How Nations Learn: a book project
Kenichi Ohno and Arkebe Oqubay, an Ethiopian high official, plan to edit
a book on How Nations Learn, inviting renowned development scholars to
review history of industrial catch-up, state's role in innovation, East
Asian country cases, prospects in Latin America and Africa, and
technology learning in the 21st century. The book will focus on not only
what latecomers learned but how. Dr. Arkebe is a policy dialogue partner
for GRIPS/JICA as well as the driver of FDI attraction and technology
learning in the Ethiopian government. The preliminary draft on
Meiji Japan's technology learning by
Ohno is already prepared.
How Ethiopia learned from Japan - so far
Oxford University Press has an Ethiopia Handbook project to which Izumi
& Kenichi Ohno contribute as joint authors. We have written a chapter on
how Ethiopia has learned from East Asia, especially Japan, and how GRIPS
and JICA have conducted bilateral industrial policy dialogue since 2008.
The Handbook is scheduled for publication in 2019. The GRIPS Development
Forum has discussed many policy issues with PM Meles (2008-12) and PM Hailemariam (2013-17). With the inauguration of new PM Dr. Abiy Ahmed
this April, we are about to re-establish our strong bilateral industrial
cooperation and commitment in Ethiopia, and Ethiopia is also willing to
work with Japan.
Productivity in Ethiopia and Vietnam
Ethiopia and Vietnam are two countries with which GRIPS
Development Forum (GDF) conduct intensive policy research & dialogue.
Despite their different level and pattern of development, both now focus
on productivity and GDF is deeply involved in it.
In both, GDF works very closely with the Japanese
embassy, JICA and policy research institutions. We work with high levels
(PM, PM Office, ministers) as well as relevant ministries and
implementing agencies. In Ethiopia, JICA-supported Kaizen programs are
now nationally owned and strongly expanding. In Vietnam, productivity
concern is widely talked about but real action is slower than in
Kidanemariam, Ohno & Thanh in
We mobilize researchers who received
PhD from GRIPS under K. Ohno's supervision--Dr. Nguyen Duc Thanh
(director, Vietnam Economic Policy Research, Vietnam National
University; former PM advisory member) and Dr. Kidanemariam Berhe Hailu
(Lead Researcher, Policy Study and Research Center under federal
government). GDF is currently working with them to produce a
policy-oriented Productivity Report in each country.
Productivity--a targeted topic for policy awareness and action
There are many things to be done to accelerate
industrialization, but a country has only limited time and human and
financial resources. Instead of advising 50 policies, it is better to
concentrate on a few topics (or even one), making sure that the chosen
policy is designed and executed with full support and professionalism.
Our GRIPS team, together with JICA
and developing country researchers, is promoting "productivity" as a
national core issue in both Vietnam and Ethiopia. Actually, Ethiopia is
already vigorously implementing kaizen as a productivity tool, but we
want to broaden the policy scope beyond kaizen. As to Vietnam, it talks
about productivity but does not know what to do.
Trying to take productivity issues
GRIPS/JICA commissioned a policy paper on productivity
to Vietnamese researchers, soon to be completed. In Ethiopia, we also
commissioned a small review paper and are talking to the
Central Statistical Agency to assess its data quality and analytical
capacity. Apart from data works, GRIPS/JICA are implementing or planning
projects to improve productivity in both countries. They include
generating export champion products, handholding for selected
manufacturing firms, review of past productivity tools and city kaizen
movements, strengthening FDI policy and industrial park quality,
dispatching Japanese industrial experts, and strengthening policy capacity of
domestic researchers and industrial institutes.
Japan is a lead donor in QPC (quality, productivity &
competitiveness) in Ethiopia. We are working with Japanese ambassadors
in both countries to implement these policies.
Mobilizing foreigners proficient in monozukuri
There are many non-Japanese people who studied in Japan
or worked in Japanese firms, and mastered Japanese language and the
spirit and skills of monozukuri (Japanese style manufacturing). The
GRIPS Development Forum is proposing the Japanese government to actively
support and use their businesses and services abroad. Izumi Ohno leads a
policy research program at the Asia Pacific Institute of Research
(Osaka) while Kenichi Ohno cooperates with Vietnamese firms, researchers
and the Japanese embassy in Hanoi for that purpose.
When he was young, Mr. Dayasiri Warnakulasooria (Sri
Lanka) came to Seto City in Japan to learn ceramic production. After
returning to Colombo, he set up a ceramic factory and exported products
to the US with Japanese guidance. He has long been a hub of learning
Japanese language, spirit and technology in Sri Lanka, heading and
actively assisting many programs and associations. He was awarded a
Japanese medal for this.
Mr. Nguyen Xuan Tuyen (Vietnam) came to Japan as a
ginno jisshusei (technical trainee) and learned welding at an SME at
the foot of Mt. Fuji for three years. Upon returning to Hanoi, he created a
company that trains and dispatches Vietnamese workers to Japan with
proper mindset and attitude based on his own experience in Japan. He
believes workers must have long-term life plans and self-discipline, and
work very hard for their family and country. JICA now supports his
Both speak perfect Japanese and can teach Japanese
spirit and attitude to others. They are willing to do more and more to
spread Japanese monozukuri in their native lands.
