, JICA
Hiroshi Ueno and Hideo
Hashimoto (ex-World Bankeconomist and professor),
JICA

Policy recommendation for SME promotion
Study on agriculture, rural development,
industry, trade, finance, ITC, etc.
Study on the support for economic transitionand development

Policy support for macroeconomic
management, financial sector reform, SME
promotion, private investment promotion,
democratization, decentralization and humanresource development
YonosukeHara(professor)
Studyon macroeconomy, finance, state
2000-2005 etc, JICA
enterprise, FDI and poverty reduction, etc.
Bilateral joint initiative to improve businessembassy, JICA,
2003-current Japaneseenvironment and strengthen competitiveness
JETRO, JBIC
through 2-year monitoring cycle of action plans
GRIPS Development Forum Kaizen, basic metals and engineering,
2009-2011 (Kenichi Ohno, Izumi Ohno), productivity movement, policy procedure andJapanese embassy, JICA
organization, etc.
2002-2004

Takashi Shiraishi and Shinji
Asanuma (professors) & 6
professors, JICA

Source: Author’s research.
Abbreviations: MITI (Ministry of International Trade and Industry), SME (small and medium enterprises), JICA (Japan
International Cooperation Agency), JETRO (Japan External Trade Organization), JBIC (Japan Bank forInternational Cooperation), GRIPS (National Graduate Institute for Policy Studies).
Note: This table lists policy dialogues that are large-scale or worthy of special attention. Besides these, Japan offers
policy advice through dispatching advisors to heads of state or ministers, expert dispatches, drafting reports ondevelopment strategy, training courses and site visits, conferences and seminars, etc. in various scale andduration.

8

Introduction(iii) Regional development with core infrastructure—Japan can build core
infrastructure such as power, a transport corridor, or a deep seaport, anduse it to develop the surrounding area—which may be a region within acountry or an area spanning more than one country. Projects such as SME
promotion, skills training, industrial parks, efficient logistics, border crossing,and regional planning should be combined with core infrastructure
for comprehensive regional development. The Greater Mekong Sub-region
development in Indochina, the Eastern Seaboard development (ESD) of
Thailand, the Brantas River Basin development of Indonesia, and the Eastern
Region development of El Salvador are examples of comprehensive regional
development in which Japan played a major role. In Africa, where Japan’s
presence is relatively small, this strategy must be realized jointly withtechnical and financial assistance of other development partners as wellas through public-private partnership.
(iv) Enabling environment for Japanese investors—for Japanese manufacturing
companies, Africa is unfamiliar land with high risks.

To encourage theirinvestment, the Japanese government should work with Japanese companies
considering concrete projects in Africa, evaluate and support investment
plans, and remove barriers to entry—be it the lack of transport access,unstable power supply, low skills of workers, or unattractive design of the
product. While such assistance serves the commercial interest of Japaneseenterprises most directly, it will also have positive spillover effects on local
investors and investors from other countries creating a win-win-win situation
so long as the principles of open access and non-exclusivity are maintained.

1-3. GRIPS-JICA industrial policy dialogue with Ethiopia
Industrial policy dialogue between Ethiopia and Japan is an attempt to put theseentry points into practice.

It also aims to transfer the methodology of industrial

policy formulation, with the distinct features cited above, from East Asia to Africa
in general and to Ethiopia in particular.

9

CHAPTER 1

In the TICAD IV hosted by the Government of Japan in Yokohama in May 2008,
JICA and JBIC co-organized a symposium on Economic Development in Africa andthe Asian Growth Experience.

It was chaired by JICA President Sadako Ogata andjoined by the distinguished panelists consisting of Ethiopian Prime Minister Meles
Zenawi, Tanzanian President Jakaya Mrisho Kikwete, former Mozambican
President Joaquim Alberto Chissano, and President of the African Development
Bank Donald Kaberuka.

As Mr. Meles later recounted, his participation in this

symposium in Yokohama convinced him that the time had come for Ethiopia to
directly approach Japan for absorbing East Asian development lessons throughintellectual exchange.
In the mean time, GDF visited several African countries—the so-called “donors’
darling” countries—and conducted mini policy discussions with governments insearch of a suitable candidate for bilateral policy dialogue.

