GRIPS
Development Forum Report

Ethiopia-Japan Industrial Policy Dialogue
Phase III
Achievements and Challenges

Japan International Cooperation Agency (JICA)GRIPS Development Forum (GDF)

Edited by the GRIPS Development Forum©GRIPS Development Forum 2023
Contact:
GRIPS Development Forum
National Graduate Institute for Policy Studies (GRIPS)
7-22-1 Roppongi, Minato-ku, Tokyo, 106-8677 Japan
Phone: 03-6439-6337
E-mail: forum@grips.ac.jp
URL: gdforum.sakura.ne.jp/en/index.htm

Ethiopia-Japan Industrial Policy Dialogue
Phase III
Achievements and Challenges

Japan International Cooperation Agency (JICA)GRIPS Development Forum (GDF)

Ethiopia-Japan Industrial Policy Dialogue
Phase III
Achievements and Challenges

Japan International Cooperation Agency (JICA)GRIPS Development Forum (GDF)

Foreword
This volume contains information on the Third Phase of the Ethiopia-Japan Industrial
Policy Dialogue (February 2017-March 2023) conducted jointly by the National
Graduate Institute for Policy Studies (GRIPS) Development Forum and the Japan
International Cooperation Agency (JICA) as part of the Ethiopia Industrial Promotion
Project. This was a twice-renewed phase of the bilateral intellectual cooperation
officially launched in 2009 at the request of then Prime Minister Meles Zenawi. The
prime minister simultaneously requested JICA’s assistance for establishing kaizen
practice in Ethiopia, a cooperation that still continues and develops today. Policy
dialogue and kaizen thus became the twin pillars of JICA’s industrial cooperation in
Ethiopia. During the last fourteen-and-half years that included preliminary dialogue
sessions in 2008, the contents, modality and partners of the bilateral industrial policy
dialogue evolved significantly as Ethiopia’s leadership, economy and policy interests
shifted. This is how it should be because, to be effective, policy dialogue must respondquickly and flexibly to the changing situation and needs of the developing country rather
than conducting predetermined research and discussions. Policy dialogue and kaizen
have spawned many other industrial projects by JICA in Ethiopia in support of FDI
attraction, industrial park management, export promotion and enterprise development.
Ethiopia thus began to receive JICA’s largest and best-coordinated industrial policy
cooperation package in Africa. This is a prototypical model of industrial cooperation
for all to understand and emulate. At the same time, all cooperation projects in Ethiopia
encountered difficulties due to the unfavorable situations generated by internal politicalinstability and the global COVID-19 pandemic, which intensified during the Third
Phase. This report covers both the positive and negative aspects of the Third Phase of
the bilateral industrial policy dialogue, as well as how we responded to the difficulties.
It also touches on JICA’s other industrial cooperation projects as well as activities
in the earlier phases, as necessary, to provide a holistic picture of Japan’s industrial
cooperation in Ethiopia.
The principal authors of this volume are Kenichi Ohno and Izumi Ohno of the
GRIPS Development Forum (GDF). The authors greatly appreciate all leaders, highofficials, experts, researchers and business people in Ethiopia, Japan and several
other countries we visited for policy discussion and engagement. Our close research
partnership with the Policy Studies Institute (PSI), the research institute of theiEthiopian government, was very productive without which high-quality studies werehardly possible. It is not amiss to say that PSI became an integrated partner of ourindustrial policy research and dialogue. JICA’s active and substantive engagement instrategic planning, policy research and discussion for this project, both by the Tokyo
headquarters and the Ethiopia office, was instrumental in expanding and deepening
Japan’s industrial cooperation in Ethiopia. Special appreciation goes to the many
JICA officials who actively participated in the dialogue including Kenichi Tomiyoshi,
Toshiyuki Nakamura, Hiroyuki Kawanishi, Hironobu Murakami, Keiji Katai, Shingo
Morihata, Keiji Ishigame, Toru Homma, Hideo Eguchi, Kenji Ishizuka, Naoto Mukai,
Chigusa Seki, Naonobu Fuwa, Misako Uehara, Rika Karikomi, Kimiaki Jin, Ken
Yamada, Makoto Shinkawa, Katsuki Morihara, Megumi Hirose, Hiroyuki Tanaka,
Takeshi Matsuyama, Kana Fukuda, Yasuhito Kikuma, Masaki Wakai, Mai Toguchi,
Ikumi Ishidate, Emi Kurita, Hiroyuki Amaya, Sakiko Kurosaka, Fekadu Nigussie
Deresse, and Gebeyehu Tuji Benti. We also acknowledge with gratitude the competentsupport of Sayoko Uesu, Akemi Nagashima and Mieko Iizuka who contributed greatly
to the industrial policy dialogue as well as the preparation of this report.
The restructuring, renaming, merging and splitting of ministries and agencies are
frequent in the Ethiopian government and this poses some difficulty in describing ourpolicy dialogue with partner organizations. The Ministry of Industry (MOI), our key
policy dialogue partner, was merged with the Ministry of Trade (MOT) to become the
Ministry of Trade and Industry (MOTI) in 2018 but it was re-separated into MOI and
the Ministry of Trade and Regional Integration (MOTRI) in 2021. In this report, theterms MOI and MOTI are variably and sometimes interchangeably used but they referto the same dialogue partner. Our main research partners, the Ethiopian Development
Research Institute (EDRI) and the Policy Study and Research Center (PSRC), weremerged into the Policy Studies Institute (PSI) in 2018. Many other ministries andagencies underwent similar restructuring with changes of their leaders and executives.
The reader is kindly requested to be patient with the multiplicity of organizational
names and their transition.

Tokyo, June 2023
GRIPS Development Forumii

Contents
Foreword•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• iContents••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• iii
List of Figures••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• v
List of Tables•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• v
Abbreviations •••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• vi
Chapter 1 Overview of Industrial Policy Dialogue•••••••••••••••••••••••••••••••••••••• 1
1-1. How it began•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 1
1-2. Evolution of topics and modality•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 3

Chapter 2 Developments during Phase III•••••••••••••••••••••••••••••••••••••••••••••••••• 9
2-1. The original objective and actual developments••••••••••••••••••••••••••••••••••••••••••••• 9
2-2. Main topics and key achievements•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••13

Chapter 3 Changing Ethiopia••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••31
3-1. Economic strategies of the three prime ministers•••••••••••••••••••••••••••••••••••••••••31
3-2. Increased social and economic instability••••••••••••••••••••••••••••••••••••••••••••••••••••36

Chapter 4 Policy analyses: where Ethiopia stands in export,
FDI attraction and global competitiveness••••••••••••••••••••••••••••••••39
4-1. Productivity••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••39
4-2. FDI policy•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••42
4-3. International comparison of apparel export performance••••••••••••••••••••••••••••••••45
4-4. Industrial park management••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••48

Chapter 5 A New Horizon, HERA and the Ten Year Perspective
Development Plan ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••51
5-1. A New Horizon of Hope••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••51
5-2. The Homegrown Economic Reform Agenda••••••••••••••••••••••••••••••••••••••••••••••••54
5-3. The Ten Year Perspective Development Plan•••••••••••••••••••••••••••••••••••••••••••••••60
5-4. The MOTI’s Ten Year Development Plan••••••••••••••••••••••••••••••••••••••••••••••••••••64
5-5. The new industrial policy••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••67iii

5-6. National Industrial Movement•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••69
5-7. Policy inconsistency check by MPD ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••72

Chapter 6 Automotive policy•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••75
6-1. The Ethiopian automotive market and Japanese manufacturers••••••••••••••••••••••76
6-2. Ethiopian policy and four missing conditions•••••••••••••••••••••••••••••••••••••••••••••••77
6-3. Lessons from Kenya and Myanmar••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••80
6-4. Volkswagen and GIZ••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••84

Chapter 7 Dissemination beyond the Ethiopian government••••••••••••••••••••87
Chapter 8 Conclusion: the guiding principles of policy dialogue••••••••••••••91
8-1. The difficulty of policy dialogue and the need for selectivity•••••••••••••••••••••••••••91
8-2. Building confidence and trust••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••92
8-3. Linking talk with industrial cooperation projects•••••••••••••••••••••••••••••••••••••••••••93
8-4. Country ownership versus candid advice•••••••••••••••••••••••••••••••••••••••••••••••••••••95
8-5. Commonalities and unique factors••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••96
8-6. Project requirements versus policy dialogue requirements••••••••••••••••••••••••••••97

Appendix
Appendix 1: Key meetings with high-level policy makers•••••••••••••••••••••••••••••••••••••••• 101
Appendix 2: Third country missions•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 104
Appendix 3: Workshops and webinars hosted by the Industrial Policy Dialogue•••••••• 105
Appendix 4: List of key Ethiopian dialogue partners••••••••••••••••••••••••••••••••••••••••••••••• 107iv

List of Figures
Figure 1.

Industrial Policy Dialogue and Industrial Cooperation Projects,

Figure 2.

Contribution of Capital Intensity and TFP to Labor

2008-2019••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 4
Productivity Growth•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 40
Figure 3.

Net FDI Inflow into Ethiopia••••••••••••••••••••••••••••••••••••••••••••••••••••• 42

Figure 4.

Three-part Strategy for Countries Receiving Manufacturing FDI•••• 44

Figure 5.

Garment Value Chain•••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 46

Figure 6.

MOTI’s Ten Year Subsector Prioritization•••••••••••••••••••••••••••••••••• 65

Figure 7.

Directions of the New Industrial Policy••••••••••••••••••••••••••••••••••••••• 68

Figure 8.

The Organization for the National Industrial Movement•••••••••••••••• 71

Figure 9.

Timeline of Automotive Industry Development•••••••••••••••••••••••••••• 78

List of Tables
Table 1.

Brief Political and Economic History of Ethiopia•••••••••••••••••••••••••• 32

Table 2.

Comparison of Three Prime Ministers•••••••••••••••••••••••••••••••••••••••• 33

Table 3.

Decomposition of Labor Productivity Growth:
Shift-share Analysis••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 41

Table 4.

Decomposition of Labor Productivity Growth by Sector,

Table 5.

Labor Cost Comparison••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 48

Table 6.

A New Horizon of Hope••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 52

Table 7.

Homegrown Economic Reform Agenda: Content Structure••••••••••• 55

Table 8.

A Comparison of Economic Policy Stance••••••••••••••••••••••••••••••••••• 59

Table 9.

GDF-hosted Dissemination Workshops•••••••••••••••••••••••••••••••••••••• 88

2004-2016••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••••• 41v

Abbreviations
AA

Addis Ababa

AAAM

African Association of Automotive Manufacturers

AD

Authoritarian Developmentalism

ADLI

Agricultural Development Led Industrialization

AGOA

African Growth and Opportunity Act

AI

Artificial Intelligence

BDS

Business Development Service

BEE

Business Enabling Environment

BGMEA

Bangladesh Garment Manufacturers and Exporters Association

BIDS

Bangladesh Institute of Development Studies

BKMEA

Bangladesh Knitwear Manufacturers and Exporters Association

BMEIs

Basic Metals and Engineering Industries

BOP

Balance of Payment

BPR

Business Process Re-engineering

C4ED

Center for Evaluation and Development

CBU

Completely Built Unit

CEO

Chief Executive Officer

CKD

Complete Knock Down

CMT

Cut-make-trim

DAG

Development Assistance GroupDD

Democratic Developmentalism

DKD

Direct Knock Down

DPF

Development Policy Forum

EAC

East Asian Community

EBA

Everything but Arms

EDRI

Ethiopian Development Research Institute

EEA

Ethiopian Economic Association

EIC

Ethiopian Investment Commission

EKI

Ethiopian Kaizen Institute

EPRDF

Ethiopian People’s Revolutionary Democratic Front

ETM

Ethiopia Tamirt Movement

ETIDI

Ethiopian Textile Industry Development Institute

vi

EU

European Union

FDI

Foreign Direct Investment

FOB

Free on Board

FTAs

Free Trade Agreements

GDF

GRIPS Development ForumGDP

Gross Domestic Product

GIZ

Deutsche Gesellschaft für Internationale Zusammenarbeit(German Corporation for International Cooperation)

GRIPS

National Graduate Institute for Policy Studies

GTP

Growth and Transformation Plan (I/II)

HERA

Homegrown Economic Reform Agenda

HLF

High Level Forum

ICT

Information and Communication Technology

IDE-JETRO	Institute of Developing Economies-Japan External Trade
Organization
IMF

International Monetary Fund

IP

Industrial Park

IPD

Initiative for Policy Dialogue

IPDC

Industrial Parks Development Corporation

JETRO

Japan External Trade Organization

JICA

Japan International Cooperation Agency

JICA Ogata RI JICA Ogata Research Institute for Peace and Development
KAM

Kenya Association of Manufacturers

KD

Knock Down

KEC

Kaizen Excellence Center

KSP

Knowledge Sharing Program

LIDI

Leather Industry Development Institute

METEC

Metals and Engineering Corporation

METI

Ministry of Economy, Trade and Industry (Japan)

MFA

Multi Fiber Arrangement

MIDI

Metals Industry Development Institute

MOENCO

Motor and Engineering Company of Ethiopia

MOF

Ministry of Finance

MOI

Ministry of Industry (Ethiopia/Myanmar)
vii

MOTI

Ministry of Trade and Industry

MOU

Memorandum of Understanding

MPD

Ministry of Planning and Development

MPDC

Metal Products Development Center

NBE

National Bank of Ethiopia

PASDEP

Plan for Accelerated and Sustained Development to End Poverty

PDC

Planning and Development Commission

PM

Prime Minister

PMO

Prime Minister’s Office

PPSEZ

Phnom Penh Special Economic Zone

PSI

Policy Studies Institute

PSRC

Policy Study and Research Center

QCD

Quality, Cost and Delivery

QPC

Quality, Productivity and Competitiveness

SEZ

Special Economic Zone

SKD

Semi Knock Down

SMEs

Small and medium-sized enterprises

SOE

State-owned Enterprise

TBT

Technical Barriers to Trade

Ten Year Plan Ten Year Perspective Development Plan
TFP

Total Factor Productivity

TICAD

Tokyo International Conference on African Development

TVET

Technical and Vocational Education and Training

UK

United Kingdom

UNCTAD

United Nations Conference on Trade and Development

UNDP

United Nations Development Programme

UNIDO

United Nations Industrial Development Organization

US

United States

USSR

Union of Soviet Socialist Republics

VDF

Vietnam Development Forum

VEPR

Vietnam Institute for Economic and Policy Research

VIPs

Very Important Persons

VW

Volkswagen

WB

World Bank

viii

WC

Washington Consensus

WTO

World Trade Organization

ZLD

Zero Liquid DischargeixOverview of Industrial Policy Dialogue

Chapter 1

Overview of Industrial Policy Dialogue
1-1. How it began
In 2002, the GRIPS Development Forum (GDF) started visiting African governments
in search of an ideal partner for industrial policy dialogue. In Zambia, Tanzania,
Ghana, Uganda and Mozambique, we met presidents and/or economic ministers andpermanent secretaries, did limited policy research and engaged in mini policy dialogue.
In the summer of 2008, we were approached by the Japan International Cooperation
Agency (JICA) to attend a policy conference in Addis Ababa. Professor Joseph Stiglitz
of Columbia University, a Nobel laureate, organized annual African Task Forcemeetings of his Initiative for Policy Dialogue (IPD), and the next meeting was to beheld in Ethiopia. JICA, which financially supported IPD, wanted Japan to contributeintellectually as well. We accepted the offer because we had heard that Ethiopia wasserious about industrial policy. But we did not know that Prime Minister Meles Zenawi
would attend virtually all sessions of the two-day conference.
In the conference, GDF explained East Asian ideas of industrialization andpresented our edited book to the Prime Minister. He started to read it during theconference. Chapter 7 of the book was JICA’s kaizen assistance in Tunisia1. In thefollowing week, Prime Minister Meles invited the Japanese ambassador to his office
and requested two-part cooperation from Japan: policy dialogue with GDF and kaizen
by JICA. He had heard about kaizen before but did not know that JICA was helping
African countries to adopt it. He said, “Please do a kaizen project in Ethiopia just as
you did in Tunisia.” Prime Minister Meles requested candor and openness rather than
diplomatic courtesy in our policy discussion. We always aimed at building mutual trust
and respecting the will and ownership of the Ethiopian government. But we were at thesame time not hesitant to point out problems in ongoing Ethiopian policies.
The Ethiopia-Japan Industrial Policy Dialogue has been conducted jointly by GDF
1Tsuyoshi Kikuchi, “The Quality and Productivity Improvement Project in Tunisia: A Comparison ofJapanese and EU Approaches,” chapter 7, GRIPS Development Forum, Diversity and Complementarity in
Development Aid: East Asian Lessons for African Growth, compiled for distribution in 2008. The book was
subsequently updated and published commercially by Routledge in 2013 with the revised title, Eastern andWestern Ideas for African Growth, where previous chapter 7 was renumbered as chapter 8.

1

CHAPTER 1

and JICA (not by GDF alone) at the three levels of the Ethiopian government: (i) Prime
Minister, (ii) Ministers, State Ministers and Commissioners of relevant ministries andstate commissions, and (iii) officials and experts at the operational level. Ethiopian andJapanese businesses, academicians, experts as well as bilateral donors and internationalorganizations were additionally and frequently consulted. Our methodology was tocollect and learn concrete international policy experiences (not just from Japan), selectand modify foreign models for Ethiopia’s consideration, then produce a policy model
most suitable for Ethiopia’s reality. We call this policy exercise translative adaptation,a term used by economic anthropologist Keiji Maegawa to denote the importation offoreign things with local initiative, ownership and adjustment. For this purpose, many
leaders, officials, businesses and researchers in third countries in Asia and Africa werevisited and interviewed.
In Addis Ababa, policy dialogue sessions were held four times a year during Phase
I (May 2009-May 2011) and twice a year during Phase II (January 2012-October 2015).
During our visits to Addis Ababa, we were almost always able to discuss policy issues
with the prime minister at length. When Prime Minister Meles passed away in August
2012, the bilateral dialogue was continued by Prime Minister Hailemariam Desalegn
with equal zest and seriousness. Though the frequency of official dialogue sessions
was reduced in the second phase, the tasks related to the dialogue increased becauseof additional research and active third-country trips. By the end of the second phase,
JICA’s engagement in Ethiopia’s industrial cooperation had expanded, leading to
the formulation of comprehensive support under the name of the Ethiopia Industrial
Promotion Project which consisted of three components: (i) industrial policy dialogue,(ii) foreign direct investment (FDI) promotion and industrial park management, and(iii) export promotion (creation of champion products). Additional projects also begansuch as women entrepreneurship development, business development service (BDS)
enhancement and support for enterprises growth as well as the construction of theTokyo International Conference on African Development (TICAD) Human Resource
Development Center. The third phase of the Industrial Policy Dialogue was implemented
as part of the Ethiopia Industrial Promotion Project with due consideration to creatingsynergies with the other two components.
In Phase III (February 2017-March 2023, with the endpoint extended due to theglobal pandemic), two main and two supplementary sessions were organized annually in
Addis Ababa until this routine was interrupted by the spread of the COVID pandemic and2Overview of Industrial Policy Dialogue

internal political uncertainty in 2020. After Prime Minister Hailemariam was succeededby Prime Minister Abiy Ahmed in 2018, the direct access to and discussion with theprime minister did not materialize but we continued to work with the Macroeconomic
Team supporting the prime minister and other key leaders of state commissions andministries responsible for industrial development.

1-2. Evolution of topics and modality
Topic choice and dialogue channels
The topics of Industrial Policy Dialogue were selected carefully before each session(a few months in advance) to fit the prevailing policy environment and the interests ofthe Ethiopian government, both of which were rapidly evolving. We refrained fromsetting a series of agendas years in advance. We also did not want to just present ourfindings or recommendations because we wanted to make sure that what we discussed
was closely related to what Ethiopia planned to do and led to actual policy formulationand improvements. This required a judicious choice of topics. The Ethiopian government
does not hesitate to revise policies or introduce new ones when it is convinced of thevalue of policy advice presented to them. We consider it important that Japan offerssome (but not necessarily all) of the funding and/or technical support needed to carryout proposed policies. This increases the chance of proper implementation as well as
the incentive for both sides to seriously engage in the dialogue. Figure 1 illustrates how
Ethiopia-Japan Industrial Policy Dialogue proceeded in parallel with JICA’s industrial
cooperation on the ground consisting of kaizen and other concrete projects.
During 2008-2022, 22 policy discussions were held with the Prime Minister, 18High Level Forum (HLF) sessions were conducted in Addis Ababa, and 19 policy
research visits to third countries in Asia and Africa were organized where Ethiopian,Japanese and/or other officials and researchers participated (not counting mutual visits
between Ethiopia and Japan). In addition, there were numerous visits to offices, factories
and project sites; discussions with international organizations and other donors; regional
trips inside Ethiopia and Japan; and workshops, seminars and invited lectures. These are
the tallies of real visits and meetings. From early 2020 to early 2022, international traveland face-to-face discussions became impractical due to the global pandemic and were
replaced by online workshops and meetings.
We had 10 face-to-face policy meetings with Prime Minister Meles Zenawi and3CHAPTER 1

Figure 1. Industrial Policy Dialogue and Industrial Cooperation Projects,
2008-2019

Note: this diagram shows main policy dialogue events and JICA’s industrial cooperation projects during
the bilateral industrial policy dialogue period. Black boxes indicate the three-level policy dialogue
in Addis Ababa (prime minister; ministers, state ministers and commissioners; and operational level
people) while blank boxes are similar sessions without the prime minister’s participation.

12 similar sessions with Prime Minister Hailemariam Desalegn (two of them were
held when he was Deputy Prime Minister). With both prime ministers, discussions
were direct, intense and action-oriented with an average length of one-and-half to twohours. The progress of kaizen and the agenda of minister-level HLFs were usuallyreported, but the discussion with the prime ministers often took unexpected turns
to new policy initiatives, hot issues at hand or how bilateral policy action could beaccelerated. The prime ministers sometimes wrote letters to us. In the first year of Phase
I, Mr. Meles sent us two long letters on the developmental philosophy of Ethiopia. He
additionally requested GDF to collect English materials on various issues related to theindustrialization of East Asia, to which we responded with six information packages. Mr.
Hailemariam also asked for policy research papers when we did not send him enough.
GDF wrote a total of 14 policy letters to the two prime ministers and other high-level
policy dialogue participants. In 2018, Prime Minister Abiy Ahmed succeeded Prime
Minister Hailemariam. Dr. Abiy’s policy interest and governing style were different
from his two predecessors, and we did not have an opportunity to see and talk to him
directly. We identified his economic advisors as key dialogue partners and discussed
issues with them.
4Overview of Industrial Policy Dialogue

At the level of ministers and state ministers, we organized formal and well-prepared
HLF sessions which usually consisted of half-day presentations and discussion in a
hotel conference room. HLF agenda was agreed 1-3 months ahead of the session by
picking up industrial issues with high policy relevance to the Ethiopian government at
the moment. As noted above, we did not choose topics years ahead because situations
and policy interests shifted very quickly in Ethiopia, and HLFs aimed at policy impact
and relevance rather than academic merit. HLFs were often covered in local TV andnews media. Apart from HLFs, parallel seminars were sometimes organized to discusssuch specific issues as kaizen, champion product creation, investment policy, industrial
parks, enterprise development, automotive assembly, metal and engineering industries,
the attraction of Japanese investors, and so on (see Appendix Tables for key meetings,
HLF agenda, policy letters, and third-country policy missions).

From general to specificOver the last eleven years, the content of policy discussions with the prime
ministers, commissioners, ministers, state ministers and other key policy leaders
gradually shifted from the exchange of general information about Ethiopia and East
Asia to the examination of specific policy instruments relevant to Ethiopia with an
expanding number of such instruments for mutual discussion and implementation. Thiswas just what we had intended.
In Phase I, broad issues were discussed such as Democratic Developmentalism(DD) and Agricultural Development Led Industrialization (ADLI), the two principal
developmental philosophies of Ethiopia, as well as how East Asian governments
drafted and executed various industrial strategies. This was a period of mutual learningin preparation for deeper policy discussion and engagement. For us, it was particularly
instructive to hear the details of DD and ADLI from Prime Minister Meles and clarify
certain points with him, which provided us with a firm ground on which concreteknowledge sharing could be initiated. Transferability and necessary adjustments ofkaizen to Ethiopian reality was another issue we discussed intensely in early sessions.
However, as JICA’s kaizen cooperation took root, deliberation on kaizen gradually
moved to the operational level such as the Ethiopian Kaizen Institute (EKI) and the
Kaizen Project Coordination Committee. The draft of Growth and Transformation Plan
(GTP: a five-year development plan that stressed economic growth and industrialization)
was also discussed. The Ethiopian government separately requested an ad hoc survey
5CHAPTER 1

on the basic metal and metal processing industries in Ethiopia, which was conducted incooperation with Germany.
In Phase II, now equipped with sufficient knowledge of the Ethiopian policy
mindset, orientation and possible weaknesses, the main focus was to selectively introduce
concrete policy measures so they would be seriously considered and actually adopted
by the Ethiopian government. It was important to choose a small number of policy
measures and produce success rather than try to cover all measures at once superficiallyand without result. Candidate policies were proposed by both sides. First, to infuse anattitude toward demand orientation and customer satisfaction (not just efficient factory
operation imparted by kaizen), export policy and FDI policy were targeted. Strategic
export promotion at the macro level and champion product creation at the micro level
were proposed. Experienced Japanese, Malaysian and Thai officials in charge of export
promotion and FDI attraction were invited to Addis Ababa to share their experiences
and lessons. A large Ministry of Industry mission headed by a state minister was sent
to Malaysia for two weeks to study strategic FDI attraction in preparation for a revisionof the Investment Proclamation and Regulation (they were revised shortly after the
mission by incorporating its findings). As manufacturing FDI began to pour into
Ethiopia from Turkey, India, China and other countries, the discussion turned to FDIled industrialization and FDI-linked technology transfer, which are common policy
agendas in East Asia. Topics such as industrial park development and management,labor productivity and wage, one-stop investor service, and intensive support of selected
small and medium-sized enterprises (SMEs) which we called handholding were added.
Bringing Japanese manufacturing firms to Ethiopia, which we thought was hardly
possible a few years back, became a bilateral priority issue.
In Phase III, the move to deepen and expand concrete industrial measurescontinued. They included enterprise development in the metal and engineering sector,
automotive assembly policy, apparel sector upgrading in cooperation with Japanesefirms, industrial park policy which included the invitation of Japanese FDI, and two
policy reports on productivity and FDI drafted jointly by PSI and GDF. It must however
be admitted that, during Phase III, the pace and effectiveness of our industrial policy
discussion were curtailed by such domestic events as political instability and military
conflicts as well as global issues related to the pandemic and energy and food supply.
The details of Phase III activities are given in the next section.
6

Overview of Industrial Policy Dialogue

Following the East Asian path?
The Ethiopian industrial policy has evolved in response to the policy interest of the
top leader, ongoing economic transformation (or the lack thereof) and shifting domestic
and international circumstances. When the preliminary sessions of the policy dialogue
started in 2008, we were unsure whether the idea of ADLI—using agriculture growth
to generate full-scale industrial growth—was practical or how it could be concretizedand scaled up in Ethiopia. By the end of Phase II, we became convinced that FDI-led
industrialization, whose possibility became apparent around 2010, would be the main
driving force of Ethiopian industrialization for a considerable time to come rather than
ADLI. Ethiopia in the 2010s emerged as a new FDI destination on the African continent
with the rapid construction of state-owned industrial parks and other infrastructure,
increased FDI arrivals and sustained high growth.
Industrial successes up to the present should be credited mainly to the strong
political will and aggressive policy learning of the Ethiopian government which wastruly outstanding by the standards of latecomer developing countries. International
cooperation was also helpful but it could not have been effective without a proper
policy mindset on the receiving side. Foreigners like us and others should be humble
about the magnitude of the contribution we have made to Ethiopian achievements.
The government worked hard to promote and incentivize flower growers with Dutchcooperation. It also vigorously attracted the first large integrated textile mill fromTurkey and a large footwear maker from China. Ethiopian Airlines grew to become
the largest air carrier in Africa. These did not happen by free markets or the “selfdiscovery” of private firms alone.
FDI-led industrialization, labor productivity, total factor productivity (TFP),
technology transfer, FDI-local firm linkage, global value chains and logistic efficiency
became the key issues surrounding Ethiopian economic development. When policy
discussion reaches this stage, we do not see any substantive difference between Asia
and Africa. All nations are different in policy capability as well as domestic and external
circumstances whether they are in Asia or Africa, so Ethiopia’s socio-economic
uniqueness itself cannot be cited as a differentiating factor. We should recognize thatmany latecomer Asian governments are struggling to implement policy measures which
Ethiopia has already adopted or is trying to introduce such as the high-level export
coordination committee, strategic FDI and industrial park policy, sectoral industrial
institutes, the national kaizen movement, and a nationwide technical and vocational
7

CHAPTER 1

education and training (TVET) system. According to our unpublished assessment
based on ten policy sub-components over thirteen countries in Asia and Africa, thequality of industrial policy of Ethiopia is superior to that of India, Vietnam, Indonesia
or Cambodia2.
This also means that Ethiopia has entered an era in which the past and current
growth experiences of East Asia—both successes to emulate and failures to avoid—are
more directly relevant to its policy formulation. There is no other country on the African
continent to which this statement applies more aptly. For this reason, our policy advice
to the Ethiopian government during Phases II and III of Industrial Policy Dialogue was
essentially East Asian.
However, Ethiopia’s policy orientation may be shifting. Both Prime Minister
Meles and Prime Minister Hailemariam openly followed the development model of
East Asia and were critical of the Washington Consensus model of the International
Monetary Fund (IMF) and the World Bank3. Prime Minister Abiy on the other handdoes not profess such a belief and his economic philosophy remains less certain due tohis distance from economic policymaking compared with his predecessors. He worked
actively with the World Bank in state-owned enterprise reform, and key plan documents
under his administration—the Homegrown Economic Reform Agenda (HERA) and theTen Year Perspective Development Plan (Ten Year Plan) in particular—are not veryclear about the relationship between the state and the market.

