Organizational Arrangements
for Industrial Policy
Formulation & Implementation
Examples from East Asia

Izumi Ohno, Sept. 2009
GRIPS Development ForumEthiopia’’s Vision, Strategies, and
Plans
ADLI
 Long-term strategies (IDS, RDS, CBS, MSE, etc.)
 PASDEP (5-year Development Plan: 05/6-10/11)
 Sector plans: RSDP I-III, HSDP I-III, ESDP I-III,
WSDP, etc.


Covering the whole sector
 Revised periodically; mechanism for constantreview & adjustments embeddedIndustry: 1) MOTI’s 5-year strategic plan for the
PASDEP period, 2) MP for “priority” sectors


The scope for improvement exists to provide
medium-term industry-wide policy (@First HLF
discussions, June 2, 2009)Sector Differences in Plan Formulation
Industry sector (productive sector) faces different
challenges from social/ infrastructure sectors in plan
formulation because of:Not public-expenditure intensive
Need to work with private agents
Importance of incentives, regulatory framework, etc.
(different from public service delivery – costing-based)
Multi-sector (incl. agriculture, infrastructure, skill
development, science & technology), requiring intersectoral coordination

Cf. Mick Foster 2001 (ex-DFID, ODI): difficulty ofagriculture Sector-wide ApproachThe forthcoming PASDEP revision provides animportant opportunity to enhance industrial policy
formulation

Outline of the Presentation
1.

Organizational arrangements: East Asian
examplesIndustrial vision and policy formulation andimplementation
Special mechanisms for executing high-priority
programs--Key perspectives: (i) inter-ministerial
coordination; and (ii) stakeholder involvement--Japan, South Korea, Malaysia, Thailand
2.

Implications for Ethiopia

Organizational Arrangements:
East Asian examples

Alliance between Leadership andTechnocrat Team in East Asia
Leadership
Type

Technocrat
Teams

Development &Industrial Vision
Formulation

Japan
Organizational(late 50s- leadership
70s)

MOF, EPA, MITI
(super-ministry
for industrial
policy)Economic and physicalplans for vision
sharing; industryspecific policies

S. Korea Strong personal(60s-70s) leadership

EPB (superministry)

5-year plans and plans
for targeted industries

Malaysia Strong personal(80s-90s) leadership

Prime Minister’s
Dept. esp., EPU(super-ministry)

Vision 2020, 5-yearplans; and Industrial
Master Plans (IMP)Thailand(80s)

Core macroeconomic
agencies (nosuper-ministry)

5-year plans; noindustry-wide plan(except after financial
crisis)Organizational
leadershipGovt.-Business Partnerships:
Experiences from East Asia
 Large volume of high-quality information

flow btw. govt.-business Govt. initiatives in operational managementof policy networks and monitoring Existence of mutual confidence, making
predictions and commitments credible The nature of govt.-business coordination

has evolved, as the private sector growsFrom govt.-led to private-sector led mechanisms
for resolving specific problems

Vision and Industrial Policy
Formulation & ImplementationEffective industrial policy formulation requires:Constructive and continuous contacts with businesses;
Mechanism to frequently review and flexibly adjust policy
implementation; andInter-ministerial coordination mechanism

Not all E. Asian countries formulate industry-wide
policy; but, they have mechanisms for sharing
industrial vision.
 Many E. Asian countries have devised centralized
coordination mechanisms and instruments:







Deliberation councils
Steering committees (national, sectoral), working groups& special task forces
Govt.- business forums
Industry & function-specific “institutes”, etc.

Japan (late 50s-70s): Development and Industrial Vision
Formulation


Prime
Minister- MLT Economic Plans- Comprehensive National
Development Plans(physical planning)
Deliberation
Councils

Participation fromofficials, business,academia, media,
labor, consumers.

PM’s Office
Econ. Planning
Agency, Land
Agency, etc.

