Chapter 7

Broadening the Policy Scope:
Organizational Arrangements∗

This chapter gives concrete examples of organizational arrangements and related
instruments for conducting industrial policies in selected countries in East
Asia—Japan, South Korea, Malaysia, and Thailand.

Different countries adopted

different organizational solutions to facilitate industrial policy making.

The typeof leadership and its effective alliance with the technocrat team were crucial
determinants of each country’s organizational arrangements.

Special attention will

be paid to the two related issues of inter-ministerial coordination and stakeholder
involvement.

We will also examine how these countries executed high-priority

programs.

While these examples may not be transferred directly to Ethiopia

because of differences in the backgrounds of the countries, it is hoped that they will
provide concrete suggestions about organizational arrangements that Ethiopia canselectively adopt.

7-1. Leadership and the technocrat team
One of the key ingredients of the “East Asian Miracle” was alliance between theleader and the technocrat team (Campos and Root, 1996; Ohno and Shimamura,2007).

All of the countries examined here, with varying degrees of success, had (i)a visionary leadership that led long-term national development, (ii) a team ofcompetent economic technocrats responsible for economic policy making andimplementation, and (iii) institutionalization of inter-ministerial coordination andgovernment-business partnership. Central coordination mechanisms were created in∗This chapter was prepared for the bilateral policy dialogue held in Addis Ababa in early September
2009 between Ethiopia and Japan. It is based on the information from official documents, a seriesof discussions and exchange of letters with Ethiopian leaders and high officials, and studies by the
GRIPS Development Forum (GDF). All responsibility for the content shall be borne by the GDF.

169

CHAPTER 7

the government machinery for formulating, implementing, and monitoring
development policies (Kondo, 2005).
It is also important to note that high-performing economies in East Asia did notpossess strong institutional bases at the beginning of their rapid development.
Capability and institutions were strengthened during (and not before) their highgrowth periods.

East Asian experiences confirm that state-building is a dynamic

process in which the government has to build up industrial policy capability throughfocused hands-on efforts in the process of industrialization.
There were significant country variations in leadership type, functions of thetechnocrat team, and approaches to the sharing of development and industrial
visions.

Table 7-1 summarizes these differences among Japan, South Korea,

Malaysia, and Thailand in their respective high growth periods.
Table 7-1. Alliance between Leadership and Technocrat Teams in East Asia
Leadership Type
Japan
(late
50s-70s)
S. Korea(60s-70s)
Malaysia(80s-90s)
Thailand(80s)

Technocrat Teams

Organization-al
leadership

MOF, EPA, MITI
(super-ministry forindustrial policy)
Strong personal EPB (super-ministry)
leadership
StrongPrime Minister’s Dept.
personal
esp., EPU
leadership(super-ministry)
OrganizationCore macro- economic
al leadershipagencies (nosuper-ministry)

Development & Industrial Vision
Formulation
Economic and physical plans forvision sharing; industry-specificpolicies
5-year plans and plans fortargeted industries
Vision 2020, 5-year plans; andIndustrial Master Plans (IMP)5-year plans; no industry-wideplan (except after financial
crisis)South Korea and Malaysia had strong personal leadership.

President Park

Chung-hee of South Korea (in power 1961–79) and Prime Minister Mahathir bin
Mohamad of Malaysia (in power 1981–2003) were charismatic leaders.

They

imposed national goals, exercised strong control, and became the driving force ofnational development and institutional building.

The Economic Planning Board(EPB) of South Korea and the Prime Minister’s Department (the Economic Planning
Unit (EPU) in particular) of Malaysia functioned as super-ministries to centrally
coordinate the formulation, implementation, and monitoring of vision documents
170

Broadening the Policy Scope: Organizational Arrangements

and development plans.

These super-ministries were technocratic arms to realize

leaders’ visions.
By contrast, organizational leadership was salient in Japan and Thailand. There wasno charismatic leader who ruled for a long time and there was no single
super-ministry in either country.

A number of key economic ministries andagencies worked in close collaboration with political leaders to formulate the vision,
which was concretized into various plans and policy measures.

In Japan, economic

technocrats and businesses shared the idea of industrial catch-up based on economic
nationalism.

While a number of economic ministries participated in policy making,the Ministry of International Trade and Industry (MITI) played the lead role incoordinating and supporting private sector activities.

In Thailand, linkage between

macroeconomic agencies and real-sector line ministries was relatively weak,
preventing the formulation of effective industrialization strategies.

However, close

coordination among core macroeconomic agencies provided a stable economic
environment conducive for promoting private-sector led growth.1
Regardless of such variations in leadership, the governments of successful East
Asian economies institutionalized government-business interactions for information
sharing and policy coordination (Weiss, 1998; Weiss and Hobson, 1995; Kondo,2005).

Large flows of high-quality information between the government andbusinesses contributed to building mutual confidence, credible commitments, andpredictability between the public and private sectors. Moreover, the nature andintensity of government-business coordination have evolved over time as the private
sector has improved its capability (see section 4-3-1 for Korea’s HCI drive).

1

Organizational leadership refers to “mission-driven control” by powerful groups or organizations, incontrast to “goal-oriented control” by a charismatic figure (Kondo, 2005). In Thailand, the Thaksin
administration (2001–06) introduced a charismatic top-down approach based on new publicmanagement, but this short period was generally considered an exceptional case in the political
history of Thailand.

