Ethiopia-Japan
Industrial Policy Dialogue
What We Discuss and How We Interact

Addis Ababa, Jan. 2015
GRIPS Development ForumKenichi Ohno

Learning to Industrialize
From Given Growth to Policy-aided Value Creation
True development is value creation by people and domestic
enterprises, not becoming rich thanks to oil, gas, diamond,copper, FDI, aid, big projects, etc.
 Growth due to given advantage (luck), not by human effort,
will sooner or later slow down (Middle Income Traps).
 Policy learning (mindset & policy method)—(i) collecting andcomparing international best (and worst) policy practices;and (ii) based on this rich information, building a generalcapability to create policies that fit your country.
 Policy dialogue—candid, concrete and pragmatic discussion
between a developing country government and experts &officials from more advanced countries (Japan/East Asia),
followed by actual project implementation.
-Individual tutoring—no standard manual or pre-set agenda; allstudents are different and times are changing.
Serious & flexible interaction between teacher & student basedon mutual respect and high aspiration.Standard Policy Menu in East Asia
Kaizen (productivity improvement philosophy & tools)
 Shindan (SME management consultant system) Engineering universities (King Mongkut ITK, Nanyang
Polytechnic, Thai-Nichi Institute of Technology…)
 TVET-business linkage (Singapore, Thailand…)
 SME finance (two-step loans, credit guarantees…)
 Integrated export promotion (Korea)
 Industrial zone development (Taiwan, Korea, Thailand,Malaysia, Singapore…)
 Strategic FDI marketing (Thai BOI, Malaysia’s MIDA, Penang,Singapore) Supporting industry promotion (parts & components; Thaiauto)Japan’s Policy Dialogue with Developing Countries
Country

PeriodHead/key players

Purpose and content

Argentina

1985-1987
1994-1996(folow up)

Saburo Okita (former foreignminister)Comperehesive study on agriculture and livestock farming, industry,transport and export promotion

Thailand1999

Shiro Mizutani (former MITIofficial)

Study on the master plan for SME promotion policy

Vietnam

1995-2001

Shigeru Ishikawa (professor)

Large-scale joint study on macroeconomy, industry, agriculture,enterprise reform, crisis management, etc.

VietnamJapanese embassy, JICA, JETRO,
2003-current
JBIC

IndonesiaBilateral joint initiative to improve business environment andstrengthen competitiveness through 2-year monitoring cycle of action
plans

2000

Shujiro Urata (professor)

Policy recommendation for SME promotion

Indonesia

2002-2004

Takashi Shiraishi and Shinji
Asanuma (professors)

Policy support for macroeconomic management, financial sector
reform, SME promotion, private investment promotion,
democratization, decentralization and human resource development

Laos2000-2005

Yonosuke Hara (professor)

Study on macroeconomy, finance, state enterprise, FDI and poverty
reduction, etc.

Myanmar1999-2002

Konosuke Odaka (professor)

Study on agriculture, rural development, industry, trade, finance, ICT,etc.

Mongolia

1998-2001

Hiroshi Ueno and Hideo
Hashimoto (World Bankeconomists and professors)

Study on the support for economic transition and development

Ethiopia

2009-

GRIPS Development Forum andJICA

Kaizen, basic metals and engineering, productivity movement, policy
procedure and organization, export promotion, technology transfer,etc.

Japan’s Industrial Policy Dialogue with Vietnam
Program

PeriodPrincipal actor(s)ContentIshikawa Project (Study on theEconomic Development Policy in theTransition toward a Market-oriented
Economy in Vietnam)

1995-2001(3.5 phases)

MPI-JICA

Joint research on macroeconomy, fiscal and financial issues, agriculture, industry,integration, currency crisis, SOE reform, and PSD; based on the principle of country
ownership and mutual respect, with emphasis on long-term real sector development.

New Miyazawa Initiative (EconomicReform Support Loan)

1999-2000

JBIC

Quick disbursing loan of 20 billion yen with conditionalities in PSD, SOE auditing,and tariffication of non-tariff barriers. Action plans in PSD were monitored andevaluated.

