HANDHOLDINGPROGRAMSTAKING FIRMS TO PRESET GOALS
THROUGH COMPREHENSIVE HELPGRIPS Development Forum
Addis Ababa, February 2014

ENTERPRISE ASSISTANCE
 Management
 Technology
 Kaizen Finance
 ICT
 Labor/recruitment
 Marketing
 FDI linkage Testing &certification
 Networking
 Start-up &innovation

Providing these services to firms
separately, individually, and on
as-needed basis:
final results are up to each firm’splanning & effort

OR
Assisting selected few firms in acomprehensive and integrated
manner until they succeed:
government works with firms
until achieving final results

WHAT IS HANDHOLDING?
It is an assistance program that satisfies all conditions below.

 Public service for SMEs with no or little fee A clear business goal is set (only one) A screening mechanism to select eligible firms
 Duration of 2-3 years (usually non-renewable)
 Multiple help is offered based on diagnosis and consultation
 A high success rate is expected
Handholding (or hands-on, yorisoi…) programs are all-inclusive
support for selected few firms that show will and potentiality – tosucceed and become a model for other firms to follow.

It is a common practice in East Asia, but some Western
economists criticize it as too selective and approve only general
help for all.

EXAMPLES OF PRESET GOALS Product development (incl. commercialization of R&D)

 Penetration of a foreign market
 Create a new high-quality product for export (champion
products)

 Creation of a local industrial cluster Overseas investment (by source country)
 Helping incoming FDI firms to operate smoothly, makeprofit and expand (by host country)
PM Hailemariam (July 2013):“Can there be a handholding program to assist Ethiopian
traders and distributors to go into manufacturing?”

1. JAPAN: JETRO’S ASSISTANCEFOR OVERSEAS INVESTMENT
 Supported by FY2012 supplementary budget

 Up to 1,000 firms in any sector (subject to expert availability) One JETRO official and one outside expert will support a firm
“hands-on” for outbound FDI (allowing the case where it isconcluded that the firm does not need to invest abroad) Up to March 2015 at the latest, or about 2+ years max.
(duration to be agreed among firm, JETRO & expert)
 Eligibility—“chuken” (large but not very large) firms & SMEs
seriously considering investing or expanding locations
abroad (= ODA recipient countries) Requirements—appointment of key person at the firm;
foreign travel at firm’s expense; legal compliance;
submission of progress reports; filling JETRO questionnaire,etc.

HOW FIRMS ARE HELPED:COMPANY  JETRO + EXPERTS
Chuken, SME & micro firms
wanting to invest abroad

Apply
Review &approve

Supportinvestment &operation
step-by-step& hands-on

Overseas investment expert
in charge of each firm
JointsupportSupport package
combining
experts & JETRO
network

Information

Service provider contract(JETRO pays fee & travel)

Existing
JETRO
support

Sectoral/area
experts

Tax & legal
offices, private
consultants

JETRO overseas offices

JETRO Headquarters

Firm
Translated from JETRO website (accessed Dec. 2013)

Company
generaldirectorplanning
to invest
abroadJETRO
expert withoverseas
experience

Costs borne by firm
- Travel, accommodation, local
transport, etc.
- Lawyer & accountant fees
- Translation & interpretation- Costs incurred for establishing acompany abroad- All other costs not supported by
JETRO

JETRO services (free)- Expert support- Consultation at JETRO HQ &domestic offices- Country information by JETRO
overseas offices- Arrange meetings with potential
overseas partners- Introduce accounting, legal, tax
consultants abroad- Market, policy, tax, legal, etc.
information

JETRO financial support- Expert fees, expert travel & allother expert-related expenses- One return air travel for one key
person from the firm

2. JAPAN: JETRO’S ASSISTANCEFOR SME EXPORT Starting in 2005, assisting 150-200 firms per year Sectors: machinery & parts, environment/energy, agro & fisheryproducts, design & traditional products, household goods,
fashion—“only one” technology & products preferred One expert offers special knowledge of his/her area; one JETRO
official provides JETRO services and monitors expert activities
 Duration: preparation period + 2 years (non-renewable)
 Eligibility—SMEs engaged in production, wanting to export
directly to a new market (not through a trading company)
 Screening process: (i) informal screening based on daily
contacts, expert views, visits & reports from other organizations;(ii) application form filled; (iii) interview with GD; (iv) JETRO HQ
selection committee  Approval Support contents—export strategy, market information, customer
information, trade fairs, business negotiation, contracts, accountsettlement, etc.