2

3

8

Kenichi Ohno, “The Quality of Industrial Policy as a Determinant of Middle Income Traps,” a paper
presented at the Singapore Economic Review Conference (SERC) 2015, Singapore, August 5-7, 2015.
The World Bank became more engaged in industrial development during Phase II of our Industrial Policy
Dialogue by financing the Ethiopia Competitiveness and Job Creation Project in 2014 ($250 million and an
additional $175 million approved in 2018) which supported the development of industrial parks (Bole Lemi
II and Kilinto Industrial Parks). This was a major departure from the Bank’s cautious stance in supporting
the government’s role in industrial development observed during our Phase I.

Developments during Phase III

Chapter 2

Developments during Phase III
2-1. The original objective and actual developments
The original objective of the third phase of Industrial Policy Dialogue was to deepen
and accelerate the policy improvement process of the Ethiopian government by moving
beyond general learning and commentaries to the creation and/or revision of many
policies that are practical and effective. This was the effort started in the second phase to
be further strengthened during the third phase. The earlier phases had found weaknesses
in the Ethiopian policy process such as low implementation capacity, frequent changesof leaders and the government, and the tendency to speed up policymaking without
sufficient deliberation and details. These features impeded effective policy learning
but were difficult to rectify in the short run. The Japanese dialogue team worked
with the Ethiopian dialogue partners with persistence and patience without expecting
quick results. An accumulation of concrete hands-on policy experiences in thecontext of Ethiopia was needed for policy improvement, not more theories or generalknowledge. For this, it was considered essential to work closely and substantially with
the Ethiopian government think tank for producing as many good policy analyses andrecommendations as possible as well as for the capacity building of the think tank itself.
The think tank should eventually be able to carry out pragmatic policy interaction withthe government without the Japanese. With these in mind, the following policy tasks
were contemplated at the beginning of Phase III.
First, the handholding support of SMEs was to be introduced. In handholding (alsoknown as hands-on or yorisoi support), the government selects a small number of SMEs
with a proper mindset and potential, discusses and agrees on one business goal to beattained within a few years, and offers customized intensive assistance to realize that
goal. This policy instrument, common in East Asia but not even known in Ethiopia, wasto be used as a means of policy learning to broaden the scope of the Ethiopian SME
policy.
Second, cooperation between Japanese and local firms in concrete businessprojects was to be supported. Japanese business interest in Ethiopia was high but few
Japanese firms actually came to Ethiopia due to many difficulties. One difficulty was9CHAPTER 2

policy inconsistency and unpredictability, an area that policy dialogue could amend.
To upgrade local firms, the technical and management support of foreign firms with aserious intention of doing business with Ethiopian firms is more effective than projects
initiated by governments or donors alone. While the private initiative was primary,the policy dialogue team could support it from the sideline by offering policy-related
information, matching and interactions with key Ethiopian authorities, and improving
policy areas related to the FDI’s planned activities.
Third, policy studies relevant to the current development stage of Ethiopia, whichthen was building state-run industrial parks to receive FDI, were to be conducted. This
was to be done in cooperation with the government’s economic think tank to acceleratesuch research and upgrade the think tank as explained above. The topics had to bechosen carefully and in proper sequence. They must be something that Ethiopia wasinterested in and Japan could assist with.
In reality, many external developments affected the execution of this plan during
Phase III. Some tasks were implemented as planned but others had to be modified or
entirely dropped due to new circumstances. Adjustments are inevitable in any policy
dialogue, but the magnitude of required changes was larger in Phase III than in theprevious phases. There were four major events that compelled us to modify our policy
dialogue plan.
The first unexpected event was the resignation of Prime Minister Hailemariam in
February 2018 due to domestic instability. Dr. Abiy who succeeded him greatly altered
the governing style in general and the handling of development strategies in particular.
Prime Minister Meles and Prime Minister Hailemariam were deeply and personallyinvolved in economic policymaking and frequently met investors and scholars to discuss
relevant issues. Prime Minister Abiy delegated economic matters to the Macroeconomic
Team and was less accessible to foreign professors. This forced us to conduct dialogue
with the Macroeconomic Team and other key economic leaders instead of the prime
minister himself. The economic philosophy and strategies of Ethiopia became less clear
because of his style as well as the fact that key documents (see below) did not spell out
fundamental policy direction though they defined immediate actions at hand.
Second, domestic politics became highly unstable which culminated in the military
conflict between the federal and Tigray forces in November 2020. During the 2010s,
Ethiopia was a rising star in Africa boasting political stability, double-digit growth,
increasing FDI and the rapid construction of infrastructure. FDI-led industrialization
10

Developments during Phase III

and participation in global value chains appeared to be future goals. However, brightnews ended in 2020 with worsening ethnic confrontation, security problems, economiccrisis and the slowdown of activities with foreign businesses and cooperation.
Third, the Abiy administration frequently restructured the government and its key
leaders. Cabinet reshuffling is not uncommon in Ethiopia, but its speed accelerated
recently. This led to changes, often more than once, of the high-level partners of ourpolicy dialogue at PSI, the Ethiopia Investment Commission (EIC), and the Ministryof Industry (MOI) and its institutes during Phase III. In October 2021, significant
institutional reforms were also conducted at our partner organizations such as the
splitting of the Ministry of Trade and Industry (MOTI) into two ministries, the placingof the Industrial Park Development Corporation (IPDC) under EIC, the upgrading of
the Planning and Development Commission (PDC) to the Ministry of Planning andDevelopment (MPD), and so on. This severed relationship we had built up and forced
us to re-establish another with new key leaders.
Fourth, from early 2020 to early 2022, the COVID-19 pandemic wreaked havocon human contacts and travel globally, and Ethiopia and Japan were no exception.
Together with the security problem in Ethiopia, this virtually eliminated the possibilityof frequent travel between Ethiopia and Japan which was essential in conducting policy
dialogue.
To cope with these circumstances, we made several adjustments in the dialogue
modality. As mentioned earlier, the Macroeconomic Team whose members were senioradvisors of the Prime Minister’s Office (PMO) and senior officials of the Ministryof Finance (MOF), together with the EIC management team and the MOTI senior
officials, became our high-level dialogue partner rather than the prime minister himself.
Another important adjustment was holding small, flexible and more numerous policy
workshops with relevant commissions and ministries in place of large-scale HLFs
which had been our regular policy meetings with economic ministers and state ministers
for each visit to Addis Ababa. Smaller meetings covered the automobile sector, apparelexport, handholding support of small and medium enterprises (SMEs), productivity,
FDI policy, and the evaluation of key policy documents such as the HERA and the Ten
Year Plan (see section 5). These took the forms of the Development Policy Forums(DPFs) co-organized by PSI and GDF with the participation of heads of PDC to share
the progress and outcome of joint policy research, as well as industry-specific seminars
hosted by MOTI with the participation of policymakers and the private sector covering
11CHAPTER 2

the textile and garment industry and the automotive industry. During the two years whentrips to Ethiopia were difficult, policy missions were substituted by works in Tokyo,
online workshops and meetings, mobilization of researchers at PSI, and conducting firm
surveys in Vietnam and Bangladesh by local researchers affiliated with GDF.
Despite the increased difficulty, some original plans were fully executed with goodresults. GDF and PSI managed to jointly produce two policy research reports, the one
on productivity and the other on FDI policy. The other completed tasks were thirdcountry policy trips to Kenya, Myanmar and Sri Lanka. These visits collected sufficient
information from these countries mainly on automobile assembly and apparel export, thetwo sectors intensively discussed with the Ethiopian authorities during Phase III. These
third-country studies contributed greatly to the formulation of policy recommendationsin the two sectors as well as the production of the Ethiopia FDI Policy Report. Details
are explained in the next sub-section.
Meanwhile, the handholding support of local SMEs was prepared, and a diagnostic
survey of high-potential metal firms was conducted by recruited Japanese experts.
However, as part of JICA’s overall project portfolio management decision, it was
decided that this activity should be integrated into the other JICA-supported projectrather than implemented as part of the Industrial Policy Dialogue. Over the years,
JICA has expanded industrial cooperation projects in support of local enterprises suchas BDS, startup contests and support, and the expansion of kaizen cooperation. As aresult, the handholding support of local firms in the metal and engineering sector wastransferred to JICA’s BDS cooperation project (see 2-2-6). The other reasons included
delays in choosing the counterpart, local awareness-raising and selection of candidate
firms. There was also a potential conflict of interest as one Japanese commercial
vehicle maker entered the Ethiopian market during Phase III which made problematicthe handholding of local commercial vehicle assemblers which might compete withthat Japanese maker. It is also important to note that the export promotion team of theIndustrial Promotion Project also took a handholding approach to support the creationof champion products in the leather sector.
During Phase III, the Japanese policy dialogue team made 18 trips to Ethiopia at
the pace of four trips per year, except from early 2020 to early 2022 when the global
pandemic interrupted our travel and work had to be conducted online.

12

Developments during Phase III

2-2. Main topics and key achievements
The main issues analyzed and presented to the Ethiopian government during Phase III
of Industrial Policy Dialogue are explained in this section. Selected analytical highlightsfrom these works are presented separately in the subsequent sections. Appendix tablesat the end of this section list our main activities during Phase III by type—High Level
Forums; workshops and webinars hosted by the Industrial Policy Dialogue; and third
countries visited for policy research. Key Ethiopian dialogue partners are also presented.

2-2-1. Two policy reports
GDF planned to produce flagship policy reports relevant to the current reality of
Ethiopia in close cooperation with an Ethiopian government think tank. This had the
double purpose of mobilizing local researchers to produce such reports efficiently andtransferring to an Ethiopian think tank the method of policy report production featuringclose contact with responsible authorities. The two topics consecutively chosen were
productivity and FDI policy, both of which seemed highly relevant to Ethiopia at thisjuncture when FDI-led industrialization was beginning with an increasing weight in thenation’s economic development.
At the outset of Phase III, there were two government economic think tanks: theEthiopian Development Research Institute (EDRI) and the Policy Study and ResearchCenter (PSRC). EDRI, headed by Mr. Newai Gebre-ab, had been our close research
partner since Phase I that co-hosted many HLF sessions with us. PSRC was a newly
created center headed by Mr. Abay Tsehaye. EDRI was oriented more toward theoreticaland empirical studies of academic type, often with donors’ funding, while PSRC wassupposed to provide concrete policy-oriented inputs directly to the government. The
Japanese dialogue team discussed the proper functions of government think tanks with
Prime Minister Hailemariam and gave a lecture on the same topic in a joint EDRI-PSRC
workshop. There were GRIPS PhD alumni in both think tanks and GDF began to talk tothem for possible joint production of flagship reports.
EDRI and PSRC were merged in 2018 to become the Policy Studies Institute(PSI). GDF decided to work with PSI. Dr. Kidanemariam Berhe Hailu, a former PhD
student of Kenichi Ohno at GRIPS, became a coordinator of Industrial Policy Dialogue
in charge of the joint PSI-GDF research as well as other elements of policy dialogue. In
the course of Phase III, the general directors of EDRI, PSRC and the merged PSI eachchanged one to three times which made effective communication with the leaders of13

CHAPTER 2

these think tanks sometimes difficult 4.
The Ethiopia Productivity Report was launched in Addis Ababa in February 2020
and the Ethiopia FDI Policy was launched online in January 2022. Both were produced
jointly with Kenichi Ohno (GDF) working closely with designated PSI researchers—
Dr. Kidanemariam Berhe Hailu and Dr. Mulu Gebreeyesus for the first report and thesetwo plus Dr. Kiflu Gedefe Molla for the second report. In addition to these authors
who intensively discussed the drafting strategy, Dr. Tsegay Gebrekidan Tekleselassie(PSI) participated in the first report. Izumi Ohno (GDF), Sayoko Uesu (GDF) and Toru
Homma (JICA) participated in the second as chapter contributors.
Each of these reports took two to three years to complete from the preliminary idea
to the final launch. Both reports were truly joint works of PSI and GDF under a researchcooperation contract, not a unilaterally commissioned study from Japan to Ethiopia.
Initial plans, chapter structure, survey design and execution, outsourced tasks, draft
checking, discussion of key issues, editing and printing and dissemination plans werediscussed face-to-face as well as by email and online meetings. The production budget
was also split between GDF (researcher and survey costs) and PSI (printing, launch anddissemination) with larger funding borne by GDF under the overall financial supported
by JICA. The FDI Policy Paper, a short companion paper of the Ethiopia FDI Policy
Report, was separately produced by GDF in November 2021 to speed up disseminationand discuss a few issues not covered by the main report. Selected key findings of thesereports are presented in section 4.
The Ethiopia Productivity Report (2020) has the following structure.
Executive Summary
1. Introduction
2. Productivity: Concept, Measurement and Significance3. Economy-wide Labor Productivity in Ethiopia
4. Zooming in on the Manufacturing Sector
5. Labor Productivity Challenges in the Emerging Ethiopian Apparel
Industry: Survey Results
6. Policy Measures towards Enhanced Productivity

4

14

During Phase III, sequentially, the EDRI executive directors were Newai Gebre-ab (who passed away in
February 2020), Mekonnen Manyazewal and Ahmed Abitew, and the PSRC directors general were Abay

Developments during Phase III

This report applied standard theoretical and empirical methods to analyze the laborproductivity and TFP of Ethiopia relative to international experience. It was the firstcomprehensive study of productivity in Ethiopia using standard methods. The launchworkshop was co-organized by the PSI and GDF in February 2020 with the participationof PDC leadership, Japanese Ambassador, JICA representatives and others. The reportdrew attention from local news media and was favorably received by many officials andresearchers. The Ten Year Plan (the current national development plan) cites it as one of
the information sources. The World Bank and the Millennium Challenge Corporation of
the United States (US) invited one of the Ethiopian lead authors to Washington, DC todeliver the report’s findings in two workshops.
The Ethiopia FDI Policy Report (2022) has the following structure.
A Compact Summary of Policy Recommendations
Overview and Summary
1. Ethiopia’s FDI Policy Evolution and Performance
2. FDI Policy for Industrialization: From Quantitative Accumulation to
Value Creation
3. Dynamics of FDI in Ethiopia: Bridging the Balance of Payment Gap
4. Enhancing the Role of FDI in Technology and Knowledge Transfer
5. Foreign Direct Investment in Ethiopia: A Survey Report
6. Current Status and Challenges of the Garment Sector: A Comparisonof Vietnam, Bangladesh and Ethiopia
7. Pursuit of Product Quality and Ethical Correctness in Developing theGarment Industry
8. FDI Strategy in the Age of Industry 4.0 and Post COVID-19
This report takes up several issues which we believe are highly relevant to Ethiopia
instead of applying the globally common methodology of FDI research. This is because
appropriate advice on FDI policy varies significantly by country, unlike productivity
studies that follow well-established standard techniques. The report features the lackof balance-of-payments impact and technology transfer in Ethiopia, an international
comparison of the apparel sector, and new global challenges for latecomer countries
Tsehaye and Ahmed Abitew. At the newly created PSI, directors general shifted from Ahmed Abitew to
Abalema Addsalem, Mekuria Haile and Beyene Petros.

15

CHAPTER 2

such as Ethiopia. Dissemination of this report could not be conducted as vigorously as
we hoped since it had to be launched online due to the pandemic without face-to-facecontact or inviting media for news reports. After the launch, PSI circulated printed
reports to relevant policymakers.
We trust that both reports have attained international quality both academicallyand as policy advice, and the analyses and policy proposals contained there have along-term value that will not diminish even if Ethiopia faces political and economic
difficulties in the short run.

2-2-2. Automotive policy
The Ethiopian automotive industry is in an early development stage where
foreign brand cars dominate its streets. The Semi Knock Down (SKD) assembly of
foreign cars and local production of commercial vehicles exist but on a small scale.
Looking forward, given its large population and assuming sustained economic growth,
Ethiopia’s automotive demand will surely increase in the long run. Each stage of
automotive development requires different policy measures or the growth of this sector
will be stunted. The previous and current prime ministers expressed keen interest inpromoting this industry. Moreover, the Japanese car brands at present dominate theEthiopian vehicle market. Toyota (new and used) is the leading brand in Ethiopia, andIsuzu trucks are popular in the commercial vehicle market. Isuzu already began truck
assembly in cooperation with Kaki, a local automotive firm. More recently, Suzuki
began Completely Built Unit (CBU) car exports to Ethiopia. For these reasons, and as aconcrete channel for Ethiopia’s policy learning, Phase III of Industrial Policy Dialogue
took up this sector as one of the key policy areas.
The Japanese dialogue team visited selected Japanese vehicle makers in Japanand elsewhere and engaged in intensive discussion with them. It also visited Ethiopian
automotive firms and sales outlets of Japanese vehicles. A study tour for the Metals
Industry Development Institute (MIDI) officials was arranged in Japan to meet Japanesefirms that might be interested in Ethiopia and learn the Japanese approach to SME
support including organizational arrangements and handholding support. GDF policy
missions were organized to Kenya and Myanmar, the two countries that went ahead of
Ethiopia in SKD car assembly and became quite successful. A series of policy papers
were drafted and three automotive workshops were organized at MOTI to present ourfindings and policy recommendations. Besides MOTI and MIDI, additional meetings
16Developments during Phase III

were held at EIC, MOF and PMO. Discussion with EIC was high-level and intensive as
EIC was in charge of compiling a new automotive policy in the early years of Phase III.
Germany’s Volkswagen (VW) was interested in working with Ethiopia and concluded
a Memorandum of Understanding (MOU) with EIC. Since VW’s representative wasin South Africa, we were not able to meet him. We instead had many discussions with
the German Corporation for International Cooperation (GIZ) which assisted VW’s
activities in Ethiopia.
MOTI/MIDI, EIC and MOF worked separately to produce different aspects of theautomotive policy such as technology, international cooperation, taxes and incentives
which required good coordination. However, it became clear through our many
discussions with them that such coordination was not occurring. We advised them tocorrect the situation and often acted as a catalyst to invite responsible policymakers to one
place to share information and progress. After studying the Ethiopian and international
cases and hearing from Japanese automotive makers, policy actions immediately neededin Ethiopia became evident, namely, (i) foreign currency shortage, (ii) restriction on
used car imports, (iii) the incentive mechanism, and (iv) small domestic demand (seesection 6). These were put into a series of papers and presentation for the reference of
key policymakers.
It is noteworthy that the Ethiopian government already rectified (or began torectify) some of these weaknesses. Severe restraints on used car imports were suddenly
introduced in 2019 which had immediate and dramatic effects on the rise of new car
sales and the fall of used car sales. It is difficult to ascertain how much influence
our advice had on this policy shift. It is a welcome move though it could have been
introduced more gradually and with prior announcement. Another important fact is that
MOF made two adjustments in the automotive tariff structure partly in the context of an
overall regular tariff review of all sectors. There are some laudable points in the recent
tax changes including penalizing used car imports and encouraging electric and otheradvanced cars. However, the automotive tax structure remains incomplete because afundamental revision to incentivize domestic assembly and discourage new car imports
is not yet in place.
It should also be noted that policy recommendations given by non-Japaneseexperts to Ethiopian authorities are quite different from what we regard as standard
policy measures. This includes advice offered by the German group (VW and GIZ)
that explored the possibility of auto parts export and establishment of a specialized17

CHAPTER 2

automotive industrial park, and consultation by Alec Erwin, a former industrial ministerof South Africa, whose framework is highly South African. Excessive attention to such
frontline topics as electronic cars and car-sharing may be amiss in Ethiopia where thecar industry is still primitive and the basics must be learned first. As the Ethiopian
automotive market is sure to grow steadily in the future (even with fluctuations),
continued automotive policy advice from Japan is essential to improve the businessenvironment and ensure the healthy growth of the industry 5.

2-2-3. P olicy support for Japanese firms partnering with Ethiopian
firms
Apart from the automotive sector, the Japanese policy dialogue team was also happy
to work with the Ethiopian government to attract foreign (especially Japanese) investors
to develop sectors Ethiopia wanted to promote. For this purpose, we can pick any sector
because policy lessons may be learned in any sector provided that the unique features ofthe sector are duly recognized. It is our belief that policy learning must be done on the
ground, at gemba, by choosing a specific industry to work on, studying its peculiarities
and considering Ethiopia’s uniqueness, to come up with concrete and differentiatedsolutions for chosen sectors through trial and error. Pragmatic policy knowledge cannot
be had by general theory, classroom instructions or hotel conferences alone. This is also
the way to avoid cookie-cutter mold solutions that ignore characteristics of individual
countries and sectors.
It is essential that government and academicians support what firms want to do
based on their business strategies, not by telling them what they should contributeto the development of the national economy. Many ask which industries Country X
should pursue, but it is ultimately up to the private sector, both domestic and foreign,
to invest, produce and expand. The policy dialogue team had no intention to develop
any particular sector of Ethiopia by its advice alone but tried to identify current and/or potential objectives of individual business firms and assisted their realization from518

Our research on Myanmar found that its government, despite the lack of knowledge of the automotive
industry, produced a simple but effective automotive policy by listening closely to Japanese automotive
makers and experts. Myanmar’s automotive policy prompted many foreign car producers to invest or
expand in Myanmar including the construction of Toyota’s first assembly plant (GRIPS Development
Forum, “Myanmar Mission Report: full English translation,” January 2020). However, the military coup in
February 2021 generated economic chaos and hampered the smooth growth of the automotive industry in
Myanmar.

Developments during Phase III

the sideline. Unless we detect a sign of keen business interest by Japanese firms, we
did not analyze the situation or propose policy actions. In this sense, we were passive
supporters.
There are many Japanese firms in various sectors interested in Ethiopia. We
had many meetings with them and collected relevant information. We supplied
requested information, especially on policy matters, and provided opportunities forJapanese firms to access relevant Ethiopian authorities 6. This included such sectors
as apparel, cigarettes, telecom, steel, horticulture, industrial park management andthe environmental technology industry. Among them, our policy support was mostintensive in the automotive sector (as already explained) and the apparel sector either
because Japanese firms approached us for policy help or because we detected great
potential for the involvement of Japanese firms from the unfolding situation. Needlessto say, we took the utmost care to protect the trade secret of each firm in providing suchsupport except in cases where firms already publicly announced their business plans inEthiopia or they explicitly absolved us of confidentiality.
In the apparel sector, Itochu Corporation 7, together with its Japanese business
partners, publicly declared that it was interested in working with apparel firms operatingin Ethiopia so they could export regularly to Japan by improving quality, lowering
cost and using domestic cotton. It sought our assistance in approaching Ethiopian
policymakers. We arranged an apparel workshop at MOTI in August 2018 where
Itochu representatives were the main speakers. Itochu chose two partner apparel firms
operating in Ethiopia, one local and another Bangladeshi, began to cooperate with
EIC, EKI and Ethiopian Textile Industry Development Institute (ETIDI), mobilized
Japanese apparel experts, and received support from the Japanese METI. Progress wasreported to the policy dialogue team regularly and we provided any additional support
necessary. The interim results of the project were publicized at the TICAD7 exhibition
6

7

JETRO offers professional support to Japanese firms interested in international business. The JETRO Addis
Ababa office was established in 2016 at the strong request of Prime Minister Hailemariam. The Ministryof Economy, Trade and Industry (METI), the Japanese embassy, JICA also support Japanese firms doing
business in developing countries. In Ethiopia, UNIDO, in cooperation with METI, additionally provide
information and services for interested Japanese firms. These organizations provide factual, procedural,technical and marketing information and provide financial assistance while our support is mostly confined
to policy areas.
Itochu, established in 1858, is one of the oldest and largest general trading houses in Japan. It operates thelargest overseas apparel business among Japanese trading houses. The firm is famous for its long-standing
corporate slogan of Sampo Yoshi, or the simultaneous pursuit of the benefits of the firm, its customers andthe society at large.

19

CHAPTER 2

in Yokohama in August 2019 which included the signing of an MOU between ETIDIand Itochu to support the quality enhancement of the apparel industry. A METIsponsored large workshop at Skylight Hotel in Addis Ababa was also organized in
February 2020. However, the project has since November 2020 been suspended due tothe Tigray situation.
It is our belief that linkage creation between domestic and foreign firms should
start on the demand side. The government should identify foreign firms seriously
considering domestic procurement and assist what they want to achieve rather than
improving productivity or developing a new product randomly without finding
customers assuming that a good product will naturally generate demand (which is often
not the case). A serious buyer gives concrete and rigorous instructions for improvement
whose realization assures a market. Thus, the producer does not have to spend time ormoney to “improve” in areas not desired by the market. It is better to let private firms
find business opportunities rather than governments doing supply-side projects.

2-2-4. Industrial park management
Industrial park construction and operation by the state have become an importantpillar of Ethiopian industrial policy. In the 2010s, the government raised it to the top
policy instrument in FDI attraction and FDI-assisted industrialization. Considerable
policy attention and financial resources were mobilized including the issuance ofEurobonds to partly fund the development of industrial parks. This policy was started
with the construction of Bole Lemi Industrial Park Phase I in Addis Ababa followedby the flagship industrial park in Hawassa. By now, more than ten state-run industrial
parks have been built or are in the process of construction across Ethiopia.
However, we found certain irregularities in the planning and management ofEthiopia’s state-run industrial parks from the viewpoint of service provision andfinancial viability. Despite great effort expended by Ethiopian leaders and officials,
Ethiopia’s parks are in many aspects different from the parks we know in Southeast Asia
where a large number of host countries and park developers fiercely compete for tenantfirms. The policy dialogue team inspected the parks in Bole Lemi, Hawassa, Mekelleand Dire Dawa (more than once for the first two) and frequently exchanged views with
Arkebe Oqubay (Senior Minister and Special Advisor to the Prime Minister) and Fitsum
Arega (EIC Commissioner), the two top officials in charge of industrial parks at thattime. Information and advice were collected from the investment promotion team of the20

Developments during Phase III

JICA’s Ethiopia Industrial Promotion Project as well as a Japanese industrial park expert
who successfully built and operated industrial parks in Cambodia. Our observations
were summarized in a policy note and submitted to Ethiopian policymakers but they did
not gather much interest or attention. Nevertheless, we believed our ideas were valid
and continued to present them on various occasions.
In the 2010s, Ethiopian industrial parks appeared successful as foreign investors
poured into newly created yet still limited industrial areas with reasonable infrastructureand services. By the 2020s, these parks began to face problems arising from external
factors such as political and policy instability and the global pandemic. Such vicissitudes
are normal and expectable in the industrial park business. Ethiopia needs advice on thesound management of industrial parks through good and bad times. The key idea isthat industrial parks are a customer-oriented commercial real estate business and thatthey should be managed for long-term profitability and cost-effectiveness in providing
facilities and services. Resilience must also be ensured against business ups and downs
which are inevitable in any property business. Our policy recommendations were givenin the GDF policy notes of 2017 and 2019, which were repeated in the GDF’s FDI
policy paper (2021) and the PSI and GRIPS’s Ethiopia FDI Policy Report (2022). They
can be summed up in the following six points 8.
1. Industrial parks must have multiple revenue sources, not just rents
from land and factory sheds.
2. Park developers should offer supporting services selectively andstrategically.
3. One stop service should be introduced functionally rather thanphysically.
4. Industrial parks must have contingency plans for low times.
5. Industrial parks should be sector-neutral and invite all sectors.
6. Diverse space choices should be available for renting land and sheds.
Details are provided in section 4-4 below.
8

See Kenichi Ohno, “Hawassa Industrial Park: Impression from a Japanese perspective,” GRIPS note
(February 2017); Kenichi Ohno, “A Note on Industrial Park Policy in Ethiopia,” GRIPS (May 2019);
GRIPS Development Forum Report, FDI Policy for Enhanced Value Creation in Ethiopia: Situation
Analysis and Policy Proposals (October 2021); and PSI & GRIPS, Ethiopia FDI Policy Report (2022).