In July 2008, GDF

researchers and JICA officials attended the African Task Force meeting of theInitiative for Policy Dialogue (IPD), organized by Professor Joseph Stiglitz ofColumbia University and supported by JICA, in Addis Ababa.

Prime Minister

Meles participated in most sessions of this two-day conference.

GDF presented apaper on East Asian industrialization featuring Dynamic Capacity Development(Ohno and Ohno, 2008) and offered a book to the prime minister which contained achapter on JICA’s kaizen project in Tunisia (GRIPS Development Forum, 2008).
In the following week, the prime minister requested Mr. Kinichi Komano, theJapanese Ambassador to Ethiopia, to initiate bilateral cooperation with twocomponents: a kaizen project modeled after Tunisia by JICA and policy dialogue
with GDF.
Policy dialogue coupled with a concrete industrial project on the African continent
was new to Japan.

To respond to the prime minister’s request with proper staffing,budgeting, and cooperation schemes, preparatory meetings were held in Tokyo andAddis Ababa between GDF and JICA.

The industrial policy dialogue team,consisting of GDF researchers and JICA officials and experts, was organized.

This

team visited Ethiopia about four times a year to conduct policy discussions,seminars, networking and site visits.

The Japanese Embassy and JICA in Ethiopia

coordinated closely with GDF and JICA Headquarters to propel this project.
10Introduction

Progress of policy dialogue and individual projects was reported and possible next
steps were deliberated regularly between Tokyo and Addis Ababa.

Mr. AbdirashidDulane, the Ethiopian Ambassador to Japan, also exchanged notes with theindustrial policy dialogue team.
Figure 1-1. GRIPS-JICA Industrial Policy Dialogue and Industrial
Support Projects

Industrial policy dialogue was conducted at three levels: (i) prime minister, (ii)concerned ministers and state ministers, and (iii) heads of directorates and institutes
and other officials and advisors in charge of project formulation and implementationon the ground.

Prime Minister Meles was so generous as to spare his precious timewith us each time, sometimes over two hours, to clarify his policy intentions and set
the direction for future bilateral cooperation.3

These meetings were supplemented

by an exchange of letters with the prime minister on such issues as Democratic
Developmentalism (DD), Agricultural Development Led Industrialization (ADLI)
and strategies for the commercialization of agriculture (chapter 6).

3

The Japanese delegation met with the prime minister for substantive discussion in July, October, andDecember 2008; June, September, and November 2009; March and October 2010; and January and
May 2011. Average length of meetings was from one-and-half to two hours. Long letters from theprime minister were received in June and July 2009.

11

CHAPTER 1

At the level of ministers and state ministers, our key counterparts were Mr. Newai
Gebre-ab, the Senior Economic Advisor to the Prime Minister, and Mr. Tadesse
Haile, the State Minister of Industry, who co-chaired the quarterly High Level
Forum (HLF) meetings together with Ambassador Komano.

After the splitting of

the Ministry of Trade and Industry (MOTI) into the Ministry of Industry (MOI) andthe Ministry of Trade (MOT) in October 2010, HLF meetings were basicallyco-chaired by Mr. Newai, new Industry Minister Mekonnen Manyazewal, and newJapanese Ambassador Hiroyuki Kishino.

HLF meetings discussed industrial policy

issues that were of interest to Ethiopian authorities including the concept andpractice of kaizen, basic metal and engineering industries, industrial strategy in thenext five-year development plan, methods of drafting industrial master plans andaction plans, national productivity movements in East Asia and Africa, international
best practices in industrial policy procedure and organization, and so on (Table 1-3).
These topics were decided interactively and sequentially to follow the shifting
policy interests of the Ethiopian government.

Ministers and state ministers fromother related ministries such as the Ministry of Finance and Economic Development(MOFED), the Ministry of Agriculture and Rural Development (MOARD), theMinistry of Education (MOE), and the Ministry of Urban Development andConstruction (MOUDC) were regularly invited to the HLF meeting or visited
individually by the Japanese policy dialogue team in case they were not able toattend the HLF meeting.