171

CHAPTER 7

7-2. Mechanisms for inter-ministerial coordination andstakeholder involvement
Industrial development has multi-sectoral dimensions, involving not only
industrialization strategy in the narrow sense but also agriculture (inputs andmarkets), infrastructure, skill development, science and technology, the environment,
and so forth.

Moreover, unlike the social or infrastructure sectors, the industry

sector is not public-expenditure intensive.

Since private agents are the main

counterpart of industrial strategy making, consideration must be given not only tobudget allocation but also to providing incentives and a regulatory framework
conducive to business activities. 2 For these reasons, effective industrial policy
formulation and implementation requires (i) inter-agency coordination mechanisms;(ii) constructive and continuous contacts with businesses; and (iii) mechanisms forfrequently reviewing and flexibly adjusting policy implementation.
Not all East Asian governments had industry-wide policies or overall industrial
master plans.

Regardless of the existence of such documents, the governments ofsuccessful economies all devised centralized mechanisms for inter-ministerial
coordination and instruments for government-business partnership for industrial
policymaking and implementation.

They included deliberation councils, steeringcommittees at the national or sectoral level, working groups, special task forces,
government-business forums, and industry-specific or function-specific institutes.
The following accounts give concrete examples of organizational arrangements andinstruments adopted by selected East Asian countries.

2

This applies to the productive sector in general, including agriculture. Based on similar analogies,
Mick Foster, a proponent for Sector-Wide Approach (SWAp) and new aid modalities such as budget
support, pool funds, and so on, recognizes the difficulty in introducing agricultural SWAp in
Sub-Saharan Africa compared with using SWAp in the health and education sectors (Foster, et. al.
2001).

172

Broadening the Policy Scope: Organizational Arrangements

7-2-1. Japan: MITI and the use of deliberation councils in abottom-up approach
Japanese economic ministries in the late 1950s to the 1970s included the Economic
Planning Agency (EPA) under the Prime Minister’s Office, the Ministry of Finance(MOF), and the Ministry of International Trade and Industry (MITI, currently the
Ministry of Economy, Trade and Industry), which collectively assumed the primaryrole in formulating medium- and long-term national visions and economic plans.
In addition, the EPA and, subsequently, the Land Agency (established in 1974)
under the Prime Minister’s Office, formulated spatial plans that included corridors,
industrial zones, and land and regional development plans.

Responsible ministries

or agencies organized deliberation councils whose members were representatives
from other ministries, business leaders, experts, and academicians.

In Japan,deliberation councils functioned as the key instrument for vision making, policy
consultation and coordination, and information sharing within and outside thegovernment.
Based on a shared vision and shared policy directions, MITI assumed full
responsibility in industrial policy formulation and implementation.

According toOkimoto (1989), MITI was the de facto super-ministry for industrial policy.
Compared to the more fragmented industrial policy making mechanism in the
United States (US), MITI was distinctive in: (i) having broad jurisdiction over manyindustrial and functional sectors from small and medium enterprises (SME) to basic
industries such as petroleum and steel, international trade, and even environmental
protection; and (ii) having both vertical (industry-based) and horizontal (functionalor cross-industrial) bureaus (Figure 7-1).

173

CHAPTER 7

Figure 7-1. Japan: The Structure of the Ministry of International Tradeand Industry
MITI
Minister
Politically appointed VM
Administrative VM
Deputy VMs
Special assistants

Attached Organizations
and External Bureaus

Main Bureau
Minister’s Secretariat(incl. Research & Statistics)
Int’l Trade Policy Bureau
Int’l Trade Admin. Bureau
Industrial Policy Bureau
Industrial Location &Environment Protection Bureau
Basic Industries Bureau
Machinery & Information Industries
BureauConsumer Goods Industries Bureau

Deliberation Councils
Industrial Structure
Export Insurance
TextilePetroleum
Electrical Works.........

Agency of National Resources& Energy
Patent Office
SME Enterprise Agency
Agency of Industrial Science& Technology
Trade & Investment Training
Other(*) Industrial Structure Council:
influential in the 60s (18 special
committees): industrial pollution,
int’l economy, consumer economy,
heavy industry, chemical industry, etc.

Int’l Trade Transaction
Industrial Location & Water
Product Safety & Household Goods Quality Indication
Aircraft & Machinery Industry
Traditional Crafts Industry...................

Source: Adapted from Okimoto (1989), p.117, Figure 3.2.

Deliberation councils were extensively used by MITI as a policy making instrument.
Deliberation councils were managed by a secretariat staffed by MITI officials.
With members from private businesses, deliberation councils provided a forum inwhich the government and businesses met and discussed policy issues and businesstrends, promoting consensus-building (World Bank, 1993).

Moreover, thestructure of deliberation councils reflected both vertical and horizontal bureaus
within MITI.

This contributed to enhancing MITI’s capacity to aggregate diverse

interests (Okimoto, 1989).

Among deliberation councils, the Industrial Structure

Council, established in 1964, was most influential as it managed the industrial
policy in its entirety by the participation of representatives from the public andprivate sectors (Johnson, 1986).

The Industrial Structure Council drafted a vision

for industrial policies for each decade.