Policy dialogue continues in Ethiopia
The GRIPS Development Forum (GDF), together with JICA,
has conducted Industrial Policy Dialogue with Ethiopia since 2008 (Phase
1 & 2). Regular and intensive discussions were held at three levels
(Prime Minister, ministers, operational). Kaizen, the
champion product approach, export & FDI policies, etc. have been
implemented. Ethiopia is now learning advanced kaizen and disseminating
kaizen knowledge to the rest of Africa. The Ethiopian government
requested, and GDF & JICA agreed, to continue the dialogue into the
third phase. Planning sessions for Phase 3 were held in Addis Ababa in
Japan is going to
provide a number of new industrial
projects for strengthening Ethiopian enterprises, industrial linkage,
technology transfer and investment climate. GDF will deeply involve
Ethiopian policy research institutes to jointly produce pragmatic policy
advice so they will be able to do the same even after Japanese experts leave -
"import substitution" of industrial policy research. Two of the
GRIPS PhD alumni will be involved in this.
Ethiopia is rapidly building industrial parks to absorb
garment FDI from China, India, Southeast Asia, etc. now coming in large
numbers. Japan will build a special industrial area that satisfies high
standards required by Japanese FDI. The JETRO office was officially
inaugurated in Addis Ababa on July 20.
South African automotive sector
|South Africa has good roads but car sales are
The automotive industry in South Africa
has grown on lavish subsidies on FDI car makers. However, it has stopped
growing (current volume: 600,000 vehicles/year) and needs revamping in order
to survive and compete globally. I was invited by the Japanese Embassy &
JICA in Pretoria to look at the matter and advise what Japan could do to
improve the situation.
I gave two seminars to policy makers and
researchers, interviewed the National Treasury and the Department of Trade &
Industry, had informal but intensive talks with key DTI officials, visited
Toyota factory, and so on. The automotive policy of South Africa is
very different from a typical East Asian
country. It subsidizes CKD, SKD and parts import instead of domestic value
creation or technology transfer. Incentives are fragmented and last only
five years in principle. DTI officials want to improve the policy but top
leaders are afraid to remove current incentives due to peculiar political
economy of this country.
My diagnosis is that difficulty can be overcome only by strong policy ownership
capability. It is not certain if South Africa can do this. However, political
leadership may improve in the near future. On the Japanese side, strong
intellectual and industrial cooperation is useful provided that it is
an "All Japan" effort encompassing all related ministries, JICA, JETRO and
interested car makers.
My back-to-office report
Vietnam: Province-based Economic Growth (PBEG) Initiative
|BRVT Chairman Linh (right) meets Keidanren
official on April 18.
Since 2015, JICA Vietnam and GRIPS
Development Forum have joined hands in PBEG, which aims at creating high
industrial growth in a few provinces to become a policy model for the
country. Ha Nam Province in the north and Baria-Vungtau (BRVT) Province in
the south were selected for their proactive mindset and economic potential.
After a research team of Vietnam National
University collects basic information, a large mission conducts intensive
policy dialogue with provincial leaders, meets with economic departments and
agencies, and visits infrastructure, farms and factories. If the policy
content and capability of the province are considered reasonable, JICA will
prepare a large number of cooperation projects in industrial HR,
infrastructure, etc. and invite Japanese investors appropriate for the
province. I am the leader of the policy dialogue between each province
and the Japanese team.
With the opening of a new highway to
Hanoi and active policies of the provincial leader, Ha Nam is attracting
many Japanese manufacturers. BRVT has oil and gas, deep sea ports (Japanese
ODA), and highways to Ho Chi Minh City are being constructed in steps. The
top team of BRVT visited Japan in mid April and explained its policy to
Policy research in Thailand & Cambodia
A GRIPS Development Forum team visited Thailand and
Cambodia from May 25 to 29.
In Thailand we updated information on FDI-local firm
matching for input procurement or joint venture partnership. There are
several organizations promoting this linkage including BOI Unit for
Industrial Linkage; Bureau of Supporting Industry Development of MOI; Japan Desk
& One-Start-One-Stop Center under the Board of
Investment (BOI); Japan Desk
under MOI; Alliance for Supporting Industries
Association (business association group); and Technology Promotion Association (industrial NPO). FDI-Thai firm
matching is a difficult task, and no one organization can cover
everything, but it is conducted reasonably well in Thailand with formal &
informal networking and mutual reference among organizations.
In Cambodia we studied
overall quality & practice of industrial policy. From the
position of very weak policy capability, Cambodia is gradually gaining
policy ownership. The Rice Policy, revisions of FDI law, a new SEZ law, and the
development plan of Sihanoukville were drafted and some began to be implemented.
The latest addition is the Industrial Development Policy (IDP) 2015-2025,
approved in March 2015, that guides Cambodia's future industrialization. The
broad direction of IDP is well-focused and reasonable, but implementation
details must now be worked out. Policies are crafted and executed by a joint effort of several top technocrats. The Supreme National Economic
Council (SNEC), the Ministry of Economy and Finance (MEF), and the Council
for the Development of Cambodia (CDC) are the three lead policy mechanisms.