JICA-NEU Joint Research onVietnam’s Industrialization Strategy

2001-2003

Vietnam-Japan Joint Initiative toImprove Business Environment with aView to Strengthen Vietnam’sCompetitivenessJoint Work between Vietnam andJapan to Strengthen theCompetitiveness of Vietnamese
Industries
Joint drafting of Motorcycle Master
Plan under MOI and VJJI2

Bilateral policy research by university researchers on selected industrial issues andJICA-NEU withsectors: AFTA, WTO, FDI, motorcycles, steel, textile and garment, footwear,
Japanese researchers
electronics, and software.
Two-year cycle agreement and implementation of dozens of concrete action plans
which were monitored and reported to high-level, with initial focus on removal ofMPI-4J, Keidanren
2003business impediments and added emphasis on strengthening of local industrial
capabilities.
Analyses by Vietnamese and Japanese experts as inputs to the drafting of the Fiveyear Plan 2006-2010, with attention on industrial policy formulation and2004
MPI-4J
competitiveness of individual industries (automobile, electronics, supporting
industries, etc).
Drafting of master plan following new content and method, with active participation
Joint Working Groupof large motorcycle assemblers and interaction with other stakeholders; VDF
2006-2007(MOI, VDF,serving as facilitator. Master plan, after significant editing, was approved in Augustproducers, experts)
2007.

Drafting and implementation ofsupporting industry development
action plan

2008-

Vietnam’s Industrialization Strategy

2011-

3J, MOIT, MPI

To implement supporting industry development master plan of 2007, action planwith clear time schedule and executing agents, together with proposed Japanese
assistance, was proposed. Agreement with Vietnam was not reached but Japanese
assistance projects began to be executed and monitored.

DPM Hai,Based on past and current industrial studies, a small number of industries and/orMPI/CIEM, METI, regions are to be chosen to receive concentrate policy effort and Japanese3J
cooperation to produce new industries in Vietnam.

Ethiopia-Japan
Industrial Policy Dialogue
PM Meles requested Kaizen & policy dialogue with Japan on
the occasion of IPD-JICA Africa Taskforce Meeting (chaired byProf. J.E. Stiglitz) in Addis Ababa, July 2008.

Kaizen (JICA support)

Phase 1 (2009-11)—30 pilot firms improved
Phase 2 (2011-14)—EKI established, 249 firms coached,a total of 409 kaizen consultants trained
Phase 3 (2015-2019)—advanced kaizen

Policy dialogue (by GRIPS & JICA)

14 sessions held so far with PM, ministers & operational
level. Also, letter exchange, policy proposals & third
country missions.
Study concrete cases in Asia & Africa, and propose
pragmatic policies based on Ethiopian reality.
JICA cooperation to facilitate implementation.

Industrial Policy Dialogue & Kaizen
2008

2009

2010

2011

2013

2012

2014

2015

2016

PM Hailemariam

PM MelesIndustrial Policy Dialogue
Preparation

Africa Taskforce
Meeting Jul. 2008

JICA’sIndustrialCooperation

Phase 1 (2009-11)

Official launch
Jun. 2009

Phase 2 (2012-15)

Final session
May 2011

TICAD VStart
Jan. 2012

PM Abe visit

Next session
Jan. 2015

Malaysia mission

Kaizen Phase 1

Kaizen Phase 3(30 pilot companies)(Advanced level)

Kaizen Phase 2（Institution & human resource)
Metal industry
surveyChampionProducts

Branding &promotion(With Germany)

Note: Black boxes indicate three-level policy dialogue in Addis Ababa (PM, ministers, operational level).

With Former PM Meles at PM Office
Chief Economic Advisor Newai

Presenting JICA’s Kaizen ReportHigh Level Forum (Aug. 2014)

At MOFED

Lecture at Civil Service University(Economic Development of Japan)

Topics Discussed at HLF
Phase 1
Policy method of East Asia; individual country studies
 Applicability of kaizen to Ethiopia; international comparisonof kaizen movement
 Discussing existing & new five-year plans Basic metal & engineering industry survey, etc.
Phase 2
Creating champion products
 Strategic FDI attraction—Malaysian experts & mission
 FDI-linked technology transfer
 Handholding “Vision” & “Productivity & Competitiveness” for GTP2
 Attracting Japanese firms to Ethiopia
 Industrial zone development