12Introduction

Table 1-3. Issues Discussed at High Level Forums
1st HLF(Jun. 2009)

2nd HLF(Sep. 2009)

3rd HLF(Nov. 2009)

4th HLF(Mar. 2010)

5th HLF(Jul. 2010)

6th HLF(Oct. 2009)

7th HLF(Jan. 2011)

8th HLF(May 2011)

Presentations by Japanese side

Presentations by Ethiopian side(1) “JICA’s plan to policy dialogue
and development study”(Masafumi Kuroki)(2) “ADLI and future directions forindustrial development”(Kenichi Ohno)(1) “Cross-cutting issues on
industrialization and policy menu
under the age of globalization:
examples from East Asia”(Kenichi Ohno)(2) “Organizational arrangements
for industrial policy formulationand 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
and structure” (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 frameworkand Ethiopia’s approach”(Toru Homma)(1) “Result of basic metal andengineering industries
firm-level study – parts
conducted by MPDC and
JICA” (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 the presentations by
GRIPS and JICA” (HE Tadesse
Haile)(1) “Concept for the industrial chapterof PASDEP II and the formulationplan”(HE Tadesse Haile)(1) “Draft plan of industry sector for
PASDEP II” (HE Tadesse Haile)(2) “Overview, contents of PASDEP II
draft of chemical subsector”(Shimelis Wolde)(1) “Report of kaizen training forcapacity building of Kaizen Unitand pilot project companies in
Osaka, Japan”(Tola Beyene)(2) “Report of kaizen training forcapacity building of Kaizen Unitand pilot project companies in
Chubu, Japan” (Bekele Mekuria)(3) “Current status of kaizen projectand institutionalization of kaizen”(Getahun Tadesse)(1) “Singapore’s experience with
(1) “Contents of industry sector inproductivity development:
Growth and Transformation Plan”
internalization, scaling-up, and(HE Tadesse Haile)international cooperation” (Izumi(2) “Singapore’s productivity
Ohno)movement and lessons learned”(Daniel Kitaw)(1) “The making of high priority(1) “Organizational structure ofdevelopment strategies:
Ministry of Industry and linkage
international comparison of policy
with other ministries” (Ahmed
procedureandorganization”
Nuru)(Kenichi Ohno)(1) “Ethiopia’s industrialization drive(1) “MSE development strategy ofunder the Growth andEthiopia” (Gabremeskel Challa)
Transformation Plan” (Kenichi Ohno) (2) “Kaizen dissemination plan and(2) “Achievements in the Quality andinstitutionalization plan” (Getahun
Productivity Improvement (Kaizen)
Tadesse)
Project” (Go Shimada)(3) “Botswana’s productivity movement(3) “Overview of national movement forand its Implication to Ethiopia”
quality and productivity(Daniel Kitaw)
improvement: experiences of
selected countries in Asia andAfrica”(Izumi Ohno)(4) “Taiwan: policy drive for innovation”(Kenichi Ohno)

13

CHAPTER 1

At the operational level, GDF and JICA held numerous meetings with the officialsof the MOTI (later, the MOI), MOARD, MOFED, MOE, and MOUDC.

They also

worked with the Ethiopian Development Research Institute (EDRI) to organize HLF
meetings and exchange researchers.

In addition, the Japanese team traveled

outside Addis Ababa to visit regional governments, tanneries, shoe and garment
factories, metal engineering firms, food processors, agricultural cooperatives, flower
farms, coffee growers, tourist establishments, and Japanese cooperation projectsites.
The bilateral policy dialogue proceeded in close coordination with Japan’s support
for kaizen in Ethiopia, which were the two components requested by Prime Minister
Meles.

From October 2009 to June 2011, the kaizen pilot project, following thestandard format of Japanese kaizen assistance, selected and improved 30 local pilot
firms by mobilizing Japanese industrial experts working together with young
Ethiopian industrial officials.

The project produced six “high” achievers and four

“good” achievers among 28 companies that completed kaizen consultations, a result
quite satisfactory by international standards.

It also produced six “level 3” kaizen

consultants who could provide consultancy services on kaizen and three “level 2”
assistant kaizen consultants who could guide kaizen activities.