Cambodia's current industrial policy is limited, but its dynamic mindset
may produce good policies in the future.
Poor policy causes middle income traps
Click graph to enlarge
I drafted a paper on "The Quality of Industrial Policy
as a Determinant of Middle Income Traps" for a Singapore conference in
August. This is an attempt to grade and compare industrial policy quality
across countries based on our past policy visits & research. 13
governments in Asia and Africa are evaluated. More may be added in the
Preliminary results show that (i) there is a wide gap in
policy quality across countries from excellent to poor (Asia is not always
better than Africa); (ii) policy quality and per capita income are
positively correlated (0.748); (iii) quality of
various policies are similar within any government; and (iv) there is little evidence that
resource endowment affects policy quality in one way or another.
The paper argues that proactive industrial policy needs to be
learned and practiced because Washington Consensus policies
(liberalize, privatize & integrate) cannot stimulate growth of a country
trapped in middle income.
comparison Policy quality
graph Full paper
Policy research mission to Indonesia
The GRIPS Development Forum team, together with two
Vietnamese experts, visited Jakarta to study its industrial policy method.
Indonesia has emerged as a huge middle income country with a population of
250 million and per capita income of $3,500. A very strong domestic demand
attracts FDI firms, but export competitiveness remains elusive. Unlike
Thailand (cars & pickup trucks), Malaysia (electronics & chips) or Vietnam (smart phones), there is
no major manufactured product that Indonesia exports. Economic policy is
turning inward & nationalistic in contrast to many neighbors which are open
& outward-looking. Jakarta's transport system is seriously inadequate and
wage pressure is far beyond labor productivity performance.
policy making is reasonably competent, policy execution is weak despite a
half century of industrialization. FDI, SME and TVET policies are more
fragmented than in Thailand, Malaysia, and even Vietnam. One reason is
big-bang decentralization that started in the early 2000s. Central
ministries lost the policy grip as most policy implementation is in the
hands of local governments. To overcome the middle income trap, Mr. Joko
Widodo, the new president (photo from TV debate), must upgrade human capital and enterprise
capacities as a top national agenda, not just building infrastructure and
restricting & controlling FDI.
and industrial policy
WTO has created 15 expert groups (E15) to review its functions. One of
them is "Reinvigorating Manufacturing" whose first meeting was held in
May 30-31 in Beijing, China. I was one of the invited experts.
WTO is often considered as a rule setter cum dispute settlement
mechanism which is not very kind to latecomer development. Moreover, in
recent years trade & investment issues have been negotiated by bilateral
and regional mechanisms, not WTO. Apparently, WTO wants to reassert
itself in a world where industrial policy is increasingly important.
I contended as follows: (i) WTO rules are quite ambiguous as to how much
industrial policy is permitted and big countries often impose their own
interpretations; (ii) WTO should balance rule setting with the need of
latecomers to industrialize; (iii) WTO should clarify permitted policy
measures and even proactively guide and assist developing countries to
use them. Many participants, including WTO legal experts, agreed with my
view. It is not yet clear whether WTO will take this proposal seriously
- and that will decide whether I will attend the next E15 meeting.
Vietnam already in a middle income trap?
(revised Apr. 2014)
is reviewing the 30 years of Doi Moi (economic liberalization) and the
possibility of a middle income trap is rapidly becoming a popular topic
for discussion among policy makers.
GRIPS, National Economics University (Hanoi), and Industrial Policy
Strategy Institute (Vietnam's Ministry of Industry and Trade) co-hosted
a workshop on "Creating New Growth Momentum" in Hanoi on March 26, 2014.
I was the first keynote speaker presenting multiple evidence that
a middle income trap had already begun in Vietnam only six years
after the country achieved a lower middle income status. I proposed
several concrete actions to overcome this problem, including
productivity focus, proper policy structure & procedure, FDI-linked
technology transfer with detailed policy components, and introducing
several standard policy measures not yet adopted in Vietnam
(kaizen, benchmarking, scaling-up of pilot projects, national productivity
Additionally, on April 15, the Communist Party Economic Committee
organized a symposium on overcoming the middle income trap where I was
also invited to speak. On both occasions my argument was covered
extensively by TV and news & online media.
GDF team invited Dr. Ed Brown and Dr.
Joe Amoako-Tuffour from the African Center
for Economic Transformation (ACET, in Accra) and Dr. Hinh Dinh (WB, in
Washington) to Tokyo for a symposium on Africa's light manufacturing at
GRIPS on March 7, 2014. Additional meetings with Japanese officials and
researchers were also arranged.
ACET just published the African Transformation
Report which ranked the transformation performance of individual African
countries and showed alternative possible paths for growth with DEPTH
(diversification, export competitiveness, productivity, technology,
human wellbeing). Dr. Hinh Dinh recently published a series of light
manufacturing studies featuring Africa and Asia and a number of
individual countries. Their results, together with industrial activities
of GRIPS and JICA in Africa, were shared with audience which included
officials, researchers, investors and consultants, media, foreign
WB light manuf studies