21

CHAPTER 2

2-2-5. Commenting on key policy documents
In Phases I and II, Prime Minister Meles and Prime Minister Hailemariam directly
sought our advice in the drafting processes of GTP I and GTP II, the two consecutive
five-year national development plans. In particular, Prime Minister Hailemariam in2013 personally requested GRIPS to support the drafting of GTP II (along with the
improvement of think tanks) at the time of his visit to Yokohama for TICAD V. He
also assured us that our advice would be valued and visibly incorporated in the final
document. We responded by providing ideas and many of them—the light manufacturingvision, kaizen philosophy, stress on quality, productivity and competitiveness, etc.—
did enter GTP II extensively. In Phase III, however, we were not invited to assist thedrafting process of forthcoming plan documents in a similar way though occasional
consultations were made with the PDC and the Macroeconomic Team. Even so, we
continued to collect information on the drafting schedule, process and writers as wellas the main contents. Information pertinent to the industrial policy was gathered withspecial interest.
There were four main national development documents related to the industrial
policy since 2018 under the Abiy administration: (i) A New Horizon of Hope which
is just a large one-page policy matrix (Spring 2019; we did not receive an electronicfile); (ii) the Homegrown Economic Reform Agenda (HERA) (English slides were
given in September 2019); (iii) the Ten Year Perspective Development Plan 2021-2030(the Ten Year Plan) approved by the Parliament in March 2021; and (iv) the MOTI’s
sectoral document for executing the Ten Year Plan, around the same time. According
to PDC, which was tasked to compile national plan documents, a five-year plan was tobe created after the Ten Year Plan was approved but we were informed at the end of2022 that this idea was no longer valid. In the past, Ethiopia’s top national development
documents had been five-year plans. Since 2020, they were replaced by the Ten Year
Plan and its related documents.
We had some difficulty in gathering information about and receiving copiesof these documents. We had access to summary slides via indirect channels but
original documents were slow to be circulated. We met the commissioner and deputy
commissioner of PDC who provided pertinent information verbally. High officials of
PMO, EIC, MOTI, PSI, etc. were also consulted. The meetings with the key membersof the Macroeconomic Team (see Appendix 1) were especially useful.
Documents (i), (ii) and (iii) above were created consecutively during 201922

Developments during Phase III

2021. The document size increased from a one-sheet matrix to a full 200-page official
document endorsed by the Parliament. Among these documents, some contents overlap
but there are differences as well (including targeted sectors). Some critical issues, suchas concrete industrial visions, the precise relationship between market force and official
intervention, and the details of sectoral promotion policies were less than clear. Thereremain several ambiguities in Ethiopia’s current development strategy despite our manyinquiries. We were not given an opportunity to clarify these directly with Prime Minister
Abiy—unlike our long discussion and letter exchange on the economic philosophy of
ADLI and latecomer industrialization with Prime Minister Meles during 2008-2009.
Unlike his two predecessors who directly managed economic development on
a day-to-day and month-to-month basis, Prime Minister Abiy does not personallyinvolve in the making of concrete economic policies. He delegates economic issues
to his Macroeconomic Team, a group of selected officials from several organizations
including PMO, MOF, EIC, PDC and the National Bank of Ethiopia (NBE), and hears
their reports. This was confirmed by the Macroeconomic Team itself as well as by thestatement of former Prime Minister Hailemariam.
Because the direct approach to Prime Minister was not granted, we remain unsure
which of the following explanations, or a completely different one, is true.
(i)	Dr. Abiy is deeply interested in industrial development and has a consistenteconomic philosophy but is currently too busy with other burning issues toexpress them clearly.
(ii)	Dr. Abiy is unfamiliar with economic issues and has no long-term philosophy
or strategy for industrial development (other than the privatization of stateowned enterprises, dealing with foreign exchange shortage and otherimmediate issues).
(iii)	The Abiy administration disowns (or places less importance on) industrial
activism and selective intervention which were the hallmark of thegovernments of Mr. Meles and Mr. Hailemariam.
Some Ethiopian high officials remarked that Prime Minister Abiy effectively
handled many economic questions during the government retreat in 2019. We also
heard more than once that he was eager to develop the automotive industry but details of
his automotive strategy remain unknown 9. He was also reported to emphasize the value
9

Under the Abiy administration, the drafting of Ethiopia’s first automotive policy was delegated to EIC. Thiswas odd because EIC was an investment promotion agency with no technical knowledge of any particular

23

CHAPTER 2

of kaizen. But these do not sufficiently reveal his underlying economic philosophy.
If case (iii) above is correct, Ethiopia is shifting from the active developmentalismof the Meles years to the economic neo-liberalism of Washington Consensus typewhich used to be dominant in the 1980s and part of the 90s but is now almost extinct inthe development world. Is Ethiopia reverting to the discredited model of free markets?
This would have been an interesting topic to discuss with the prime minister and otherleaders of the Ethiopian government.
In separate sections, the features of the Abiy government in comparison with thepreceding two governments (section 3), our assessment of HERA and the Ten Years
Plan (section 5), and the analysis of the automotive sector (section 6) will be presented
in more detail.

2-2-6. Other topics and issues
There are other topics and issues which attracted the attention of the Ethiopian
leaders during Phase II and III. The Japanese dialogue team intended to follow themup and pursued some of them partially during Phase III but did not come to fullmaterialization for various reasons. Policy dialogue is an intensive real-time interaction
with the government of a developing country under changing circumstances and does
not by its nature guarantee completion of all planned agenda. Shifts in external factors,
dialogue partners and policy interests of the government are normal and inevitable.
Uncompleted or partly completed policy studies and actions in Phase III included thefollowing.

QPC supportBecause the previous five-year plan (GTP I) was heavy on quantitative targets
but hardly mentioned quality, productivity and competitiveness (QPC), we
recommended the inclusion of this aspect in GTP II. To our pleasant surprise,
the phrase QPC was extensively used in the final edition of GTP II. However,
the government (especially MOTI) admitted that it did not possess sufficientknowledge to concretize this policy. MOTI asked Japan to become a lead donor
industry. EIC worked with Germans and South African experts. MOTI thought the drafting of this policy
should be its mandate. MIDI under MOTI worked separately from EIC on this policy. Meanwhile, MOF
dealt with taxes, tariffs and incentives of the automotive sector. Given this situation, we did not perceive
any clear direction coming from the prime minister.

24

Developments during Phase III

in QPC promotion and we welcomed the prioritization of QPC. But QPC policy
is not a separate entity different from standard industrial policy. It is the objectiveof virtually all industrial measures that include human resource development,
SME support, export promotion, FDI attraction, sectoral promotion, technology
and linkage, standards and certification, ethical correctness, and so on. QPC isachieved by properly executing these well-known policies. The past and present
Japanese industrial cooperation in Ethiopia, including kaizen 10, had always aimed
to upgrade QPC. The gap between this understanding of ours and the Ethiopian
expectation of a new Japanese assistance package for QPC persisted without
resolution. We could have argued that the successful application of all ongoing
Japanese industrial cooperation projects was our contribution to QPC, but we did
not insist on this.

HandholdingHowever, the policy dialogue team did try to introduce one new policy for QCD.
Industrial human resource and enterprise development support were two criticalpillars of industrial policy. However, Ethiopia’s SME policy was sporadic andundeveloped (except kaizen). SME promotion covers a very wide area including
management, technology, finance, export, marketing, product development, labor,
environment, etc. It is difficult to quickly improve all these aspects in Ethiopia.
Institution building (an SME law, an SME agency, the shindanshi system, etc.) is
also highly desirable but will take great effort, time and resources. Our intention
was to add one element in SME promotion with proper design rather than installing
many components thinly and superficially. For this purpose, we chose handholding(also known as yorisoi or hands-on SME support). It is intensive and customized
support for a small number of selected SMEs with one concrete business goalfor each firm and a time limit of two to three years. Handholding is commonly
practiced by many central and local SME support organizations in Japan. It is also
conducted by the Japan External Trade Organization (JETRO) for SME export
as well as SME support agencies in Taiwan, Korea, Malaysia, etc. The Industrial
Policy Dialogue attempted to introduce a pilot model of handholding support to10

The full title of kaizen cooperation is the JICA-supported Project on Capacity Development for KAIZEN
Implementation for Quality and Productivity Improvement and Competitiveness Enhancement (20152020).

25

CHAPTER 2

Ethiopia in a simplified and limited way.
Resources were set aside, seminars were held to explain the concept to relevant

officials, MIDI was chosen as the key partner (because we wanted to work on
the metal and engineering sector in consideration of possible linkage with theautomotive sector), several candidate firms were identified and visited, and aJapanese expert team was mobilized to professionally evaluate the candidate firms.
However, our activity did not proceed beyond this point for multiple reasons. First,
JICA introduced a new project—the Project on Business Development Service(BDS) Enhancement for Enterprises Growth—which included a component toprovide handholding support to local SMEs 11. It is also important to note that theexport promotion team of the Industrial Promotion Project took the handholding
approach to create champion products in the leather and leather products sector
with the newly created brand of Highland Leather. As a result, handholding
support to SMEs was implemented as part of the related JICA-supported projects
and activities. Second, the general director and other key counterparts at MIDI
subsequently left the government which reduced the effectiveness of the project(see below). Third, some candidate firms had to be removed from the alreadyfinalized list due to one firm’s refusal to work with Ethiopian officials and a newconflict of interest with a Japanese automotive company 12.

Review of past productivity tools
MOTI Minister Ahmed Abitew argued that, before pursuing QPC further, the pastpolicies for productivity should be critically reviewed for missing elements. This
was a reasonable suggestion. The policy dialogue team implemented a review
study of kaizen, business process re-engineering (BPR) and twinning (pairing of
foreign and domestic technical institutions for coaching). A local consultant firm,
IPE Global in Addis Ababa, was selected by competitive bidding and conducteda review study based on the information and instruction provided by the policy
JICA and GRIPS agreed, after a series of discussions, that new JICA projects would replace handholding
prepared by the policy dialogue team. Handholding on a smaller scale was continued on the selected metaland engineering firms by the BDS project.
12
After the handholding support began, Isuzu announced its plan to assemble medium-sized trucks in Ethiopia
in collaboration with Kaki, a local private firm. We dropped a candidate firm that assembled Chinese trucks
as it competed with Isuzu in truck sales. We instead decided to support Isuzu from the perspective of policy
and relation-building with the Ethiopian government.
11

26

Developments during Phase III

dialogue team. The result was reported in a workshop at the MOTI in August 2017with the attendance of two state ministers of industry, some officials of industry
institutes and EKI 13.

Capacity building of MIDI
As mentioned above, we worked with MIDI under MOTI not only to implement
handholding but also to build capacities at MIDI. The textile and leather institutes(ETIDI and Leather Industry Development Institute (LIDI)), also under MOTI,
were awash with donor assistance of various kinds but institutes of other sectors
received much less donor support. Since Japan was experienced in manufacturing
cooperation (especially engineering and machinery) 14, we deemed it appropriatethat the policy dialogue team took up this relatively neglected sector. We had
meetings with the MIDI director general and his team every time we visited Addis
Ababa for information exchange and project promotion. MIDI also arranged many
visits to related local firms for us. We invited the director general and three officials
from MIDI to Japan in 2018 for an intensive study tour that included numerous
discussions on SME support, engineering and automotive sectors as well as visits
to one automotive firm and three factories in Kanto and Kansai. However, within
a year or two after the Japan tour, all participants but one, including the director
general, left MIDI for various reasons. One remaining person was promoted to thedirector general and we continued to have regular discussions with him. But hewas also replaced by a new director general in 2021. Frequent personnel changes
are common in Ethiopia but this all-out change of our MIDI counterparts posed a
serious problem in continuing our support.

Sideline support for a Japanese industrial park
One of the ways to improve industrial park management in Ethiopia was to dispatch
an experienced Japanese industrial park manager for a concrete task. During our
Although the policy dialogue team provided detailed information and instruction to the local consultants,
the result was not up to our expectation. Most “findings” were already known to us and Ethiopian officials.
Many pages were devoted to the analysis of kaizen by extensively citing the documents supplied by us
instead of conducting new interviews.
14
In Phase I, JICA and the Metal Products Development Center (MPDC, the predecessor of MIDI) conducteda joint study on the basic metals and engineering industries (BMEIs). Toru Homma, JICA’s senior advisor
on private sector development, together with German experts, were intensively engaged in this study.
1327

CHAPTER 2

policy study mission in 2015 (Phase II), we found such an expert in Cambodia. Mr.
Hiroshi Uematsu was the CEO of the Phnom Penh Special Economic Zone (PPSEZ)
who successfully created this SEZ by inviting many Japanese firms. He was eager
to take up a new challenge in Africa and agreed to set up a small industrial parkwith rental factories in Ethiopia to attract Japanese investors. We invited him to
Ethiopia to collect information and talk to officials including a presentation at HLF(Phase II). Mr. Uematsu set up a Japanese company to implement his project anddispatched young staff to Ethiopia for further preparation. He encountered many
problems but he initially thought they were no greater than those in Cambodia.
Subsequently, during Phase III, he joined the investment promotion team of the
JICA’s Ethiopia Industrial Promotion Project to support the activities related to
IPDC. The policy dialogue team worked closely with him. He was also supportedby the Japanese embassy, JICA and JETRO, and his plan was publicized in the
Nikkei Newspaper, Japan’s leading business media. However, Mr. Uematsu
eventually had to end his project mainly due to greater-than-expected impediments
imposed by the Ethiopian government. This included a unilateral large land rent
increase after the agreement was reached; a forced change of the implementationsite from Kilinto Industrial Park to Bole Lemi II; inability to assure quality inbuilding park infrastructure; and the general unpredictability of policy direction
and park costs. He returned to Cambodia where the investment climate was morepredictable.

The JETRO modelPrime Minister Hailemariam seriously wanted a JETRO office in Ethiopia. Heeven negotiated it directly with Prime Minister Shinzo Abe. He believed that thepresence of JETRO would accelerate Japanese investment. In response to his
enthusiasm, the JETRO Addis Ababa office was established in July 2016. Later,
we detected a sign that the Ethiopian government wanted more from JETRO. To
create an effective agency to promote export and FDI, the adoption of the JETRO
model was considered. Dr. Arkebe Oqubay who then was the key minister in
Ethiopian industrialization expressed interest to learn more from JETRO, and weconveyed his request to JETRO. A closed workshop on the functions of JETRO
was organized in Addis Ababa and Mr. Tadesse Haile (State Minister at PMO) who
attended it emphatically praised its content. However, Dr. Arkebe was unable to28

Developments during Phase III

attend. After this workshop, the interest in the JETRO model seems to have waned.

Invitation to capital-intensive mega projects
We received urgent requests from MOTI to assist large-scale national industrial
projects which, from the Japanese standpoint, did not seem appropriate to
Ethiopia’s current capacity, development stage and macroeconomic conditions.
They included a large integrated steel mill, a petrochemical complex with anextensive pipeline network, agro-industry parks15 and SME industrial parks. We
politely and quietly stayed out of these megaprojects. The request for Japan toparticipate in the integrated steel mill was repeatedly made by the MOTI minister
but we did not give a clear answer. The policy dialogue team did examine the
Feasibility Studies (F/S) report conducted by a British steel consultant firm
which we found less than convincing 16. Other big projects were studied and even
implemented by multiple donors and international consultants including the United
Nations Industrial Development Organization (UNIDO), India, China, the United
Kingdom (UK) and the US. We remained uncomfortable with the proposals oflarge capital investments or sector-specific industrial parks featuring agriculture,
SMEs, etc.
Even with these less-than-perfect results, we believe industrial policy dialogue isworth conducting. As noted above, policy dialogue does not ensure the completion of
all proposed actions because it explores new policy grounds through trial-and-error in
the unique context of the host country rather than following a well-established blueprint
or scenario. As a result, not everything goes as planned and some activities remainunfulfilled. That is natural and inevitable in any policy dialogue.
The rest of this report turns to policy substance and presents the selected highlights
The idea of agro-industry parks was already there when we started policy dialogue in 2008 (then supportedby the United Nations Development Programme: UNDP). We regarded this as too costly, ambiguous andineffective and made no further inquiries. The proposal continued to survive with shifting project names
and donors.
16
In 2000-01, GRIPS was engaged in an intensive policy discussion with Vietnam Steel Corporation on thefeasibility and design of an integrated steel mill together with a Japanese professor specializing in the Asiansteel industry and a JICA expert from Nippon Steel. We argued that a huge and expensive state-owned steel
mill was a high risk for Vietnam whose steel demand was still small and policy and project management
capacities were insufficient. Ethiopia’s current conditions are less favorable than Vietnam two decades ago.
We shared our Vietnam documents with Ethiopian authorities but received no response.
15

29

CHAPTER 2

of policy analysis and related documents we produced and shared with the Ethiopian
authorities during Phase III.

30

Changing Ethiopia

Chapter 3

Changing Ethiopia
3-1. Economic strategies of the three prime ministers
Our industrial policy dialogue spanned the administrations of three prime ministers:
Prime Minister Meles Zenawi (1991-2012), Prime Minister Hailemariam Desalegn(2012-2018) and Prime Minister Abiy Ahmed (2018-). Each had his style of governingand working with donors including Japan. There was a particularly strong styledifference between the first two and Dr. Abiy. Because our dialogue was conducted
at high levels (including the first two prime ministers), changes in the Ethiopian
government affected the modality of our dialogue significantly, especially before andafter 2018. More importantly, each government designed and implemented economic
policies differently. Below we summarize the most salient features of these three prime
ministers.
Table 1 contains the brief history of Ethiopia in the last several decades covering
Emperor Haile Selassie, the Derg and the three prime ministers. More specifically,
Table 2 compares the policy styles of the three prime ministers as observed through ourpolicy dialogue which greatly affected the political and economic course of events inEthiopia.

Prime Minister Meles
Prime Minister Meles, who requested kaizen cooperation and policy dialogue
to Japan in 2008, was a national leader who read many books and articles, attended
academic conferences, listened to the opinions of many economists, exchanged lettersand emails with them (including our team), and wrote papers advocating an escapefrom the neoclassical economic doctrine (Washington Consensus: WC). One of his
papers was published in a conference volume 17. Democratic developmentalism (DD),an academic concept that emerged from the conferences he was attending, was adopted
17

Meles Zenawi, “States and Markets: Neoliberal Limitations and the Case for a Developmental State,”
chapter 5, A. Noman, K. Botchwey, H. Stein & J.E. Stiglitz, eds., Good Growth and Governance in Africa:
Rethinking Development Strategies, Oxford University Press, 2012. In the same volume, Izumi Ohno and
Kenichi Ohno of GRIPS also contributed a chapter, “Dynamic Capacity Development: What Africa Can
Learn from Industrial Policy Formulation in East Asia” (chapter 7).

31

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Table 1. Brief Political and Economic History of Ethiopia
Emperor Haile Selassie 1930-74• Invasion by Italy (1936-41), dictatorship thereafterSocialist military regime ofMengistu Haile Mariam 1974-91• Political purge, famines, a large number of refugees• Collapsed by the advancement of anti-government forces

President/Prime Minister Meles
Zenawi (Ethiopian People’s
Revolutionary Democratic Front:
EPRDF) 1991-2012• F ederalism, a new constitution, coping with the Eritrean
problem• The idea of Agricultural Development Led Industrialization(ADLI)• Turning to development and industrialization around 2003
• PM guides drafting of industrial, agricultural and otherstrategies• Denial of neo-classical liberal economic doctrine and learningof Asian development models• Prioritized promotion of food processing, leather, garment,etc.
• Sending staff to Korea, adopting monthly national export
council• Discussion with renowned scholars supporting state-guided
development such as Stiglitz, Rodrik• Industrial policy dialogue and kaizen with Japan since 2009
• Top sales invitation of Turkish, Indian, Chinese, etc. FDIPrime Minister Hailemariam
Desalegn (EPRDF) 2012-18• D evelopmentalism continued, GTP II, strengthening of kaizen,
inviting Japanese FDI• Creation of state-run industrial parks• Resignation following domestic instability

Prime Minister Abiy Ahmed(Prosperity Party) 2018-• Delegating economic policy to Macroeconomic Team• Moving away from active intervention? Working closely with
Washington institutions• State-owned enterprises (SOE) reform, coping with debt andforeign currency shortage, planting trees and beautifying
Addis Ababa, resumed the World Trade Organization (WTO)
accession negotiation• Homegrown Economic Reform Agenda (HERA) and Ten YearPlan
• Regional, ethnic and religious tension escalates to theNorthern conflict with Tigray and other violent crashes
elsewhereas Ethiopia’s economic philosophy as distinct from the WC or East Asia’s authoritariandevelopmentalism (AD).
In our dialogue and letter correspondence, Prime Minister Meles defined DD as “aregime that conducts developmental policies continuously by delivering developmental
results and thereby winning free multiple-party elections consecutively.” He listed
three components of Ethiopian DD: (i) a strong state that encourages value creation andpunishes rent-seeking, (ii) political stability based on the support of numerous small
32

Changing Ethiopia

Table 2. Comparison of Three Prime Ministers
PM MelesPM Hailemariam

PM Abiy

Background

From Northern Tigray;from student to armed
fighter; ends Derg rule

From Southern Nations,
Nationalities, and People’s
Region (SNNPR); civilengineering; teachingexperience; from Deputy
Prime Minister andForeign Minister to PM

From Oromia; military,
Member of Parliament,
Science and Technology
Minister; elected by party
to PM

Governingstyle

Suppressing oppositions;
top-down quick decision
makingBalanced and moderate;
not authoritarian

Introduction of bold
actions and reforms

Development
philosophy

Rejects WC; adopts Asiandevelopmentalism; writing
papers and attending
conferences

Continuation ofdevelopmental policies;
starts a shift from stateled to private sector-led
development

Indirect managementof economy through
Macro Team; a shift fromdevelopmentalism to more
traditional WC policies?

Industrial
policyMonthly export steeringcommittee; national
expansion of TVET
and agri. extension;
kaizen; carrot-and-stick
promotion of priority
sectors; FDI attraction

Strengthen EIC; build
industrial parks (Dr.
Arkebe); continued FDI
attraction; passion fordeepening kaizen

Partial sales of SOEs andintroducing competition;
close cooperation withWorld Bank; copingwith economic crisis
and worsening foreign
currency shortage

Domestic
politics

Democratic
Developmentalism; inreality, one-party rule

Fails to manage erupting
violence and instability

Medemer philosophy;
urges ethnic unity; releaseof political prisoners; talks
with opposition parties;
instability continues;
Tigray problem

Foreigndiplomacy

Balanced relations with
West, China, India, etc.;
mediating and sending
troops to unstableneighbors

Same as left

Active interaction
with West, Middle
East, internationalorganizations; Nobel prize;
friction with West over
TigrayOther

Good memory; leadershipin climate change debate;
discussion with investors
and scholars

Continue dialogue withJapan; request Japan’s
support for GTP II at
TICAD V (Yokohama)

Young (born in 1976);
meets only state heads
and VIPs

farmers (not big capitalists), and (iii) agricultural development led industrialization(ADLI)—a mechanism where agricultural growth prepares conditions for full-fledged
industrialization via strong linkage between the two sectors. Entrepreneurs, whether
domestic or foreign, are not viewed as unconditional allies of Ethiopian development asthey may fall into rent-seeking patterns. Government must guide them by the carrot and33

CHAPTER 3

the stick. The typical example of this was the leather industry which was prohibited fromexporting unprocessed skins and hides and at the same time assisted by the technicaland training support of LIDI, an active use of international cooperation including thetwinning of LIDI with India, the prioritized allocation of loans and foreign currencies,and continued policy attention.

Prime Minister Hailemariam
Prime Minister Hailemariam was equally eager to discuss developmental issues
with Japan. He expressed a strong desire to strengthen three components of industrial
cooperation with Japan, namely, industrial policy dialogue, kaizen and attraction ofJapanese FDI.
On the occasion of TICAD V in Yokohama in May 2013, Prime Minister
Hailemariam requested three things to GDF: (i) advice on GTP II (next five-yearplan), (ii) the role of the newly established National Planning Commission, and (iii)the reform of EDRI (government think tank). Regarding (i), various suggestions were
subsequently offered to Ethiopia during the drafting process of GTP II and many ofthem were incorporated in the final document such as the vision of becoming Africa’s
light manufacturing leader, stress on the kaizen philosophy and creation of the kaizen
roadmap, and the importance of quality, productivity and competitiveness (QPC) which
was missing in the previous plan documents. QPC thus became an important industrial
goal of Ethiopia. However, the government in general and MOTI in particular admitted
that they were unsure about the necessary concrete measures for QPC and needed
further learning. Regarding the think tank, EDRI was merged with PSRC, anothergovernment think tank, in 2018 to become the Policy Studies Institute (PSI) with which
GDF continued to work closely. GDF provided consultation and gave a workshop on
the proper role of a government economic think tank at the request of Mr. Ahmed
Abitew, then Director General of PSRC.
Prime Minister Hailemariam was passionate about elevating kaizen to a national
mindset rather than a bunch of convenient tools. He stated, “Some firms regard kaizen
as already mastered when cost reduction or productivity improvement is attained
after a few months’ effort. Some consider kaizen as a short-term tool. Kaizen must
be a philosophy that must be implemented endlessly… Kaizen should not be a fadthat disappears in a short time. I constantly talk to my people about this risk throughthe media. In some countries, kaizen evaporated before it took root. That should not34

Changing Ethiopia

happen in Ethiopia” (dialogue at the PMO, February 25, 2014). He brought up kaizen invirtually every dialogue session with us.
Prime Minister Hailemariam was also emphatic about attracting Japanese firms:“My wish is to invite as many Japanese investors and trading houses as possible. The
current number is too few. We will continue to make effort, and I believe JETRO will
lend us a great helping hand. I have seen the superb functions of JETRO since my
Foreign Minister days. I request the establishment of the JETRO Office in Ethiopia. The
presence of Japanese firms gives us a role model that no other country can provide.”His vigorous campaign with Prime Minister Abe and other Japanese leaders brought
the JETRO office to Addis Ababa in July 2016 where Prime Minister Hailemariam
attended the inauguration ceremony.