It published the vision of Heavy andChemical Industry (HCI) in the 1960s, knowledge-intensive industries in the 1970s,
creativity and knowledge-based industries in the 1980s, and better quality of life in
the 1990s (Kawakita, 1991).

The Industrial Structure Council also discussed

measures to support pioneer industries and ensure the transition of sunset industries.
174

Broadening the Policy Scope: Organizational Arrangements

Japan’s policymaking process was characterized by a bottom-up approach in which
policy formulation started with MITI’s junior officials gathering and analyzing dataand information and conducting intensive hearings from various stakeholders,
especially the business community (Figure 7-2).

The information collected served

as the basic input for subsequent discussions in the subcommittee and thedeliberation

council,recommendations.

which

respectively

draftedandfinalized

policyThroughout the process, deputy division directors (officials intheir mid-thirties) were at the center of communication flows both inside MITI andbetween MITI and the private sector and thus had a considerable voice indetermining the policy direction (Okimoto, 1989).
Figure 7-2. Japan: MITI’s Deliberation Council and Policy Formulation(late 1950s–early 1970s)
Conduct survey;
compile data

MITI junior staff
study group(Prepare draft)

MITI Research group(subcommittee)(Feedback)

Hearing:
Learned individuals
Interested parties
Overseas employees
Local representatives
Others
Outside lecturers(Briefings, subcommittees’ reports)

Deliberation council(Report)Public relations:Publications
Explanatory meetings
Lectures
Others

Source: Ono (1992).

7-2-2. South Korea: the super-ministry and the top-down
approachDuring the 1960s and 70s, President Park Chung-hee exercised strong personalleadership.

This was a top-down approach to economic policy making,175

CHAPTER 7

implementation and monitoring (Figure 7-3). The EPB, created in 1961, wasdesignated as a super-ministry integrating development planning, budget control, aid
management, overall policy coordination, and monitoring.3 Headed by the Deputy
Prime Minister who chaired the Economic Minister’s Council and directly reportingto the President, the EPB was above other ministries and agencies.

Policy research

institutes also played an important role in applying specialized knowledge andexpertise to produce analyses of long-term issues.

Among them, the Korean

Development Institute (KDI), established in 1971, assisted the EPB in formulating
medium- and long-term economic policies.4
Figure 7-3. South Korea: Development Vision and Government-Business
Partnership (1960s–70s){

President(Blue House)Economic
Secretariats{

State Council

Five-year plan

KDI
- Policy analyses

Chaired by Deputy PM

Economic Minister’sCouncil

EPB
Deputy PM- Development planning- Public investment planning- Budget- Monitoring- Aid management

Govt.-BusinessMeetings:- Export promotion- Economic briefs- HCI drive, etc.

{

{

{

MCI

Business FinanceDirect presidential
control overeconomic policies
EPB as superministry
Research institute(KDI, etc.),
providing analysis
for MLT economic
policies
Govt.-business:very close &cooperative
relations
Performancebased rewards &penalties

Ministries/Agencies

Source: Author.

3

4

EPB combined several strategic functions previously entrusted to different ministries. These
included: (i) development planning, which was originally with the Ministry of Reconstruction
working with USAID in the aftermath of the Korean War; (ii) budget formulation; (iii) collection andevaluation of census and other statistics that was originally done by the Ministry of Internal Affairs;and (iv) jurisdiction over the inflow of foreign capital and technology (Kim and Leipziger, 1993).
Stimulated by KDI’s success, other ministries also established institutes under their jurisdictions.
These included the Korean Education Development Institute (KEDI) in 1972 by the Ministry of
Education, the Korean Rural Economics Institute (KREI) in 1978 by the Ministry of Agriculture andFishery, and the Korean Institute for Human Settlement (KIHS) in 1978 by the Ministry ofConstruction. By 1992, there were at least 10 policy research institutes in the Korean government(Kim and Leipziger, 1993).

176

Broadening the Policy Scope: Organizational Arrangements

From the mid 1960s to the early 1980s, a close and cooperative relationship existed
between the government and private businesses.

Meetings were held frequently

and regularly between leaders of both groups.

The Monthly Export Promotion

Meeting was particularly important in coordinating the export drive. It was presided
over by President Park and attended by selected business association leaders,
governors of financial institutions, major export enterprises, and economic
ministries.

In the meeting, President Park would first be given briefings on theachievement of export targets from every business receiving subsidized policy loans.
Second, members discussed problems of specific industries.

Third, businessmembers expressed their views on export market trends and examined the drafts ofregulations and policies.

Fourth, based on the opinions of the business community,

President Park ordered relevant departments of the ministries to adopt remedial
measures.

In subsequent meetings, ministries were obliged to report on theiractions and industry performance (World Bank, 1993; Cheng, et. al., 1996; Kondo,2005).
To prepare for these meetings, the Ministry of Commerce and Industry (MCI)
collected information from individual exporters on a monthly, weekly, andsometimes even daily basis.

It also monitored and analyzed market conditions.

Moreover, lower-level meetings among middle managers in private industries,
middle-level officials in the government, and experts and academicians
supplemented the Monthly Export Promotion Meetings.

These meetings took

place in the form of industrial discussion groups, divided into either functional or
sectoral groups depending on the issue (Campos and Root, 1996).
President Park also organized the Monthly Economic Briefing.

