Basic Metal andEngineering Industries (BMEIs):
International Comparison of Policy
Framework and Ethiopia’s Approach
The 4th High Level Forum on Industrial Developmentin Ethiopia
Toru Homma
Senior Advisor on Private Sector Development
Japan International Cooperation Agency (JICA)
Homma.Toru@jica.go.jp

Addis Ababa, 3/3/2010

Contents
 Metal/Engineering industrial master plans in selected

countries – Examples: (1) As a part of an industrial
master plan, (2) As a BMEI-related sub-sector
specific master plan Metal/Engineering industrial master plans in selected
countries – Findings on style and contents
 Ethiopia’s BMEI policy framework: (1) PASDEP II trade and industry chapter, (2) BMEI strategy, (3)
BMEI firm-level study, (4) BMEI master plan Some implications for Ethiopia’s BMEI

1. Metal/Engineering industrial
master plans in selected countries

Metal/Engineering industrial master plan
BMEI master plan is unique Hard to find “BMEI” or equivalent sector master plan inother countries Rather wide to be singled out as one group of subsectors
Basic Metal Industries (ISIC Rev.3.1 Div. 27):

production of metalfrom ore, scrap and conversion of billet, slab etc. into primary metal
products

Engineering Industries (ISIC Rev.3.1 Div. 28-35):
28.Manufacture of fabricated metal products, except machinery andequipment
29.Manufacture of machinery and equipment n.e.c.
30.Manufacture of office, accounting and computing machinery
31.Manufacture of electrical machinery and apparatus n.e.c.
32.Manufacture of radio, television and communication equipment andapparatus
33.Manufacture of medical, precision and optical instruments, watches andclocks34.Manufacture of motor vehicles, trailers and semi-trailers
35.Manufacture of other transport equipment

Metal/Engineering industrial master plan
(1) as a part of an industrial master plan Indonesia: National Industrial Development

Policy, 2005-2025 (2005)
 9 out of 32 priority industries can be classified as“BMEI”: steel, machinery and equipment, transport …
 Malaysia: Third Industrial Master Plan (IMP3)

2006-2020 5 out of 12 target growth manufacturing industries

can be classified as “BMEI”: electrical and electronics,
medical devices, machinery and equipment, metals,
transport equipment

Metal/Engineering industrial master plan
(1) as a part of an industrial master plan India: National Strategy for Manufacturing

2006-2015
 2 out of 7 core sub-sectors can be classified as“BMEI” - auto components, IT hardware - and steel is
one of 3 additional core sub-sectors.
 Zambia: Commerce, Trade and Industrial Policy(2009)
 1 out of 6 priority sectors can be classified as “BMEI”– engineering products

Metal/Engineering industrial master plan(2) as a sub-sector specific master plan Thailand: Master Plan for Iron Industry
 Iron/steel industry considering linkages withdownstream industries (a part of engineering
industries)
 Indonesia: Automotive Industry Roadmap 2025

(2008)
 Based on the automotive chapter of the National

Industrial Development Policy Vietnam: Master Plan of Vietnam Motorcycle

Industry for the Period of 2006-2015, with a
Vision to 2020 (2007) Motorcycle industry including its supporting industries

[Example] Indonesia: National Industrial
Development Policy – Priority Sectors

BMEI
equivalentsubsectors(Source) www.depperin.go.id/ENG2006/default.aspx, MInistry of Industry, Indonesia

[Example] Indonesia: National Industrial
Development Policy – Priority Sectors
 BMEI-related priority sub-sectors
 Electric machinery and equipment
 Steel Plant, construction and mining machineries andequipment
 Agricultural equipment and machinery Consumer electronics
 Transport industry: automotives
Categoraised as Transport industry: shipbuilding« Future Leading Transport industry: aviation
Industries » Transport industry: railway

[Example] Indonesia: National Industrial
Development Policy – Framework by sector
One
sheet
per
one
subsector