Prime Minister Abiy
Prime Minister Abiy's priorities and strategies are only indirectly known to us
through media reports and high officials because we were not given a chance to directly
meet and talk to him, unlike his two predecessors.
Prime Minister Abiy surprised the nation by announcing a policy to partially sell(privatize) state-owned monopolies and/or allow (mostly foreign) private competitors
to enter the telecom, logistic and airline sectors. This was a departure from the Meles’
policy to retain “essential” sectors in the state hand. A foreign competitor firm
(Safaricom-Vodafone-Sumitomo group) was already introduced in the telecom sector
but liberalization in other sectors turned out to be slow. Another policy shift was acloser relationship with the World Bank and the IMF, from which the previous prime
ministers stayed aloof, to promote the above-mentioned liberalization policy and secure
external financing. The government and the IMF agreed on program-based balance-ofpayments financing. The effort to improve the World Bank Doing Business ranking,started by Mr. Hailemariam, was also continued 18. The Abiy administration also had
to cope with the severe shortage of foreign currency, a perennial problem for Ethiopia
which got worse in recent years.
However, these policy actions do not collectively tell us where the Ethiopian
economy is heading or what development strategy Ethiopia wants to adopt. The long18

However, the World Bank announced the termination of this annual ranking exercise in 2021 due tothe political scandal inside the Bank’s management. It plans to start a new project, Business Enabling
Environment (BEE) to replace the old exercise.

35

CHAPTER 3

term vision is not made clear, unlike Mr. Meles who advocated ADLI and DD, shunned
the WC and eagerly learned from East Asia. In particular, Dr. Abiy’s position in the
global developmental debate remains unclear in such areas as the role of the market
versus the state, general versus selective intervention, small versus wise government,
etc. Neither do economic policy documents compiled under him (see section 5) give asharp clue on this. One thing that is clear is Prime Minister Abiy delegates economic
policymaking to his Macroeconomic Team 19 and does not directly instruct policy
actions unlike Mr. Meles or Mr. Hailemariam did earlier. This point was confirmed
by our interviews with Mr. Hailemariam, Ambassador Girma Birru (PMO) and theother key members of the Macroeconomic Team. It was also often suggested that Prime
Minister Abiy was very busy with domestic political affairs ever since his assumptionof power and had little time to spell out his economic vision. Whether this is the main
reason for the relative paucity of his economic statements is moot.
Many officials informed us that Prime Minister Abiy was very keen on promoting
the automotive industry. He mentioned this on many occasions including a parliamentary
session, a government retreat and TV broadcast. This is encouraging because theautomotive sector is of great interest to us. However, without direct discussion with him,
we do not know exactly what he intends to achieve, his presumptions and priorities, andhow and with whom he plans to develop this industry. EIC was initially assigned todraft the automotive strategy but this function was later taken over by MOI/MIDI. The
roles of MOF and the Ministry of Trade (MOT) remain unclear. In a similar vein, we
hear Dr. Abiy is in favor of kaizen but details are not revealed.

3-2. Increased social and economic instability
Besides the changes of government, two factors that are beyond our analytical purview
greatly affected our policy dialogue during Phase III. They are the global COVID
pandemic that started in early 2020 and political uncertainty in Ethiopia that became
evident during the previous government and continued to worsen since then. Bothseverely restricted our travel to Ethiopia and suspended person-to-person contacts andthe sharing of the same space and time which are essential for effective bilateral dialogue.
19

36

The Macroeconomic Team is a group of selected officials from PMO, MOF, PDC/MPD, NBE, EIC, etc.
that directly and frequently assists and reports to PM Abiy. The key members with whom we often talked
include Dr. Mamo Mihretu (Senior Advisor and Chief Trade Negotiator, PMO), Dr. Eyob Tekalgn Tolina(MOF State Minister), Dr. Fitsum Assefa (PDC Commissioner/MPD Minister) and Mr. Abebe Abebayehu(former EIC Commissioner).

Changing Ethiopia

We resorted to remote discussions with our policy and research partners during most of2020 and 2021, but emails and online meetings cannot substitute face-to-face meetingsin building trust, confidence and the sense of working together. This is particularly
so as many of our dialogue partners were replaced as a result of frequent government
reshuffling and the Tigray problem. Some of them had to leave their positions andsometimes even the country. This required establishment of effective working relations
with the new appointees but this was hardly possible via short online meetings.
Of these impediments, the effects of the COVID pandemic were global and wellknown. Like many other countries, Ethiopia and Japan imposed a state of emergency andrestricted international travel whose timing and strictness depended on each country’s
situation and policy. Our regular travel to Ethiopia, organized four times annually, wassuspended after February 2020 and resumed only in April 2022 20.
Regarding domestic political instability, from around 2015, anti-government
movements and violence spread widely and the state of emergency was declared, leading
to the resignation of Prime Minister Hailemariam in 2018. Possible causes of instability
included the end of the Meles rule which led to the emergence of opposition forcesand ethnic enmity, rising youth unemployment, and the land acquisition problem that
ignited the latent resentment. Under the Abiy administration, the military confrontation
between the federal and Tigray forces which erupted in November 2020 added to thedifficulty in direct contact with our Ethiopian counterparts. As the military situation
aggravated in November 2021, most diplomatic missions had to evacuate the country.
Since then, the situation calmed down and peace talks were organized. However,other social and political tensions—inside Oromia, between Amhara and Oromia, andbetween the National and Oromo Ethiopian Orthodox Church—are also destabilizing
Ethiopia.

20

Travel to Ethiopia was not entirely banned (except late 2021-early 2022) but various controls and quarantine
requirement for sanitary and security reasons rendered short-time visits impractical. For a one-week visit,
COVID vaccination, many tests before, during and after the trip, frequent health reporting, and two-weekquarantine upon return to Japan were required. There was also uncertainty about whether we could meetcounterparts in person even if we were in Addis Ababa.

37

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitiveness

Chapter 4

Policy analyses: where Ethiopia stands in export,
FDI attraction and global competitivenessThis section gives the selected highlights of the policy research outputs of Industrial
Policy Dialogue produced by GDF or jointly with PSI. The covered studies include
the Ethiopia Productivity Report (February 2020), FDI Policy for Enhanced Value
Creation in Ethiopia (October 2021), the Ethiopia FDI Policy Report (January 2022) andassociated three-country surveys of the garment industry, and various policy notes on
industrial park management whose suggestions are also incorporated in the Ethiopia FDI
Policy Report. These studies collectively provide an overall assessment of Ethiopia’sinternational competitiveness, especially in export-oriented light manufacturing. They
are reported and circulated to relevant Ethiopian leaders and officials through reportlaunching events, workshops, hardcopies, media and downloadable soft copies.

4-1. Productivity
The Ethiopia Productivity Report of 2020 was the first report that analyzed laborproductivity and total factor productivity (TFP) of Ethiopia using standard theories andempirical methods. Its findings were highly appreciated by PDC (the drafter of the Ten
Year Plan), the World Bank and the Millennium Challenge Corporation of the UnitedStates, among others. The latter two invited the Ethiopian principal author of the Report
to Washington, DC to discuss its findings in two workshops organized by them. The key
messages for Ethiopian policymakers can be summarized in the following ten points.
1. Ethiopia had reasonably high productivity growth but the absolute level isstill low.
2. Heavy investment has been the main drivers of labor productivity in recent
years.
3. Labor mobility from low- to high-productivity activities is limited in
Ethiopia.

39

CHAPTER 4

4. There is a fear of premature de-industrialization as rural labor migrates toservices, not industry.
5. Diverse productivity performance is observed across various sub-sectors
within manufacturing.
6. If (minimum) wages are not set rationally, there is the risk of losing the
wage-productivity balance.
7. Ethiopian workers are trainable in skills, but attitude and discipline arelacking.
8. Ethiopian firms can learn from foreign methods in managing andincentivizing workers.
9. Locational differences in worker type are detected in Addis Ababa,
Hawassa and Mekelle.
10. Severe external impediments to productivity exist (foreign currency,
power, logistics, etc.)
In what follows, corroborating data is selectively cited from the Report. Ethiopia’s
economy-wide labor productivity grew 4.94% per annum during 2000-2016. This growth
can be decomposed into capital intensity (investment in machinery and equipment) andTFP (improved efficiency) as shown in Figure 2. In developing countries experiencing
rapid industrialization, we expect both effects to be strong. The main driver of Ethiopia’slabor productivity had long been TFP but after 2012 it shifted dramatically to capital
Figure 2. Contribution of Capital Intensity and TFP to Labor Productivity
GrowthSource: Ethiopia Productivity Report (2020), p.28.

40

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitiveness

Table 3. Decomposition of Labor Productivity Growth: Shift-share Analysis
Productivity
GrowthSources of Labor Productivity Growth

Contribution Shares to Labor
Productivity Growth (%)

WithineffectShift EffectInteraction
EffectWithineffectShift EffectInteraction
Effect2004-2007

7.9

21.7

4.6

0.5

81.0

17.0

2.0

2008-2011

6.6

14.2

7.2

0.5

64.7

32.9

2.4

2012-2016

6.0

15.7

9.9

1.3

58.3

36.9

4.8

2004-2016

6.6

79.5

26.7

15.5

65.3

21.9

12.7

Source: Ethiopia Productivity Report (2020), p.31.

investment. Heavy investment in infrastructure and other physical assets produced
quantitative expansion without quality, and the cost ineffectiveness of large public
investment projects was questionable. This is alarming because TFP should continue tobe the strong driver of the Ethiopian economy in many years to come.
Using another standard decomposition, labor productivity growth can be divided
into the within effect (productivity improvement in each sector), the shift effect(productivity improvement due to labor migration across sectors) and the interaction
effect (secondary interaction between the two) as in Table 3. Labor productivity was
initially driven largely by the within effect but its contribution gradually declined.
The shift effect became larger. This is worrisome because Ethiopia needs to keep both
effects active and large for a prolonged period to realize industrial transformation. The
within effect should rise rather than fall, and the shift effect should also remain strong.
The same decomposition can be used to reveal sector-wise dynamics as in Table 4.
Agriculture was the greatest contributor to overall labor productivity growth followed
by services and industry. This is not encouraging in a country where industrialization
Table 4. Decomposition of Labor Productivity Growth by Sector, 2004-2016
Sources of labor productivity growth(%)

Contribution share to labor productivity(%)

Agriculture

Industry

Service

Agriculture

Industry

Service

Within effect

46.31

12.14

21.05

58.25

15.28

26.48

Shift Effect

-8.03

5.89

28.82

-30.0822.08

108.00Interaction Effect

-7.21

6.56

16.16

-46.4742.28

104.18Source: Ethiopia Productivity Report (2020), p.32.

41

CHAPTER 4

is a paramount goal. Moreover, agricultural labor moves mostly to services, and only
modestly to industry. Ethiopia’s internal labor migration not only is small but fails tofollow the standard pattern of agriculture to manufacturing (then later to services). Thismay be a sign of “premature de-industrialization” which besets many middle-income
economies. Within the industry, it is construction, not manufacturing, that mostly
absorbs rural labor. Unlike East Asia, structural transformation is not visible despite
Ethiopia’s continued high growth and active policy support for manufacturing.

4-2. FDI policy
The FDI Policy Report of 2022 contained more concrete suggestions for policy reformthan the Ethiopia Productivity Report which was heavier in data analysis and fact
finding. FDI inflow into Ethiopia increased greatly in the 2010s and peaked at $4 billion
in 2016. However, instead of further accelerating to tens of billion dollars (as observedin latecomer industrial countries in East Asia), the inflow subsequently declined andstagnated (Figure 3). This was partly due to such non-economic factors as politicalinstability and the global pandemic but also due to Ethiopia’s weak policy and the lackof domestic capacity. The Report argued that FDI policy reform was necessary because
Figure 3. Net FDI Inflow into Ethiopia

Sources: for 1977-2019, World Bank, World Development Indicators (last updatedon July 30, 2021, accessed on September 6, 2021). For 2020 and 2021,
National Bank of Ethiopia data as reported in Trading Economics.com isused which includes the license fee for foreign participation in the telecom
sector amounting to $850 million; supplemented by recent news reports.

42

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitivenessit had become one of the main pillars of Ethiopia’s development strategy.
The core message of the Ethiopia FDI Policy Report was that FDI policy should
be more selective and encouraging to FDI firms that bring new or additional value tothe national economy. This can be restated as a movement from quantity-based FDI toquality-based FDI. However, this shift must be gradual, phased and overlapping because
Ethiopia still needs large FDI firms that create many jobs. The Report advocated theparallel attraction of large labor-intensive FDI and smaller but value-creating andtechnology-bringing FDI. To invite advanced FDI, it advised Ethiopia to ease theminimum capital size of FDI projects and prepare small and more varied industrial
rental space as initial policy actions.
Another crucial point was the adoption of a proactive FDI policy. The main weightof FDI policy should shift from administrative stipulations of the current Proclamations
and Regulations to more substantive promotional strategies such as policy goals, targeted
sectors, incentives linked with performance criteria, official support and public-private
collaboration. For this, the Report recommended the drafting of a new ground-breaking
document that included these components instead of cumulative minor revisions of past
Proclamations and Regulations.
To strengthen FDI policy, a three-part strategy was proposed. It consists of (i)strengthening domestic firms and labor, (ii) proper FDI selection and attraction, and(iii) the creation of FDI-local firm linkage (Figure 4). Each demands serious policy
learning and extensive preparation. Domestic capacity must be raised first to a certain
level before FDI-local linkage can occur.
To effectively execute the policy agenda above, Ethiopia needs clear performance
criteria and the enhanced capacity of industry officials to conduct and monitor eachpolicy. In addition, the investment climate must be greatly improved.
Both theory and international data suggest that the impacts of FDI on the balanceof payments (BOP) and technology transfer are not automatic. FDI has an ambiguous
effect on BOP because its impacts contain both positive and negative effects. The
negative effects include (i) initial importation of equipment and construction materials,(ii) lead time before operation reaches full capacity, (iii) heavy dependency on imported
inputs, and (iv) projects that generate little domestic value-added. The first two reasons
are temporary but the last two are long-term and structural. If non-improvement of
BOP is due to the latter, mere passage of time does not correct the situation. Rich
theoretical and empirical literature tells us that FDI generates technology transfer only43CHAPTER 4

Figure 4. Three-part Strategy for Countries Receiving Manufacturing FDI

Note: small-letter items under each box are concrete policy actions recommended in the
Ethiopian context.

if necessary domestic conditions are in place. These conditions vary depending on
the country and sector, and may include political stability, macroeconomic stability,
economic liberalization, investment climate, the development of the financial sector,
policy effectiveness, and—most importantly—the capacity of domestic workers andenterprises.
There are two global trends Ethiopia as a latecomer economy must cope with.
The first is the double requirements imposed on light manufacturing export by foreign
buyers, and the second is Industry 4.0. Global buyers impose strict product quality. They
also require socially decent conduct in manufacturing. Ethiopia must fulfill both. One
problem is the proliferation of many overlapping standards and certifications, especiallyfor ethical conduct. Assistance is sometimes available from foreign buyers, donors andinternational organizations to learn and implement these requirements. Domestically,
government and industrial associations, if they are capable, should provide thenecessary support. Many developing countries incorporate the idea of Industry 4.0 in
their development plans, but the substance is often lacking. How this new wave oftechnology impacts Ethiopia is uncertain. Capacity building is needed to cope with thenegative aspects of AI and automation, especially the fear of job loss.
44

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitiveness

Ethiopia currently faces an economic crisis. When it is overcome, the nationneeds to restore investor confidence to fully realize its economic potential. FDI isaffected by both concrete facts and investor psychology. Ethiopia must work on
both. Lost confidence is always recoverable even after a severe crisis or conflict asshown in Cambodia, Rwanda, Vietnam, Sri Lanka, Ethiopia after the Derg, etc. But
restoration may take a long time, sometimes decades, before a vibrant FDI inflow starts
again. The policy must accelerate and shorten it. Moreover, investor psychology is
not linear but hysteretic. Perception first moves slowly, then changes rapidly after acritical point. Policy effort may not produce immediate results but the effort must becontinued. Investors evaluate credible future policies highly even if the status quo isfar from satisfactory. Show a bright future—large demand, ample skilled labor, the riseof targeted sectors, etc.—and back it up with initial actions. A policy regime change
should be broadcast to investors with effective presentation. At the same time, small but
visible early results must be produced, which increases policy credibility and justifies
an optimistic investment decision. In FDI marketing, different characteristics among
different investors and nationalities must be recognized. Goals, strategies, decisionmaking speed, time scope, technology transfer, etc. all differ among Chinese, Indian,
Korean, European and Japanese investors and even across individual firms from thesame country.

4-3. International comparison of apparel export performance
The policy dialogue team organized a three-country garment firm survey in Ethiopia,
Vietnam and Bangladesh during November 2020-January 2021. Each country covered
about 30 firms from which qualitative findings and remaining challenges wereextracted. The survey was conducted by the researchers of PSI, the Bangladesh Instituteof Development Studies (BIDS) and the Vietnam Development Forum (VDF) in theirrespective countries after discussing and coordinating the methodology 21. The main
findings are as follows.
It must first be noted that Ethiopia is a latecomer while the other two are wellestablished large garment exporters after China. Naturally, Ethiopian performance is far
smaller than the others in terms of export volume, the number of firms or employment,
21

Surveys were conducted by Dr. Mulu Gebreeyesus and Dr. Kiflu Gedefe Molla (Ethiopia), Dr. Le Ha Thanh(Vietnam) and Dr. Monzur Hossain (Bangladesh). The Ethiopian survey studied only ten garment firms
because it also included firms from three other sub-sectors.

45

CHAPTER 4

the quality of policy, the quality of workers, the effectiveness of industry associations,and so on 22. The question is whether this is only due to the time factor (Ethiopia is a
latecomer) or the existence of some structural problem in Ethiopia that prevents thesound growth of the industry.
Regarding participation in the global value chain, all garment exporting countries
began with the lowest point in the Smile Curve (CMT or cut-make-trim) and try tocapture more value by moving upstream, i.e., incorporating material procurement (FOBor free-on-board). This movement is most advanced in Bangladesh where 70% of firms
engage in FOB and the remaining 30% in CMT. In Vietnam, the ratios are 25% and 65%(Figure 5). While there is no reliable data in Ethiopia, the EIC-JICA survey 23 reportsthat some exporters located in industrial parks do CMT and others FOB. However, this
only reflects the global strategy of each FDI firm rather than the capacity of Ethiopian
garment manufacturers since virtually all Ethiopian garment export is conducted by FDI.
In the other countries, domestic firms are dominant (Bangladesh) or coexist with FDI(Vietnam) in garment export. Ethiopia is in a very early stage of industrial development
Figure 5. Garment Value Chain

Source: General Statistics Office of Vietnam: percentages are Vietnam’s numbers as of 2019.

Ethiopia, Vietnam and Bangladesh each report the following statistics—export volume in 2019: $0.14b,$40.3b, $34.6b; the number of firms: 176, 7623, 3500; the number of employment: 0.1-0.3m?, 1.56m, 4m(sources: UNCTADstat, national statistics and various studies and reports; consistency is not necessarily
guaranteed across countries).
23
Ethiopian Investment Commission and Japan International Cooperation Agency Ethiopia Industrial
Promotion Project, Report on Export Gap Analysis, unpublished internal report (2021).
22

46

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitivenesswhere participation of local garment firms in the global value chain has not yet started.
Another indicator of industrial maturity is the share of domestic value-added ingarment export. Incomplete data suggest that this share is about 60% of the total valueof garment export in both Vietnam and Bangladesh. Similar information does not exist
in Ethiopia but we suspect it to be much smaller as almost all materials and accessories
for garment production are imported and Ethiopian wages are still very low.
Turning to labor costs, Ethiopia has by far the lowest cost in both monthly
wage and unit labor cost (Table 5). However, this does not directly translate into
the competitiveness of Ethiopian labor because there are other facts unfavorable toEthiopia. They include (i) simplicity of Ethiopian garment products in comparison
with the products of the others, (ii) the lack of knowledge, discipline and soft skills of
Ethiopian workers, and (iii) poor investment conditions such as the shortage of foreign
currency, unreliable power, logistic inefficiency and bureaucratic hindrances. It isinteresting to note that, in the World Bank’s Ease of Doing Business ranking in 2020,
Vietnam ranked 70th, Ethiopia 159th and Bangladesh 168th among 190 countries andterritories 24. Bangladesh is ranked below Ethiopia. A good investment climate is an
important element in FDI attraction or growth generation, but it alone cannot explain
diverse economic performance among countries.
In Bangladesh, the government and the two powerful industrial associations(Bangladesh Garment Manufacturers and Exporters Association (BGMEA) and
Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA)) havestrongly supported the garment sector through a subsidy for the use of domestic fiber,
short-term export finance, foreign currency retention privilege, overcoming challenges
such as the termination of Multi Fiber Arrangement (MFA) and the Rana Plaza accident,
and effective public-private collaboration. Such domestic support is less active in
Vietnam and at an early stage in Ethiopia.
It is interesting to observe that the COVID pandemic had little impact on
Vietnam’s garment shipment while many garment manufacturers in Bangladesh andEthiopia were severely affected. This is probably thanks to the fact that Vietnam has
secured major export markets by concluding many bilateral and regional Free Trade
Agreements (FTAs). Vietnam also benefits greatly from its China-plus-One status; it is24

The World Bank’s annual Ease of Doing Business (EDB) ranking was terminated in 2020 due to thepolitical scandal at the Bank Headquarters. As the Bank’s website reports, the BEE project is about toreplace the old ranking.

47

CHAPTER 4

Table 5. Labor Cost Comparison
Ethiopia

VietnamBangladesh

Average monthly manufacturing wage incl.
bonuses, overtime, social security$83 (2016)$344 (2020)$154 (2020)

Labor productivity (value added/person/ year)$1,271$12,700$10,400

Unit labor cost (US cents/$1 worth of product)

6.5 cents

32.5 cents

17.8 cents

PSI & GDF 2020

JETRO 2020

JETRO 2020

Survey source

Note: JETRO, “2020 JETRO Survey on Business Conditions of Japanese Companies Operating Overseas(Asia and Oceania)”.

the most favored destination for investors exiting China for any economic or politicalreason. The trade war between China and the US significantly boosted FDI inflow into
Vietnam. Bangladesh also enjoys the China-plus-One advantage but to a less degree
than Vietnam. Meanwhile, Ethiopia has no broad network of FTAs with its major
markets (the European Union (EU) and the US) and lost the existing trade privilege of
the African Growth and Opportunity Act (AGOA) in January 2022.

4-4. Industrial park management
Industrial parks offer a relatively good environment for factory operation in a country
where business conditions are generally poor. Ethiopia has built many state-owned
industrial parks and attracted FDI to them. However, given the short history of modern
industrial parks in Ethiopia, there is much room for improvement. The Ethiopia FDI
Policy Report and its companion paper as well as a series of policy notes by GDF offer
six concrete suggestions listed below for this purpose. The key idea is that industrial
parks are a customer-oriented real estate business and that they should be managed
for long-term profitability and cost-effectiveness in providing facilities and services.
Resilience must also be ensured against business ups and downs which are inevitablein any property business. This principle does not change whether the industrial park is
publicly owned or privately owned.
First, industrial park developers must have multiple revenue sources, not just rents
from land and factory sheds. The presence of alternative revenue sources lowers such
rents and strengthens the financial attractiveness of the park. This can be done by offeringvarious fee-based services such as management consultation; support for accounting, tax
or environmental documentation; labor recruitment and management; linkage creation
with buyers or suppliers; ICT installation and maintenance; and offices, meeting rooms,
48

Policy analyses: where Ethiopia stands in export, FDI attraction and global competitivenessincubation space, equipment, vehicles, etc. for rent. Another way to raise revenue is toprovide basic infrastructure services (especially power) reliably but with an additionalcharge by investing in a substation, round-the-clock engineers, etc. These constitute themain revenue sources of many Japanese industrial parks in Southeast Asia. Most tenantfirms highly appreciate these services even at additional costs.
Second, park developers should offer various facilities and services selectively
and strategically. Frontline technology and generous services should not be provided
at any cost. The cost here includes not just initial investment but also future operation,
maintenance and replacement costs. Cautious cost-benefit analysis must be done
to decide which facilities and services are worth offering. The tightfisted approachis necessary for business survival under severe competition among host countries
and parks. Financial viability must be carefully checked when building a grandiosepark management office, non-standard waste treatment, apartments and dormitories,
restaurants, shops, schools, clinics, banks, golf courses, beautiful landscaping, and soon. These services, even when offered, may be outsourced to private providers. The
normal practice at Japanese industrial parks in Asia is to offer only basics—safety,
security, reliable power, water supply, standard wastewater treatment, internal roads,
etc.—with high quality but not frills and add-ons which tenant firms do not strongly
want or for which they are unwilling to pay extra. In Ethiopia, the effectiveness of
Zero Liquid Discharge (ZLD) should be revisited. JICA experts recommend standard
two-step wastewater treatment for light water users such as garment and footwear firms
instead of installing centralized ZLD for the entire park.
Third, one stop service should be introduced functionally rather than physically.
The existence of one trusted official at the end of a telephone hotline, who can connect
distressed tenant firms to any office and service to solve any problem at any time,
is more valuable than installing many desks manned with seconded officials. The
matter is more of a soft support mechanism than the physical installation of desks andcounters. At Thilawa SEZ, Myanmar, Mr. Yoichi Matsui, head of the One Stop Service
Center, takes care of any issue immediately and professionally. At Kizuna Industrial
Park, Vietnam, Ms. Satoko Shirakawa handles all matters raised by Japanese investors
and Mr. Nam Kyoung Wan does the same for Korean investors. One stop services are
adopted at virtually all industrial parks around the globe but some of them are just by
name; investors still face bureaucratic hassles and delays. In Ethiopia, some investmentrelated services are slow, irregular, or entirely missing such as visa and work permits,49

CHAPTER 4

certificate of country origin, residence permit, post-investment services and follow-up,
and claim and complaint procedure by an investing firm.
Fourth, industrial parks must have contingency plans for low times. Property
business has both good times and bad ones, and good times never last forever. The
speed of tenant firm arrival (and departure) depends on many factors, most of which
are beyond the control of a host country or a park developer. Ethiopia’s state-owned
industrial parks were initially very popular among foreign investors, but the COVID
pandemic, global demand decline, political instability in Ethiopia and the suspension of
AGOA privilege are taking a toll on investor arrival. Future demand for industrial park
space is difficult to forecast. New construction, expansion and borrowing must be paced
judiciously to avoid unrented land or sheds.
Fifth, industrial parks should invite all sectors, especially in the early stage of theirdevelopment. The Ethiopian government specifies sectors to each industrial park rather
than leaving the matter to the choice of investors. Some argue that the geographicalconcentration of firms of the same sector creates synergy and sharing of resources suchas skilled engineers and specialized waste treatment. This is theoretically plausible
but does not always happen in reality. Firms in the same sector are often rivals who
are wary of labor poaching and information leakage to others. It is better to let firms
decide where to invest, including whether they prefer concentration or dispersion. In
Asia, most industrial parks welcome investors of any kind as long as they comply withnational laws and park regulations and pay dues on time. Sector indifference is a naturalconsequence of severe competition among industrial parks to attract as many goodtenants as possible.
Six, diverse choices should be available for renting land and sheds. As noted above,
Ethiopia has built many same-size, large-capacity rental sheds. These standardized sheds
are suitable for labor-intensive export-oriented light manufacturing such as garment andfootwear production in the early stage of FDI-led industrialization. However, to attract
more sophisticated manufacturing now and in the future, customized industrial spaceshould also be offered. When Japanese manufacturers invest abroad, they typically startwith small and made-to-order industrial space of about 250-1,000m2, or even smaller
incubation space with only one machine. If successful, they move to bigger rental spaceor build their own factories. Some European and American firms behave similarly.

50

A New Horizon, HERA and the Ten Year Perspective Development Plan

Chapter 5

A New Horizon, HERA and the Ten Year
Perspective Development Plan
Several policy documents give us a clue to the economic policy orientation of the Abiyadministration: A New Horizon of Hope (Spring 2019), the Homegrown Economic
Reform Agenda (September 2019), the Ten Year Perspective Development Plan: A
Pathway to Prosperity 2021-2030 (approved by the Parliament in March 2021), the
MOI’s Ten Year Development Plan (the ministerial detailed version of the nationalplan), the MOI’s new industrial policy draft, and the documents and activities related
to the MOI’s Ethiopia Tamirt Movement (National Industrialization Movement). This
chapter examines these documents and activities.