Like the Monthly

Export Promotion Meeting, the briefing was attended by the President, EPB,
business leaders, and representatives of financial institutions.

While the Monthly

Export Promotion Meeting focused on devising countermeasures to eliminate
impediments to export growth, the Briefing paid more attention to analyzing andmonitoring economic performance regarding exports (Kondo, 2005).

177

CHAPTER 7

7-2-3. Malaysia: A super-ministry and multi-layered,inter-ministerial coordination
Since independence in 1957, the successive Prime Ministers in Malaysia havegenerally exercised strong leadership, and technocrats have served as the support
arm to realize the leader’s vision.

The organizations responsible for policymaking

were mainly in the Prime Minister’s Department such as the Economic Planning
Unit (EPU), the Implementation and Coordination Unit (ICU), and the PublicService Department, in addition to the MOF.

The EPU in particular functioned asa super-ministry, taking a lead in the formulation of long- and medium-term plans
and reviews, public investment planning and development budget, as well as in aid
management.
Malaysia established a multi-layered, inter-ministerial coordination mechanism foreach of the planning and implementation functions.

The National PlanningCouncil (NPC) was placed at the highest level of decision-making with regard tosocio-economic matters.

Chaired by the Prime Minister and comprised of key

economic ministers, the NPC served virtually as the economic committee of the
Cabinet.

Below the NPC was the National Development Planning Committee(NDPC), a working level planning committee chaired by the Chief Secretary to thegovernment and consisting of the heads of all ministries.

The EPU acted as thesecretariat, and a similar planning setup existed at the state and district levels.

The

National Action Council (NAC), chaired by the Prime Minister, had the highest
authority over the overall implementation and coordination of development
strategies.

It met regularly with selected government agencies for intensive review

of progress of and problems with development strategies.

The ICU served as thesecretariat. A similar institutional setup was copied at the state and district levels.
During the 1971–1985 period, Bumiputra or the New Economic Policy (NEP) was
the overriding policy framework in Malaysia. 5

The government-business

relationship became somewhat antagonistic because the NEP favored the ethnic
5

The NEP (or Bumiputra policy) was an affirmative action plan aimed at poverty problems andimbalances among ethnic groups in favor of indigenous Malay. It was formulated in 1971 in
response to the 1969 ethnic riot.

178

Broadening the Policy Scope: Organizational Arrangements

Malay and the government also established a number of state-owned enterprises.
A major breakthrough in industrial policy was made in 1981 when Prime Minister
Mahathir took office.

Mahathir renovated economic policies and institutionalarrangements for a strategic government-business relationship.

In 1981 helaunched the Look East Policy, which urged Malaysians to learn from the Japaneseand Korean experiences in economic development.

He launched the Vision of

Malaysia Incorporated in 1983 and started Vision 2020, with a pro-businessorientation, in 1991.

The Ministry of International Trade and Industry (MITI) of

Malaysia formulated the first Industrial Master Plan (IMP1, 1986–95), which laid
the foundation for manufacturing to become the leading sector of the economy.
To realize Vision 2020, the second Industrial Master Plan (IMP2, 1996–2005) aimed
at improving the competitiveness of manufacturing by broadening and raising its
activities along the value chain curve.

Its two key thrusts were “manufacturing

plus plus” and “cluster-based industrial development” (Ohno, 2006).

The

background paper was prepared by a researcher at the Malaysian Institute of
Economic Research (MIER).

IMP2 paid greater attention than IMP1 to theinstitutionalization of policy coordination mechanisms and established the following
three-layered bodies (Figure 7-4).
(i)

The Industrial Coordination Council (ICC), aimed at monitoring the progressof IMP2 and examining problems raised by the subordinate committees.
It was chaired by the Minister of the International Trade and Industry andincluded eight officials from MITI, EPU, MOF, Central Bank, related
economic ministries (at the level of permanent secretary), and 15 business
representatives (Chamber of Commerce, Federations of Malaysian
Manufacturers, major industrial associations).

(ii) The Industrial Policy and Incentive Committee (IPIC), aimed at examining
investment promotion policies.

IPIC members were limited to economic

technocrats (officials from eight ministries and agencies).
(iii) The Public-Private Cluster Working Group (CWG) and the Strategic Thrustand Initiative Task Force (STITF).
179

The members consisted of both

CHAPTER 7

government officials and business representatives. As subordinate groups
to IPIC, the former discussed the promotion of 18 targeted sectors in IMP2,
while the latter examined policy measures to build up international
competitiveness and prepare for economic globalization (Torii, 2000; Kondo,2005).
Figure 7-4.

Malaysia: Mechanisms for Industrial Policy Coordination(1991– )NPC

PM’s Dept.

NAC
PM
Deputy PM

EPU

ICU

(planning)(monitoring)

Vision 2020
Malaysia Plan (Five-Year DP)
MOF

Chinesesociety

Indiansociety

IMP2

Chaired by MITI Minister,
Govt & business.

Industry Coordination
Council (ICC)

Budgetdialogue

Political Parties

Malaysociety

MITI

CentralBank

Govt. only (8 ministries/agencies)

Industry Policy and Incentive
Committee (IPIC)

Annualdialogue

Govt.& businessIndustry Cluster Working
Groups (18 CWGs)

IndustrygroupsIndividual
firmsChambers of Commerce

Source: Adapted from Torii (2000), p.166, Figure 2.

