Download Industrial Restructuring

Main Issues Discussed and
The Way Forward
Policy Formulation in Developing Countries
GRIPS Development Forum
Key Relations
Leadership
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Critical role of top leaders (cannot be outsourced!)
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Providing development vision
Organizing technocratic teams
Affecting how the system works
Different types of leadership: political, economic
and developmental, etc.
Issues
 Sustainability of “good” (=strong & effective)
leaders?; succession problems
 Personal leadership vs. organizational leadership?
Types of Leadership and Technocrat
Teams
Leadership Type
Technocrat Teams
Japan
Organizational
(Late 50s-70s) leadership
MOF, EPA, MITI (superministry for industrial policy)
S. Korea
(60s-70s)
Strong personal
leadership
EPB (super-ministry), headed
by Deputy PM; reporting
directly to the President
Malaysia
(80s-90s)
Strong personal
leadership
Prime Minister’s Dept. esp.,
EPU (super-ministry) & ICU
Thailand (80s) Organizational
leadership
Four macro core agencies (no
super-ministry); but, weak
macro-sector links
Technocrats (Central Admin.)
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Developmental coalition btw. leaders and
technocrats is crucial (b/c leaders alone cannot
design & implement policies)
Serving as a strategic core center of development
management (not just donor management)
Issues
 The stability of professional civil services often
threatened
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Political interference in civil service appointments;
technocrats are held “hostages” by political leaders.
Weak inter-agency coordination (within central
admin., central-local admin., private sector, etc.)
Problems of monitoring & evaluation
Technocrats (Central Admin.)
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Limitation in the quality and flow of information,
preventing the govt. from making right policy
decisions.
Establishing formal systems & rules does not
guarantee their effective functions.
Problems of corruption
Capacity constraints: dilemma btw. what should
be done (multitude of development challenges)
and what can be done (govt. capacity
constraints); need for prioritization
Limited bargaining power against donors;
sometimes, donor-driven policy and aid decision
Local Administration
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Need to respond to local needs (esp. public service
delivery, poverty-focused programs)
Importance of “bottom-up” approach, to ensure
citizen participation in the development process
Issues
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Sequencing? -- decentralization vs. de-concentration
Weak capability of local administration
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Need for staff training, e.g., budget formulation and execution
Need to diversify local revenue sources; design fiscal transfer
formula
Need for capacity to work with community organizations
Vertically divided functions, reflecting ministerial
fragmentation at the central-level
Role of politicians in local governance

Use of “pork barrel” funds, with little attention to local needs
What Can We Do?
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Influence international opinions toward greater
political space (e.g., the definition of democracy,
constitutional rules on re-election)?
Build a cadre of elite technocrats, to foster
“organizational leadership”?
-- e.g., the role of Dr. Ungphakorn, Thailand
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Create a “super-ministry” which has strong
authority for vision concretization and
implementation of priority tasks?
Make the system transparent and rule-based
(e.g., design of pork barrel funds)?
What Can We Do?
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Should we look at alternative approaches to
capacity development & prioritization?
For example, how about pursuing “dynamic
capacity development” -- rather than
comprehensive “good governance” approach?
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Phased approach: goal orientation strategy targeted,
concrete action plans
Attention to the “positives” rather than the “negatives”
(binding constraints)
Reform government to execute targeted policies
effectively
Related Issues
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How to change culture?
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How to change “rent-seeking” mindset
(overcoming financial incentives)?
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A sense of nationalism, dedication to public services, etc.
Identify and foster leaders of motivated & competent
technocrats -- as a role model for others?
Reward by “non-financial” incentives (e.g., combining
training with merit-based appointment; prestige)?
Political system
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Presidential system vs. parliamentary system matter.
Does this matter?
Role of External Partners
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Publicize “good leaders” and promote intellectual
debates on “democratic developmentalism”?
Use policy dialogues as an entry point for
engaging partner countries in “dynamic capacity
development”?
– although this is effective only when trustful relations exist
btw. external partners and countries….