5-1. A New Horizon of HopeThis is just a one-page matrix of policy purposes and actions to express what Ethiopia
intended to the domestic and foreign audience. It has nine rows covering various
topics in democracy and rule of law, job creation and competitiveness, and enablers.
It has four columns which are issues and constraints, key facts and challenges, effects
and actions (2018-2019), and effects and actions (2020). The policy dialogue teamreceived a hard copy of this sheet from JICA (Table 6). In February 2019, we had theopportunity to meet Dr. Mamo E. Mihretu, policy advisor at PMO and coordinator of
the Macroeconomic Team, for the first time. The allotted time was very short and we
asked many questions about the roles, members and modalities of the Macroeconomic
Team among which this policy matrix was one. Dr. Mamo acknowledged that thispolicy matrix was drafted by his Team. It was consistent with GTP II (the current fiveyear plan) and summarized the objectives and government’s accountability in a concise
form for external communication. He said this could be considered as revised highlights
of GTP II. There were some puzzling aspects to this matrix such as the lack of detail in
real-sector issues 25, but we did not have time to go further into this. It is presumable that25

For example, future actions related to productive sectors (agriculture, manufacturing and services) are quite
terse: (i) increase the manufacturing share of export to 15%, (ii) export ICT service by creating an ICT
cluster for young graduates, (iii) increase the number of transit tourists by 80%, (iv) increase the share of51

CHAPTER 5

Table 6. A New Horizon of Hope
Points of Departure:• Weak democratization and justice system• Poor public service delivery• Elevated risk of debt distress and low domestic resource mobilization• Poor export performance and weak trade balance

Democracy and Rule of Law

Issues & Constraints

Justice and
Democracy

Public Service
DeliveryJob Creation and Competitiveness

Macro-economic
Management

Productive Sectors(Agriculture,
Manufacturing andServices)

Export and Revenue
mobilization

Enablers

Financial Sector

Human Capital

Logistics

Electricity

52

Key Facts & Challenges• Inadequate safeguarding of the freedom and wellbeing of citizens resulted in widespread popular protests• Initiatives being taken the past 6 months to address these demands• Deep-rooted undemocratic leanings and absence of strong institutions pose a threat to the new reform initiative• Historical and current conflicts resurface and result in clashes and instability thereby threatening the safety of citizens• Absence of a meritocratic system of hiring and retention of public servants• Lengthy and exhausting procedures for government services including: for paying taxes, starting a business, municipal
services, basic utilities, health services etc.…
• Regulatory requirements are redundant, unrealistic, impossible/excessively costly to implement• Poor working environment of public servants• Persistent inflation• Poor export performance• Limited supply of financial services, foreign exchange shortage• Elevated risk of debt distress• 70 million Ethiopians are below the age of 30• Youth unemployment is especially critical in rural areas• Agriculture is not modernized and not sufficiently linked with other sectors• Traditional agricultural practices, limited use of irrigation and mechanization, limited inputs supply, poor utilization ofwater resources• Growth of manufacturing industry, esp. agro-processing, is delayed due to a complex set of challenges• Total export of goods and services does not exceed 10% of GDP, significantly below 24% expected from a country thesize of Ethiopia• Export performance is alarming and declining--2.9 Billion this year against target of 8 Billion• Narrow tax base. unfair tax system, high tax compliance cost, low tax collection• Poor financial infrastructure limiting availability of financial services• limited financing available to the private sector• Poor financial inclusiveness and accessibility• Poor quality and accessibility of education• High gender inequality• Weak educational institutions• Low rate of births assisted by health professionals• Low rate of vaccination• High rate of water borne diseases because of limited water supply & sanitation• High cost of logistics undermining, over trade competitiveness• Limited participation of private sector in the logistics supply chain• Lack of modern systems and inefficient customs clearance procedures• Tedious and bureaucratic system, and an inefficient financial system crippling future prospects for sectoral development• Ethiopia's low tariff rates have resulted in increasingly high government subsidies• Low electric supply and limited private sector participation in the sector has limited the competitiveness of the sector

A New Horizon, HERA and the Ten Year Perspective Development Plan

• High youth unemployment• Slow structural transformation of the economy• Low productivity and traditional agricultural practices• Poor quality and low inclusivity of the education• Low access to energy and reliability• Growing illegal activities (including contraband, illegal arms trafficking,displacement of citizens)• W eakening values of togetherness, tolerance and national unity

Effects and Actions (2018-2019)

Effects and Actions (2020)

1. R
 evise restrictive laws with a view to ensure compliance withpertinent human rights standards
2. B uild national consensus by preparing and starting implementation ofcomprehensive national roadmap for democratization and transition
3. R educe the incidence of communal clashes and violence, through the
adoption and enforcement of a Hate Speech Law
4. T ake measures to enhance independence, impartiality and capacity of
the judiciary and democratic institutions

1. G
 uarantee a level playing field and hold free, fair, and credible electionsin 2020
2. I mplement the national roadmap for transition & democratization andstrengthen constitutional democracy
3. I mplement legal and related reforms to combat against human rights
violations by law enforcement bodies
4. Introduce an administrative procedure law and improve the rule -making
procedures to enhance fairness, transparency and participation

1. Develop and endorse a comprehensive public service reform roadmap
2. Streamline and simplify procedures for starting a business3. Implement electronic filing and e-payment tax administration
4. S implify and optimize the process for issuing construction permits andproperty registration

1. Completion and implementation of e-government services
2. Implement a system to simplify the tax payment system
3. Full roll-out of the civil service reform interventions

1. Maintain fiscal deficit of 3% of GDP or lower
2. I mprove public investment management through greater prioritizationof investment
3. M
 aximize the involvement of the private sector in infrastructure
financing trough public-private partnership

1. Maintaining fiscal deficit of 2.5% of GDP or lower by rationalizing
government subsidy
2. lmprove debt policy management including stronger control on SOEs
borrowing policy and achieve "moderate" risk of debt distress

1. Increase productivity by expanding irrigation in selected areas andmodernize agricultural practices
2. Support and enable investments in industrial parks and elsewhere to
become fully operational
3. Enhance the contribution of the service sector to the economy - withspecial focus on ICT and tourism sectors
4. Complete agro-industrial parks and make operational; expand small
and medium enterprises

1. I ncrease the share of manufacturing export in total merchandize export
to l 5%2. E
 xport ICT Service export by creating an lCT Cluster to young graduates
3. I ncrease the number of transit tourist arrival by 80% by streamlining thevisa regime and developing a Stop over Tourism packages
4. Increase share of service exports
5. Expand integrated agro-industry

1. R ationalize and improve tax incentives to increase and diversify
exports
2. Implement a system to effectively control contraband
3. Review all tax break and incentive schemes and revise as needed
4. lncrease value-added exports in select agricultural products

1. Increase share of exports to GDP to 15%
2. lncrease share of mining and manufacturing to total exports to 35%
3. Finalize Ethiopia's WTO and CFTA membership
4. Increase shore of tax revenue to 15% of GDP
5. Implement new system of VAT and excise tax

1. D evelop a roadmap for introducing trade financing instruments
including capital market
2. l ncrease loans available to the private sector by 20% annually andensure its fair disbursement
3. Expand credit registry to MFls

1. Enhance the use of modern financial technology
2. Establish a system enabling e-commerce and digital financing
3. Introduce capital market

1. Implement the new education roadmap
2. Improve the organization, quality and leadership capacity of the sector
3. Promote private sector investment in primary education
4. D evise a prevention oriented national health plan; expand access tobalanced nutrition and dean water
5. Expand health service coverage, improving quality of health services

1. I mplement programs to increase international competitiveness inquality of education
2. Increase percentage of women in undergraduate programs or 45%
3. Increase health professional assisted births to 90%
4. Increase share of fully vaccinated children to 90%
5. Increase clean water access to 80%

1. Launch a customs single window service
2. Enhance private sector participation in the entire logistics supply
chain
3. Diversify Ethiopia's port access1. Cut import and export transit time by half
2. R
 educe the number of documents required for import and export by half
3. R educe the average duel time of imported goods to 2 days in dry ports
4. I ncrease general cargo carried by multi-modal transport systemcoverage to 90%

1. lmplement a revised tariff scheme and alleviate financial distress
2. Facilitate participation of the private sector in power supply

1. Increase access to electricity to 50%
2. Increase total installed capacity to 6,000 MW
3. Reduce electricity wastage to 15%53CHAPTER 5

this matrix was an intermediate product between GTP II and the subsequent HERA andthe Ten Year Plan. We later tried to clarify the relationship between this policy matrixand HERA with PMO and PDC, but we did not succeed in obtaining a clear answer.

5-2. The Homegrown Economic Reform Agenda
The Homegrown Economic Reform Agenda (HERA) was produced by the
Macroeconomic Team whose members come from MOF (State Minister Eyob acted
as a secretariat and spokesperson), PDC, PMO, NBE and others over many months inseveral iterations, with no foreign advisor involved. The Party Executive Committee
and the Cabinet of Ministers deliberated and approved it, and Prime Minister Abiyofficially announced it in September 2019. In October 2019, the policy dialogue teammet the technocrats of the Macroeconomic Team responsible for drafting HERA. We
were informed that Dr. Abiy would not change the main thrusts of existing economic
strategies, but the role of the state had to be constantly redefined especially because theprivate sector did not grow as strongly as expected. PDC assured us that HERA, witha time scope of three years, was consistent with the Ten Year Plan (and the Five Year
Development Plan to be prepared later 26) and provided the basis for these plans to come.
HERA was (and is) the statement of utmost importance indicating Ethiopia’s economic
policy directions. It sets directions but contains no action details.
Ambassador Girma Birru, a special economic advisor of PM, explained HERA to
the policy dialogue team as follows.
Ethiopia’s economic model has not changed from the days of Prime Minister
Meles or Prime Minister Hailemariam. However, because of aggressive
public spending the nation has lost macroeconomic balance and faces
serious foreign currency and debt crises. The purpose of HERA is to deal
with these crises in the next three years. The first pillar (macroeconomy)
simply means working with the IMF and the World Bank to overcome thismacroeconomic predicament. The second pillar (structural reforms) breaks
service exports, and (v) expand integrated agro-industry. References to manufacturing are very limited.
Moreover, the time scope of one year (within 2020) is too short to initiate any substantive project, let alone
produce results.
26
MPD (upgraded from PDC) explained in December 2022 that the idea of five year development plan had
been canceled.

54

A New Horizon, HERA and the Ten Year Perspective Development Plan

Table 7. Homegrown Economic Reform Agenda: Content Structure
Situation analysis

Policy directions(three “reforms”)

Past achievements • High growth• Poverty reduction• arious social achievements
Remaining issues• Growth driven mainly by public investment which
stimulated construction and services• Investments financed mostly by public loans andexternal loans and grants• Negative real interest rates and exchange rate
overvaluation• Ethiopian social indicators below the average of lower
middle-income countries• The lack of structural transformation (manufacturing did
not surge)• Growth driven mostly by capital accumulation rather
than productivity• Productivity growth constrained by various bottlenecks
in overall economy and specific sectors• Serious macroeconomic imbalances including foreign
currency shortage (poor export performance), external
debt burden, limited private sector access to financeand high inflation

1. Macroeconomic
stabilization• Fiscal consolidation and efficiency improvement• Coping with foreign currency shortage• Anti-inflation measures and financial crisis management• Enterprise access to finance, etc.

2. Structuralreforms• Administration reform and deregulation• Privatization of telecom, power and logistic service• Introduction of competition

3. Selective sector
promotion• Agriculture• Manufacturing• Mining• Tourism• ICT

state monopolies in telecom, power and logistic service by introducing
competition or partial sales. We will do this carefully, not hastily. The third
pillar (priority sector promotion) means raising the productivity of the fivesectors. We can restate it as export promotion and import substitution. This
pillar cannot be completed within three years so it will inevitably overlap
with the Ten Year Plan. It is a long-term productivity question of which wehave little knowledge. We need international assistance on this. (Interview
with Ambassador Girma at PMO, February 21, 2020)
Prior to this, the GRIPS team drafted a short memo on HERA and shared it with55

CHAPTER 5

the Macroeconomic Team and Ambassador Girma 27. We also verbally presented ourthoughts to the key members of the Macroeconomic Team (Dr. Mamo, Dr. Eyob, and
Mr. Abebe) at a closed workshop at EIC. Our main arguments were as follows.
HERA’s situation analysis is fairly honest and objective. We basically agreewith the picture presented here although there may be some arguments
about details. The findings of the Ethiopian Productivity Report (PSI and
GRIPS, 2020) largely overlap with HERA’s past review. For example,
labor productivity decomposition in our Report offers statistical support
to the investment-driven (not TFP-driven) growth. Our Report also detects
the lack of labor mobility from agriculture to manufacturing. Regarding thesecond part, the three-way policy framework is a standard one, and we do
not have any objection at this level of generality. HERA as a general policy
box should be acceptable to almost everyone. The crucial thing is what
Ethiopia will put into this three-way box and how each component relates
to each other…
Macroeconomic stability is not very controversial; every country mustachieve it as a precondition for economic development. The issue is mainly
a technical one of how to solve inflation, foreign currency shortage, debt
crisis, and the like, with minimum damage to the society and businesses.
In contrast, the logical relationship between the two real-sector pillars—
structural reforms and sector-specific promotion—entails a long-lasting
policy debate … and how it is handled will produce very different policy
and economic results.
HERA as currently presented … defines a policy framework without
presenting the final contents that go into this framework. As such, HERA
is difficult to assess or criticize because crucial issues arise and debate will
begin when concrete implementation details are decided and relationships
among pillars are clarified, not from the framework itself which is fairly
standard.
27

56

Kenichi Ohno, “Homegrown Economic Reform Agenda: A Perspective from the Japanese Industrial Policy
Dialogue Team,” policy note, November 7, 2019.

A New Horizon, HERA and the Ten Year Perspective Development Plan

There has been a long debate on how real-sector development policies should beorganized among development economists and international organizations. From thelate 1980s to the 1990s, Japanese development officials and economists challenged thethen-prevailing view that justified the structural adjustment policy of the World Bank.
It was the time when Japanese Official Development Assistance (ODA) and financial
contribution to the World Bank expanded but Japan felt that the Bank’s policy practice
was contrary to what Japan believed was a good development strategy for latecomer
countries.
The Washington Consensus (WC) prioritizes liberalization, privatization, global
integration and a good business climate. Moreover, these conditions are regarded
as largely sufficient for latecomer growth and industrialization as private firms can
automatically choose prospective industries and grow. Hence, governments arecounseled not to intervene selectively in individual sectors but let the market decide
which industries will emerge and win. WC advocates argue that selective intervention
is bound to fail because governments are not wise enough to choose the right sectors topromote and because their policies are always hijacked by interest groups and lobbyists.
Therefore, good industrial promotion is a general one that ensures a suitable businessenvironment for all to compete fairly without the government favoring any particularfirm or sector. More recently, it is said the IMF and the World Bank no longer preachrigid free-market principles but now accept the importance of industrial promotion. But
what they regard as good industrial promotion is the improvement of the level playing
field in which private players compete, not selective coaching of individual players forwinning.
Japan (and most of East Asia) believes that general economic liberalizationis necessary, but its execution should be paced to the rising competitiveness ofdomestic industries. The primary policy aim should be the enhancement of real-sector
competitiveness with the government guiding and supporting targeted industries. Since
not all industries can be promoted simultaneously, such intervention must necessarily
be selective. We admit that many governments are foolish and influenced by politicalpressure as WC warns. But instead of quitting intervention, we advise learning how
to conduct industrial policy effectively without unfair favor or corruption. This policy
learning can be done through trial and error, external advice, comparison of numerous
international experiences, and creating a model most suitable for domestic reality. Thatis how Japan rose in the late 19th century and how it advises developing countries today.
57

CHAPTER 5

Many East Asian nations followed. As national competitiveness rises, liberalization,
privatization, global integration and other opening measures can be adopted inproper speed and scope. Big-bang liberalization without fostering competitiveness isinadvisable as it will lead to the dominance of foreign imports and FDI.
This argument is hardly new. In the 18th century, Friedrich List in Germany andAlexander Hamilton in the US argued that latecomer countries such as theirs neededstate-sponsored industrial protection rather than the free market to catch up with the UK,then the leading economy. In the late 19th century, Japanese national leaders such as
Ito Hirobumi and Okubo Toshimichi rejected British advice to open up and trade freely
because such policy, based on the Ricardian comparative advantage theory, would only
benefit already-strong advanced nations while latecomers such as Meiji Japan would
be flooded with Western goods with no prospect for catch-up industrialization. Morerecently, Ha-joon Chang, Joseph Stiglitz, Dani Rodrik, Mario Cimoli, Giovanni Dosi
and other economists have severely criticized WC policies as unfair and depriving
policy tools for latecomers to climb up. We can also see what happens to developing
countries that open up quickly without fostering competitiveness. Mongolia andKyrgyzstan did so in the 1990s and Chinese imports now dominate their economies.
Many African countries lost what little industrial base they had when the IMF and theWorld Bank imposed liberalization and privatization in the early 1990s. The Kenyan
automotive industry was devastated when the free import of used cars was allowed
under Washington pressure and has not recovered from the damage since.
In Ethiopia, Prime Minister Meles adopted the Eastern Way. He first learned from
Korea and Taiwan. Japan was invited in 2008 to introduce kaizen and initiate bilateralindustrial policy dialogue. That was how Japan’s current industrial cooperation in
Ethiopia started. He was interested in both theory and practice and wanted to introduce
targeted measures as soon as possible. He instructed certain firms to try kaizen frominternet information even before JICA officially launched kaizen cooperation. He
approached individual foreign firms and invited them to invest in Ethiopia.
Despite his persistent learning and swift actions for about a decade, Ethiopia did not
succeed in promoting targeted sectors or structural transformation. Manufacturing did
not surge, and priority sectors such as garment, leather and food processing did not show
visible results. Maybe his learning was not sufficient. But we suspect the main problem
was the lack of private response to his policies as well as the absence of competenttechnocrats and ground officials who could effectively execute them. Strong leadership
58

A New Horizon, HERA and the Ten Year Perspective Development Plan

was not enough to drive industrialization in Ethiopia. Prime Minister Hailemariambasically continued the Meles strategy but there was also no clear advancement in thepriority sectors.
How about HERA? As noted above, HERA is a broad framework without the
specification of details. As such, it permits possibilities of both general liberalizationand selective industrial promotion, and the relationship between the two has not yet
been clarified. Depending on what Ethiopian policymakers put into the pillars, it may
become WC, the Meles strategy or something else. Now that the policy framework
is set, substantive debate and decision-making on policy content must follow. Somepeople suspect that the government is abandoning the Meles strategy and reverting to
WC. But that is only one possibility within the announced HERA framework. Whether
that would happen will become clear in the future. The table summarizing the stancesof WC, Prime Minister Meles and HERA and submitted to the Macroeconomic Teamis shown in Table 8.
Table 8. A Comparison of Economic Policy StanceWashington
Consensus

Macroeconomic
stability

Generalimprovements
on businessconditions

Selective
industrial
concern &promotion

RemarkPM MelesHomegrown Economic
Reform Agenda

Top priority: bold budget
cuts, tight money,
flexible exchange rate aspreconditions for reformand growth (IMF)

Coping with crises as
they arise (inflation, fuel& sugar shortage, F/X
allocation, etc.)

Concern indicatedbut effective andconcrete enough? F/X,
finance, inflation, debt
sustainability, etc. (5slides)Big-bang liberalization:
Liberalize, privatize,
integrate, good and level
investment climate asap

Maintaining tight controls(banking, telecom, SOES,etc.); no long-term
liberalization plan shown

Will to SOE reforms,
better infrastructureservices expressed, with
WB support (WB EDB
ranking also targeted) (1slide)

Undesirable; don't do it
Government is unwise &policies are captured byinterests (Anne Krueger)

Strong state guidance& support on priority
sectors; learning how to
do this from East (incl.
Kaizen)Listed but details
unknown; still
general--agriculture,
manufacturing, mining,
tourism, ICT (1 slide each)

Traditional IMF & WB
and most Westerners;
criticized for damaging
real economy in Africa, L.
America, Former USSR,
Asian crisis countries

Despite serious policy
learning, targeted
manufacturing sectors
remained weak andvisible transformation did
not occur

Weights and depths of 3
pillars unknown; Generaland Selective should bothbe pursued strongly andin balance (Framework or
Ingredients approach?

Note: this table was presented to the Macroeconomic Team at the EIC workshop in October 2019.

59

CHAPTER 5

From the Asian experience and the Japanese perspective 28, we propose balance
between the two real-sector orientations with priority placed on industrial promotion.
More specifically, we propose (i) strengthening key sectors with selective industrial
promotion with great attention on building private capacity and government’s support
capacity; and (ii) pacing liberalization, privatization, global integration, etc. to the
speed and degree of competitiveness enhancement of the Ethiopian industries. This isa difficult task that even Prime Minister Meles could not attain. Ethiopia needs morepolicy learning rather than abandoning it for free markets.

5-3. The Ten Year Perspective Development Plan
The Ten Year Perspective Development Plan: A Pathway to Prosperity 2021-2030 (TheTen Year Plan) was prepared by the Planning and Development Commission (PDC)(now the Ministry of Planning and Development: MPD) through extensive stakeholder
consultations and approved by the Parliament in March 2021. This is Ethiopia’s firstten-year plan in place of previous five-year plans. It is the most important national
document that governs the development policy in the years to come. However, HERA
also continued to be cited as a supplementary document that prepared the conditions forthe execution of the ten-year plan.
The Ten Year Plan has the following structure (popular English version; chaptersand sections of particular interest to Industrial Policy Dialogue are shown in bold
letters).
1. Past Economic Performance and Its Major Challenges
2. Homegrown Economic Reform and Scope of the Ten-Year Plan
3. National Development Vision and Strategic Pillars
3.1 National Development Vision, Objectives and Strategic Pillars
3.2 Objectives of the Development Plan
28

60

The documents reflecting this perspective include Overseas Economic Cooperation Fund, “Issues Related to
the World Bank’s Approach to Structural Adjustment: a Proposal from a Major Partner,” a paper submitted
to the World Bank (1991); Toru Yanagihara, “Development and Dynamic Efficiency: Framework Approachversus Ingredients Approach,” a policy note (1992); Shigeru Ishikawa, “Underdevelopment of the market
economy and the limits of economic liberalization,” in his Basic Issues in Development Economics (1990);
and Tatsuo Kaneda, “Kyrgyzstan’s Road to Economic Recovery: an Effort in Intellectual Assistance,”
submitted to the Kyrgyz government (1992). All these were translated into English and contained in Izumi
Ohno & Kenichi Ohno, eds., Japanese Views on Economic Development: Diverse Paths to the Market,
Routledge, 1998 (paperback edition 2015; e-book also available).

A New Horizon, HERA and the Ten Year Perspective Development Plan

3.3 Strategic Pillars and Key Priority Areas
3.4 Global and Regional Development Commitments
4. Macroeconomic Plan
5. Economic Sectors Development Plan
5.1 Agriculture
5.2 Manufacturing
5.3 Construction
5.4 Mining and Petroleum
5.5 Trade
5.6 Tourism
5.7 Urban Development
6. Infrastructure Development Plan
7. Demography and Human Resource Development
8. Gender and Social Inclusion
9. Justice and Public Services
10. Peace Building and Regional Development Cooperation
11. Environment and Climate Change
12. Implementation Strategies and Monitoring and Evaluation System
In June 2020, the GDF team made two general comments on the draft version of
the Ten Year Plan.
First, many visions, objectives and other ideas are provided but concrete targets,actions and numbers are less visible. This is somewhat inevitable because this is acomprehensive national plan addressing all social and economic issues. Some missing
numbers and details are to be filled with ministerial ten-year plans that follow thenational plan. Nevertheless, the presentation of selected key targets and actions would
have been effective even in a national plan. To be credible, the random or excessive
inclusion of slogans and goals must be avoided.
Second, the presented policy structure is confusing. Overlapping ideas appear
in many places (Strategic pillars, Productive sectors, Enabling sectors, etc.) and are
difficult to distinguish from each other. For each productive sector, “focus areas” and“objectives” are similar and duplicative. “Enabling sectors” contain means and methods,
but other sections also contain some of these things. There are also overlaps among“Challenges,” “Failures” and “Potentials.” Too many ideas are provided for each issue61

CHAPTER 5

without a clear structure. We would prefer a simpler three-layer structure consistingof vision(s) - intermediate targets - concrete policy actions, where all ideas should beplaced within this framework and appear only once. Only several key intermediatetargets and policy actions should be highlighted given the limited time, capacity andresources for policy implementation.
More specific comments include the following.
(i) Vision 2030, “Ethiopia: An African Beacon of Prosperity” is less clear than theprevious vision of “Becoming a Light Manufacturing Leader in Africa” of GTP
II in terms of what Ethiopia wants to attain in the next decade.
(ii) The relationship between the productive sectors of the plan and HERA’s five
selected sectors (and their promotion strategies) is not evident.
(iii) Terms such as “quality growth,” “productivity and competitiveness” and“production and productivity” are mentioned frequently. GTP II also stressed
QPC without defining attaining methods. The new plan must go beyond GTP
II and specify concrete measures to realize these goals.
(iv) 
Statements about “private & competition-friendly bureaucracy,” “public
private partnership” and “quality infrastructure for quality FDI” are welcome
although they also need concrete action plans.
(v) Macroeconomic goals are interesting and ambitious. Ethiopia wants to grow
10% per year during 2020/21-2029/30 spearheaded by manufacturing growthof 20.6% per year. The manufacturing share in gross domestic product (GDP)shall rise from 6.9% now to 17.2% while the service share remains relatively
flat. These may be achievable but only if the policy is upgraded and made more
effective.
Discussion of the manufacturing industry in the Ten Year Plan is general (butalso see the next subsection). Below is the full citation of listed items in section 5.2(Manufacturing). Relationship or stratification among focus areas, objectives and main
targets is unclear.
Twelve• Enhancing capacity utilization

major focus• Strengthening coordinationareas• Raising production and productivity from existing industrial
establishments

62

A New Horizon, HERA and the Ten Year Perspective Development Plan

• Satisfying domestic demand as well as supplying export markets
by producing competitive industrial products such as foodstuffs,
wearing apparel, housing materials and pharmaceuticals• Encouraging manufacturing industries that utilize locally produced
inputs• Raising the variety, quantity and quality of exportable industrial
commodities• Strengthening the value chain, interlinkages, and interdependencies
within the manufacturing industry• Attracting new investments in large numbers, varieties andqualities into manufacturing by introducing, based on studies,
new investment incentives and simplified procedures, as well as
enhancing the role and partnership of the private sector to that end• Coordinating the development of heavy metal and engineering
industries, chemical and pharmaceutical industries, and other hightech industries• Strengthening the cluster organization system• Expanding small- and medium-scale industries and creating
an enabling environment for transitioning to the next stage ofdevelopment• Expanding job opportunities.
Four
objectives• Create employment opportunities by improving the production andproductivity of existing manufacturing plants and by attracting new
high-quality investments• Expand manufacturing industries that can produce strategiccommodities that can substitute imports; producing high-quality
export goods in volume and variety• Increase the share of manufacturing in the gross domestic productby creating a conducive environment for improved participation ofprivate investors in the subsector• Ensure that the development of manufacturing industry is consistent
with the country’s sustainable and green economy development
strategy.
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CHAPTER 5

Five main
targets• Increase average capacity utilization of the manufacturing industry
from 50% to 85%• Raise the domestic market share of locally manufactured industrial
products from 30% to 60% by expanding manufacturing industries
that produce substitutes of strategic import goods• Raise the competitiveness of the manufacturing industry by
improving product quality• Raise the number of small and medium-scale manufacturing
enterprises from 2,000 to 11,000 by attracting high-quality
investments and focusing on those industries that employ advanced
technologies• Create a total of 5 million new job opportunities in the manufacturingindustry during the ten years period by raising the number of job
opportunities created annually from 175 thousand in 2019/20 to 850
thousand in 2029/30

It was explained that the new Ten Year Plan was produced with extensive bottomup (ministerial level) inputs and intensive consultation with various stakeholders.
However, from our observation of the past drafting processes of GTP I and GTP II, we
did not see any significant departure in this practice. Donor consultation was less thanthe previous times.
Our ideas and assessments were not communicated effectively to the Ethiopian
government because this time we were not requested to comment unlike the previous
two five-year plans, and because contact became difficult due to the global pandemic
and frequent changes of government structure and leaders. Moreover, advice on any
substantive revision of content or structure was unrealistic at the late stage of plan
preparation (June 2020) when we first obtained information on the content of theforthcoming Ten Year Plan.