Another important instrument for realizing Vision 2020 was the Vision of Malaysia
Incorporated, which regarded the government-business relationship as a firm-typeorganization.

Although announced in the early 1980s, its institutionalization began

only in 1991 when Vision 2020 was launched. Similar to IMP2, the Vision of
Malaysia Incorporated established multi-layered bodies.
At the highest policy level, the Malaysian Business Council (MBC) was establishedin 1991 to share problems and information on industrial development among
political, government, and business leaders.

Modeled on Korea’s Monthly Export

Promotion Meeting, the MBC was chaired by the Prime Minister and managed by180

Broadening the Policy Scope: Organizational Arrangements

the Prime Minister’s Department.

The members included 10 key ministers and 10

officials, 55 business representatives, and some representatives from labor.

MBC

facilitated direct communication among big businesses, labor, and the Prime
Minister.

At the working level, the Malaysia Incorporated Officials’ Committee

was established in 1993.

The Committee was chaired by the Chief Cabinet

Secretary of the Prime Minister’s Department, and the members included
government officials, business associations, and business leaders.

It was modeled

after Japan’s government-business relations.
Furthermore, all government branches and federal states were requested to establish
government-business councils and annual forums.

Although the frequency of their

meetings varied among agencies, well-known examples included the annual budget
dialogue organized by the MOF to seek business opinions prior to budget
formulation, and the annual trade industrial dialogue organized by MITI, which had
started even before 1991.

7-2-4. Thailand: National and sectoral steeringcommittees for Industrial Restructuring Plan
Unlike the three countries mentioned above, the Thai government traditionally had
no industrial sector planning and no industrial targeting strategy (Christiensen, et.
al., 1993).

Policies were most effective in maintaining macroeconomic stability,

which was conducive to trade, investment, and private sector growth. No single
super-ministry existed, and until the late 1990s the core macroeconomic
agencies—the National Economic and Social Development Board (NESDB), theBureau of the Budget, the Fiscal Policy Office (FPO), and the Bank ofThailand—collectively exercised strong power and shared responsibilities for
economic policymaking.
The Asian financial crisis that erupted in July 1997 prompted the Thai government
to conduct a comprehensive industry review. Pressed by the circumstances, thegovernment quickly formulated the Industrial Restructuring Plan (IRP) for
enhancing industrial competitiveness with due attention to social conditions.

The

IRP consisted of the Master Plan, the Strategic Plan, and the Action Plan for181CHAPTER 7

industrial restructuring, and it included as its objectives upgrading labor skills intarget industries, supporting small and medium enterprises, relocating high pollution
industries, and promoting clean technology.

The Ministry of Industry (MOI) was

the leading ministry, and it organized the involvement of various stakeholders suchas the public sector, businesses, and academicians.

Although the IRP wasformulated and implemented within the frameworks of structural adjustment loans
from the World Bank and the Asian Development Bank, the Thai government took
full initiative in developing the content of the Master Plan, the Strategic Plan, and
the Action Plan.
The IRP was formulated in the following steps (Figure 7-5).6

First, MOI reviewed

industrial research from several sources, such as the Thailand Development andResearch Institute (TDRI) and the Chulalongkorn University, and drafted theguidelines for industrial restructuring in consultation with the agencies concerned.
The Cabinet approved the guidelines, and the National Industrial Development
Committee was established in September 1997 to supervise and manage theformulation of the IRP.

The Committee was chaired by the Deputy Prime Ministerand managed by MOI with the participation of related ministries, businesses, andacademicians.

In January 1998, the Industrial Restructuring Master Plan wasapproved by the Cabinet.
The National Industrial Development Committee appointed a subcommittee toprepare the Strategic Plan and the Action Plan for Industrial Restructuring.
subcommittee was chaired by the Deputy Minister of MOI.

TheThe Director Generalof the Office of Industrial Economics and a representative from the Industrial
Promotion Department acted as the secretariat and prepared these plans in
consultation with the public and private sectors, investment promotion agencies, andacademicians.

Workshops were held for this purpose.

The Strategic Plan,approved by the Cabinet in March 1998, provided a framework for the restructuringof 13 industrial sectors.

Guided by this framework, the Action Plan was drafted

and approved by the National Industrial Development Committee in June 1998, and6

Based on the Industrial Restructuring Plan (1998–2002), the National Industrial Development
Committee, unofficial translation by Vibool Chandrangsu, as a contribution of Deutsche Investitions
und Entwicklungsgesellschaft mbH (DEG) and the Regional Advisory Service Project.

182

Broadening the Policy Scope: Organizational Arrangements

subsequently by the Cabinet.
Figure 7-5. Thailand: Formulation and Implementation of IRP(after 1997)

Source: Adapted from Higashi (2000), p.166, Figure 3.

Furthermore, ten specialized “institutes” were established to design concrete
promotional measures for targeted industries and themes and to cope with problems
in the IRP implementation process.

They were operated jointly by the public andprivate sectors, each with its own staff and board.

They acted as a hub of

information sharing and consultation between government and businesses and insome cases formulated industry-specific master plans (e.g., Thai Automobile Master
Plan 2002–2006).