In addition, akaizen manual, kaizen videos, and the dissemination plan for kaizen were prepared.
Nevertheless, the kaizen pilot project was only the first step in Ethiopia’s national
movement for quality and productivity improvement, and JICA will continue tosupport the subsequent phase of the kaizen project.

The policy dialogue teamclosely monitored the kaizen project and organized supportive activities.

It hosted

open seminars on the concept and adaptability of kaizen, produced a booklet to
introduce kaizen (see next paragraph) and initiated policy discussions and internal
meetings to narrow the perception gap between the Ethiopian and Japanese side forsmooth progress of the kaizen project.
Quick response to information requests was also an important work of the industrial
policy dialogue team.

At the request of the prime minister, GDF compiled

information packages on Japanese technical education, rural life improvement
movements in East Asia, global information on basic metal and engineering
industries, international comparison of industrial policy formulation methods, and14

Introduction

technology absorption of Japan and Korea through foreign-aided industrial projects.
Introducing Kaizen to Africa, a booklet explaining the concept of kaizen as well as
how it took root in Japan and how it was applied to the developing world withJapanese assistance, was produced as an introductory reference for those unfamiliar
with the concept (GRIPS Development Forum, 2009).

A handbook of national

quality and productivity movements in East Asia and Africa is currently underpreparation.

National movement for mindset change is our provisional answer tothe prime minister’s inquiry as to how East Asian governments steered a private
sector away from rent seeking and property speculation and toward value creationand competitiveness.
Networking was another important activity for the policy dialogue.

Apart frominteractions with the Ethiopian leaders and officials mentioned above, meetings
were organized with a group of donors supporting Ethiopia’s private sector
development.

GDF and JICA also met with individual donors and programs suchas GTZ (now GIZ), World Bank, the Engineering Capacity Building Program(ECBP, a large-scale program run jointly by Ethiopia and Germany), DFID, USAID,
UNIDO, UNDP, FAO, China, India, Korea, and the Sasakawa Africa Association.
GDF and JICA contacted Japanese firms interested in investing in Ethiopia; held
seminars and explored the possibility of research cooperation with Addis Ababa
University and the Ethiopian Economic Policy Research Institute; visited Civil
Service College and Ethiopian Management Institute; and participated in industrial
policy conferences organized by the German Development Institute (DIE) in Bonnand by the African Union in Addis Ababa.

1-4. Features of Ethiopian industrial strategy
Ethiopia is unique among Sub-Saharan African countries in its bold and determined
approach to economic development.4

Led by a strong and intelligent leader, thecountry has established a proactive and evolving development orientation expressedin the concepts of DD and ADLI.
4

Ethiopia’s ownership of development policy isMore discussion on Ethiopian policy orientation is given in chapter 4.

15

CHAPTER 1

strong.

It rejects neo-liberal advice for small government and instead opts forprivate sector-driven growth guided by a strong state.

The government is regarded

as the principal development agent for replacing rent seeking with value creation,commercializing smallholder agriculture, and promoting agricultural growth thatprovides conditions for the initial stage of industrialization.

Internal value creation

is to be realized through acquiring skills and upgrading technology embodied inhuman capital rather than from extractive resources or capital and aid inflows.
This approach has similarities with East Asia’s Authoritarian Developmentalism(AD) in the past but there are also differences.

In the first few sessions of thebilateral policy dialogue, Ethiopian development philosophy was clarified with theprime minister which provided the background for subsequent policy advice andconcrete industrial support.

The tentative result of this exchange is contained inchapter 5 of this report.
Another remarkable feature of Ethiopian industrial policy is aggressive policy
learning and dynamic linkage between policy learning and expansion of policy
scope.

It was only several years ago, in the early 2000s, that Ethiopia settled its

urgent problems related to national security, such as famine relief and conflict with
its neighbor, and began to seriously tackle the issue of long-term economic
development.

At the outset, Ethiopian policy capability was low and the main

policy measures employed for this purpose were a package of generous incentives
for a small number of export industries such as leather, garment, agro processing
and flowers, and monitoring of progress by the monthly Export Steering Committee
chaired by the prime minister.

Over time, policy experience was gradually

accumulated through self effort and donor support.

Tools such as benchmarking,business process re-engineering (BPR), institutional twinning and, most recently,
kaizen were added to the industrial policy toolkit.