5-4. The MOTI’s Ten Year Development Plan
After the completion of the national Ten Year Perspective Development Plan, eachministry is required to produce its ten year plan. We obtained the MOTI’s Ten Year
Plan (Amharic) in February 2021 although it was finalized within the ministry muchearlier. MOTI prepared a 22-page English slide presentation to inform its contents to64

A New Horizon, HERA and the Ten Year Perspective Development Plan

the donors (Development Assistance Group: DAG) in April 2021. Its contents run as
follows.
MOTI’s methods for formulating the ten-year sector plan are first explained(Strengths-Weakness Opportunities Treats (SWOT) and Political, Economic, Social,
Technological, Environmental, and Legal factors (PESTEL) analysis, performance
review with stakeholders, etc.) The ten-year sector vision was presented (By 2030/31
make Ethiopia’s manufacturing industry and trade sector globally competitive). Past
performance is reviewed. Ten manufacturing challenges are identified. It is argued that
addressing these challenges will contribute to the national economy. Then the priority
subsectors for the next ten years are listed (Figure 6). In the first five years, past priority
industries such as agro-processing, leather and garment continue to be targeted. In thenext five years, Ethiopia is expected to graduate from these traditional industries and go
to more sophisticated ones. ICT is prioritized throughout the decade.
Then three “linkages” (backward, forward and regional distribution of
manufacturing) are discussed, and 16 targets, mostly quantitative, are presented.

Figure 6. MOTI’s Ten Year Subsector Prioritization

Source: Ministry of Trade and Industry, “10 Year Perspective Plan Priorities 2020/21-2030/31: Major
Reform Agendas and Support Areas,” presentation slides to DAG, April 2021.

65

CHAPTER 5• Improve the Ease of Starting a Business ranking to among the top 50 countries• Improve the average growth rate of the manufacturing industry from 16.6% to20.6%• Improve the manufacturing industry contribution to the GDP from 6.8% to 17.8%• Improve the capacity of the manufacturing industries from 50% to 85%• Grow the export earning of the manufacturing industry from $4 million to $9
billion• Create a minimum of 5 million new job opportunities in the manufacturing sector• Grow the share of the import substitution of local manufacturers from 30% to60%• Reform the quality inspection and regulation of products to increase Ethiopia’scompetitiveness• To join the WTO complete 30 negotiations with member states, endorse
agreements and implement 25 [a word is missing]• By looking into global and regional standards increase the number of national
standards from 11,200 to 13,000• Revise 70% of national standards we have
• Create awareness around standards in relation to WTO/ Trade Barriers (Technical
Barriers to Trade: TBT)/Enquiry point/• Increase training and technical support to manufacturers to increase productivity,
capacity utilization, product diversification from 30% to 60%• Accrediting conformity assessment institutions to ensure their assessment is
accepted globally and are competitive• Improve the consumer protection by addressing illegal trade practice and taking
actions on violators• Increase the number of small and medium manufacturers from 19 thousand to
81 thousand
Then initiatives which MOTI has already started, current donor support andprojects needing additional support are listed.
Looking at both the national and MOTI Ten Year Plans, the past reviews andmany targeted ideas are mostly reasonable. The latter include the quality of growth,
productivity, competitiveness, appropriate official support of the private sector, value
chains, linkages, employment generation and SME promotion. At the same time, it
must be admitted that both the national and sectoral ten year plans are full of wish66

A New Horizon, HERA and the Ten Year Perspective Development Planlists—focus areas, objectives and targets whose relationship remains unclear—butquite weak in presenting concrete and implementable action plans equipped withtimeline, resource, executing agency, monitoring mechanism, etc. As with the Plan
for Accelerated and Sustained Development to End Poverty (PASDEP), GTP I and
GTP II, some quantitative targets seem overambitious (e.g., manufacturing export torise from $4 million to $9 billion). Regarding focus areas, they are too broad covering
agriculture, manufacturing, mining, services (including tourism), energy, transport,
finance, innovation and technology, urban development, and irrigation. It is almost theentire Ethiopian economy. Selectivity is necessary given the limited executing capacity
and resources.
MOTI also informed us that an automotive sector development plan had been
separately prepared by MIDI. This plan was not included in the MOTI’s Ten Year
Plan or the National Ten Year Plan, which is odd if automotive promotion is one of
the national industrial priorities. Previously, EIC was drafting an automotive sector
development plan but this process has been terminated and the drafting authority seems
to have shifted to MOTI. During the drafting process, we were not provided immediately
with the content of the proposed automotive sector development plan prepared either by
EIC or MOTI. The next section discusses this industry more fully.

5-5. The new industrial policy
The Ethiopian government began to revise the industrial policy from the Spring of2022. We were informed of this revision during the first mission to Ethiopia after the
pandemic-related two-year travel ban was lifted in April 2022. This was the first effort
to update Ethiopia’s industrial policy since 2002 when the previous industrial strategy
was formulated by Prime Minister Meles 29. The policy dialogue team was provided
with the slides of the new draft policy framework circulated among development
partners in May 2022 (Figure 7) and the draft document in Amharic in June 2022, but
we were told that there had been many changes from this version. We have not received
29

At the outset of Industrial Policy Dialogue Phase I, we had an opportunity to discuss the 2002 industrial
strategy with Prime Minister Meles who admitted that he himself “had a hand” in drafting this document.
This document deviated from the standard policy format as it preached in lengthy passages desired national
objectives and direction without providing any data or graphics. Even so, each chapter of the document
clearly defined individual policy orientations such as export promotion, the importance of labor-intensive
light manufacturing, the relationship between the private sector and the government, the roles of domestic
and foreign enterprises, and the need of citizen’s involvement. The revision of this document is natural andoverdue given many changes that occurred in the last 20 years and the need for more details.

67

CHAPTER 5

Figure 7. Directions of the New Industrial Policy

Source: MOI’s Draft revised Manufacturing Industry Policy Framework: Review with key
stakeholders (May 2022).

the final document though we were promised that its Amharic original and English
translation would be made available when finalized. From our discussions with MOI
Minister Melaku and high officials of MOI and MPD during our missions in September
and December 2022, the new document is likely to highlight such pillars as market
orientation, the private sector as the engine of growth, the equal importance of export
and import substitution, green economy and the cluster approach. These were explained
as departures from the past, but we are not entirely sure about the novelty of these pillars.
68

A New Horizon, HERA and the Ten Year Perspective Development Plan

Under these pillars, we were informed that 25 directives and 62 areas of interventions
were listed (some say the number of the latter is 65). These 62 areas of intervention
seem to correspond to individual projects with which donors are solicited to cooperate,
and these may not be made open until the document is finally and officially approved.
During our December 2022 mission, we were informed that the new industrial policy
was soon to be submitted to the Council of Ministers for approval.
MOI Minister Melaku stressed the need to prioritize and concretize among many
policies contained in the new document. Specifically, he cited the creation of actionplans, sector-specific studies of import substitution, and the drafting of Industrial
Resource Mapping as required next actions. He also requested Japanese advice on
which sectors should be targeted for import substitution. Regarding the mapping ofresources and technologies, he noted that the final decision must be in the hands ofprivate enterprises but the government must also set appropriate policy directions. He
also pointed to the knowledge gap that existed in both the public and private sector that
had to be filled.

5-6. National Industrial Movement
The MOI launched the National Industrial Movement (Ethiopia Tamirt) in the Springof 2022 as it engaged in the above-mentioned revision work of the industrial policy.
This movement is considered to be one of the key implementation instruments of the
new industrial policy as well as the manufacturing chapter of the Ten Year Perspective
Development Plan. The origin of this movement was explained as follows. The
Macroeconomic Team (the advisory group reporting to the prime minister) pointed
out the stagnant manufacturing sector despite many years of promotion, to which MOI
Minister Melaku and high MOI officials proposed a new national movement to improve
the situation. The government accepted this proposal. After preparation and the draftingof a few key documents, Prime Minister Abiy officially launched the movement in
Addis Ababa in May 2022. Initially, the Kaizen Excellence Center (KEC) assumed thesecretariat role of the movement. However, Minister Melaku’s determination to makethis movement a long-term commitment (10-20 years) rather than a temporary one,the secretariat function was moved to a newly created permanent office in the MOI
headquarters in September 2022. The movement is activated not only in Addis Ababa
but also in all levels including federal, regional states and private sector. A number ofdeliberation and coordination mechanisms were also created to solve specific problems.
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CHAPTER 5

In terms of organizational structure, the highest body of the movement is the
National Council headed by Minister Melaku 30, and the MOI Steering Committee, also
headed by Minister, is placed under it. The Steering Committee is expected to meet
every three months but this has not yet been realized. Under it, there are five “clusters”(policy deliberation mechanisms) for promoting inter-ministerial coordination: financeand taxes, capacity building and Research and Development (R&D), raw materials andinfrastructure, investment and development partners, and regional states and special
cities. Each cluster is led by a state minister or an equivalent focal person. In regional
states and cities, two focal persons are designated (a leader and a technical staff). Under
the cluster mechanism, discussion between MOI and the tax and customs authorities
are already underway. MOI also discusses fiscal issues with the Macroeconomic Teamand monetary and financial issues with NBE. The policy trade-off between MOI and
the fiscal and monetary authorities has not yet been solved but understanding between
the two parties is deepening according to MOI officials. Under the clusters, technicalworking groups are appointed. These groups conduct research and surveys to provide
necessary information to the clusters (Figure 8). Thus, the MOI initiated new policy
actions centered on the National Industrial Movement in 2022, leadership in interministerial policy discussions and negotiations with development partners (donors)
and, through these, attempts to make manufacturing promotion more “harmonized.”
Meetings with development partners are supposed to take place every month whiledevelopment partner meetings attended by Minister Melaku are expected in every
quarter.
Many think that the MOI’s influence within the government has increased thanks
to the revision of the industrial policy and the initiation of the National Industrial
Movement. This tendency is recognized not only by the MOI itself but also by otherministries and industry-oriented development partners. At the same time, it must be
admitted that the rapid implementation of a new nationwide movement burdens the
MOI and produces some internal confusion. After a few waves of radical restructuring
imposed by the government, the current organization of the MOI exhibits many
ambiguities and inconsistencies. Tasks are duplicated among different departments, and30

70

The MOI wished Prime Minister Abiy to chair the National Council but this did not materialize. Instead,
Minister Melaku chairs both the National Council and the Steering Committee. For the success of animportant national policy, the strong involvement of a top leader is essential as witnessed in many Asian
examples. From this viewpoint, the above arrangement is not an ideal one.

A New Horizon, HERA and the Ten Year Perspective Development Plan

Figure 8. The Organization for the National Industrial Movement

Source: “Ethiopia Tamirt: A national movement to build a manufacturing Ethiopia
through an integrated and sustainable approach,” with some updates.

the scope and functions of each department are often unclear. More than one department
or person are formulating the new industrial policy or implementing the new movement,
which made it difficult for us to identify the key person responsible for each policy. One
example is replacing KEC by a newly created office in the headquarters as the secretariatof the national movement within a short time. Details of the movement documents
drafted by different persons are not exactly the same. A number of MOI officials we met
also admitted duplication and ambiguity within the current structure of the MOI. For the
successful implementation of the revised industrial policy and the National Industrial
Movement, the amelioration of such internal inconsistencies is critical in addition to themore fundamental question of whether the policy and movement will produce visible
industrial results.
Policy inconsistency arises not just within the MOI but also among ministries. The
latter situation is not a new phenomenon in Ethiopia as well as in other countries. MOIMinister Melaku regards inter-ministerial policy inconsistency as one of the key causesof Ethiopia’s stagnant manufacturing sector and shows strong interest in removing
it. His interest appears equally shared by the rest of the Ethiopian government. In
Ethiopia, solving the inconsistency problem in economic policy is the responsibilityof the Macroeconomic Team. Recently, moreover, MPD has been tasked by the prime71

CHAPTER 5

minister to check specific inter-ministerial policy issues before they come to the Councilof Ministers for approval.
MOI Minister Melaku stated that, while the top national leader had to strike abalance between macroeconomic stability and industrial promotion, politicians needed
information necessary to evaluate the merits and demerits of any policy and come to
an informed decision. He requested the Japanese policy dialogue team to share theinternational experiences of inter-ministerial coordination. GDF responded to thisrequest by organizing a policy workshop on the topic of policy inconsistency (fifth
Development Policy Forum (DPF) seminar) in Addis Ababa in December 2022
where the causes and solutions of policy inconsistency were deliberated, Ethiopia’ssituation was analyzed, and many concrete examples from East Asia were presented
for practical analysis and suggestions. Policy inconsistency may arise from the classicaltug-of-war between the fiscal authority and the industry-promoting ministry but also
from task duplication, ambiguous responsibility, frequent organizational reforms, thelack of knowledge by policymakers, and the low capacity and unfitting attitude of
implementing officials. Solutions also vary depending on the cause. East Asia can offer
many examples of successes and even failures. Ultimately, what is critically importantis not which policy coordination model should be adopted in any particular country
but the quality of national leaders and technocrats who utilize such policy coordination
model.

5-7. Policy inconsistency check by MPD
At the time of cabinet reshuffle in October 2021, it was decided that all new policy
documents must be checked for policy inconsistency by MPD before they go to theCouncil of Ministers. This procedure was introduced to reduce inter-ministerialinconsistencies which were considered to be one of the causes of past policy failures.
In November 2022, MPD produced a guideline document for this purpose entitled
Policy Alignment for Prosperity: Alignment of Development Policies and Programs. It
states that policy alignment consists of three types: inter-ministerial (across sectors),macroeconomic vs. sectoral, and federal vs. regional states. Examples of the need forpolicy coordination across ministries include education vs. industrial human resource
requirements and input-output relations among agriculture, mining and industry. The
guideline also requires each ministry to explain why a new policy is needed, proposedchanges from the existing document, targeted results, expected challenges, etc. to be72

A New Horizon, HERA and the Ten Year Perspective Development Plan

scrutinized by MPD, a process called Policy Mapping. It is hoped that this undertaking
will remove inconsistencies among ministries and improve the policy capacity of MPD
and relevant ministries.
The first-round exercise of this policy checking was underway when the policy
dialogue team arrived in Ethiopia in December 2022. The draft of the MOI’s new
industrial policy was examined in this first-round exercise, among others. MPD
Minister Fitsum asked the Japanese team to talk to the MPD technical team engaged
in this exercise at a hotel in the suburb of Addis Ababa. The Japanese team did soto understand the concrete actions of this policy exercise and provide preliminary
comments and suggestions.
Key points of the MPD’s guideline documents for policy inconsistency check Policies must ensure mutual consistency with an explicit framework andprocedure Definitions of terms: Policy, Strategy, Program, Project (from general tospecific) Types of inconsistency: macroeconomic vs. sector, sector vs. subsectors, andfederal vs. regional states Good policy must satisfy coherence, mutual consistency, social welfare,feasibility, political suitability, comprehensiveness, etc.
 Policymaking procedure (drafting period is 18 months)
Ministry proposes→Policy Concept Note is checked by MPD using
template→Schedule and budget for drafting work are decided→Survey
and expert evaluation are conducted→Second study meeting at
the regional level→Ministry submits draft document following
given format→Ministry of Justice checks→Council of Ministers
approves→Implementation→Monitoring and evaluation
Annex: Policy Mapping Workshop
Examine existing policy→Relevant ministry presents the outlineof proposed policy→Alignment analysis→Identify a new law to becreated→Identify organizations to be created or closed→Determine
Program [action plan?]→Decide budget
73

Automotive policy

Chapter 6

Automotive policy
The Ethiopian government, Prime Minister Hailemariam and Prime Minister Abiyin particular, frequently expressed interest in promoting the automotive sector. The
former instructed EIC and MOTI to attract FDI car assemblers and draft Ethiopia’s first
automotive sector plan. Given the large population and balance-of-payments pressure
exerted by car imports, it is natural that Ethiopian policy targets this industry despite
many difficulties in technology, management, institution and market size. At the sametime, Japanese brand vehicles have dominated the streets of Ethiopia though most ofthem were used vehicles and illegal or parallel imports. Japanese automotive producers
may be interested in assembling cars and trucks in a potentially large and growing
market such as this, provided that certain conditions are met. At present, however, there
are many practical impediments to automotive assembly in Ethiopia.
In Phase III, the policy dialogue team saw the future possibility of convergenceof bilateral policy interests, Ethiopian and Japanese, in the automotive sector as wellas much room for policy learning, and began research on the sector. The Ethiopian
automotive market is currently very small and suppressed by various obstacles as
explained below. It is still in a very early stage of development (SKD assembly) andmust travel a long way before the domestic automotive market and production mature.
The government is willing and serious to promote the sector but it lacks practicalknowledge for implementing needed actions. Policy learning that fits Ethiopia’s reality
is essential.
In 2018, GRIPS and JICA intensified the discussion of automotive policy with
Ethiopia’s responsible authorities. Our main partners were MOTI (including Metals
Industry Development Institute (MIDI)), EIC, PMO and MOF. To prepare necessary
information, the Japanese policy dialogue team repeatedly interviewed automotive
manufacturers and dealers in Japan, Ethiopia and elsewhere. We invited MIDI
officials to Japan in June 2018 and dispatched policy missions to Kenya in August
2018 and Myanmar in November 2019. Because Germany was also interested in car
assembly and upgrading the Ethiopian automotive sector, we met GIZ representatives
to exchange information almost every time we visited Addis Ababa. GDF produced a75

CHAPTER 6

series of automotive policy documents and submitted to our counterparts. Among them,
the “Note on the Assembly of Japanese Automobiles and Construction Equipment inEthiopia” (November 2018), “Automotive Industry Promotion in Ethiopia” (March
2020), and “Ethiopian Automotive Policy in the African Automotive Market” (August2022) were most important ones. Additionally, a report on the Myanmar automotive
industry, comments on Ethiopian automotive policy, and information updates on African
automotive developments were also provided. We conducted three MOTI-hosted
automotive seminars in February 2019, February 2020 and September 2022 in Addis
Ababa. We also continuously monitored the progress of the Isuzu-Kaki cooperation toassemble Isuzu trucks in the suburbs of Addis Ababa.

6-1. The Ethiopian automotive market and Japanese manufacturers
There is no comprehensive official automotive data in Ethiopia but private firms andconsulting firms collect available information. Ethiopia’s motorization rate is one of
the lowest in the world at eight vehicles per 1,000 persons. There are nine assembling
plants of foreign brand vehicles (Chinese, Korean, Italian, French and Japanese) but
their operation ratios remain low due to problems in foreign exchange, security andsuppressed demand. They collectively assemble less than 1,000 vehicles per year, far
below their total capacity (28,000?)
Bishoftu Automotive Manufacturing Industry, a member of Ethio-EngineeringGroup (formerly Metals and Engineering Corporation, a large industry complex owned
and run by the military) is the largest assembler of buses in Ethiopia, but all productionlines laid idle due to the lack of imported components when we visited it in December
2022. The firm said the next allocation of foreign currency would be in April 2023.
Isuzu, partnering with Kaki PLC, a local distributor and service provider ofimported Isuzu trucks, began to test produce medium-sized Isuzu trucks at Kaki’s
Alem Gena plant in 2019. But it has not reached its production capacity due to many
operational difficulties in Ethiopia as explained above. Isuzu is so far the only Japanese
automotive firm that entered the Ethiopian market to assemble vehicles locally. The
policy dialogue team visited the head offices of both firms and Kaki’s plants forinterviews and tours and continued to monitor developments. Itochu Corporation Addis
Ababa, the Japanese trading house that supports Isuzu, was also frequently visited andinterviewed. Besides problems related to foreign currency and security, one remaining
problem for commercial vehicle assemblers is the too narrow tax gap (5%) between
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Automotive policy

local assembly and new truck import which gives little incentive for local assembly.
The gap is as much as 50% in Kenya where Isuzu has established a large truck assemblyplant (see 6-3-1).
Toyota Tsusho is in charge of marketing Toyota cars in Africa. The Motor andEngineering Company (MOENCO), a subsidiary of London-based Inchcape PLC
which distributes motor vehicles globally, is the exclusive dealer of Toyota as wellas other foreign automotive brands in Ethiopia. The policy dialogue team visited both
firms several times each for interviews and discussion. Toyota Tsusho explained how
it analyzed the Ethiopian market. MOENCO management explained the local market
situation and business challenges. MOENCO sells, inspects and repairs Toyota cars aswell as supplies genuine Toyota components at its Addis Ababa head office and several
branches in the country. We toured its main premise and were impressed with theefficiency and professionalism with which inspection and repair and paint works were
performed. MOENCO technicians are well-trained. There is a small training centerto teach Toyota standards. Customers can purchase car components within several
minutes of arrival thanks to the Toyota inventory management system. One remaining
problem for MOENCO is the lack of space for a large number of cars it must service,
but we recently heard the company had acquired a new location in the outskirts of Addis
Ababa.
We also interviewed Komatsu, a Japanese construction machinery maker, andtoured its Oyama engine plant in Tochigi Prefecture with the MIDI delegation visiting
Japan. Ethiopia’s demand for construction machinery is potentially large thanks tobuilding booms and active public investment projects.

6-2. Ethiopian policy and four missing conditions
In automotive policy discussion, we first emphasize that appropriate policy differs
across countries and depends critically on the demand size and the development stage ofthe industry. It is important to recognize the current position of Ethiopia on the timelineof automotive development and introduce suitable actions for it (Figure 9). Global
frontline automotive technology is changing but Ethiopia’s top priority is not to lead orfollow that trend. To establish an initial automotive production base, Ethiopia must startby overcoming basic problems.
Through the many discussions we had with the above-mentioned Japanese
automotive makers in Japan, Ethiopia, Kenya and Myanmar and their local partner77

CHAPTER 6

Figure 9. Timeline of Automotive Industry Development

firms, problems deterring their entry into Ethiopia and/or subsequent expansion became
quite clear. We repetitively communicated them to the Ethiopian policymakers. The
four most formidable obstacles in Ethiopia were as follows.
(i) Foreign currency shortage—all of the interviewed Japanese assemblers cited
this as the biggest challenge for assembly in Ethiopia. Needless to say, this is
not a problem only for automakers but for all businesses operating in Ethiopia.
(ii) Used vehicles and parallel imports—these reduce the sales of locally assembled
new vehicles. The restriction should be introduced in proper steps and speed
balancing industrial needs with the interests of used car traders, dealers andusers.
(iii) The incentive structure—Ethiopia’s automotive levies are very high andcomplex even after the recent revisions. For commercial vehicles, thedifference between CBU and local assembly is 5%, which is too small tooffset the added costs of local production (it should at least be 20-30%; Kenya
has a 50% difference). Similar consideration is necessary for passenger cars
as well.
(iv) The volume problem—Ethiopia’s new car market (new car imports plus local
assembly) is less than 8,000 vehicles per year. For growth and profitability,
the industry needs at least 100,000-200,000. Even if the current market is78

Automotive policy

small, the government can announce long-term forecasts, and introduce
policies consistent with (do not frustrate) such forecasts.
Among these, the foreign currency problem is very serious and worsening whose
quick solution is difficult to foresee. It is a macroeconomic and financial issue rather
than an industrial one, but it severely affects the operation of all industries. If thegovernment prioritizes the automotive sector, it may consider allocating the limited
supply of foreign currency to this sector after satisfying the minimum needs of essential
food, medicine and fuel.
Regarding used car restriction, the Ethiopian government in 2019 suddenly
implemented a strong curb on used vehicles by imposing steep taxes and tariffs on theirimports, which essentially killed this market segment. We are in full support of thispolicy direction, but the way it was introduced suddenly and without sufficient leadtime or stakeholder consultation was not what we recommended. Many countries—
including Kenya, see below—face a policy gridlock when used car dealers and theirpolitical allies oppose a tax change against them and block policy reform. In Ethiopia,
the negative political reaction did not occur to any significant extent. Even so, tomaintain political stability, it is always wise to be aware of conflicting interests among
stakeholders when a tough policy decision is made. That said, we happily acknowledge
that this bold policy action effectively removed one of the obstacles to local assembly
we listed above and significantly changed the Ethiopian automotive market. We do
not know how much our advice contributed to the decision-making of the Ethiopian
government.
With the used car problem resolved, the next problem Ethiopia must address isthe incentive structure. Ethiopian automotive taxes are too high and complex and they
do not favor local assembly over new car imports. The Ethiopian tax and tariff system
has been revised twice since we began our automotive investigation: first for regularinternational tax review and adjustments (for all sectors, not just for automotive) andsecond for implementing the used car restriction mentioned above. With these revisions,
the Ethiopian tax structure became more favorable to domestic assembly and new car
imports vis-à-vis used car imports, and vehicles embodying new technology (electronic
and other clean vehicles) are given additional privileges. However, more adjustments
are needed. First, the high average automotive levies compared with other countries
still remain. There may be a tug of war between revenue-raising authority (say, MOF)
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CHAPTER 6

and industry-promoting authority (say, MOI) as observed in many countries. Second,
the tax system is still very complex meticulously distinguishing different engine
capacities, vehicle types and technology whose policy purposes we do not know. Third,
an incentive system more favorable to local assembly relative to new car imports must
be installed. New car imports reduce the sales of locally produced vehicles just like used
car imports. Fourth, the meager incentive (the tax gap of 5%) for the domestic assemblyof commercial vehicles remains unchanged.
Finally, the Ethiopian market at present is too small to attract investment in a large
automotive plant with latest equipment. In the long run, the problem of small demand
may be alleviated. Moreover, investors will be assured even now if buoyant and credible
demand forecasts are announced and initial policies to justify such forecasts are drafted.
Demand forecasts are a crucial ingredient of any automotive sector development plan,and international experiences can illustrate how such forecasts should be made andwhat supporting policies are necessary.
The new automotive policy to be drafted should include the measures to solvethese four obstacles. A further revision of the incentive structure and the presentation ofdemand forecasts are especially crucial in the new document.
There was another important point that the policy dialogue team made to EIC,
MOTI and MOF. These three bodies must cooperate closely in drafting and executing
an automotive policy but it was found that they did not share information or ongoingactions with the others. For example, EIC and MOTI did not know how and why MOF
was revising the automotive tariff structure. Moreover, MOTI and MOF knew little
about EIC's automotive cooperation with the Germans. The Japanese team detected
these separate movements by talking to all of them, and encouraged the formation of aworking group consisting of mid-level officials and experts from each organization withdaily contacts. The lack of effective horizontal communication may not be confinedto the automotive sector but pervasive in other policy areas. Another vital factor for
effective policymaking is a strong commitment and clear guidance from top national
leaders.

6-3. Lessons from Kenya and Myanmar
After reviewing developing countries in Asia and Africa, Kenya and Myanmar wereselected as appropriate benchmark countries for the Ethiopian automotive sector as
they share the same features as Ethiopia such as small domestic demand, a very early80Automotive policy

development stage (SKD), the dominance of foreign brands, the (previous) dominanceof used car imports, the lack of policy knowledge and experience, and so on. However,they both succeeded in drafting an effective automotive policy that stimulated domestic
car demand and accelerated the inflow of FDI assemblers. In 2018 and 2019, policy
research missions were dispatched to these two countries to collect further informationand lessons. Each mission produced back-to-office reports and presentation slides
which were shared with the Ethiopian authorities 31. Additional information was also
cited from our past research in Thailand, Indonesia, Vietnam, South Africa, Uzbekistan,
Morocco, Ghana, Nigeria, etc. and offered to the relevant authorities.