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Jointly formulate policies, by sharing external
perspectives (e.g., VN-Japan Joint Initiative to
Improve Business Environment)?
Provide new ideas and knowledge, when specific
problems have been identified by countries (e.g.,
Ethiopia (kaizen), Cambodia (one-window-service
office, ombudsman)?
Role of External Partners
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Act as a coordinator for large-scale, regional
infrastructure (e.g., development corridors,
power pools), where respective countries face
different interests?
Act as a watch-dog to ensure transparency of the
development process, by assuming “joint
responsibility” in development management?
Supplementary Note:
Govt.–Business Partnerships
Vision sharing and industrial policy
formulation
 Priority programs
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<Organizational arrangements: examples
from East Asia>
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Japan
South Korea
Malaysia
Thailand
Issues on Sector-level Coordination
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Productive sector (industry, agriculture, etc.)
faces different challenges from social/
infrastructure sectors in vision/plan formation
because of:
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Not public-expenditure intensive
Need to work with private agents
Importance of incentives, regulatory framework, etc.
(different from public service delivery -- costing based)
Multi-sector (incl. agriculture, infrastructure, skill
development, science & technology), requiring intersectoral coordination
Cf. Mick Foster (2001): difficulty of agricultural
SWAP
Experiences from East Asia
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Govt.-business partnerships around shared vision
Large volume of high-quality information flow btw.
govt.-business
Govt. initiatives in operational management of
policy networks (and monitoring)
Existence of mutual confidence, making
predictions and commitments credible
Evolving nature of govt.-business coordination, as
the private sector grows
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From govt.-led to private-sector led mechanisms for
resolving specific problems
(1) Vision Sharing and Industrial
Policy Formulation
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Not all E. Asian countries formulate industry-wide
policy; but they have instruments for sharing
industrial visions.
Effective industrial vision formulation requires:
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Constructive and continuous contacts with businesses;
Mechanism to frequently review and flexibly adjust
policy implementation.
Many E. Asian countries used Deliberation
Councils; but their functions & institutional
arrangements are diverse.
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Scope: vision/plan formulation, problem-solving &
performance monitoring, information-sharing, etc.
(2) Priority Programs
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Some E. Asian countries established Special Task
Forces to plan and monitor the implementation of
high-priority programs
Intensive inter-ministerial coordination (due to
multi-sector nature)
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Critical role of leadership and the secretariat; the
secretariat was given the authority to manage
Combination of “top-down” and “bottom-up”
approaches
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Gathering high-quality information; linking it to
decision-making
Rapid problem-solving mechanisms
Japan (late 50s-70s): Development and Industrial
Vision Formulation
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Prime
Minister
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- MLT Economic Plans
- Comprehensive National
Development Plans
(physical planning)
Deliberation
Councils
PM’s Office
Econ. Planning
Agency, Land
Agency, etc.
Participation from
officials, business,
academia, media,
labor, consumers.
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MOF
MITI
Deliberation
Councils
- Industrial vision
- Industry-specific policies
- Coordination & support
to business activities
(e.g., finance, technology)
Organizational
leadership
No single superministry
Govt. formulating
MLT economic and
physical plans via.
deliberation
councils
MITI serving as
super-ministry for
industrial policy
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Very broad
jurisdiction
Working with the
private sector
MITI
Minister
Politically appointed VM
Administrative VM
Deputy VMs
Special assistants
Source: Adapted from D.Okimoto (1989)
Figure 3.2 p.117
Main Bureau
Minister’s Secretariat
(incl. Research & Statistics)
Int’l Trade Policy Bureau
Int’l Trade Admin. Bureau
Industrial Policy Bureau
Industrial Location &
Environment Protection Bureau
Basic Industries Bureau
Machinery & Information Industries
Bureau
Consumer Goods Industries Bureau
Deliberation Councils
Industrial Structure
Export Insurance
Textile
Petroleum
Electrical Works
.........