MOF

MITI
Deliberation
Councils- Industrial vision- Industry-specific policies- Coordination & support
to business activities(e.g., finance, technology)

Organizational
leadership
No single superministry
Govt. formulating
MLT economic
and physicalplans via.
deliberation
councils
MITI serving as
super-ministry
for industrial
policyMITI as Super-Ministry for Industrial
Policy: Japan (late 50s-70s)
Ministry of International Trade & Industry, MITI
(now, METI) as a super-ministry for industrial
policyExtraordinary broad jurisdiction encompassing
from SME to petroleum refining
 Organization into vertical (industry-specific) andhorizontal (functional or cross-industrial) bureaus A bottom-up approach to policy-making, withpower concentrated at the level of deputy
division director
 Capacity to work in harmony with the private
sector (e.g., through Deliberation Councils)[Okimoto 1989]
Cf. US (fragmented machinery): Depts. of Commerce,
Defense, Energy, State, USTR, Congress, White House

MITI
Minister

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

Main Bureau

Politically appointed VM
Administrative VM
Deputy VMs
Special assistants

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.........

Attached Organizations
and External Bureaus
Agency of National Resources＆Energy
Patient 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...................

Deliberation Councils and Bottom-up
Approach: Japan (late 50s- ) DC used by MITI extensively:

Vision formation, industrial policy planning, specificproblem-solving, information sharing, etc.
 Two types: 1) functional, 2) industry-specific Members: MITI officials, business, academia, thepress (and in some cases, labor and consumers) Bottom-up approach, consensus-building

respectedKey roles of MITI deputy division director (center ofcommunication flows within/outside MITI); andjunior staff (survey & information gathering) MITI’s role was to coordinate and support

private sector activities, rather than dictatingthemIndustrial Vision Formulation and the Deliberation Council
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)Source: Ono (1992)

Public relations:Publications
Explanatory meetings
Lectures
OthersSouth Korea (60s-70s): Development Vision and Govt.Business Partnerships
President(Blue House)Economic
SecretariatsState 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

Ministries/Agencies

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

EPB as Super Ministry and Top-Down
Approach: South Korea (60s-70s)


Rapid economic development and national security as
the overriding objective
Top-down approach: strong leadership (esp.,
President Park), providing visions and policy direction
Economic Planning Board (EPB) as a super-ministry:headed by Deputy PM, reporting directly to the
PresidentIntegrate development planning, fiscal control, aid
management, overall policy coordination & monitoring
Research institutes (e.g., KDI), providing policy analyses
to EPB

Govt.-managed policy networks and monitoring ofbusinessVarious meetings with business, performance-based
incentives, special prizes & medals, risk sharing, etc.

Leadership Vision and Inter-Ministerial
Coordination: Malaysia (80s-90s)
PM provided LT vision and direction for changes; andpolicy formulation and implementation were conducted
via. multi-layered, inter-ministerial coordination
Prime Minister & PM’’s Dept.


PM Mahathir’s initiative to renovate direction foreconomic policies and institutional arrangements(pro-Malay to strategic partnership with business)

Learning from the “Look East Policy” (1981)

The Vision 2020, announced by PM at the first
Malaysian Business Council (1991)
Institutionalized the Malaysia Inc. Vision

Ministry of International Trade & IndustryIndustrial Master Plan (IMP) 2 (1996-2005) to
implement the Vision 2020
Various initiatives to implement IMP2

Multi-layered Model: Industrial
Master Plan 2 (90s)IMP2 (1996-2005): Industry-wide master plan toattain the Vision 2020. Implementation supported by:Industrial Coordination Council (ICC), chaired by MITI
MinisterIndustrial Policy and Incentive Committee (IPIC)

Members: 8 officials from MITI, EPU, MOF, CB, related
economic ministries (PS levels), 15 business
representatives (Chamber of Commerce, FMM, majorindustrial associations)Monitor the IMP2 progress and examine problems
suggested by IPIC, CWGs
Members: officials only (8 ministries/agencies)

Public-Private Cluster WG (18 CWGs) and Strategic
Thrust and Initiative Task Force (STITF)


Focusing on 18 targeted industrial clusters and crosscutting issues
Participation of the private sector

Malaysia: Mechanism
for Industrial Policy
Coordination (1991-)

NPC

PM’s Dept.

PM NEAC
Deputy PM

EPU(planning)

ICU(monitoring)

Vision 2020
Malaysia Plan (Five-Year DP)

Central
Bank
IMP2

MOF

MITI

Chaired by MITI Minister,
Govt & business.

