Policy Dialogue forIndustrial Policy
Formulation in Ethiopia
National Graduate Institute for Policy Studies (GRIPS)
Addis Ababa, July 2010
This presentation explains the draft interim report of theEthiopia-Japan industrial policy dialogue from mid 2009 to early
2010. The dialogue is expected to continue for another year.
Industrial policy dialogue with Ethiopia is conducted jointly by
GRIPS and JICA. This material was prepared by the GRIPS
Development Forum. Views expressed here are not necessarily
those of the Ethiopian government or the Japanese government.

Initiation of Bilateral Policy Dialogue
 May 2008: the 4th Tokyo International

Conference on African Development (TICAD IV):
Japanese commitment to increase cooperation inAfrica.
 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
 June 2009: Official launch of the 2-year project.

Purposes of
Bilateral Industrial Policy Dialogue
 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.
 Create pilot projects which should be scaled up by
Ethiopian effort.
 Promoting industrial policy dialogue in the rest ofAfrica (if successful).
 Providing specific information upon request(Japanese TVET system, kaizen, metals, rural life
improvement movement, etc).

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

Preparation

Official launchJun.2009

Industrial policy dialogue

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

InterimReport

Spring2011

FinalReport

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

Kaizen (30 pilot firms)

Industrial support
projects

Basic metal & engineering industries study(With ECBP)

Institutionalization of kaizen
Other?

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

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

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

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

2nd HLF(Sep. 2009)

3rd HLF(Nov. 2009)

4th HLF(Mar. 2010)

5th HLF(Jul. 2010,proposed)

Japanese side

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
industries firm-level study – parts
conducted by MPDC and JICA” (ToruHomma)(1) “Evaluation of current PASDEP focusing on
industrial development and related sectors”(HE Tadesse Haile)(1) “Comments and feedback by the Policy
Dialogue Steering Committee on thepresentations by GRIPS and JICA” (HETadesse Haile)(1) “Concept for the industrial chapter ofPASDEP II and the formulation plan” (HETadesse Haile)(1) “Draft plan of industry sector for PASDEPII” (HE Tadesse Haile)(2) “Overview, contents of PASDEP II draft ofchemical subsector” (Shimelis Wolde)(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”

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.

Enhancing Industrial Human and Enterprise
Capability: Standard Menu
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 systemEnterprise 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

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, quality control,kaizen, SME promotion, etc.) can be provided.
Policy dialogue for making and strengthening
visions and strategies.
Comprehensive regional development with core
infrastructure, supported by HRD, regionalplanning, industrial support, rural development,etc.
Creating enabling environment for Japanese
investment under the principle of open access andnon-excludability.

Features of
Ethiopian Industrial Strategy Unique development strategy based on DD andADLI: strong state guiding private sector, interest
in East Asia.
 Linkage between policy learning and expansion ofpolicy scope Around 2003-now: promoting a few export
sectors with incentives and donor support;
learning BPR, benchmarking, policy documents,
scaling up of pilots, twinning, public-private
dialogue, kaizen…
 PASDEP II: addition of import substitution,kaizen institutionalization, etc. as policy
capability has risen.

Expanding Policy Scope The need for broadening the policy scope was alsosuggested by Dani Rodrik (2008) and World Bank: Move from 1st to 2nd generation industrial policies.
 Support investors beyond current priority industries.
 Broaden the list of policy instruments.
 Our approach Emphasis on policy evolution—matching the speedof policy learning with policy expansion.
 Supporting policy expansion with concrete, handson information, studies, and technical cooperation toavoid policy mistakes and political capture.

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

Ch.1 – Introduction
Ch.2 – DD and ADLICh.3 – Broadening the policy scope: cross-cutting
issuesCh.4 – Broadening the policy scope: organizationalarrangements
Ch.5 – Policy direction for the next five years
Ch.6 – An international comparison of industrial
master plans

Ch.2 – DD and ADLI Review of Ethiopia’s steps toward a developmental

state since the 1990s, and early results.
 Democratic Developmentalism—definition, issues,comparison with East Asian developmental states.
 Agricultural Development Led Industrialization—
core ADLI, enhanced ADLI, further expansion ofpolicy scope and measures.

Core ADLI

Enhanced ADLICh.3 – Cross-cutting Issues
Critical review of Ethiopian industrial policies: Policy framework and structure
 Past review and future evaluation
 Time dimension of industrial promotion
 Import substitution
 Industrial clusters and corridors
 SME promotion

Ch.4 – Organizational Arrangements
Introducing East Asian experiences on: Leadership and a technocrat team Mechanisms for inter-ministerial coordination andstakeholder involvement
 Mechanisms for executing high priority policies
 Implications for Ethiopia

Ch.5 – Policy Direction for the Next
Five Years
Based on current PASDEP and discussion withMOTI, advice was given on:
 Recent performance Proactive industrial policy Expansion of policy scope and measures
 Internalizing skills and technology
 Priority sectors
 Priority issues
 Numerical targets
 Policy documents and organization

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

Ch.6 – An International Comparison ofIndustrial Master Plans
Upon PM’s request, a quick study was conducted on
industrial policy documents in Asia:
 Master plan types
 Chapter components
 Required features
 Relative scope of government vs. market
 Concrete examples from Asian policy documents:
Thailand, Malaysia, etc.
 Recommendations for Ethiopia

Standard Ingredients of an Industrial Master Plan
VisionImportance, role, orientation, and positioning ofindustry in national development

Targets

Long- and medium-term numerical and/or qualitative
targets

Situation analysis

Current status, potentials and obstacles of thedomestic industry in the national, regional and global
context; tables and graphics for data, surveys,international comparisons, etc.

Policy issues

A small number of selected issues should beidentified, prioritized, and analyzed in preparation for
designing policy action

Action planoraction mechanism

A large matrix that pre-specifies actions, sub-actions,
expected output, success criteria, deadlines, andresponsible organizations; procedure for monitoring
and reporting should also be specified.
Alternatively, a monthly high-level committee chaired
by top leader, or a well-focused and well-coordinatedbudgeting and project approval process may substitutethe action plan matrix.