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Main Issues Discussed and The Way Forward Policy Formulation in Developing Countries GRIPS Development Forum Key Relations Leadership Critical role of top leaders (cannot be outsourced!) 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.) 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 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.) 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 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 Sequencing? -- decentralization vs. de-concentration Weak capability of local administration 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? 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 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? Should we look at alternative approaches to capacity development & prioritization? For example, how about pursuing “dynamic capacity development” -- rather than comprehensive “good governance” approach? 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 How to change culture? How to change “rent-seeking” mindset (overcoming financial incentives)? 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 Presidential system vs. parliamentary system matter. Does this matter? Role of External Partners 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…. 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 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 <Organizational arrangements: examples from East Asia> Japan South Korea Malaysia Thailand Issues on Sector-level Coordination Productive sector (industry, agriculture, etc.) faces different challenges from social/ infrastructure sectors in vision/plan formation because of: 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 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 From govt.-led to private-sector led mechanisms for resolving specific problems (1) Vision Sharing and Industrial Policy Formulation Not all E. Asian countries formulate industry-wide policy; but they have instruments for sharing industrial visions. Effective industrial vision formulation requires: 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. Scope: vision/plan formulation, problem-solving & performance monitoring, information-sharing, etc. (2) Priority Programs 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) Critical role of leadership and the secretariat; the secretariat was given the authority to manage Combination of “top-down” and “bottom-up” approaches Gathering high-quality information; linking it to decision-making Rapid problem-solving mechanisms Japan (late 50s-70s): Development and Industrial Vision Formulation Prime Minister - 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. 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 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 President (Blue House) Economic Secretariats State Council Chaired by Deputy PM Five-year plan Economic Minister’s Council EPB Deputy PM KDI - Development planning - Public investment planning Budget Monitoring Aid management Govt.-Business Meetings: Export promotion Economic briefs - HCI drive, etc. 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) Monthly Export Promotion Meetings, as the most important communication channels 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 Chaired by President Park; managed by EPB Members: President, EPB, business leaders, representatives of financial institutions South Korea : HCI Drive (1973-79) High-priority in the Third Five-Year DP (under President Park: targets set until Fifth Five-Year DP): HCI Promotion Committee (73) 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): 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. PM Mahathir’s initiative to renovate direction for economic policies and institutional arrangements (pro-Malay to strategic partnership with business) 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 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 Malaysian Business Council (MBC) (91) Malaysia Inc. Officials’ Committee (93) 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 MOF: Annual budget dialogue METI: Annual trade and industry dialogue (88-) Malaysia (90s): Industrial Master Plan 2 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 Industrial Policy and Incentive Committee (IPIC): 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) 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 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 IRP drafting Used SAL financing (WB, ADB), but with Thailand’s ownership Master Plans for 13 industries formulated Institutes (6 industries; 4 thematic) 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