Attached Organizations
and External Bureaus
Agency of National Resources
＆Energy
Patient Office
SME Enterprise Agency
Agency of Industrial Science
& Technology
Trade & Investment Training
Other
(*) Industrial Structure Council:
influential in the 60s (18 special
committees): industrial pollution,
int’l economy, consumer economy,
heavy industry, chemical industry, etc.
Int’l Trade Transaction
Industrial Location & Water
Product Safety & Household Goods Quality Indication
Aircraft & Machinery Industry
Traditional Crafts Industry
...................
Japan: Industrial Vision Formulation and the Deliberation Council
Conduct survey;
compile data
MITI junior staff
study group
(Prepare draft)
MITI Research group
(subcommittee)
(Feedback)
Hearing:
Learned individuals
Interested parties
Overseas employees
Local representatives
Others
Outside lecturers
(Briefings, subcommittees’ reports)
Deliberation council
(Report)
Source: Ono (1992)
Public relations:
Publications
Explanatory meetings
Lectures
Others
South Korea (60s-70s): Development Vision and
Govt.-Business Partnerships
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President
(Blue House)
Economic
Secretariats
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State Council
Chaired by Deputy PM
Five-year plan
Economic Minister’s
Council
EPB
Deputy PM
KDI
- Development planning
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Public investment planning
Budget
Monitoring
Aid management
Govt.-Business
Meetings:
Export promotion
Economic briefs
- HCI drive, etc.
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MTI
Ministries/Agencies
Business Finance
Direct presidential
control over
economic policies
EPB as superministry
Research institute
(KDI, etc.),
providing analysis
for MLT economic
policies
Govt.-business:
close and
cooperative
relations
Performancebased rewards &
penalties
South Korea： Export Drive (60s-early
80s)
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Monthly Export Promotion Meetings, as the most
important communication channels
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Chaired by President Park
Members: economic ministries, business association
leaders, governors of financial institutions, major export
enterprises
Monitor the achievements of export targets;
coordinating measures to eliminate impediments to
export growth
Mutual responsibilities: ministries are ordered to take
measures and report at the next meeting
Business
are rewarded, based on export performance
Monthly Economic Briefing
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Chaired by President Park; managed by EPB
Members: President, EPB, business leaders,
representatives of financial institutions
South Korea : HCI Drive (1973-79)
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High-priority in the Third Five-Year DP (under President Park:
targets set until Fifth Five-Year DP):
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HCI Promotion Committee (73)
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Chaired by President Park; equivalent to State Council
Members: Prime minister, Presidential Secretary for Economic
Affairs, 6 ministers (EPB, MTI, MOF, MOE, MOST, MOC)
HCI Planning Team (Special Task Force):
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Heavy and Chemical Industry (HCI): 6 strategic industries
(industrial machinery, shipbuilding, electronics, steel,
petrochemicals, etc.)
Managed by the Blue House (headed by Presidential Secretary for
Economic Affairs)
Members: economic secretariats of the Blue House, MTI, EPB, MOF,
MTI, MOC
Financial and fiscal incentives: National Investment Fund (74);
tax incentives, tariff reduction, etc.
Macroeconomic implications? -- driven by the Blue House and
MTI (rather than EPB and MOF)
Leadership Vision and Technocratic
Arm: Malaysia (80s-90s)
Prime Minister & PM’s Dept.
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PM Mahathir’s initiative to renovate direction for economic
policies and institutional arrangements (pro-Malay to
strategic partnership with business)
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Learning from the “Look East Policy” (1981)
The Vision 2020, announced by PM at the first Malaysian
Business Council (1991)
Institutionalized the Malaysia Inc. Vision
Ministry of Industry & Trade
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Industrial Master Plan (IMP) 2 (1996-2005) to
implement the Vision 2020
Various initiatives to implement IMP2
Although PM provided LT vision and direction for changes,
policy formulation and implementation were conducted via.
multi-layered, inter-coordination mechanism.
Malaysia (90s): Malaysia Incorporated
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Malaysian Business Council (MBC) (91)
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Malaysia Inc. Officials’ Committee (93)
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Chaired by PM Mahathir; organized by PM’s Dept.