Sectoral master plans weredrafted, specialized institutes for priority sectors were set up, and mechanisms suchas agricultural extension services, technical and vocational education and training(TVET) system, and public-private dialogue were established nationwide.

Scaling

up of a small pilot project to different sectors and regions has become a routine
procedure.

By now, the Ethiopian authorities feel sufficiently confident to take thenext step forward in industrial policy formulation.

In the Growth andTransformation Plan (GTP) 2010/11-2014/15, the Ethiopian government is
16

Introduction

expanding policy support from export sectors to import substitution sectors such as
chemicals and basic metal and engineering.

It is also launching new initiatives

such as the institutionalization of kaizen, the revamping of micro and small
enterprise policy, and creation of new industrial zones.

1-5. Impacts of industrial policy dialogue
The two-year bilateral industrial policy dialogue has produced a number of results
for both Ethiopia and Japan in the formulation of development and international
cooperation policies.

They can be summarized as follows.

First, the policy dialogue accelerated Ethiopia’s policy learning.

Regular visits,

intensive meetings and provision of specific information allowed the Ethiopian
authorities to select topics and raise questions according to changing policy needs
and interests.

Ethiopia previously learned the development experiences of Korea

and Taiwan through literature and dispatching of several young officials to the
Korean Development Institute (KDI) in the late 1990s.

However, theEthiopia-Japan policy dialogue provided far more direct and interactive access toJapanese thinking and East Asian development experiences.

Moreover, Ethiopia’s

inclination for aggressive policy learning was highly consistent with the features ofJapan’s development support explained above, especially the principle of Dynamic
Capacity Development.

Issues taken up in the last two years were broad and many.

Our discussions started with the clarification of Ethiopia’s guiding principles of DD
and ADLI.

The bilateral policy dialogue then turned to practical advice for

expanding Ethiopia’s policy space while avoiding known pitfalls, how to design
national movements for mindset change, development plans, sectoral andsub-sectoral master plans and action plans, and so on.

Although the results of ourbilateral discussions are not clearly visible in the GTP (see chapter 3), it is hopedthat policy learning in the last few years will produce tangible changes in the years
to come.
Second, weaknesses in policy procedure and organization have been identified andcommunicated to the Ethiopian authorities.
17

This is one of the areas in which

CHAPTER 1

significant improvement is desirable in the coming years.

Discussions on anumber of sectors and issues such as kaizen, TVET, micro and small enterprises(MSEs), and basic metal and engineering have revealed common methodologicalproblems which prevented effective policy making in Ethiopia (chapters 3, 4 and 7).
They included preference of speed over quality in industrial policy formulation, thelack of sufficient consensus building on key policy directions among stakeholders
inside and outside government, and the lack of a high-level policy coordination
mechanism across ministries and agencies.

These problems were detected against

the best policy practices of East Asian high-performing economies.

An alternative

policy arrangement to overcome them, consisting of the three-layer structure of anational council, a planning commission and a policy think tank, was suggested.

Itis hoped that serious reform in central policy coordination will be undertaken during
the GTP period so that the next five-year plan will be produced by a more advanced
policy mechanism.
Third, policy dialogue was made effective by its close linkage with JICA’s industrial
projects (kaizen pilot project, technical assistance for establishing the Ethiopian
Kaizen Institute and kaizen institutionalization, and a basic metal and engineering
sector survey).

Feedback between policy dialogue and concrete industrial projects

is a feature not always visible even in Japan’s economic cooperation in East Asia. In
Ethiopia, the prime minister’s initial request for two-track cooperation ensured thatthe two components would proceed interactively.

This arrangement turned out tobe highly productive as policy advice could be directly implemented, at least
partially, through concrete projects while the latter could be supported by open
seminars, policy discussions and institutional adjustments initiated by the policy
dialogue.

As Ethiopia regards kaizen as the core instrument for national movementfor quality and productivity improvement, it is particularly important that problems
encountered in kaizen projects be immediately reported and solved by high-level
policy makers.
Fourth, the three-level policy dialogue, consisting of the prime minister, ministers
and state ministers, and operational people and conducted in the sprit of mutual
respect and full candor, provided excellent channels for Japan to know Ethiopia’s
most pressing policy needs and target its resources toward them.
18

In particular,

Introduction

regular access to the prime minister and long and substantive exchange with him
enabled Japan to identify the most desired contribution to Ethiopia based on its
comparative advantage.