Some institutes originated from the Industry Promotion

Department of the MOI while others were transformed from different existing
agencies or established by donor assistance.
Table 7-2 shows these ten specialized institutes.

They included six

industry-specific institutes (textile, food, automobile, electrical and electronics, caneand sugar research, and iron and steel) and four thematic institutes (productivity,
technical and vocational education and training (TVET), management and183

CHAPTER 7

certification, and SME development).
Table 7-2. Thailand: Institutes Created as Part of IRP (as of Oct. 1999)
Name
Thailand
Productivity
InstituteThai-German
Institute

Start-up Date
Organizations
June 1995
Originated from MOI industry promotion dept. 20 Board
members, 161 staff.
Nov. 1995

Thailand Textile June 1997
Institute
National Food
Oct. 1996
Institute (NFI)
Management
March 1999
Systems
Certification
Institute (MSCI)
ThailandApril 1999
Automotive
Institute (TAI)Electrical &Feb. 1999
Electronics
Institute (EEI)
Foundation for April 1999
Cane & Sugar
Research
Institute
Institute for SME June 1999
Development
The Iron & Steel Dec. 1998
Institute of(cabinet
Thailandapproval)

Financial cooperation from KfW, GDC. Technicaltraining (CNC, CAM/CAD, etc.), 12 Board members, 79
staff, 5 German experts.
Based on MOI industry promotion dept. and industry
association. 20 Board members, 27 staff.
Based on MOI industry promotion dept. and industry
association. 20 Board members, 27 staff.
Originated from Thai Industrial Standard Institute (TISI).
14 Board members, 55 staff.

Supporting industry development. 20 Board members,
28 staff
Supporting industry development. 29 Board members,
28 staff.
Originated from Cane & Sugar Research Institute. 13
Board members.

Modeled on Japan’s SME Univ. Operated by
Thammasat Univ. in cooperation with 8 local
universities. 21 Board members.
Aimed at joint marketing promotion of four steel
companies (oversupply)

Source: Higashi (2000). Reprinted from Table 4-1.

7-3. Mechanisms for executing high priority programs
Successful East Asian economies organized special task forces and national
committees to plan, implement and monitor high-priority programs.

As theexamples below show, these task forces and committees were closely supervised by
top leaders, and their decisions were often accorded cabinet-level authority.

184

Broadening the Policy Scope: Organizational Arrangements

Secretariat teams were established in relevant ministries and agencies and given thestrong authority to manage the entire process and do the necessary inter-agency
coordination and stakeholder consultations.

In many cases, the process combined

both top-down and bottom-up approaches.

This strategy facilitated the gatheringofhigh-quality

information,“fast-track”

decision-making,

and

rapid

problem-solving.

7-3-1. South Korea: Special task forces for export driveand HCI drive
As mentioned, in South Korea, the export drive was one of the highest national
priorities under the Park administration.

The President chaired monthly export

promotion meetings at which MCI served as the secretariat.

The meetings

monitored export performance, identified bottlenecks, and discussed concretemeasures for promoting exports.

A notable point was that the President imposed

rigid performance standards on subsidized businesses under a strict monitoringmechanism.

The government and businesses assumed mutual responsibilities.

On the one hand, ministries were ordered by the President to take measures andreport the results at the next meeting. On the other, businesses were rewarded andpenalized according to their export performance; high performing companies were
not only given financial and fiscal incentives but also awarded medals. 7

As

explained above, this top-down approach was complemented by a range ofbottom-up activities coordinated by MCI with the involvement of businesses,
concerned ministries and academicians at the operational level.
The HCI drive was another high-priority program during 1973–79.

Under thepromotional laws, six strategic industries were targeted including industrial
machinery, shipbuilding, electronics, steel, and petrochemicals.

The Third

Five-Year Plan (1972–76) set specific targets for physical quantities of steel, ships,
automobiles, and so on, to be produced by 1980.
To implement this program, the HCI Promotion Committee was established in 1973.
7

In the Confucian culture, public recognition by the president has special meaning with high prestige.

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Chaired by the President himself, the Committee was given the highest authority,equal to the State Council.

At the working level, a special task force, called the

HCI Planning Team, was established with the membership of high-level economic
technocrats from the Economic Secretariat of the Blue House, the EPB, and MCI.
Because the HCI Planning Team was headed by the Presidential Secretary of
Economic Affairs of the Blue House, the HCI program was entirely under the directcontrol of the President (Hong, 1997). Massive government support, including
import protection, tax incentives, and most importantly, preferential access to thecredit of the National Investment Fund, was provided to strategic industries.
It must be admitted that the HCI drive provoked controversy.

This was partly

because the decision making was highly centralized at the Blue House and the MCI,
bypassing the more orthodox mechanism led by the EPB.

It was also because its

large financial and fiscal mobilization forced the EPB to make difficult decisions tobalance micro investment planning with macroeconomic management.
The nature of industrial policy making changed significantly under President Chun
Doo-hwan (in power 1980–88).
policies.

A typical example was his semiconductor-related

In contrast to the promotion effort up until the 1970s, the government

focused on formulating industry guidelines and refrained from actively pushingpolicy targets.

In addition, most of these policies were demanded by the private

sector rather than initiated by the government.