Kenya
Kenya’s automotive sale is dominated by used car imports. New car sales fluctuatein the range of 10,000-20,000 vehicles per year, which is greater than Ethiopia but not
sufficiently large for robust industrial growth. Domestic automotive sales peaked in2015 but fell subsequently. This was partly due to the political uncertainty surrounding
the 2017 presidential election and partly due to the lowering of the commercial banklending rate ceiling from 17% to 14% and the credit crunch it caused (banks no longer
lent to car buyers because profit margin was too small). Among new vehicle sales,
Japanese models dominate in both passenger cars and commercial vehicles with Isuzu(34%), Toyota (20%) and Hino (3%) as major brands 32.
The Kenyan automotive tax structure is simple and does not differentiate passenger
cars and commercial vehicles. It levies 50% more taxes—25% customs duty and
20% excise tax, multiplicably applied—on finished vehicle imports compared withdomestically assembled vehicles which are exempt from these taxes (a uniform value
added tax of 16% is imposed on all products including imported and domesticallyassembled vehicles). Special regulations remain for specialized or luxurious vehicles
and there are also import declaration fee (2%), railway development levy (1.5%) andmerchant shipping levy ($1.75/ton/20 feet) applicable to all imports, but car dealers
GRIPS Development Forum, “Report on the Automotive Industry Policy of Kenya,” October 5, 2018; andGRIPS Development Forum, “GDF Myanmar Mission Report,” January 24, 2020. For presentation slides,
see “International Comparison of Automotive Assembly Policies: For Inviting Global Players to Ethiopia
and Supporting their Expansion” (February 2019); “Policy for Attracting Automotive Assembly Part II”(August 2019); and “Key Findings in Myanmar’s Automotive Policy and Lessons for Ethiopia” (February2020).
32
These are situations observed in August 2018 when the GDF mission visited Nairobi, with some updates on
the status of the new automotive policy.
3181CHAPTER 6

say these are manageable and not too cumbersome. Japanese automotive firms also
confirm that tax and customs procedure in Kenya is not bureaucratic or complex, and all
officers say the same thing. This is quite different from Ethiopia where the automotive
tax structure is very complicated and tax and customs officials may make contradictorydecisions.
Kenya’s automotive policy is produced under a strong private initiative. The
Kenya Association of Manufacturers (KAM) coordinates and presents industry
voice. Government receives and adjusts private proposals. Kenya began to revise
the automotive policy in 2018 but has not finished it due to political complications
as explained below. It aims to increase automotive contribution to GDP, automotive
export to the East Asian Community (EAC) and localization. Commercial vehicles(trucks, buses and mini-buses) are prioritized.
One remaining problem is the prevalence of used cars which discourages domestic
assembly. The new policy attempting to reduce the car age limit from 8 to 5 (and later,3) years was announced in January 2019 but met with strong opposition from used car
traders. Kenya also wants to coordinate the automotive age limit with the EAC member
countries, but this also proved difficult. Another important proposed change is tostrictly monitor the eligibility of and give more incentive to domestic assemblers basedon the amount of value creation. For this, new definitions of knock-down production
are proposed:• DKD (Direct KD): Imported in whole, wheels and accessories fitted locally (nolonger to be permitted).
• KD level 1 (SKD): Body separated from driveline, paint and trimming allowed,etc.
• KD level 2: Painted and welded cab, rear body and chassis devoid of trim,
electrical and mechanical attachment, etc.
• KD level 3: Cab, rear body and chassis supplied in sub-assemblies for welding
and painting, etc.
An effective restriction on used cars and a transparent incentive scheme fordomestic value creation are two policy measures critically needed for Kenya at thisjuncture of automotive development. However, policy finalization and approval aredelayed due mainly to strong resistance from used car dealers.

82

Automotive policy

Myanmar
In contrast to Kenya, one salient feature of Myanmar’s automotive market is thegradual but effective elimination of used car imports implemented successfully inrecent years. Used Toyota vehicles once dominated Myanmar streets. New car sales
were only a few thousand vehicles per year (similar to Ethiopia today). However,
Myanmar restricted used car import in steps from 2014 to 2017. A ban on right-handdrive cars and a registration ban in the Yangon area were introduced. The car age limit
was reduced from 10 to 3 years. This effectively eliminated used car imports. New
car sales quickly rose from 4,168 units in 2016 to 17,500 units in 2018 and continued
to climb thereafter. Not only the very rich but also the upper middle class began tobuy cars 33. This proves that, even if other policy measures are not in place, used car
restriction alone can dramatically change the domestic car market (a similar change also
occurred in Nigeria when high CBU tariffs immediately stimulated SKD assembly).
For a long time, Suzuki was the only carmaker with its own assembly plant in
Myanmar (since 1998). After the introduction of used car restriction, it expanded
capacity and moved from SKD to Complete Knock Down (CKD). Toyota used to sellfinished cars but now built its first assembly plant in Myanmar. Other assemblers are
Nissan, Ford, Kia and Hyundai but their car assembly is done by local firms.
The Japanese and Myanmar business chambers drafted a private sector proposal on
automotive policy in 2015. The government instructed the Ministry of Industry (MOI)
to revise the private proposal into a policy format, focusing on production issues only.
Japanese firms continued to advise MOI. Public hearings were held on the final draft
in 2017. The Cabinet approved the automotive policy in May 2019. We regard thispolicy highly because it correctly identifies key policy issues such as (i) importance ofmarket size, (ii) selection of priority models, (iii) proper definitions of SKD and CKD,(iv) appropriate incentives for local assembly, and (v) promotion of supporting industry(domestic component suppliers) as a future task. MOI admits that changes it made fromthe private proposal to the final document were relatively minor.
However, the policy document does not specify concrete contents. It stresses theimportance of these key issues without making any numerical decision on essential
details. It may be risky for foreign carmakers to invest or expand without knowing these33

The situations described in this subsection are those prevailing up to February 2021 when the military
coup toppled the civilian government and Myanmar’s economy stagnated. Thus, the policy lessons from
Myanmar we study are those prior to the military coup.

83CHAPTER 6

details (priority models, precise definitions of SKD and CKD, and incentives associatedwith these). Japanese carmakers seem willing to invest because, based on past records,
they trust the Myanmar government to do the right things in the end.
Permanent Secretary Aung Naing Oo of the Ministry of Investment and Foreign
Economic Relations stated: “President Thein Sein invited Toyota to come and assemble
cars. Toyota did research for six months and arrived at a negative conclusion. Toyota
said that Myanmar was full of used cars, and it would not invest unless used car inflow
was stopped. The Myanmar government took this seriously and introduced measures
to curb used car imports… Our automotive policy is still incomplete and serves as thebasis for continued discussion with stakeholders” (interview in Naypyidaw, November
28, 2019).
Another key feature of Myanmar is the acceptance of foreign advice when it
seems sincere and reasonable. The Myanmar government is weak and inexperienced
in economic management. It lacks leadership, knowledge and inter-ministerial
coordination. Ministries wait for top-down instructions but they are slow in coming.
This causes delay and inaction in policymaking. Despite these problems, the Myanmar
government listens carefully to the economic advice of eligible foreigners andadopts most of it. National pride and ownership are not overly exhibited in economic
policymaking. This was true in the drafting of the automotive policy, the Investment
Law, the SEZ law, and the operation of Thilawa SEZ. Japanese automakers, especially
Suzuki and Toyota, continuously give advice and requests to MOI, and most ideas havebeen accepted.

6-4. Volkswagen and GIZ
Around 2018 as we were proceeding with automotive research, we sensed rising Germaninterest in the Ethiopian automotive market. In the next year on the occasion of the visitof German President Frank-Walter Steinmeier to Addis Ababa, an MOU was signed on
January 28, 2019 by Thomas Schaefer, Head of the Volkswagen (VW) Sub-SaharanAfrica Region (located in South Africa) and EIC Commissioner Abebe Abebayehu.
It stipulated German cooperation in four areas—car assembly, component production,
mobility (car sharing) and technical training—without specifying a timeframe. GIZ
began to assist Ethiopia’s automotive sector in support of VW’s move. A study wascommissioned and a tour to Germany was arranged.
For Japan, Germany is a potential competitor as well as an ally in upgrading the84Automotive policy

Ethiopian automotive industry. Rival firms can cooperate in a policy support of target
countries, especially in the early stage of their industrial development, while fiercelycompeting in business operation. This was actually seen in such countries as Thailand
and Vietnam where Japanese automotive and motorcycle firms cooperated and competed
simultaneously. However, collaboration among firms of different nationalities andbusiness cultures may be more difficult. A common understanding of the challenges
and potentials of the Ethiopian automotive market must be established before JapanGermany cooperation could go ahead. It may be added that Japanese car models are
dominant while German cars are scarce in the current Ethiopian market, which implies
that German advice must be consistent with the strategic orientation of existing large
players.
In 2019, the policy dialogue team had regular meetings with GIZ Ethiopia to
exchange and update mutual information (we did not have a chance to talk directly tothe representative of VW). VW South Africa was the chair of the African Association ofAutomotive Manufacturers (AAAM) at that time and the AAAM member firms toured
Ethiopia and other African countries in the summer of 2019 to explore new businessideas. However, many German proposals were puzzling to the Japanese dialogue team.
For example, the idea of producing car components in Ethiopia and exporting to South
Africa seemed unrealistic given the current capacity of the Ethiopian industry as wellas the logistic cost and inefficiency. The proposal to build a special industrial park forautomotive firms also appeared strange. The initiative to set up an automotive training
center in selected African countries (including Ethiopia) operated jointly by two global
car giants sounded impractical as each foreign car firm has its own training philosophy
which is difficult to unify (it is better to let one firm do the training rather than mix
different methods). Car sharing service is a nice idea but hardly the top policy priority
for Ethiopia today and such service may be supplied by a local IT firm via the internet.
In late 2019, GIZ invited ten-plus Ethiopian officials to Germany to visit the plants ofPorsche, Mercedes-Benz and VW as well as component suppliers, policy authorities andthink tanks. However, Germany may not be the best benchmark country for Ethiopia 34.
Despite many meetings we had with GIZ Ethiopia, we were unable to determine
whether German ideas were consistent with the Japanese views on the current status and34

Among the tour participants, Industry State Minister Teka said that he was surprised to know that German
automotive firms could procure 80% of components domestically. MIDI Director General Dereje remarked
that, regardless of relevance to Ethiopia, he was greatly impressed by the three German plants.

85

CHAPTER 6

future possibilities of the Ethiopian automotive industry and whether Germans would
agree with the four initial policy actions we regard as essential in the current Ethiopian
context (subsection 6-2). Subsequently, in our meetings with GIZ Ethiopia in September
and December 2022, we were told that VW was no longer interested in automotive
cooperation with Ethiopia and GIZ’s support program for it no longer existed.

86Dissemination beyond the Ethiopian government

Chapter 7

Dissemination beyond the Ethiopian government
In Phase III, the Ethiopia-Japan Industrial Policy Dialogue organized many policy
events with the Ethiopian dialogue partners which were variously called High Level
Forums (HLFs), Development Policy Forums (DPFs), Knowledge Sharing Forums(KSFs), policy workshops, interim report workshops and report launch workshops.
During 2020-2021 under travel restriction due to the COVID pandemic, these events
slowed down but were continued online whenever possible.
Apart from these official policy events, the policy dialogue team also organizedworkshops for the interested general public (officials, business people, researchers,
students, consultants, etc.) to widely disseminate our policy analyses and dialogue
results. The frequency of such PR workshops increased after 2020 because we had tocut down on other dialogue activities that required face-to-face contact. Because GRIPS
as a university adopted Zoom for all its lectures, workshops and internal meetings, we
also used the Zoom conferencing system to economize costs and technical expertise.
Our staff learned how to operate it and became able to manage online workshops
without major problems provided that the number of participants did not exceed 200(the system’s limit) or foreign speakers faced no technical hitches. Some workshops
directly discussed Ethiopia but others reported the results of comparative studies in
Asia and Africa conducted for the Ethiopia-Japan Industrial Policy Dialogue. Some of
the workshops were co-organized with the JICA Ogata Research Institute for Peace andDevelopment (JICA Ogata RI) or the Brenthurst Foundation. Table 9 lists our online PR
workshops. Besides these, GDF also organized many online workshops which were notdirectly related to the themes of the bilateral policy dialogue.
In addition, the GDF’s policy dialogue team published academic books and articles
related to the policy dialogue as follows.
• 
Izumi Ohno, “Significance and Challenges of ‘The Ishikawa Project’: A
Practitioner’s Perspective Based on the Experience of Japan-Ethiopia industrial
Policy Dialogue,” Journal of International Development Studies vol.27, no.1,
Japan Society for International Development, June 2018 (Japanese original).
• Izumi Ohno, “Industrial Policy and Kaizen: From the Experience of Industrial
87CHAPTER 7

Table 9. GDF-hosted Dissemination Workshops
Presenters (*: main speaker)

Language

No. ofParticipants

Kenichi Ohno (GRIPS)*,
Yonosuke Hara (GRIPS)

Japanese83

2 Nov. 2020 The Asian Aspiration:
what Africa needs to learn
from Asia’s experience

Greg Mills (Brenthurst
Foundation)*, Hailemariam
Desalegn (former EthiopianPM), Kenichi Ohno (GRIPS)

English63

3 Apr. 2021

Japanese strategic andeconomic partnerships
with Africa in a turbulentera

Céline Pajon (IFRI)*, Katsumi
Hirano (IDE-JETRO), Izumi
Ohno (GRIPS)

English55

4 Sep. 2021 Comparative garment
survey in Ethiopia,
Vietnam and Bangladesh

Kenichi Ohno (GRIPS)*, Kenta
Goto (Kansai Univ.)

Japanese105

5 Feb. 2022 Japanese experience inindustrial policy support

Izumi Ohno*, Kenichi Ohno
(GRIPS); Akio Hosono, Minoru
Yamada (JICA Ogata RI);
Kuniaki Amatsu (Yamaguchi
Univ.)

Japanese80

6 Mar. 2023

Japan’s industrial policy
with Ethiopia 20082023: achievements
and challenges (closed
webinar for int’l audience)

Kenichi Ohno*, Izumi Ohno*(GRIPS); Jong il Kim (Dongguk
Univ.); Keiji Ishigame, Toru
Homma (JICA)

English13

7 Mar. 2023

Japan’s industrial policy
with Ethiopia 20082023: achievements andchallenges (open webinar)

Kenichi Ohno, Izumi Ohno,
Sayoko Uesu (GRIPS), Keiji
Ishigame, Toru Homma (JICA)

Japanese108

Date
1 Jul. 2020

Topic
Evolution of Ethiopia’s
development strategy
under three prime
ministers

Note: workshop no. 2 was co-hosted by the Brenthurst Foundation in Johannesburg. Workshops nos.4
and 5 were co-hosted by JICA Ogata RI. The last two workshops (nos. 6 and 7) were co-hosted by
JICA to review the entire period of bilateral industrial policy dialogue.

Practice and Industrial Policy Dialogue in Ethiopia,” Journal of International
Development Studies vol.27, no.2, Japan Society for International Development,
November 2018 (Japanese original).
• 
Kenichi Ohno and Izumi Ohno, “A Japanese Perspective on Ethiopia’s
Transformation,” chapter 47, F. Cheru, C. Cramer and A. Oqubay (eds.) The
Oxford Handbook of the Ethiopian Economy, Oxford University Press, 2019.
• Arkebe Oqubay and Kenichi Ohno (eds.) How Nations Learn: Technology
Learning, Industrial Policy and Catch-up, Oxford University Press, 2019.
88

Dissemination beyond the Ethiopian government

Besides editing, Kenichi Ohno also contributed “Meiji Japan: Progressive
Learning of Western Technology” as chapter 5. (This book was translated into
Vietnamese for the Communist Party leaders with the title: QUỐC GIA HỌC
TẬP: Học tập công nghệ, chính sách công nghiệp và vắt kịp thành công, Hanoi:
True State Politics Publishing House, 2020.)• 
Izumi Ohno and Sayoko Uesu, “New Partnership between Business andDevelopment: A Case Study of Ethiopia’s Industrial Development,” chapter
16, Shigeru Otsubo and Christian Samen Otchia (eds.) Designing Integrated
Industrial Policies for Inclusive Development in Africa and Asia: Volume II,
Routledge, 2020.
• Kenichi Ohno, “Ethiopia Beyond Middle Income: Transforming the National
Mindset,” chapter 2.4, M.G. Desta, D. Dori and M.E. Mihretu (eds.) Ethiopia in
the Wake of Political Reforms, Los Angeles: Tsehai Publishers & Distributors,
2020.
• Izumi Ohno, “Overview: Japanese Perspectives on Industrial Development andthe Concept of Translative Adaptation,” chapter 1, Izumi Ohno, Kuniaki Amatsu
and Akio Hosono (eds.), Policy Learning for Industrial Development and theRole of Development Cooperation, Research Project- Japanese Experiences ofIndustrial Development and Development Cooperation: Analysis of Translative
Adaptation Process. Volume I. JICA Ogata RI, 2022.
• Kenichi Ohno and Izumi Ohno, “Ethiopia-Japan Industrial Policy Dialogue:
Learning Eastern Methods through Intensive Discussions and Concrete
Cooperation, chapter 8, Izumi Ohno, Kuniaki Amatsu and Akio Hosono (eds.),
Policy Learning for Industrial Development and the Role of Development
Cooperation, Research Project - Japanese Experiences of Industrial Development
and Development Cooperation: Analysis of Translative Adaptation Process.
Volume I. JICA Ogata RI, 2022.
• Kenichi Ohno, Akio Hosono, Kuniaki Amatsu, and Minoru Yamada, “Bilateral
Policy Dialogue: Japanese Cooperation for Enhancing Industrial Policy
Capacity,” chapter 5, Izumi Ohno, Kimiaki Jin, Kuniaki Amastu, and Junichi
Mori (eds.), Introducing Foreign Models for Development: Japanese Experience
and Cooperation in the Age of New Technology, Springer (forthcoming).

89

Conclusion: the guiding principles of policy dialogue

Chapter 8

Conclusion: the guiding principles of policy
dialogue
In closing, it might be worthwhile to enumerate several practical lessons gained fromthe Ethiopia-Japan Industrial Policy Dialogue in general and its third phase in particular.
The six points below are mutually related and collectively reveal the unique features ofpolicy dialogue as distinct from other development cooperation projects.

8-1. The difficulty of policy dialogue and the need for selectivity
Development cooperation is never easy. All cooperation projects carry difficulties of one
sort or another. Political instability, policy instability, frequent changes of government
and project counterparts, the mindset problem, the gap between what is possible andwhat is desired by national leaders, and the lack of genuine trust between the assisted
and the assisting are some of the common problems that arise in any project. It must
be stressed, however, that they are particularly critical in the case of bilateral policy
dialogue.
Policy dialogue cannot be conducted with all developing countries. There arevery few countries that can truly benefit from serious intellectual exchange with Japanbecause conditions for success are tough. It is not like building roads and bridges ortraining technicians for which blueprints and established methods exist. Two things
must be mentioned.
First, effective policy dialogue requires the serious interest and active commitmentof the highest national leader such as the president or the prime minister. If they are notavailable, we need at least the deep involvement of an influential minister or a senioradvisor in charge of economic policy who directly advises and has the trust of the top
national leader. Ministers and state (vice) ministers without such power and top accesscan still be excellent dialogue partners but they are politically insufficient to promotebilateral policy dialogue. This is because, for policy dialogue to be dynamic, constantadjustments are needed across the jurisdictions of multiple ministries which only the
top leader can manage. Not many national leaders are both economically literate andwilling to take risks to produce real changes. Most leaders delegate economic issues to91

CHAPTER 8

relevant ministries and committees. Many welcome policy cooperation with donors but
they do not spare much personal time for hearing expert opinions. In this sense, Prime
Minister Meles and Prime Minister Hailemariam were exceptional. They not only heard
us attentively but asked for more materials when we did not provide them enough.
Second, each policy dialogue is different regarding topics, modality, duration andparticipants. Moreover, these features constantly change within a country. There is no
pre-set outline to guide us. We must always be alert and ready to propose or revise
topics and even the framework of policy dialogue because policy interests and economic
situations may change at any time. It was our standard practice to finalize the topic one
to three months before the next session. If we insist on doing what was decided years ormonths ago, policy dialogue will quickly lose relevance.
Only a small number of developing country governments are capable of learning
effectively from advanced countries. Even if they are willing and make a great effort,
they may fail in their learning for various reasons. At the same time, when successfully
executed, policy dialogue can bring great benefits to both the developing country andJapan. The host country is assisted to draft concrete policies that fit the unique national
context instead of one-size-fits-all solutions, and many of the discussed policies aresupported for implementation by JICA’s industrial cooperation projects. Japan on theother hand can align its cooperation projects to the revealed priorities of top national
leaders and increase its local support, relevance and cost-effectiveness. This deepens
our bilateral relationship with the developing country beyond individual projects.
In each developing country, Japan—the Japanese embassy and the JICA officein particular—should engage in regular communication and policy discussion withnational leaders and their chief advisors whenever this is possible. This may or may not
trigger fruitful intellectual exchange. But if a high-level leader shows serious interestin policy learning from Japan, we should immediately intensify our engagement andprepare formal policy dialogue. This is particularly crucial with developing countries
which are our key strategic partners. On the other hand, if our approach does not induce
any response, policy dialogue with that government may be hard to realize, at least forthe moment. We must be highly alert and selective in initiating policy dialogue with
developing country governments.

8-2. Building confidence and trust
As with any human activity, confidence and trust are critically important for the success
92

Conclusion: the guiding principles of policy dialogueof any development cooperation. Building personal relationships between a developing
country and Japan at all levels from top leaders to on-the-ground managers and experts
should be pursued not just for the sake of project facilitation but as an ultimate goalof any bilateral project. When solid human relations are established, they will become
long-lasting precious assets. Without this, policy dialogue will become superficial andmechanical without much substance. To build them, two issues must be considered.
First, the mindset of all Japanese officials, experts and consultants must be
consistent with confidence- and trust-building. Any development cooperation must be
undertaken for the welfare of the host country and its people as well as for the professional
satisfaction of offering meaningful assistance to them, not just for the money, fameand promotion of the service provider. Fortunately, most Japanese persons engaged
in development cooperation and overseas businesses have the passion and dedication
suitable for this purpose. When we show this attitude and work for the enjoyment of
the work, local counterparts and people will surely notice and respond. Conducting
industrial policy dialogue does not add any points in the evaluation of professors at theuniversity or the publish-or-perish academic community but this should not deter us
from doing necessary and useful works.
Second, to develop a good relationship, long-term presence and commitment
are essential. This condition is usually not met by Japanese ambassadors, JICA chief
representatives and those working under them who must leave the country after a few
years. The rotation cycle of Japanese overseas official postings seems shorter thanthose of other donor countries. This problem can be partly amended by the presence ofJapanese officials who manage to stay longer or repeated times because they truly love
the host country as well as by the long-lasting activities of university professors who
can decide the duration of commitment by themselves. Many outstanding industrial
projects are conducted by the comprehensive and ardent involvement of such renowned
researchers as Professor Shigeru Ishikawa (Vietnam), Professor Yonosuke Hara (Laos),Professor Akio Hosono (Latin America), and Professor Shoji Shiba (India). Thiscertainly cements the bilateral human relationship. GDF also tried to serve as a longterm academic hub in the policy dialogue with Ethiopia and Vietnam.

8-3. Linking talk with industrial cooperation projects“Policy dialogue” is implemented by many donors but most of such dialogue is not very
flexible or dynamic. They are often the interim or final presentation of some research
93CHAPTER 8

projects, tours and seminars to publicize the past achievements of some country, ora conditionality negotiation linked with balance-of-payments support in the case of
the IMF and the World Bank. The preferred topics of Western donors tend to be lessindustrial and more towards macroeconomic, legal, social or governance aspects. Whenindustrial issues are taken up, they are usually cross-sectoral problems such as ICT,
globalization, green growth and enterprise reform rather than sector-specific targetingand promotion. Korea also offers largescale policy cooperation to developing countries
called the Knowledge Sharing Program (KSP), but its approach is far broader and more
standardized than the Japanese.
Our definition of policy dialogue is intellectual cooperation between a developing
country and an advanced country held regularly over many years with an open andevolving agenda. It is a flexible consultative mechanism Japan employs routinely in
East Asia and elsewhere. Since the 1990s, Japan has conducted policy dialogue with adozen or so partner countries, and Ethiopia is the first African country to which Japan
has applied such a consultation mechanism.
Japan’s policy dialogue is unique in many aspects. First, it aims directly atstrengthening the state’s role and capacity in industrialization rather than reducing thescope of government intervention. Second, there is no pre-determined format. Policy
consultation and knowledge sharing are tailor-made to each country, conducted througha highly interactive process. Japan’s policy dialogue usually starts with a national leaderof a developing country requesting Japan to discuss development strategy generally orteach and transfer a specific experience of East Asian development. This certainly differsfrom normal technical assistance with narrowly prescribed terms of reference. Third,
while intellectual cooperation takes place in a bilateral context, Japan cites concrete
cases from all around the world, not just Japanese experiences which are usually too
hard to digest or emulate for beginners.
Perhaps the most important feature of the Ethiopia-Japan Industrial Policy
Dialogue is the close link between policy discussion and JICA’s subsequent industrial
cooperation projects. In our policy dialogue, talk does not end as such but leads inmany cases to concrete projects that assist the realization of policy goals just discussed.
The dissemination and institutionalization of kaizen, national movement, as well as
the incorporation of the kaizen philosophy into GTP II (Phases I and II) are typicalexamples. The other examples included the metal industry survey (Phase I), export
promotion (champion products and branding, Phases II and III), support of FDI
94

Conclusion: the guiding principles of policy dialogue

attraction and industrial park management (Phases II and III) and BDS support (Phase
III). Apart from JICA, the JETRO Addis Ababa office was also established in July 2016at the strong request of Prime Minister Hailemariam. The nexus between talk and action
strongly incentivizes both Ethiopia and Japan to engage in the dialogue seriously andhonestly. This linkage is unique to our policy dialogue in Ethiopia thanks to JICA’s
active involvement in the dialogue since its initiation. The talk-action linkage is usually
not realized in the “policy dialogues” by other donor countries.

8-4. Country ownership versus candid advice
Respecting the country ownership of a developing country’s government seems tobe the obligatory code of conduct for development partners. However, practicing thisprinciple is not easy because the host government is not always right about its ideas ordevelopment strategy. If it were, there would be no need for intellectual cooperationfrom outside. The question, therefore, is how to properly inspire and guide government
leaders and officials to abandon unrealistic ideas and instead choose better goals andmethods without offending or discouraging them. Not only that, this learning process
must arouse a sense of pride and achievement rather than inferiority and humiliation.
This requires not just a full understanding of the nation’s economy, politics and social
ethos but also skillful diplomacy and persuasion technique. This is more difficult thanguiding a mediocre student to write a thesis because students usually respect professors
but presidents, prime ministers and their advisors are supposed to be above us.
A good policy dialogue team must always observe diplomatic protocol andcourtesy. Yet it must speak out (in a polite way) when ideas presented by thecounterpart are contrary to global practice or industrial common sense. If this offends
our dialogue partners, we will be in a serious bind. Moreover, we also make mistakes as
our knowledge is far from complete. At the beginning of our bilateral policy dialogue,
Prime Minister Meles asked us to be frank and forthcoming. Most Ethiopian officials
also appreciated our honest assessments. This greatly helped us in our communication
with the Ethiopian government. This does not however mean that our sincere objections
were always accepted. Our critical comments concerning how SME policy was draftedor how state-owned industrial parks should be managed had little impact on the ongoingpolicies. However, such incidents did not sour our relationship with Ethiopia. We willcontinue to voice the same rejected assessments without being discouraged. Our views,
though imperfect, are backed by many observations and studies in a large number
95

CHAPTER 8

of developing countries and we stand by them whether or not they are immediately
accepted.