Framework of Factory, Construction and Mining Machinery & Equipment Industry Development(Source) www.depperin.go.id/ENG2006/default.aspx, MInistry of Industry, Indonesia

[Example] Indonesia: National Industrial
Development Policy – Framework by sector
Core industry: product mix
 Supporting industry: parts/components
 Related industry: beneficiary, service provider etc.
 Mid-term targets: first 5 years, target production volume
 Long-term targets: next 15 years, ditto Strategy: sector and technology
 Mid-term action plan: first 5 years
 Long-term action plan: next 15 years
 Supporting elements Stages in technological development
 Market: export and domestic
 Human resources Infrastructure

[Example] Malaysia: Third Industrial Master
Plan (IMP3) (2006-20) – Framework














[Ch.1] Performance & challenges: trends in last period[Ch.2] Macro-framework of the IMP3: target, priority sector,
strategy, policy, implementation mechanism[Ch.3] External trade, [Ch.4] Investments[Ch.5] SME Development [Ch.6] Branding[Ch.7] Growth areas in the manufacturing sector: target industries[Ch.8-13] Non-resource based industries (6 industries):
performance, prospects, challenges, strategies and policies[Ch.14-19] Resource based industries (6 industries): performance,
prospects, challenges, strategies and policies[Ch.20] Growth areas in services[Ch.21] Development of Halal industries[Ch.22] Enhancing domestic capability[Ch.23] Human resource requirements[Ch.24] ICT and other technology developments[Ch.25] Logistics

[Example] Malaysia: Third Industrial Master
Plan (IMP3) (2006-20) – Target industries

Non-resource based target industries (5/6)
1. Electrical and electronics: semiconductors, smartphones, PDAs,

audio & visual products, PV fabricated wafers
2. Medical devices: high-end hospital & laboratory equipment etc.
3. Textiles and apparel
4. Machinery and equipment: metal working machine tools,
materials handling equipment, specialised machinery,
packaging machinery, fuel cell power generators
5. Metals: stainless steel plates, cold-rolled coils, wire products,
welding wires, galvanised iron and sheets
6. Transport equipment: passenger cars, speciality vehicles,
engines, transmissions, automotive electronics components,
vessels for coastal shipping, aircraft parts and components
Resource based target industries (0/6)
 Petrochemicals, Pharmaceuticals, Wood-based, Rubber-based,

Oil palm-based, Food Processing

[Example] Zambia: Commerce, Trade andIndustrial Policy – Structure
Vision2030

Fifth National Development Plan (2006-2010): Upstream/downstream
manufacturing activities based on mining & agro-industry

Commerce, Trade and Industrial Policy (CTI Policy) 2009-(10 years)
PolicyCom&Trade Inv. Promo. ThematicIndustrial
Framework
PolicyPolicyIssues
PolicyVision: to develop a competitive, export-led manufacturing sector that contributes
20% of GDP by 2015
MSMEs
Rural
Priority Sectors
1. Processed Foods (60% of manufacturing GDP)SME Dev Industrialization
2. Textiles and Garments (15% of manu.GDP)
Policy3. Engineering Products (14% of Non Trad. Exp)
4. Gemstones (10% of NTE)
5. Leather and Leather Products (3% of NTE)
6. Wood and Wood Products (8% of manu.GDP)
Industrial Strategy
To be prepared as a vehicle to implement Industrial Policy(Source) Elaborated by the author, based on various documents and papers issued by the Government of Zambia,
the Ministry of Commerce, Trade and Industry of Zambia and Zambia Development Agency