When the Basic Plan for the

Promotion of the Electronics Industry was prepared, MCI formed a working groupwith sixteen members including the head of MCI’s Electric and Electronics Industry
Bureau (secretariat), related ministries, private companies, the Korean Institute ofElectronics Technology, and the Electronics Industry Association of Korea (Hong,1997).

7-3-2. Thailand: Cabinet-level and national committees
for Eastern Seaboard Development
The 1980s was the time when Thailand made a leap forward in development byadopting export-oriented industrialization.

Prior to this, in the late 1970s, thegovernment faced serious balance of payments problems triggered by the oil crises,
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Broadening the Policy Scope: Organizational Arrangements

and strengthening industrial competitiveness became an urgent goal for the country.
Prime Minister Prem Tinsulanonda (in power 1980–88) took the lead in pushing apriority policy agenda and instituted mechanisms for addressing three national
priorities: (i) Eastern Seaboard Development (ESD); (ii) government-businessconsultation; and (iii) rural development.

All of these were highlighted in the Fifth

National Economic and Social Development Plan (1982–86).
For each of the three priority programs, Prime Minister Prem established a national
committee under his chairmanship and entrusted the technocrat teams of NESDB toplan, coordinate and monitor respective programs.

Below, we will examine howthese committees were organized and functioned for two of the national priority
programs, (i) and (ii) above.
As Thailand’s first forward-looking strategic initiative for economic take-off, theESD program was a flagship regional development program that received thehighest priority in the Fifth and Sixth Development Plans.8

Located 80 to 200 km

southeast of Bangkok (the Thai capital), the ESD program had an unprecedented
scale with numerous project components in infrastructure development including
deep seaports, roads, railways, power and communication, etc; industrial zones;
urban development; water resources; and environmental management.9

It aimed tostrengthen international competitiveness by building industrial zones and to
generate employment outside Bangkok to mitigate concentration of population andindustry.
In late 1980, Prime Minister Prem established special coordination anddecision-making mechanisms exclusively for the program.

These included: (i) the

Eastern Seaboard Development Committee (ESDC), a cabinet-level national
committee chaired by the Prime Minister and managed by the Secretary General of89

The Fifth Development Plan had one entire chapter dedicated to the ESD program.
The basic plan for ESD was formulated with the funding of the World Bank. Japan provided
wide-ranging assistance including both technical cooperation (master plans, feasibility studies, etc.)
and financial cooperation. Regarding the latter, during the period of 1982–1993, Japan financed 16
major infrastructure projects amounting to a total loan commitment of 179 billion yen (via 27 loan
agreements). The total public investment for ESD-related infrastructure was estimated at around
USD1.5 billion, which was largely funded by Japanese ODA loans.

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CHAPTER 7NESDB; (ii) sub-committees chaired by the ministers of government organizations
in charge; and (iii) the Office of the Eastern Seaboard Development Committee(OESD) within NESDB to act as the secretariat.

The OESD was headed by the

Deputy Secretary General of the NESDB.
These mechanisms combined top-down (policy issues) and bottom-up (technicalissues) approaches and facilitated both vertical and horizontal coordination.

The

presence of a cabinet-level committee enabled quick decision-making on priority
policy issues (de facto “fast track” processes) and strategic use of donor assistance.
The OESD coordinated the Budget Bureau, the Department of Technical andEconomic Cooperation (DTEC), and the Fiscal Policy Office (responsible for loanaid) to work on the details of the budget and aid resource mobilization. In this way,
the ESD program was treated as a special program outside the routine policy making
channels.

The mechanisms also incorporated multi-layered check and balance

functions.

The NESDB secretariat acted as an influential liaison office to plan andimplement the program. Highly motivated and competent technocrats were recruited,
many of them seconded from related ministries and agencies, for this task (Ohnoand Shimamura, 2007).

Figure 7-6 describes the overall decision-making structure

for the ESD program.
The National Joint Public and Private Consultative Committee (JPPCC) was the firstformal mechanism for public and private sector collaboration in Thailand.
Designating the private sector as the engine of growth, Prime Minister Premestablished JPPCC in 1981.

Like the ESDC, it was chaired by Prime Minister

Prem, and the Secretary General of NESDB served as the committee secretary.
Other members were deputy prime ministers, ministers and deputy ministers of
economic ministries, the Governor of the Bank of Thailand, and the Secretary
General of the Board of Investment.

The private sector was represented by theThai Chamber of Commerce, the Federation of Thai Industries, and the Thai
Bankers Association.
JPPCC differed from the government-business forums in Japan and Korea examined
above.

Only matters of general interest were discussed, typically, problems that

plagued the majority of (if not all) large firms.
188

Nevertheless, because these forums

Broadening the Policy Scope: Organizational Arrangements

were open to the press, they put pressure on the Prime Minister to respond to thereform proposals put forward by the business community.

Through JPPCC,

information on the impact of regulations, tax measures, and trade policy on theperformance of individual firms as well as the national economy was quickly
communicated to officials, helping the government to respond to the problems.
Big businesses were incorporated into the policymaking process, especially in themaking of trade policy (Campos and Root, 1996).
Figure 7-6. Thailand: Coordination and Decision-making for ESD

Source: Masumi Shimamura – drawn upon provisions from the Regulations of the Office of the Prime
Minister Governing the ESD (1985) and information provided by NESDB, TICA, BOB, FPO,PDMO and MOI to the GRIPS team.