Similarly for Ethiopia, policy dialogue at all levels

enabled the government to relay its policy intention precisely and raise issues
flexibly to Japan (and East Asia).

This is important because Ethiopia is a countryof strong policy ownership with a clear developmental orientation.

Pin-pointmatching of needs and offers has made Ethiopia-Japan intellectual cooperation
highly effective and purged all seeds of distrust and misunderstanding.

Though all

donors are required to align with the national development plan, just reading the
GTP will not allow such fine-tuning of development assistance to country needs.
In the eighth—and last—session of industrial policy dialogue in May 2011, theprime minister and the industry minister strongly requested the continuation ofpolicy dialogue with Japan in one form or another.

In response to these requests,

the Japanese government, JICA and GDF are currently exploring the modality ofextension of bilateral policy dialogue.

As to Japan’s support for kaizen, it willcontinue into the second phase as was previously agreed regardless of the future
modality of policy dialogue.

1-6. Guide to chapters
The rest of this report is organized as follows.
Chapter 2 gives an outline of JICA’s KAIZEN project as it was implemented, inparallel with the industrial policy dialogue, from October 2009 to May 2011.
Chapters 3 and 4 are materials prepared for the most recent policy dialogue sessions
in January and May 2011.

Together they provide a good summary of our policy

conclusions and recommendations.

Chapter 3 contains assessments of the GTP inlight of the previous sessions of bilateral policy dialogue.

Chapter 4 discusses

problems in policy procedure and organization which were identified as one of theroot causes of general policy weaknesses in Ethiopia.
Chapters 5 to 9 are papers submitted to the earlier sessions of policy dialogue before
19CHAPTER 1

the content of the new five-year plan was known.

Chapter 5 gives ourinterpretation of DD and ADLI, which are the two highest governing concepts ofEthiopian development.

This chapter was drafted for clarifying the basic policy

stance of the Ethiopian government at the beginning of the two-year policy dialogue.
Chapters 6 and 7 argue cross-cutting issues and organizational arrangements thatshould be minded in expanding policy scope and instruments as the government’s
intention to do so in the next five-year plan was known at the time of writing.
Chapter 8 includes policy advice in drafting the industrial section of the next
five-year plan by the MOTI.

Chapter 9, prepared at the request of the Ethiopian

government, analyzes how industrial master plans in high-performing economies are
structured.
Chapter 10 presents the international comparison of policy framework on the Basic
Metal and Engineering Industries (BMEIs) and the highlights of the Firm-level
Study on the BMEIs requested by the Ethiopian government and conducted jointly
by JICA and the ECBP.

The chapter reports only the results produced by JICA

along with the review of international experiences and the Ethiopian policy
framework for these industries.
The ordering of chapters in this report does not follow time sequence.

The outline

of JICA’s KAIZEN project (chapter 2) and the two most recent papers for policy
dialogue (chapters 3 and 4) are placed ahead of others because they contain latest
information on Ethiopia’s development orientation, especially the GTP and kaizen,
and are most relevant to the readers with time constraints.

As Ethiopia’s policies

evolve rapidly, any discussion not reflecting the GTP may fail to give a full pictureof where the country is headed.

The remaining chapters, however, are also usefulas they offer concrete advice on how to improve industrial policy measures,
documents and organizations applicable not only to Ethiopia but also to otherdeveloping countries provided that appropriate modifications are made.

All papers

were written for immediate use at policy dialogue sessions or reporting progress togovernments and not for academic publication.
Throughout this volume, the reader will notice that the main methodology of
persuasion used in the bilateral policy dialogue was international comparison of best20Introduction

policy practices, gathered mostly from East Asian high-performing economies, sothat Ethiopia was provided with solid reference materials with which to build its
own policies.

The ultimate purpose of studying a large number of international

best policy practices is not to copy them randomly and blindly to a different soil but
to strengthen Ethiopia’s general capability to compose a policy package mostsuitable for its local context based on the principles of selectivity, modification, andcombination.

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