[Example] Thailand: Master Plan for Iron
Industry– Overall structure
Iron/steel industry structure: Up/mid/down streams
 Downstream industry & linkages: 5 industries - electric
appliances, automotive, furniture, canning, construction
 Steel industry status: capacity utilisation, import/export,
cost structure, government protection, competitiveness Steel industry vision: 1) productivity/efficiency, 2)
clustering/linkage, 3) Gov. & industry common goals, 4)
domestic demand increase Steel industry strategic plan: SWOT, Porter Five, BCG
 10 yrs Master Plan:
Plan 1st period (3 yrs) - 4 objectives; 2ndperiod (7 yrs) - 7 objectives
 Action Plan : Under 10 each problem area, 1-3 strategicplans and 2-30 action plans are listedMaster plan format
Duration Rather long period (10-20 years) of long-term master plan
 Often together with medium-term master plan (ex. 5 years) or

action plan Rolling plan approach (ex. Malaysia: 15-years rolling plan) Combination of the 20 years long-term master plan (as a vision;rolling plan basis) and 5 years medium-term action plan (as apractical guidance) seem to workVolume As a part of an industrial master plan: various – ex. Malaysia(15-35 pages for each sub-sector out of total 750 pages);
Indonesia (6 formatted pages for each sub-sector out of total
250 pages)
 As a sub-sector specific master plan: various – several pages
to 100 pages
 Brief and concise one would work; formatted sub-sector masterplan would be useful and easy for comparison

Industry classification / prioritisation
Most of the master plans identify priority industries (orsub-sectors)
 Some BMEI related sub-sectors are identified aspriority industries and placed in a significant part in theindustrial master plans
 However, not as an overarching “BMEI”
 More focused sub-sectors within the engineering
industries (such as agriculture machinery, automotive,
electric component…)
Performance review
Performance during the previous plan
 Major performances: Structural change, number ofcompanies, new investments, productivity
improvement, export/import trend, technologicaldevelopment, performance by major products…
 Problems/challenges identified: Capacity utilisation,
dependency on external resources (import, fund),technological/technical capability, limited policy andfinancial support, inadequate infrastructure…
 Comparison with neighbouring countries, regional
performances, international trends…
 Critical analysis and accurate data are required forbenchmarkingNumerical target setting: metal/steel
 Numerical target setting on directly related

index (ex. Indonesia) vs Less direct numericaltarget setting for each sub-sector (ex. Malaysia,
Thailand) Latter, for example, Malaysia: macro-economic

targets, overall manufacturing sector targets only +Investment target by priority sector
 Crude steel industry’s production capacity, ironmaking capacity, HRC/CRC/flat/long productcapacity…
 Steel consumption per capita
 Investment volume

Numerical target setting:engineering industries
 Various according to countries and sub-sectors
 Production volume, Installed capacity utilisation
 Investment value, export value (considered asexport-oriented industries) Supply-side capacity of component industries
against demand (considered as supporting
industries)
 Employment creation (considered as labourintensive industries)Target markets


Export / Domestic
 Metal/steel: Import substitution - domestic consumption

oriented; some export-oriented depending on type and level ofproduct
 Engineering: mixed

Client industries
 Metal/steel:Downstream market creation other than construction
 For example, Thailand - electric appliances, automotive,
furniture, canning, construction Engineering:

respective industries as machinery users (prototyping andmachinery development are often mentioned)
 Assembly industries
 Final consumers
Institutional framework
 Identification of key stakeholders
 Ministry of Industry, Trade, Finance, Technology,

Higher Education, Energy, Mineral Resources…
 Regional Government R&D and Training Institutes: Ministerial, University,
Educational and Vocational, Private Institutes…
 Business Association: by sub-sector, by elemental
technology, by region, by size…
 Often duplicated/overlapped; coordinationneededIdentification of appropriate technology andprocess Metal/steel industry (process oriented)
 Only hot rolling / cold rolling (Long product / flat product) Electric arc furnace steel making – continuous casting - rolling Blast furnace iron making –Basic oxygen furnace steel making– continuous casting – rolling Direct Reduced Iron (DRI) Engineering industry (elemental technology