JETRO SME EXPORT (CONT.) Success criteria: (i) exporting to the same buyer three times
or more ; (ii) sales through an agent with payments received.
If the firm develops two new markets, support is terminatedeven before 2 years.
 About 30% of firms “succeed” three years after the end of
support. Even without “success,” most firms make progress.
JETRO’s comments for both support (FDI & export)
 Joint support by JETRO official and business expert iscrucial. JETRO official has broad information and network
while expert has specialized knowledge.

 Information sharing among experts is also important (30 for
export and 150-200 for FDI)

3. KOBE CITY: KOBE ASIAN BUSINESSSUPPORT CENTER Kobe is a port city with a population of 1.45 million

 2010—central government policy shifts toward promotionof SME overseas investment
 2011—preparation―Guidance of Prof. Asaka (Konan Univ; previously Panasonic)―City conducts SME surveys—a sharp increase of SMEs wanting toinvest in Vietnam, Thailand & Indonesia detected―City conducts overseas study trips to these countries―Study group proposes establishment of the Center July 2012—Center established next to JETRO Kobe
―Four full-time city officials at the Center; 95 registered experts―Yorisoi (standing by to help) support: one official + a group of
experts, assisting with any problems related to overseas investment―Well-stacked shelves with latest information―36 firms supported, 60 expert sessions in the first 15 months

From Kobe to WorldThe Kobe Asian Business Support Center

The City of Kobe

 Targeted: manufacturing SMEs in Kobe (SMEs in other cities
may also come for advice) Support measures:―Dispatching a group of experts (+ city official) to the firm for advice―Seminars and study meetings―Free expert consultation, upto 10 times/year (legal, accounting, tax etc.)―Overseas missions for information gathering and networking―Cooperation with other business or support organizations

4. KOREA: KOTRA’S BRANCH OFFICESERVICE FOR SME EXPORT Customized marketing services offered by KOTRA’s overseas
offices, which act as local sales representatives of Korean
SMEs—collecting market information, identifying potential
buyers, business matchmaking, etc.
 All sectors are targeted Eligibility—SMEs engaged in production of goods with new
overseas market potential
 KOTRA overseas officers will assess market potential ofgoods proposed by firms, in light of local market conditions
and KOTRA office’s capacity for service provision
 Screening process: (i) application filed by firms; (ii) selection(KOTRA HQ request relevant KOTRA overseas offices forreview); (iii) service fee payment by firms and contract
agreement; (iv) service provision by KOTRA overseas offices;(v) evaluation by KOTRA overseas offices and follow-up.

KOTRA SME Export (CONT.) Duration: 1 year (renewable upto 3 years)
 Fees: 2.5-3.5 million won/year (export to Japan; fees differ
by country) (approx. 2,500-3,500 USD) 50-60 SMEs/year (supported by KOTRA office in Japan)
 KOTRA overseas offices can provide additional marketing
support, as necessary (extra fees charged)―Hiring local sales representatives on behalf of firms (“Sales
Representative Service”)―Providing firms with rental office space, which can be used formarketing activities (“My Office Service”); KOTRA overseas
officers can also give necessary advice―Extending the support period (upto 3 years), by providing limited
scope of services for those firms unable to achieve the objective.

5. KOREA: KOTRA’S ASSISTANCE FOR FDIATTRACTION
 Within KOTRA, Invest KOREA (IK) is responsible forpromoting inbound FDI—identifying potential foreign
investors, supporting investment projects, providing ongoingsupport for foreign investors already in Korea, etc.
IK’s Project Manager (PM) Program A PM (KOTRA officer or govt./relevant agency official) is
assigned to each investment project to offer customized
services.