Industry Coordination
Council (ICC)
Budgetdialogue

Political Parties

Govt. only (8 ministries/agencies)

Industry Policy and Incentive
Committee (IPIC)

Malay
society

Chinesesociety

Indiansociety

Annualdialogue

Govt.& businessIndustry Cluster Working
Groups (18 CWGs)

IndustrygroupsChambers of Commerce

Individual
firms

Source: Adapted from Takashi Torii, “Mahathir’s Developmentalism and Implementation Mechanism:
Malaysia Incorporated Policy and BCIC,” ch.4, Higashi (2000), pp. 166, Figure 2.

Multi-layered Model: Malaysia
Incorporated (90s)Institutionalizing govt.-business consultative bodies
for policy coordination
Malaysian Business Council (MBC) (91)







Malaysia Inc. Officials’ Committee (93)Chaired by PM Mahathir; organized by PM’s Dept.
Members: 10 ministers, 10 officials, 55 business
representatives (modeled on the Korean Monthly Export
Promotion Meetings)
Facilitated direct communication among big business,labor and the PM
Chaired by the Chief Cabinet Secretary of PM’s Dept.
Members: govt. officials, business associations andbusiness leaders (modeled on Japan’s govt.-business
relations)All govt. branches, federal states were requested toestablish govt.- business councils and annual forums

Industrial Restructuring Plan (IRP):
Thailand (late 90s)
The Industrial Restructuring Plan (IRP, 98-02) formulated
at the time of financial crisis, via Steering Committees.
(Usually, Thai govt. has no industry-wide policy.)National Industrial Development Committee, chaired by
Deputy PM; managed by MOI with members from related
ministries, business, academia.
Sub-committee on National Industrial Restructuring (IRP
drafting), chaired by Deputy Minister MOI
Implemented with SAL financing (WB, ADB), but under
Thailand’s strong ownership.

8 programs (for 13 industries) designed, incl. productivity
improvement, technological upgrading, skill development.
Institutes (6 industries; 4 thematic) created as a hub of
information & consultation, drafting industry/issue-specificpolicy measures, etc.
Operated and financed jointly by public & business (someinstitutes originated from MOI depts.)

Mechanism for IRP Formulation and Implementation(Thailand after 1997)
Prime Minister
CabinetGovt.-business consultation body,established in the early 80s.

Economic Cabinet
Meeting

JPPCC

NESDB
Financial Sector
ReformIndustrial
Restructuring

Chaired by Deputy PM

Chaired by Deputy Minister, MOI

National Industrial
Development Committee

Sub-committee on National
Industrial Restructuring

SocialInfrastructure

OthersExamine & discuss basic
policy & direction
Examine & discuss detailed
measures & actions

Operated jointly by public ＆ private
Institutes
sectors
Textile, Food, Automobile, Iron & Steel, SME,
Productivity, Mgt. System Certificate, etc.

Information sharing;Specific MP formulation, etc.

Line Ministries

Thai EXIM Bank
IFCT
SICGC

Federation of Thai Industries
Industry Associations
Chamber of Commerce

Commercial
Banks

Source: Shigeki Higashi “Industry: Business and Government in a Changing Economic Structure”
ch.3, Suehiro & Higashi (2000), p.166. Figure 3 aThailand: “Institutes”” created as part of IRP (as of Oct. 1999)
Name

Start-up Date

Organizations

Thailand Productivity InstituteJune 1995

Originated from MOI industry promotion
dept. 20 Board members, 161 staff.

Thai-German InstituteNov. 1995

Financial cooperation from KfW, GDC.
Technical training (CNC, CAM/CAD, etc.), 12
Board members, 79 staff, 5 German experts.

Thailand Textile InstituteJune 1997

Based on MOI industry promotion dept. andindustry association. 20 Board members, 27
staff.

National Food Institute (NFI)

Oct. 1996

Based on MOI industry promotion dept. andindustry association. 20 Board members, 27
staff.

Management Systems
Certification Institute (MSCI)March 1999

Originated from Thai Industrial Standard
Institute (TISI). 14 Board members, 55 staff.

Thailand Automotive Institute(TAI)

April 1999

Supporting industry development. 20 Board
members, 28 staff

Electrical & Electronics Institute(EEI)

Feb. 1999

Supporting industry development. 29 Board
members, 28 staff.

Foundation for Cane & Sugar
Research Institute

April 1999

Originated from Cane & Sugar ResearchInstitute. 13 Board members.

Institute for SME Development

June 1999

Modeled on Japan’s SME Univ. Operated by
Thammasat Univ. in cooperation with 8 local
universities. 21 Board members.