oriented) Casting (pattern making, melting, moulding) Forging Welding Machining
 Metal stamping and pressing Heat treatment and surface treatment
 Mould and dieTechnology development and technicalcapability improvement
Adoption of new and appropriate technology
considering available resources Improvement of current technology quality
 Improvement of quality and productivity management
 Research and development
 Prototyping and product development
 Facility improvement and development
 Certification and standardisation system: process andskill Partnership and strategic alliance among industry,
academy and government Partnership between upstream and downstream
industries
 Foreign technology: partnership, investment,
technology transfer
[Example] Indonesia: National Industrial
Development Policy –Medium-term action plans for steel industry
1. To facilitate partnership between upstream and downstream steel industry
in order to meet the need for downstream industry raw material;
2. To facilitate restructuring of production machinery & equipment;
3. To increase utilization of nameplate capacity steel rolling industry and its
downstream industries;
4. To encourage strategic between national steel industry and technology
sources using local raw materials;
5. To increase monitoring over the application of SNI steel industry product;
6. To use locally-manufactured steel for construction infrastructure (natural
gas mining, train rail, port, bridge, automotive, etc.) ;7. To develop downstream industry (CRC, BJLS, natural gas piping, tinplate,
big profile steel-based construction material industry);
8. To encourage the establishment of information exchange media to
encourage synergy between national steel industry and its upstream anddownstream industries and other related agencies;To improve partnership
between upstream and downstream industry

[Example] Malaysia: Third Industrial Master
Plan (IMP3) (2006-20) –Strategic thrust for metals industry
1. Enhancing the competitiveness of the industry to support thegrowth of the manufacturing and construction sectors
2. Sustaining and expanding the exports of iron and steel products forexisting and new markets
3. Promoting new applications of steel in selected industries
4. Encouraging collaborations between producers and users of steel;and upstream and downstream manufacturers
5. Attracting new investments in niche areas in the sub-sector
6. Developing the skilled and qualified workforce2. Ethiopia’s BMEI policy framework
Ethiopia’s
andsome implications for Ethiopia’s BMEI
Ethiopia’s

Ethiopia
BMEI policy framework
PASDEP (2005/06-2009/10)

PASDEP II (2010/11-2014/15)

PASDEP II Preparation

BMEI documents: draft prepared by MPDCBMEI Strategy

BMEI Firm-level Study

BMEI Master Plan

(2007/08)(2010 First half)(2010 Second half?)

Jointly supported by
ecbp and JICA

Considered to besupported by JICA

BMEI Strategy
Basic Metal and Engineering Industry
Development Strategy and Action Plan
As commented in last November…

Well structured and smooth flow from general/technicalbackground to performance review, circumstance(infrastructure, human resource, policy), gap analysis
and development strategy
 Informative with some detailed data but further key
industrial information and data are required to capture
the whole picture of the BMEI  need for the Firm-level
Study Strategic Issues, Strategic Objective and Goals andAction Plans are not always logically consistent “Engineering industry” seems to be broad to makeeffective action plans as a single industry: need to be
more focusedBMEI Firm-level Study
Period: February – June 2010
 Implementation:
 The MPDC team headed by the MPDC Head
 Phase 1(field survey – collecting data): MPDC and ecbp
 Phase 2 (analysis): The MPDC team supported by experts fromecbp and JICA and MPDC local consultants

Field survey: 10 basic metal companies, 30 engineering
companies, 10 user companies
 Expected output: A final report with current level ofproduction capacity, available technology, humanresources, machinery and equipment, raw materials
and scrap, market demand and supply, gap
identification, required resources and possible
countermeasures etc.
 National Workshop: 1st in May for stakeholder
consultation on draft final report; 2nd after completion of
the final report for dissemination of the resultBMEI Master Plan
 To be prepared in the second half of 2010
 As a guidance tool for BMEI Based on: PASDEP II Industry and Trade Chapter
 BMEI Strategy
 BMEI Firm-level Study
 (Other countries’ experience)