 The PM provides information at every step of the investment
process—e.g., providing administrative services as proxy,arranging meetings with relevant agencies for clients, andsetting up task forces to resolve client grievances.
 Experts are mobilized to accelerate the process of FDI—freeconsultations; a pool of 20 private experts (finance, tax, law
securities, accounting, construction, IP, etc.).

Information on Koreanmarkets and industries
On-site administrative
supportProject site search support

Consultation on FDI incentives,
Law, tax, labor issues

Assurance in seeking
business partners

Investment consultation for
operation set up

Helping in arranging meetings withgovernment officers

References to invest-related agencies

Source:http://www.ikp.or.kr/why/pm_program.jsp

Ongoing evaluation of your business
Development plan

 Duration: no limit (pre-investment ～ implementation F/U)
 Other existing services available―Incubation Center, providing rental offices (extra fee) and initial start-up
support, in collaboration with local govt., banks, and consultants, etc.
―Foreign Investment Ombudsman Service (NPO within KOTRA):“Home-Doctor” System, one-on-one service in investigating andresolving grievances

6. MALAYSIA: MATRADE’S
HANDHOLDING FOR SME EXPORT Starting in 2003/04; high success rate expected 24 firms per year (12 Malay SMEs & 12 woman SMEs)
 All sectors are targeted, but high-value, high-tech & knowledge
firms are prioritized Two MATRADE officials support for 3 years (non-renewable)—one
program officer & one trade expert (total 20 officials available)
 Eligibility—Malay or woman ownership & CEO; in operation for atleast 3 years with domestic market presence; office or factory
located in Malaysia
 Screening process: (i) internal selection based on MATRADE
database & SME Corp information; (ii) submission of firm profile
to MATRADE; (iii) MATRADE Technical Committee evaluation &company visit  Approval Support contents—seminars on branding, laws/taxes/markets,
standards, trade finance, etc.; business missions & trade fairs;
free web listing: all costs paid by MATRADE incl. foreign travel

7. TAIWAN: HELPING TO CREATELOCAL INDUSTRIAL CLUSTERS
 In 1989, “One Town, One Product” (OTOP) was started by SME
Administration under MoEA (copied from Japan’s OVOP) Create high-value, high-image local cultural products fortourist & export markets under “Taiwan OTOP” brand name SMEA dispatches a group of experts to target community for
3 years: (i) identify local needs, existing resources & missing
factors, local consensus building & training; (ii) strengthenbusinesses & promote products; (iii) achieve growth &sustainability under community ownership Support contents—R&D, remaking traditional products,
workflow re-engineering, branding, packaging, store display,
tourism linkage creation, marketing (4 OTOP shops, web,media, ads, trade shows…), Taiwan OTOP Design Award 286 featured towns have been successfully coachedhttp://otop.tw/ (accessed Dec.26, 2013)

COMPARISON: SELECTED HANDHOLDING PROGRAMSCountry /Goal

Target Sector

Duration

AgencyJAPAN/JETRO

JAPAN/JETROKOREA/KOTRA/KOREA/KOTRA (IK)

2+ years

Screen
ing

Fee

Yes

Actual expenses
only (Expert
costs paid by
JETRO)

1 JETRO official +Actual expenses
only (Expert
costs paid by
JETRO)

1 JETRO official +Yes

1+ KOTRA officers atoverseas offices(Sales Representative
service, etc)

Overseas FDI
promotion of
SMEs

All sectors

SME export
promotion

Machinery & parts,
etc. (Only one tech.
preferred)

Preparation
period + 2
years

Yes

SME export
promotion

All sectors

1 yearYes

Inbound FDI
promotion

All sectors(upto 3
years)

No limit(2.5m-3.5m
won/year)(FDI lawcompliance)

Actual expenses
only(Expert costs
paid by KOTRA)

Service1 business expert(special knowledge)

1 business expert(special knowledge)

1 KOTRA/govt. official(Project Manager) +a group of experts

MALAYSIA/
MATRADE

SME export
promotion

All sectors (highvalue, high-tech. &knowledge
preferred)

3 years

Yes

Free (All costs
paid by
MATRADE)

2 MATRADE officers(1 program officer +1 trade expert)

TAIWAN/One Town, One
Product

High-value, highimage local cultural
products

3 yearsYes

N.A.