The Iron & Steel Institute ofThailandDec. 1998

Aimed at joint marketing promotion of four
steel companies (oversupply)(cabinet approval)

Source: Higashi (2000)

Special Mechanisms for Executing
High-Priority Programs
 Some E. Asian countries established Special

Task Forces and Steering Committees to planand monitor the implementation of flagshipprograms
 Closely supervised by top leaders, with thesecretariat given strong authority to manage:
Inter-ministerial coordination
 Stakeholder interactions Combination of “top-down” and “bottom-up”

approaches

Gathering high-quality information; linking it todecision-making
 Rapid problem-solving mechanisms
Export-Drive: South Korea(60s-70s)
 Monthly Export Promotion Meetings, as themost important communication channels







Chaired by President Park
Members: economic ministers, business association
leaders, governors of financial institutions, major
export enterprises
Monitor the achievements of export targets;coordinating measures to eliminate impediments toexport growth
Mutual responsibilities: ministries are ordered to takemeasures and report at the next meeting.
Businessare rewarded, based on export performance Monthly Economic Briefings

Chaired by President Park; managed by EPB
Members: President, all ministers, EPB, businessleaders, representatives of financial institutions

HCI Drive: South Korea (1973-79)


High-priority in the Third Five-Year DP (targets set
until Fifth Five-Year DP)

HCI Promotion Committee (73)









Chaired by President Park; equivalent to State Council
Members: Prime Minister, Presidential Secretary for Economic
Affairs, 6 ministers (EPB, MCI, MOF, MOE, MOST, MOC)HCI Planning Team (Special Task Force):

Heavy and Chemical Industry (HCI): 6 strategic industries -industrial machinery, shipbuilding, electronics, steel,
petrochemicals, etc.

Managed by the Blue House (headed by Presidential
Secretary for Economic Affairs)
Members: economic secretariats of the Blue House, MTI, EPB,
MOF, MCI

Financial and fiscal incentives: National Investment
Fund, tax incentives, tariff reduction, etc.
Macroeconomic implications? -- driven by the Blue
House and MCI (rather than EPB and MOF)

Steering Committees for HighPriority Programs: Thailand (80s)In Thailand, close coordination among macro
economic agencies has been key for macro stability,
contributing to private sector development.

-- the existence of Sino-Thai families involved in business & banksBut, coordination between macroeconomic and sector
agencies has not been strong.



PM Prem (80-88) focused on three priorities, andestablished national committees:Eastern Seaboard Development Program Committee(ESDC)
Joint Public-Private Consultative Committee (JPCCC),
as the first, formal govt.- business forum in the country
Rural Development Committee


These were chaired by PM Prem; managed by the
National Economic and Social Development Board(NESDB) responsible for development planning.

Eastern Seaboard Development
Program: Thailand (80s)High-priority program in the Fifth & Sixth DPs;
comprehensive regional development with largescale infrastructure investments & industrial zones
Cabinet-level, national committee: Eastern Seaboard
Development Committee (ESDC)Secretariat created in NESDB (headed by DeputySG): Office of Eastern Seaboard Development(OESB)


Competent staff recruited from the ministries concerned

Sub-committeesChaired by PM Prem and managed by SG of NESDB; de facto,“fast track” mechanism

Chaired by minister of the government agency in charge
ESB regional development, chemical fertilizer, petro-chemical,
and education & social development

Mechanism for pursuing “strategic use of donor
assistance” incorporated

Overview of the coordination and decision making mechanisms
Cabinet
ProposeEastern Seaboard Development Committee (ESDC)
Chair: Prime Minister (later, Deputy PM)
Secretary: Secretary General of the National Economic and Social
Development Board (NESDB)
Propose・Approve・Control・Direct
・Supervise

Secretariat

Appoint

Sub-committees
Chair: Minister of government agency in charge

BudgetBureau of the
Budget (BOB)

Technical Assistance
Department of Technicaland Economic Cooperation(DTEC)

Loan

Office of the Eastern Seaboard
Development
Committee(OESD) within the NESDBFiscal Policy
Office (FPO)
・Coordinate
・Oversee・AdviseGovernment agencies (central, regional, local) and State enterprises