Letter from GRIPS to PM (Apr. 2014)
With manufacturing FDI inflow, Ethiopia is starting on apath to FDI-led industrialization like East Asia. East Asianexperiences will become more relevant.
 To accelerate FDI, better business climate, strategic FDI
marketing, wage increase not exceeding productivity
increase, and SME support are needed.
 Labor shortage in certain locations & skills and logisticbottlenecks must be anticipated and solved.
 To inculcate kaizen philosophy, we advise launching KaizenMonth (launched in September).
 Various industrial measures should be strengthened inproper steps & sequences instead of hasty introduction.
Japan will support Ethiopia’s policy effort.
Suggestions for GTP2 (Sep. 2014)
Proposing concrete targets for Vision 2025 (middle income &light manufacturing leader in Africa).
 MOI & MOT should be reunited and strengthened.
 Kaizen should be the main pillar for productivity
enhancement. Concrete kaizen targets are proposed.
 Wage and labor productivity data for Ethiopia and Asian
economies are provided.
 To improve FDI policy, mind WB’s Doing Business ranking,prepare industrial zones properly, and strategically invite(Japanese) FDI.
 Additional proposals for manufacturing SMEs, MOI’sinstitutes, handholding, national image building, etc.
Very Eager to Invite Japanese Firms
While Turkish, Indian and Chinese firms arrive in large
numbers, the Ethiopian government eagerly waits for thearrival of Japanese firms. Japanese firms are expected to belong-term partners and strengthen Ethiopian firms.
 Passionate call to Japan (PM, PM Office, MOI)
“Please establish a JETRO office.” “We will build factory sheds or an industrial zone reserved forJapanese. We welcome Japanese IZ developers, but if they
don’t come, we will build them anyway and wait for Japanesecompanies.”Our initial response
Japanese investors are very cautious and last ones to arrive ina new economic frontier.
 We invest heavily in East Asia, and are currently interested inMyanmar & India. Africa is far and still out of our radar screen.
Uniqueness of Japanese Companies
Manufacturing-orientedーーwe prefer manufacturing
rather than quick trade, real estate or mining.
 Monozukuri spiritーーwe are proud of gemba and pursue
quality & customer satisfaction.
 Long-term orientationーーwe are slow to come to frontiercountries but, once invested, we will stay even withdifficulties.
 Enhancing local capabilityーーmany Japanese firms arewilling to train HR & improve partner companies.
 Legal complianceーーwe observe local laws on labor, tax,environment, etc. better than others.
Japan may be a maverick in the world of quick profits & flexible
partnership. But developing countries will notice and value
our business conduct in the long run.

Prime Minister Hailemariam“From my days of Foreign Minister, I saw and heard the wonderful
functions and activities of JETRO [Japan External TradeOrganization], and wanted to invite it to Ethiopia. My hope is tohave Japanese investors and trading companies in Ethiopia; thecurrent number is too small. PM Abe’s visit here may have
improved our image in Japan. I want JETRO because I believe it will
persuade Japanese firms on the ground to come here. The
presence of Japanese firms will become a role model and teach us
many things. This will not happen with companies from othercountries.” (at PM Office, Feb. 25, 2014)“Studying kaizen will not produce real results unless Japanese firms
come and teach us.”
“I am optimistic. Previously your ambassador said no Japanese
investor would come. But now situations are changing.”Our Current Works (Other than Kaizen)
FDI marketing in Japanーーin cooperation with Ethiopia,
we supply information which has value to Japanese investors(Ethiopia Light Manufacturing Workshop in Tokyo, “Ethiopia
Information Kit for Japanese Businesses”)
 Suggesting industrial zone design & servicesーーweexplain to Ethiopians how Japanese IZ developers indeveloping Asia solve various problems—IZ ownership &management; customs, foreign currency & land clearance;
power failure; special support for SMEs, etc.
 Exploring possible Japanese supportーーbrainstorming
among METI, MoFA, JICA, JETRO, JBIC & GRIPS to find ways
to combine available measures to accelerate Japanese FDI toEthiopia.
 National re-branding (JICA)ーーDentsu & FASID are
producing ideas & materials to elevate Ethiopia’s image.
Our Proposal to Japanese Companies
Ethiopia may not be an investors’ paradise yet, but it has
good, low-cost labor and it is very serious about industrial
learning. No other African country is like this.
 Please practice what you do everywhere else.
 Go for long-term mutual benefit, not for short-term gain.
 Combine what Ethiopia has with Japanese technology &method, and produce high quality.
 Teach Ethiopian managers, engineers and workers.
 Please use EKI, TIDI, LIDI, etc. for improving your factory
and/or partner companies.
 If you face any policy problem (regulation, customs, tax…),
please contact the Japanese Embassy (or JICA, JETRO,GRIPS). We will use all available means, including policy
dialogue with Ethiopia & working with other investor
countries, to solve your problem.
Final Remarks
Ethiopia’s resolve to industrialize and learn from Japan &East Asia is remarkable. Such resolve is not seen in Vietnam
or Indonesia.
 If this resolve is combined with enhanced policy capability,
sustainable growth will be achieved. Ethiopia has a long way
to go in policy learning, but Japan wants to be a good friend& teacher. We will continue to say “quality over speed.” Japan is a small player in ODA & FDI in Ethiopia. But we areproud to engage in bilateral policy dialogue more
pragmatically than other development partners. We value
sincerity, frankness and mutual trust.
