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Industrialization Strategy in Developing Countries - An approach from JICA November 13, New York Go Shimada, Director

Industrialization Strategy in Developing Countries - An approach from JICA November 13, New York Go Shimada, Director Research Program Division, JICA Research Institute. 1. © Shinichi Kuno and Kenshiro Imamura. Purpose of the study. Aims of the study

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Industrialization Strategy in Developing Countries - An approach from JICA November 13, New York Go Shimada, Director

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  1. Industrialization Strategy in Developing Countries - An approach from JICA November 13, New York Go Shimada, Director Research Program Division, JICA Research Institute 1 © Shinichi Kuno and Kenshiro Imamura

  2. Purpose of the study • Aims of the study • Accelerate Industrial development in Africa • Mainstream this as an international agenda • International setting of TICADV (Japan, UN (UN secretariat and UNDP), WB, and AU) • Publish discussion papers and hold a side event at TICAD V • Aim of today’s presentation • Introduce JICA’s approach and lessons from industrial cooperation in Ethiopia

  3. Possibilities and Challenges of Economic Transformation of Africa (1) • Bright forecast • EIU (2012) forecasted that average growth of the regional economy in 2013-16 will be around 5% year • Challenges • Decreasing demand for region’s exports, and falling financial flow (FDI, aid and remittances) • Doing business is still not good for private sector • Youth unemployment (60% of unemployment is young people)

  4. Africahasdeindustrialized (John Page 2012)

  5. Africa has deindustrializedExiting high sophistication industries (John Page 2012)

  6. Possibilities and Challenges of Economic Transformation of Africa (2) • deindustrialization since the mid ‘80s • A declining share of output and employment • Declining sophistication • Anemic manufactured export growth • Key • Transform economic structure from rural agricultural based economies to more diversified economies (creating job opportunities) • Industrialization is the main driver of the change • Harness human capital, filling the knowledge gap

  7. Debate on Economic Transformation (1) • OECF (current JICA, 1993a) argued in favor of infant industry protection and of credit subsidies for selected industries that are believed to have export potential, in opposition to bank’s approach • WB (1993). East Asian Miracle, which endorsed industrial policy but only for export promotion, not on import protection and credit market intervention, OECF (1993b) disagreed with its view. • But, mainstream policy has not changed and industrial policy was sidelined

  8. Debate on Economic transformation (2) • Emerging economies development • “Return of industrial policy” (Rodrick 2007, Lin and Chang 2009, Cimoli, Dosi and Stigtitz 2009, The Economist 2010, Hausmann, Rodrick, Velasco 2010) • DCED (Donor Committee for Enterprise Development) (2010) • GDI (German Development Institute) (2008) • Human Development Report (2012) • KDI (Korean Development Institute) (2012) • JICA

  9. Economic transformation in African context and the initiatives at TICAD IV • 2008 African Union Summit “The industrialization of Africa” • AU (2008) adopted AIDA(Action for the Accelerated Industrial Development of Africa) “no country of region in the world has achieved prosperity and a decent socio-economic life for its citizens without the development of a robust industrial sector (p1)” • ACET established 2008 • Economic Report of Africa (2010)

  10. Africa and Asia • GNI/capita in 1970 • Zambia $432 • Malaysia $392 • GNI/capita in 2011 • Zambia $1,452 • Malaysia $9,656

  11. “Industrialization Strategy” as a process – NOT a piece of document A trial and error process: be aware, some may end up in flops, but it has be embraced as part of the game Support measures adopted in accordance with institutional capacity– one may as well begin with neutral – cross sectorial – measures Lessons from the Asian Growth Experience 11

  12. Diversified Paths of Development in Asia A self-owned process of strategic responses to the changing environment and challenges/opportunities Diversity across countries Domestic Capital-Dependent vs. Foreign Capital-Dependent Natural Resource-Rich vs. Natural Resource-Poor Interventionism vs. Liberalism Diversity over Time IS → EO → (IS ⇔ EO) → Globalization Diversity in growth-leading Industries Heavy industry, consumer electronics, textiles, agro-processing, human resources, ICT … 12

  13. Transition of Development Strategies in Asia

  14. The Initiative for Policy Dialogue (IPD) :African Taskforce Meeting in AddisAbaba (Jul. 2008) TICAD IV (May 2008) G8 Hokkaido Toyako Summit (Jul. 2008) Symposium : Economic Development in Africa and the Asian Growth Experience (May 2008) Follow up Japan’s enhanced support to Africa Industrial Policy Support to Ethiopia 14

  15. Request from Prime Minister Meles (July, 2008) Support to formulate development policy Exchange of views on industrial development strategy, and recommendations by the Japanese side based on Asian development experience. Support to nurture private companies Technical cooperation of JICA for enhancing competitiveness of private companies on the basis of JICA’s experience in Tunisia. The project of policy dialogue on industrial development The project on quality and productivity improvement (KAIZEN) Industrial development support framework in Ethiopia 15

  16. Findings from Policy Dialogue • Mutual dialogue based approach ⇔ HRV “Growth diagnosis” • Industrial Policy Dialogue = 5 Year Development Plan (Macro) + SectorialPolicy + SME Development Policy + Learning (L2C: Learning to compete) • Leaning = Management + Skill • Selective learning from neighbors • Key = PPP + Practical Planning + Inter-government coordination

  17. (Source: Otsuka and Sonobe 2011)

  18. Pictorial Presentation of some of the achievements obtained in the pilot companies Fig.1 Sort, Set-in-order & Shine(3S) are implemented to standardize the inventory stock Fig. 2 In-process stock is repositioned to avoid Muda of transportation Before After

  19. Spreading out the KAIZEN movement from Ethiopia to other African countries

  20. Thank you!

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