 With detailed action plans

PASDEP II Draft
BMEI Development Plan - target setting
1. Increase steel consumption per capita from12kg (current) to 34kg (African average)
2. Full capacity utilisation
3. Develop local design/manufacturing capability
 90% of leather industry; 35% of textile industry; 85%of sugar industry; 85% of cement industry; 95% ofconstruction steel; 85% of small & medium transport
vehicles
4. Production value of B101 billion in 5 years

Some thoughts for PASDEP II Draft
BMEI Development Plan - target setting
1. Increase steel consumption per capita from 12kg
(current) to 34kg (African average)This means 0.96 million tons (current) to 3.06 million tons
(5 years later; assuming 2.5% pop. growth) in Ethiopia – if
so, relatively good size to take off: which way to go?
Target or projection? Steel consumption heavily depends
on user demand, macro economy and external conditions
Cf. world average is approx. 200kg (WSA)

2. Full capacity utilisation


Need for data on existing capacity both metal andengineering industries through firm-level study etc.

Some thoughts for PASDEP II Draft
BMEI Development Plan - target setting3.

Develop local design/manufacturing capability (90% ofleather industry; 35% of textile industry; 85% of sugar industry;
85% of cement industry; 95% of construction steel; 85% of small& medium transport vehicles)
Seems challenging (for example, transport vehicles –compared with then local content requirement in Asiancases)

4.

Production value of B101 billion in 5 years

meaning of production value as aggregated industries to beconsidered

Other items to be considered … see next some slides

Material flow

Visualising and understanding material flow from ironsupply to production of long and flat products[Example] Material Flow: Vietnamese Iron and Steel Industry (2005)

Unit 1000 tons, (Source) Kawabata (2007), compiled from SEAISI (2006)

Geographical strategies


Visualising and mapping geographical strategies for industrial
clustering and transportation of raw material, import goods,
supplied component, final products: Nationally and Regionally[Example] ASEAN Map: Iron ore, steel mills, ports/roads(Source) SEAISI (2009)

Supporting industries“industries which supply various components, parts and materials for
assembly makers in such mechanical industries as the automotive,
electric and electronics industries” (Urata, 2000)
Key for sound industrial structure
Much broader meaning: supplier for i.e. agricultural machinery etc.
[Example] Structure of supporting industries in Indonesia
Assemblers

Potential Supporting
Industries(Source) JICA (1997)

Steel intensity (IISI/WSA)

Steel Intensity (g/USD)

Asia

Japan
Korea
China
Indonesia
Malaysia
ThailandPhilippine
Singapore
Vietnam
USA
UK
FranceGermany

Developed
countries
GDP per capita (USD)(Source) Kawabata (2005)

Government vs. Market

Initial capital investment (sunk cost)
Gestation periodMarket volatility
Product type
Private sector maturity and dynamism
Government policy capability
Trust between government and business

Setting targets and specifying products, producers,
investment, technology, location, markets, etc.
Greater scope forGreater scope forgovernment
markets
Large
Small
Long
Short
High
Low
Industrial inputs
Consumer goods
Low
High
High
Low
High
Low

(Source) Ohno, K. (2009), Industrial Master Plans: International Comparison of Contents and Structure

Depend on sub-sector within BMEI
 Gov. driven: Iron making, mining machinery, power plant

equipment…
 Market driven: Consumer electronics, automotive, motorcycle…

Some implications
Asian master plans are useful as references but all themaster plans are unique and there is no standard Metal and engineering industries are identified asprioritised industries More focused sub-sector prioritisation required - inparticular within the “engineering industries”
 Necessity to grasp industrial basic information – BMEI

firm-level study should provide basic idea

Importance of upstream/downstream industrial linkages
as suppliers and users; and geographical linkages
 Metal/steel industry: selection of process/technology
according to downstream requirement and resource
availability; capacity utilisation
 Engineering industries: technical/technologicalcapability improvement is a key: both elemental technology


aspect and industrial managerial aspect (such as Kaizen)

Thank you

JICA’s VISION
JICA’s“Inclusive and Dynamic Development”
41