A group of experts(special knowledge)

MoEA

FINDINGS FROM COMPARISON(JETRO, KOTRA, MATRADE)
There are differences among selected handholding programs of
three Agencies:
Use of internal vs. external resources
MATRADE: internal resources (staff)
JETRO (& Kobe City) and KOTRA (Invest KOREA, PM System):combination of internal and external resources

Scope of support
MATRADE: strategic use of the existing support services
KOTRA (Branch Office Service): intensive support to overseas marketing,using their overseas functions
JETRO: all types of customized support and advisory services

Direct vs. indirect support
KOTRA (Branch Office Service): provide services on behalf of SMEs
(direct support)
JETRO (& Kobe City) and MATRADE: coaching, standing by to help
(indirect support)

FINDINGS FROM COMPARISON (CONT.)ALL Agencies have “functioning” standard support services ofexport promotion and investment attraction services, such as:Trade missions, business matchmaking, exhibition & seminars, market
information, etc.
FDI investors consulting, administrative support, grievance resolutions,etc.

Handholding programs fully utilize these basic functions.

For screening eligible firms, Agencies must have capacity toidentify firms with high potential and strong will to work hard
JETRO: day-to-day contacts with SMEs by JETRO officers (HQ,
regional offices), interviews with GD
MATRADE: good database, supplemented by the information provided
by SME Corp.
KOTRA (Branch Office Service): overseas offices providing theinformation on local market potential

The depth of information and knowledge of the Agency officers
on individual SMEs is critical to select eligible firms.

FINDINGS FROM COMPARISON (CONT.)The Agency officers play a key role as program officers, by
linking the need of a particular SME with Agency’s existingsupport menu (not just outsourcing to outside experts)

Combination of a program officer and specialized expert(s)(internal or outside expert) seems to work well.
MATRADE: a program officer + a trade expert (internal staff),providing comprehensive support by using the existing support menu.
KOTRA (Invest KOREA): a project manager + outside experts,
providing comprehensive one-stop services to foreign investors
JETRO: a program officer (HQ or regional offices) + outside businessexperts with specialized knowledge, working together.
In Japan, there are many private business experts, with richexperiences of overseas trading business (incl. retired businessmen)—e.g., by sector, country and region. JETRO and Kobe City (andother local governments) actively mobilize such business experts.

IMPLICATIONS FOR ETHIOPIA
To establish “Ethiopian” handholding programs, the following
aspects may worth considering:Make “the basics” work: Strengthening the basic functions of
FDI attraction (EIA), export promotion is fundamental.
Designate a lead Agency, in light of a clear goal: FDI attraction(e.g., FDI linkages, technology transfer), champion products,
domestic private sector development, etc.
Establish criteria and process of screening eligible firms.

The lead Agency should assign (at least one) officer, whocoordinates handholding programs.
Work with the existing service providers, which havespecialized expertise and day-to-day contacts with firms.
Integrate their services into the Agency’s support packages.
Ethiopia does not yet have many business experts like Japan;
but it has accumulated sector expertise (e.g., LIDI, TIDI, MIDI)
and is now introducing Kaizen (EKI).

IMPLICATIONS FOR ETHIOPIA (CONT.)
Lead agency/
HH. Program

FDI Attraction (EIA)
FDI linkages, T/TChampion Products
Exports

Program officer

Program officer

Local Private Sector
Transformation
Program officer

Kaizen(EKI)
Expert service
providers

LIDI

TIDI

MIDI

Possibilities?

―Can EIA officers and LIDI/ TIDI/ MIDI & EKI officers work together,
providing customized support packages to FDI companies, andalso support local partners for technology transfer (T/T)?
―Can EKI train LIDI/ TIDI/ MIDI officers for Kaizen, so that theseexpert service providers could further upgrade their capacity and
Kaizen become an integral part of the support packages?