Members: 10 ministers, 10 officials, 55 business
representatives
Modeled on the Korean Monthly Export Promotion Meetings
Shared the Vision 2020; facilitated direct communication
among big business, labor and the PM
Chaired by the Chief Cabinet Secretary of PM’s Dept.
Members: govt. officials, business associations and
business leaders
All govt. branches, federal states were requested
to establish govt.- business councils and annual
forums
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MOF: Annual budget dialogue
METI: Annual trade and industry dialogue (88-)
Malaysia (90s): Industrial Master Plan 2
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IMP2: industry-wide master plan to attain the Vision
2020 (together with Malaysia Inc.).
Its implementation was supported by:
Industrial Coordination Council (ICC), chaired by
Minister of MOI
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Industrial Policy and Incentive Committee (IPIC):
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Members: 8 officials from MOI, EPU, MOF, CB, related
economic ministries (PS levels), 15 business representatives
(Chamber of Commerce, FMM, major industrial associations)
Monitor the progress of IMP2 and examine problems suggested
by IPIC, CWGs
Members: officials only (8 ministries/agencies)
Public-Private Cluster WG (18 CWGs) and Strategic
Thrust and Initiative Task Force (STITF)
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Participation of private sector
Malaysia: Mechanisms
for Industrial Policy
Coordination (1991-)
NPC
PM’s Dept.
PM NEAC
Deputy PM
EPU
(planning)
ICU
(monitoring)
Vision 2020
Malaysia Plan (Five-Year DP)
MOF
Budget
dialogue
Political Parties
Malay
society
Chinese
society
MITI
Indian
society
Annual
dialogue
Central
Bank
IMP2
Chaired by MOTI Minister,
Govt & business.
Industry Coordination
Council (ICC)
Govt. only (8 ministries/agencies)
Industry Policy and Incentive
Committee (IPIC)
Govt.& business
Industry Cluster Working
Groups (18 CWGs)
Industry
groups
Chambers of Commerce
Individual
firms
Source: Adapted from Takashi Torii, “Mahathir’s Developmentalism and Implementation Mechanism:
Malaysia Incorporated Policy and BCIC,” ch.4, Higashi (2000), pp. 166, Figure 2.
Thailand (late 90s): Public-Private Partnership
for Industrial Restructuring
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Need for industrial restructuring, after the
financial crisis
National Committee on Industrial Development,
chaired by Deputy PM
Sub-committee on National Industrial
Restructuring, chaired by Deputy Minister, MOI
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IRP drafting
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Used SAL financing (WB, ADB), but with
Thailand’s ownership
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Master Plans for 13 industries formulated
Institutes (6 industries; 4 thematic)
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Operated and financed jointly by public & business
Each institute acts as a hub of information &
consultations, drafting industry / issue-specific MP, etc.
Public-Private Partnership for Industrial Restructuring
(Thailand after 1997)
Prime Minister
Cabinet
Govt.-business consultation body,
established in the early 80s.
Economic Cabinet
Meeting
JPPCC
NESDB
Financial Sector
Reform
Industrial
Restructuring
Chaired by Deputy PM
Chaired by Deputy Minister, MOI
National Committee on
Industrial Development
Sub-committee on National
Industrial Restructuring
Social
Infrastructure
Others
Examine & discuss basic
policy & direction
Examine & discuss detailed
measures & actions
Operated jointly by public ＆ private
Institutes
sectors
Textile, Food, Automobile, Iron & Steel, SME,
Productivity, Mgt. System Certificate, etc.
Information sharing;
Specific MP formulation, etc.
Line Ministries
Thai EXIM Bank
IFCT
SICGC
Federation of Thai Industries
Industry Associations
Chamber of Commerce
Commercial
Banks
Source: Shigeki Higashi “Industry: Business and Government in a Changing Economic Structure”
ch.3, Suehiro & Higashi (2000), p.166. Figure 3