8-5. Commonalities and unique factors
In any international comparison, the common objection is that “each country is different
and the time has also changed, so this foreign model is not applicable to our country.”
But the statement is too general and superficial to be useful from the standpoint ofpolicy learning. It is obvious that every situation carries both commonalities with others
and uniqueness of its own. The important thing is not that these two aspects are always
present but whether the policy designer can clearly and concretely distinguish what
is common from what is unique in each case. If this is done, a valid starting pointis established for the formulation of policies most suitable for the home country’s
circumstances. But this requires a thorough knowledge of both domestic and foreignsituations.
Meiji Japan may seem too remote for any latecomer country of the twenty-first
century to learn from. But such factors as dedicated technocrats, good engineering
education, skilled labor force, competitive domestic firms, import substitution,industrial infrastructure and public-private collaboration which the Meiji government
tried to foster—mostly successfully—are time-invariant necessities for any latecomer
country in the process of industrialization. However, what concrete methods should
be used to attain these universal goals depends on initial conditions and differs fromcountry to country and from one age to another. Concrete details must be discovered byeach country.
The mindset and orientation of Ethiopian leaders and officials are very different
from those of Vietnamese leaders and officials. An approach that works well in Ethiopia
hardly works in Vietnam, and vice versa. For instance, there is no need to urge Ethiopian
ministers into policy action because they are already fast and energetic. We sometimes
advised them to slow down and think harder before finalizing an important policy.
This is not so in Vietnam where policy inaction and delay are common. The situationand capacity of the private sector are also diverse across countries. Vietnamese laboris skillful, sensitive and mobile. Workers hop jobs and locations in response to market
forces. However, they are highly short-sighted and internal labor migration occurs
only in one direction from north to south. In Ethiopia, rural-urban labor migration isstill limited as regional and ethnic barriers to movement are considerable. There are96Conclusion: the guiding principles of policy dialogue

many other details to each country that demand different approaches to any common
developmental goal.
This implies that one-size-fits-all advice is unproductive and must be shunned.
We instead need translative adaptation, or the process of using imported ideas andthings selectively as inputs to build a suitable domestic model. Good policy dialogue
must be founded on sufficient information of domestic society, economy and politics
as well as broad and detailed knowledge on benchmark countries from which the mostappropriate model for the home country is created through selection, adjustment andcombination. The choice of foreign models should not be random but be backed by acareful examination of which country cases are most relevant to the problem at hand.
Thus, the information required for policy dialogue is immense. To offer truly usefulpolicy advice, one should not proceed with the story of just one foreign country or
without full knowledge of the host society.

8-6. Project requirements versus policy dialogue requirements
It is customary to oblige development cooperation projects to produce visible results by
the end of the project period which is typically a few years. If the technique and methods
required by the project are standardized and well known, this requirement is reasonable.
A blueprint and targets can be shown in advance and cost-effectiveness relative to othersimilar projects is easily ascertained. This applies to constructing a structure, training
technicians, introducing kaizen, etc. A completed building as per the plan or the numberof graduating people or firms gives a clear gauge to judge the project’s effectiveness.
Policy dialogue is quite opposite of these standard projects. As stated earlier,each dialogue mechanism must be designed differently and must flexibly respond tothe changing needs and circumstances of the host country. Success is not guaranteedand depends on many external factors beyond control. How things will roll, including
whether and how long the dialogue can continue beneficially to both parties, is hardto predict. Positive outcomes are difficult to identify, slow to emerge and hardly
quantifiable. However, they are real even if they are difficult to appraise.
Bilateral dialogue creates a solid communication channel with top leaders whichfacilitates Japanese diplomacy and economic cooperation far beyond industrial policy.
Dense personal contacts with the nation’s leaders, officials, businesses and researchers
greatly expand the possibility of future interaction with Japan. Thus, policy dialogue
should not be evaluated simply by the number of letters and reports sent to top leaders,97

CHAPTER 8

workshops and conferences, academic books and lectures, visits to government offices
and factories, and other activities which are merely instruments to achieve the ultimate
goal, namely, the deepening of bilateral relations based on mutual respect, understanding
and benefits through intellectual exchange. The Ishikawa Project in Vietnam offereddirect access to the General Secretary of the Communist Party and stimulated bilateral
academic and official exchange greatly. Our policy dialogue enabled the Japaneseambassador to interact with the prime minister (sometimes the prime minister contacted
our ambassador), expanded JICA’s industrial cooperation in a systematized way, andbrought the JETRO office to Addis Ababa.
At the outset of Industrial Policy Dialogue Phase I, we were asked to list all
proposed discussion topics with Ethiopia in the coming three years. This was a difficult
request given the nature of policy dialogue as amply explained above. One cannot
forecast everything in a football match because the strategy depends on the opponent’s
move. Policy dialogue is one important tool of Japanese diplomacy and economic
cooperation, and its evaluation criteria should be created in due recognition of its uniquecharacteristics and ultimate objectives. The criteria must be broad, long-term anddiplomatic, not the counting of how many concrete things are done during the project
period. Nurtured confidence and trust cannot be measured easily. Target countries must
be selected with care. As policy dialogue entails much uncertainty, failure should be
tolerated because success depends on many external factors. It is like assessing thevalue of basic scientific research rather than the application of known technology. It
is also like a baseball player who may not hit a home run at every bat but produces
impressive records in the long run.
It is also essential that JICA offices in developing countries—especially thoselocated in strategically important partner countries—should endeavor to build policy
channels with national economic leaders whenever and wherever possible, together
with Japanese embassies. This may not always ignite the interest and action of thecounterpart, but such channel-building should be an integral part of Japan’s overseas
economic mission. We must continuously cast a net even if we get no fish most of
the time. If top leaders are seriously and competently interested in intellectual
dialogue with Japan, a formal mechanism should be prepared swiftly and effectively.
It is important that JICA (both headquarters and overseas offices) work closely withJapanese ambassadors and embassy teams and proactively get involved in the designand execution of policy dialogue (not just in project management and logistics but,98Conclusion: the guiding principles of policy dialogue

more importantly, in discussing policy substance) as was frequently witnessed in thepast phases of our policy dialogue. The Ethiopia-Japan Industrial Policy Dialogue haspresented a useful model of bilateral policy interaction and cooperation provided thatthe conditions are right on both sides of the dialogue.

99

Appendix

Appendix 1:
Key meetings with high-level policymakers
Direct dialogue with the Prime Minister
Daterd

FormatMain topicsst

3 March 2017

Letter to P.M.
Hailemariam(9 pages)

Report of 1 Industrial Policy Dialogue Mission (HLF, Kilinto
IP, Hawassa IP vs. Japanese IP model, QPC program,
Handholding, JETRO etc.)

25th Aug. 2017

Letter to P.M.
Hailemariam(4 pages)

Report of 1st HLF follow-up and mission findings (Kaizen city
movement, Productivity research, Mindset issue, Industrial
Park and Japanese area, Handholding for metal industry,
JETRO model etc.)

8th Nov. 2017

Direct dialogue with Joint research with Ethiopian think tank, Kaizen, Mindset
P.M. Hailemariam
issue, Handholding for metal industry, JETRO model, etc.)(over one hour)

2nd May 2018

Letter to former P.M. Thank you letter and reporting the progress (Handholding
Hailemariam
for metal industry, Joint research on Productivity with
(3 pages)
PSRC, Attracting Japanese investor and Industrial Park
development, Co-authoring with Minister Arkebe

2nd May 2018

Letter to P.M. Abiy(7 pages)

Introduction and explanation for the Industrial Policy
Dialogue and main activities

High Level Forum (HLF) agenda
Date

Presentation from Japan(including a panelist from third country)

Presentation from Ethiopia

1st HLF(Feb. 2017,
Addis Ababa) “Japan’s Contribution to GTP2 forIndustrialization with Quality” (Izumi
Ohno/GRIPS & Keiji Katai/JICA) “Income Equalization vs. Polarization”(Kenichi Ohno/GRIPS)

2nd HLF(Nov. 2017,
Addis Ababa) “Productivity Enhancing Measures “ Productivity Determinants in thein Sri Lanka and Ethiopia” (Kenichi
Textile & Garment Industry in Ethiopia”
Ohno/GRIPS)(Tsegaye Gebrekidan/EDRI) “Economic Performance and Labor  “Productivity Earnings in the
Productivity in Vietnam: Data Analysis
Metalworking Sector in Ethiopia”
and Policy Recommendation” (Nguyen(Girum Abebe/EDRI)
Duc Thanh/VEPR) “Literature Review of Wage-Labor
Productivity Nexus in Ethiopia”(Kidanemariam Berhe Hailu/PSRC) “ Anti-Export Bias and Effectivenessof Export Incentives in the Ethiopian
Manufacturing” (Mulu Gebreeyesus/
EDRI) “ Ethiopian Youth Development and
Growth Strategy” (Matiyas Assefa/
Ministry of Youth and Sport)
 “Empirical Analysis of Effect on Job
Search Assistance in Urban Africa”(Girum Abebe/EDRI)

101

Development Policy Forum (DPF) agenda
Date

Theme and participantsstEthiopia Productivity Report (Interim
1 DPF(Feb. 2019,
Discussions)
Addis Ababa)  P
 articipants: PDC, MOTI, IPDC,
EIC, TIDI, MIDI, LIDI, EKI, ECCSA,AACCSA, etc., plus Japaneseparticipants (incl. Ambassador
Matsunaga)

Presentations
 “Introduction of Project” (Kenichi Ohno/
GRIPS)
 “Introduction, Concepts and Importanceof Productivity, Ethiopia’s Productivity inInternational Comparison (Macro Level)”(Kidanemariam Berhe Hailu/PSI) “Preliminary Analysis of Firm and Worker
Survey (Manufacturing Level)” (Mulu
Gebreeyesus/PSI)

Ethiopia Productivity Report (Final
2nd DPF “Policy Measures to Enhance(Aug. 2019,
Validation Discussions)
Productivity” (Kenichi Ohno/GRIPS)
Addis Ababa)  P
 articipants: PDC, MOTI, IPDC, EIC, “Labor Productivity Data Analysis”
LIDI, MIDI, EKI, & donors (World Bank,(Kidanemariam Berhe Hailu/PSI)ILO, UNIDO, USAID, UNPD, SIDA “Summary of Field Survey on Appareletc.), plus Japanese participants (incl.
Industry” (Mulu Gebreeyesus/PSI)
Ambassador Matsunaga)
Ethiopia Productivity Report (Launch
3rd DPF Introducing the Major Contents of the(Feb. 2020,
Workshop)
Report (Kenichi Ohno)
Addis Ababa)  Participants: PDC, MOTI, IPDC, EIC, Selected Highlights of Chapters 3 & 4
TIDI, MIDI, LIDI, EKI, FeSMMIDA, EEA,
(Kidanemariam Berhe Hailu/PSI)House of peoples Representatives, Selected Highlights of Chapter 5 andWorld Bank, plus Japanesepolicy measures (Mulu Gebreeyesus/PSI)
participants (incl. Ambassador
Matsunaga), and media
4th DPF(Jan. 2022,
Online)

FDI Policy Report (Launch Webinar)
 articipants: EIC, MOF, EKI,
 P
UNIDO, World Bank, UNDP, C4ED
Ethiopia, Japanese participants (incl.
Ambassador Ito), and media

Presentation of Report (GRIPS, PSI & JICA)
 “Ethiopia FDI Policy Report 2022:
Main Findings and Recommendations”(Kenichi Ohno/GRIPS) “Dynamics of FDI in Ethiopia: Bridging
the Balance of Payments Gap” and“Enhancing the Role of FDI in Technology
and Knowledge Transfer” (Kiflu Gedefe
Molla/PSI).
 “Pursuit of Product Quality and Ethical
Correctness in Developing the Garment
Industry” (Izumi Ohno and Sayoko Uesu)
 “Ethiopia in the Industry 4.0 and PostPandemic Age” (Toru Homma/JICA)
 Q&A, discussion

Policy Workshop: Policy Trade-offs
5th DPF(Dec. 2022,
and Inconsistencies: Why Ethiopian
Addis Ababa) Manufacturing Fails to Grow Fast?
Participants: MOI, MOF, EIC, MPD,
MIDI, KEC, NBE, DBE, World Bank, GIZ,
UNIDO, USAID, researchers, private
sector, and media

Keynote speech: MOI State Minister Mr.
Hassen “Policy Inconsistencies in Ethiopian
Manufacturing Industry Growth” (Amare
Matebu/PSI) “Resolving Policy Trade-offs andInconsistencies: Ethiopia’s Mechanisms
and Asian Experiences” (Kenichi Ohno/
GRIPS)
 Q&A, discussion

102

Appendix

Meetings with key economic and industrial ministries (real sessions)
Date

Partners

Topics discussed

Feb. 2019(9th field mission)

PMO, MOTI, EIC(separate meeting)Economic policy of new administration, industrial
policy dialogue, productivity report, automotive policy
and incentives for attracting Japanese manufacturers,
industrial park development

May 2019(10th field mission)

PMO, MOF, MOTI, EIC(separate meeting)

Explaining Japanese industrial cooperation, automotive
policy and incentives for attracting Japanesemanufacturers

Aug. 2019(11th field mission)

PMO, MOF, MOTI, EIC(separate meeting),
Dinner at Residence ofJapanese Ambassador

Policy recommendation for automotive policy anddiscussion

Nov. 2019(12th field mission)

PMO, MOF, EIC @ PMO Productivity report, HERA

Feb. 2020(13th field mission)

MOTI, EIC
(separate meeting)Automotive policy

Apr. 2022(14th field mission)

MOI, EIC(separate meting)Automotive policy, reorganization of industrial ministries

Sep. 2022(15th field mission)

MOI, EIC, MOF(separate meeting)Automotive policy, policy inconsistencies and National
Industry Movement

Dec. 2022(16th field mission)

MOI, EIC(separate meeting)

Policy inconsistencies, FDI-local linkage policy andreview of industrial policy dialogue

Meetings with key economic and industrial ministries (online sessions)
Date

Partners

Topics discussed

MOTI
10th Feb. 2021

Minister Teka
Gebreyesusu

Progress of joint FDI policy research, automotive policy,
10 year development plan and MOTI’s 10 year plan

10th Nov. 2020

Mr. Bruck Teshome(Advisor) etc.

Drafting process of automotive policy and discussion

11th Nov. 2020

Ms. Lelise Neme(Commissioner)(attended by JICA etc.)

Briefing of joint FDI policy research, automotive policy,
10-year development plan

12th Feb. 2021

Mr. Bruck Teshome(Advisor), PDC

Briefing of joint FDI policy research, automotive policy,
10-year development plan

10th Nov. 2021

Mr. Bruck Teshome(Advisor)

Progress of joint FDI policy research, automotive policy

Dr. Fitsum(Commissioner)

Joint FDI policy research, drafting process of 10-year
development plan, discussed whether PDC can act as aplatform for policy discussion

EIC

PDC
12th Oct. 2020103

Appendix 2:
Third country missions
Countries
visited

PeriodTopics1 Sri Lanka

Oct. 2017

1) Overseas expansion of Sri Lankan garment and apparel industries,2) Ethical issues in the industry, 3) Merit and demerit of Sri Lanka’s
strategy to be a middle-income country (the apparel industry as a main
manufacturing activity).
Findings were shared at 2nd HLF and used for FDI joint policy research

2 KenyaAug. 2018

1) Automotive polity and industrial strategy, 2) Research on Japanesemanufacturers and local suppliers, 3) Government activities to promote
QPC.
Findings were shared at 1st automotive seminar and discussions withkey policy makers

3 Djibouti

Feb. 20191) Logistics between Ethiopia and Djibouti, 2) Logistic services ofDjibouti

4 Myanmar

Nov. 20191) Automotive policy, 2) Industrial Park (Special Economic Zones),
3) Garment industry.
Findings were shared at 2nd automotive seminar and discussions; also
used for joint FDI policy research104Appendix

Appendix 3:
Workshops and webinars hosted by the Industrial
Policy Dialogue
For MOI/MOTI and EIC
Theme/panelists

Presentations

Aug. 2017,
Addis Ababa

QPC Study Meeting (Follow-up of 1st HLF Evaluating three productivity tools (kaizen,
benchmarking, twinning) (IPE Global)
and Preparatory meeting for 2nd HLF)
 Invited officials: MOI, PSRC etc.
 Literature review of productivity (PSRC)

Aug. 2018,
Addis Ababa

Seminar on the Textile and Garment Production shift of textile and garment
Industry, in collaboration with Itochu (coindustry and perception of global buyer,organized by MOI, JICA, GRIPS, UNIDO)
competitiveness of Asian countries and articipants: TIDI, Ethiopian Textile andEthiopia, 8 essential KPIs for global
 P
Garment Manufacturers Organization,marketEKI

Feb. 2019,
Addis AbabaFirst Automotive Seminar (co-organized “The Potential and Issues in Japaneseby MOTI, JICA, GRIPS, UNIDO)
Automotive Assembly in Ethiopia: A
Study based on Producer Interviews,
 Participants: MOTI, EIC, MIDI and otherrelated ministries and organizations,
Kenya Mission and International Data
private automotive firms, Japanese andComparison” (Kenichi Ohno/GRIPS)
German participants Discussion chaired by MOI State
Minister Yohannes Dinkayehu

Feb. 2020,
Addis Ababa

Second Automotive Seminar (co “The Evolution and Current Status oforganized by MOTI, JICA, GRIPS,
Myanmar’s Automotive Industry” (ToruUNIDO)
Homma/JICA)
 Participants: MOTI, EIC, MIDI and other  “Key Findings in Myanmar’s Automotive
related ministries and organizations,
Policy and Lessons for Ethiopia”
private automotive firms, Japanese and(Kenichi Ohno/GRIPS)
German participants Discussion chaired by MOI State
Minister Mr. Teka Gebreyesusu

Sept. 2022,
Addis Ababa

Third Automotive Seminar (co-organizedby MOI, JICA, GRIPS) articipants: MOI, MIDI, EIC
 P
and other related organizations,private automotive firms, Japaneseparticipants “Ethiopian Automotive Policy in the
African Automotive Market” (Kenichi
Ohno/GRIPS) “Global and African Automotive Industry:
Emerging Trends and Strategies” (Toru
Homma/JICA) Discussion chaired by Mr. Asfaw Abebe/MIDI

Dec. 2022,
Addis Ababa

The FDI-local firm linkage Workshop (coorganized by MOI, JICA, GRIPS) Invited officials: MOI, MIDI, UNIDO,JICA “FDI-Local Firm Linkage Development:
East Asian Experiences and
Suggestions for Ethiopia” (Kenichi
Ohno/GRIPS) “Business Linkage Promotion between
Domestic Enterprises and FDI Firms:
JICA’s Approach” (Toru Homma/JICA) Discussion chaired by MIDI Director
Milkessa

105

Theme/panelists

Presentations

Dec. 2022,
Addis Ababa

Knowledge Sharing Seminar on Industrial  “Ethiopia-Japan Industrial Policy
Policy Dialogue (co-organized by MOI,
Dialogue under JICA’s Industrial
JICA, GRIPS)
Promotion Project” (Izumi Ohno/GRIPS) Participants: MIDI and related centers

April 2022,
Addis Ababa(EIC)

Presentation of FDI Report Participants: about 50 EIC officials
including Commissioner Mme.Lelise,
Deputy Commissioners Mr. Temesgenand Mr. Daniel Presentation of FDI Report (Kenichi
Ohno/ GRIPS) Presentation of chapter 8: Impact of
COVID-19, Industry 4.0 (Toru Homma/
JICA)

For PSRC/PSI Knowledge Sharing Forum (KSF)
Presentation
st

1 KSF
(Nov. 2017) “ Productivity Enhancing Measures in Ethiopia and Sri Lanka; A BilateralComparison” (Kenichi Ohno/GRIPS)
 ” Labor Productivity in Vietnam: Data Analysis and Policy Recommendations”(Nguyen Duc Thanh/VEPR) “Wage-Labor Productivity Nexus on the Ethiopian Manufacturing” (Kidanemariam
Berhe Hailu/PSRC)

2nd KSF(Aug. 2018) “ Development Policy Think Tanks: Selected Case Studies from Asia” (Kenichi
Ohno/GRIPS)

106

Appendix

Appendix 4:
List of key Ethiopian dialogue partners
Organization

Title

Name

Dates of meeting

Government and Public institutes
1 PMO

2 MOI/MOTI

Prime Minister

Mr. Hailemariam
Desalegn

08/11/2017
21/02/2020 (as the chairpersonof the board of trustees
at Hailemariam & RomanFoundation)
20/11/2020 (Panelist for the
GDF-Brenthurst Webinar)

Senior Minister &Special Advisor to PM

Dr. Arkebe Oqubay

02/02/2017
10,11,15/02, 04/06/2018
25,28,29/08/2018

State Minister

Mr. Tadesse Haile

07/08, 13/11/2017

Chief Cabinet
Secretary

Mr. Alemaheyu

07/02, 08/08, 13/11/2017

Special Economic
Advisor of PM

Amb. Girma Birru

21/02/2020

Special Advisor

Mr. Newai Gebre-ab

07/08, 07/11/2017

Senior Advisor to
PM & Chief Trade
Negotiator

Dr. Mamo E. Mihretu

29/05, 08,09/08, 30/10/2019

MinisterMr. Ahmed Abitew

08/02, 05/06, 07,10/11/2017

Dr. Ambachew
Mekonnen

04/06, 15/08/2018

Ms. Fetlework
Gebregziabher

05/12/2018

Mr. Melaku Alebel

25/04, 13/9/2022
14/10/2022 (in Tokyo)

State Minister(charged for Metal
industry)

Mr. Alem

09/08/2017

State Minister

Dr. Meles Mebrahtu

07/11/2017

State Minister
Mr. Yohannes(charged for Metal and Dinkayehu
Mechanic Industry)

08/06, 05/12/2018

State Minister(charged for Garment
and Textile Industry)

Mr. Bogale Feleke
Temesgen

15/08/2018

State Minister

Mr. Teka Gebreyesusu

30/05, 06,08/08, 28/10/2019
20/02/2020, 10/02/2021(online)

107Organization

3 MOFED/MOF

4 MOFA

5 EIC

Title

Name

Dates of meeting

State Minister

Mr. Hassan
Hohammed Moalin

14/12/2022

Director General

Mr. Ahmed Nuru

08/02, 05,07/06, 07,11/08/2017,15/11/2017, 07/06/2018
16/09, 14/12/2022 (Director at
East Africa Holding)

Deputy DGDG

Ms. Firehiwot
Shemelise

14/11/2017, 20/02/2020
10/02/2021 (online)

Advisor to the State
MinisterMr. Dugasa Dunfa
Bachule21/04/2022

Advisor to the Minister Ms. Maryamawit
Engdawork

16/09/2022

Mr. Asfaw Abebe
Senior Advisor of
Minister & Coordinatorof ETM

16/09, 13,19/12/2022

Advisor to the Minister Mr. Haddish Harefaw

19/12/2022

Project Assistant of
ETM

Mr. Tadele Asmare

13,19/12/2022

State Minister

Dr. Eyob TekalignTolina31/05, 30/10/2019,14/09/2022

Director, Tax Policy
Directorate

Mr. Mulay Weldu
Asegehegn

08/08/2019

Team Leader of Tax
Directorate

Mr. Gossa Tefera

14/09/2022

State Minister (former Dr. Markos T. Rike
Ambassador in Japan)

30/08, 04/12/2018

Ambassador in Japan

Mr. Kassa T.
Gebrehiwet

Several meetings during 2019-21

Commissioner

Mr. Fitsum Arega

04,06/02, 07/11/2017

Mr. Abebe Abebayehu 30/05, 30/10/2019, 19/02/2020
Ms. Lelise Neme
Deputy Commissioner Mr. Belachew Firkre

11/11/2020 (online)
26/04/2022
04/02/2017

Mr. Abebe Abebayehu 11/08/2017
Mr. Temesegen Tilahun 30/05, 06/08/2019
20,26/04/2022

Advisor108

Mr. Anteneh A.
Senbeta

06/08/2019

Mr. Daniel Teressa

26/04, 15/04/2022

Mr. Bruck Teshome

06/08/2019, 19/02/2020
12/02/2021 (online)
10/11/2021 (FDI policy workshop)

Appendix

Organization

Title
Advisor

6 PDCMPD

Name

Dates of meeting

Ms. Edom
Woldegiorgis

06/08/2019

Mr. Taffere Tesfachew

30/10/2019, 19/022020
10/11/2021 (online)

Assistant toCommissioner

Mr. Ewnetu Hailu
Tamane11/11/2020 (online)

Labour Market
Analytics Director

Mr. Deresse Fekadu
Nigussie

18/04, 15/09, 19/12/2022
31/01/2023 (EIC labor workshop)

Commissioner
MinisterDr. Fitsum Assefa
Adela

30/10/2019
12/10/2020 (online)
26/04, 13/12/2022

Deputy Commissioner Mr. Getachew

08/08/2019

Dr. Nemera G. Mamo

12/102020 (online)

State Minister

Ms. Tirumar Abate

16/09/2022

Communication
Director

Mr. Tesfaye Abate

Director

Mr. Ksubishtt Kassa

DPG Project Office

Ms. Shalom

Director ofDevelopment Project
Directorate

Mr. Bereket
Fesehatsion

Technical Advisor

Mr. Tsadkan
Alemayehu

16/09, 17/12/2022

ExpertMr. Habtamu Takele

17/12/2022

Mr. Tegere Hailu
Mr. Berhanu Assefa
7 EDRI/PSRC
PSI

Executive Director(EDRI)

Director General(PSRC/PSI)

Dr. Makonnen
Manyazewal

01,02/02, 06,10/11/2017

Dr. Yohannes Ayalew

15,17/08/2018

Mr. Abay Tsehaye(PSRC)

07/02/2017

Dr. Ahmed Abite(PSRCPSI)

06, 07/06, 17/08/2018
27/05/2019

Dr. Abalema
Addisalem (PSI)

14/09/2020 (online)

Dr. Mekuria Haile (PSI) 30/10/2020 (online)

Deputy DG

Prof. Beyene Petros(PSI)

27/01/2022 (online/webinar)
18/04, 13/09, 15/12/2022

Mr. Alebel Dessie

09/11/2017, 31/10/2019
26/04/2022

Dr. Yohannes Ayalew

Several meetings109

Organization

Title

9 MIDIMTEIRDC

10 LIDILLPIRDC

11 TIDITGIRDC

12 EKIKEC

Dates of meeting

Deputy DG

Mr. Teferi Tiyaru

26/04, 13/09/2022

Director of Planning

Ms. Gebrehiwot

02/08, 06/11/2017

Lead Researcher

Dr. Mulu Gebreeyesus

Several meetings

Dr. Berhe Hailu
Kidanemariam

Several meetings

Dr. Kiflu Gedefe Molla

Several meetings (online)
18/04/2022

Dr. Amare Matebu

18,26/04, 13,15/09/2022
12,15,17/12/2022

Dr. Netsanet Jore

13,15/09/2022

Mr. Dereje Rahnet

15/09, 12/12/2022

Mr. Firomusa Teshale

15/09, 12/12/2022

Director General

Dr. Milkessa Jagema

13,16/09/2022
14/10/2022 (in Tokyo)
15,19/12/2022

Deputy DG

Mr. Seleshi Lemma
Bekele13/09, 15,19/12/2022

Mr. Hadugu Hailekiros

13/09/2022
14/10/2022 (in Tokyo)

Researcher

8 New MIDI

Name

Director General

Mr. Wolkeneh Delelegn 03,09/02, 09/06, 08/08,(MIDI)
08/11/2017
13/02, 05/06, 04/12/2018

Director Deputy DG
DG

Mr. Dereje Asfaw(MIDI)

13/02, 13/08/2018
27/05, 07/08, 31/10/2019
18/02/2020

Director General

Mr. Asfaw Regessa(MTEIRDC)

21,25/04, 16/09/2022

Director General

Mr. Wondu Legese

06/06/2017

Mr. Dagnachew
Shiferaw
Deputy DG

Mr. Hailekiros Debesay 03/02/2017

Director General

Mr. Seleshi Lemma
Bekele07/06/2017, 15/08/2018
18/02/2020

Mr. Yared Mesfin

18/02/2020

Director General (EKI)

Mr. MekonnenYaie

07/08/2017

Deputy DG (EKI)

Mr. Sebrewongel

06/06, 03/08/2017

Center Manager (KEC) Mr. Asnake Gudisa

20/04, 06/07 (online), 13/09/2022
14/10/2022 (in Tokyo)
14,15,19/12/2022

13 DBE

President

Dr. Yohannes Ayalew

19/04/2022

14 NBE

Vice President

Mr. Fikadu Digafie

12/09/2022

110

Appendix

Organization
15 FeSMMIDA

16 IPDC

17 CINE

Title

Name

Director General

Mr. Asfaw Abebe

Deputy DG

Mr. Seyoum Woujira

CEOMs. Lelise Neme

Deputy CEO

Mr. Amare Asgedom

Dates of meeting
03/02/2017

31/10/2019

Coordinator of Mekelle Mr. Zekarias
IP

03/08/2017 (in Mekelle IP)

Founder & President

Mr. Mulatu Teshome

20/04, 14/09/2022

CEO

Mr. Lemma Degafa

111

Ⅳ