Source: Masumi Shimamura -- drawn upon provisions from the Regulations of the Office of the Prime Minister Governing
the Eastern Seaboard Development (1985) and information provided by NESDB, TICA, BOB, FPO, PDMO and MOI to the
GRIPS teamImplications for Ethiopia

Achievements
1) GOE has already built mechanisms for
implementing the Industrial Development
Strategy (IDS).
 Monthly Export Steering CommitteeChaired by PM; managed by MOTI
Members: chief economic adviser & representatives
from economic ministries concerned
Monitor the achievements of export targets and takemeasures to eliminate constraints for export growth Regular sectoral forums

Chaired and managed by MOTI
Meetings with respective industry associations (e.g.,
textile & garments, LLPTI, agro-processing, horticulture,
pepper)Establish annual and monthly export targets of therespective sectors

Achievements
 MOTI, organized around “priority” industries

to implement the IDS
Industry-specific “Development Centers” (e.g.,
textile & leather industry, metal products) and
Depts. (agro-processing, chemical industry):
acting as a hub of formulating & implementing
sectoral MP, monitoring business performance,
supporting problem-solving, preparing reports to
the Monthly Export Steering Committee Technology Institutes (e.g., LLPTI, TAI): providing
technical advices to firms, mobilizing donor
support, etc.
Achievements
2) GOE has devised instruments for gathering
information on the problems faced by theprivate sector
 Dialogues with Chambers of Commerce(national & local levels)
National Business Forum (annual), with PM
participation
 National Public-Private Dialogue (bi-annual) Issue-specific working groups & technical groups PSD Hub: research and analyses for private

sector development
 PSD Sector/Technical Working Groups

Aid coordination; govt.-donor consultations

Source: Based on GRIPS team’s interviews with MOTI, PSD Hub, Addis Ababa Chamberof Commerce in Addis Ababa in October 2008.

Challenges
 Mechanism for constantly reviewing &adjusting industry-wideOngoing discussions on possible expansion of policy
scope; “second-generation” of industrial policy (WB,
Prof. Rodrik, etc.)
Coping with unexpected shocks, e.g., world financial
crisis Mechanism for involving various

stakeholders

Not only business, but also, research institutes, experts& academicians

 Mechanism for addressing functional, or

cross-cutting issues (in addition to industryspecific issues)

Challenges
 Mechanism for strengthening inter-

ministerial coordination, esp. among
MOTI, MOFED and MOARD[Examples of issues]
MOTI’s inputs to relevant chapter of next PASDEP Agro-industry MP formulation
 Integrated Agro Food Parks
 Growth Corridors, linking agro-ecologicalpotentials with infrastructure & markets, etc.
PossibilitiesHow can our bilateral policy dialogue
contribute?
- High Level Forum- Policy Dialogue Steering Committee
Expanding the role of MOTI’s“Development Centers”?
Using the experiences gained from
ECBP?

References
Campos, Jose E. and Hilton L. Root (1996). The Key to the Asian Miracle: Making
Shared Growth Credible, The Brookings Institution.
Kim, Kihwan and Danny M. Leipziger (1993). “The Lessons of East Asia:
Korea – A Case of Government-Led Development,” A World Bank Publication.
Higashi, Shigeki (2000). “Industry: Business and Government in a Changing
Economic Structure,” ch.2 in Akira Suehiro and Shigeki Higashi (2000).
Hong, Sung Gul (1997). The Political Economy of Industrial Policy in East Asia:
The Semiconductor Industry in Taiwan and South Korea, Edward Elgar.
Kondo, Hisahiro (2005). “Comparative Analysis of Governance: Relationshipbetween Bureaucracy and Policy Co-ordination Capacity with Particular Reference
to Bangladesh,” JICA Institute for International Cooperation.
Ohno, Izumi and Masumi Shimamura (2007). Managing the Development
Process and Aid: East Asian Experiences in Building Central Economic Agencies,
GRIPS Development Forum.
Ohno, Kenichi (2006). Industrial Policy Formulation in Thailand, Malaysia andJapan: Lessons for Vietnamese Policy Makers, Vietnam Development ForumOkimoto, Daniel I. (1989). Between MITI and the Market: Japanese Industrial
Policy for High Technology, Stanford University Press.
Torii, Takashi (2000). “Mahathir’s Developmentalism and Implementation
Mechanisms: Malaysia Incorporated Policy and BCIC”, ch.4 in Shigeki
Higashi (2000).