7-4. Implications for Ethiopia
Over the last five years, the Ethiopian government has made impressive
achievements in building mechanisms for implementing the Industrial Development
Strategy (IDS).
First, the government organized the Monthly Export Steering Committee, chaired by
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the Prime Minister and managed by MOTI, with the participation of related
ministries and agencies, to review export performance and discuss measures to betaken for export promotion.
Second, MOTI regularly organizes sectoral forums with businesses and meets
industrial associations (for example, textile and garment, leather and leather
products, agro-processing, horticulture) to discuss export targets of respective
industrial sectors.
Third, MOTI has built its structure around “priority” industry departments, based on
the strategic vision of IDS, and established industry-specific “Development
Centers” to act as a hub of formulating and implementing sectoral master plans,monitoring business performance, supporting problem-solving, and preparing
reports to the Monthly Export Steering Committee.

Furthermore, sector-specifictechnology and training institutes, especially the Leather and Leather ProductsTechnology Institute (LLPTI) and the Textile and Apparel Institute, have been
established to mobilize donor support and provide technical advice to firms.
Fourth, Ethiopia has devised instruments to gather information on the problems
faced by the private sector.

These include dialogues between government andchambers of commerce at both national and local levels; the Private Sector
Development (PSD) Hub, located in the Addis Ababa Chamber of Commerce, which
conducts research and analyses for private sector development; and the PSD
Sector/Technical

Working

Group,

which

facilitates

government-donor

aidcoordination.
These are laudable achievements in a relatively short period.

Nevertheless, as

Ethiopia hopes to move up to the next stage of industrial development, continuous
efforts are required to build additional policy capability.

For this purpose, basedon the experiences of East Asia, the Ethiopian government may consider
strengthening the following organizational aspects:(i)

A mechanism for constantly reviewing and adjusting industry-wide policy.
This is particularly important as there are ongoing discussions on the possible
expansion of the policy scope of the IDS or moving to the “second190

Broadening the Policy Scope: Organizational Arrangements

generation” of industrial policy. 10 Such a mechanism would also be usefulin coping with unexpected shocks, such as a global financial crisis or anacute foreign exchange shortage.
(ii) A mechanism for involving various stakeholders—not only businesses as
has already been done, but also research institutes, experts, and academicians.
East Asian economies have actively mobilized the knowledge and expertisefrom experts and researchers outside the government and involved them inthe policymaking process through deliberation councils, national and sector
committees, institutes, and other informal discussion meetings.

Assuggested in chapter 6, Ethiopian experts and researchers may be mobilized
for the evaluation of past and future industrial promotion measures, whose
results should serve as analytical input to the industry chapter of the next
A Plan for Accelerated and Sustained Development to End Poverty(PASDEP) (see (iv) below).
(iii) A mechanism for addressing cross-cutting or functional issues, in addition
to industry-specific issues. Now that MOTI has made progress in building
capacity to respond to industry-specific issues, it may also wish to consider
how to address cross-cutting issues—for example, quality and safety
standards, international trade policy, and industrial location—and makeeffective links between these perspectives and industry-specific support.
This will become important when the planned kaizen program, focusing
on selected pilot companies with the Japan International Cooperation
Agency (JICA)’s technical cooperation, comes to a scaling-up stage andinvolves a larger number of firms. Cross-cutting perspectives would also
be useful for ensuring methodological uniformity on sectoral master plans.
(iv) A mechanism for strengthening inter-ministerial coordination, especiallyamong MOTI, the Ministry of Finance and Economic Development(MOFED), and the Ministry of Agriculture and Rural Development(MOARD). Collaboration between MOTI and MOFED is crucial as MOTI
10World Bank (2009), Annex 10: Macroeconomic Assessment and Monitoring Arrangements, p.150.

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prepares the industry chapter of the next PASDEP and, subsequently, thefive-year industrial implementation plan.

Moreover, since incentive

measures have fiscal and financial implications for both export industry
promotion and proposed import substitution, MOFED should be involvedin the discussion on the possible expansion of industrial policy scope.
Furthermore, to promote ADLI, it is vital that MOTI and MOARD work
jointly to concretize several concepts related to the agro- industry sector
such as “integrated agro food parks” and “growth corridors.”Moreover,ministries and agencies charged with infrastructure development andregional governments should also be involved when necessary.

All these

can be achieved by strengthening inter-ministerial coordination mechanisms
centered around MOTI.
To achieve these organizational goals, it is important to consider how National
Graduate Institute for Policy Studies (GRIPS)-JICA industrial policy dialogue with
the Ethiopian authorities may be used for the building of industrial policy capability
mentioned in (i)–(iv) above.

This is related to the question of how the policy-level

forum and the working-level forum (Policy Dialogue Steering Committee) of thebilateral policy dialogue can contribute to promoting industrial policy coordinationand stakeholder interactions that include both businesses and researchers.
Additionally, it is also useful to consider the following possibilities: (i) whether
MOTI’s Development Centers can in the future assume the role of managing
government-business partnership in respective industrial sectors; (ii) whether toestablish functional centers similar to Malaysia’s STITF and Thailand’s “Institutes”;
and (iii) how the experience of inter-ministerial coordination under the Engineering
Capacity Building Program should be used to improve the design of aninter-ministerial coordination mechanism.

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