Main Issues Discussed and The Way Forward

Policy Formulation in Developing CountriesGRIPS Development Forum

Key Relations

Leadership Critical role of top leaders (cannot be out-

sourced!) 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(Late 50s-70s)

Organizational leadership

MOF, EPA, MITI (super-ministry 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 s

pace (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?

A sense of nationalism, dedication to public services, etc.

How to change “rent-seeking” mindset (overcoming financial incentives)? 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 partn

er 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 differe

nt 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 fro

m public service delivery -- costing based) Multi-sector (incl. agriculture, infrastructure, skill development, sc

ience & technology), requiring inter-sectoral 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

Organizational leadership

No single super-ministry

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

PrimeMinister

MITIMOFEcon. PlanningAgency, LandAgency, etc.

PM’s Office

- MLT Economic Plans- Comprehensive National Development Plans (physical planning)

DeliberationCouncils

DeliberationCouncils

- Industrial vision- Industry-specific policies- Coordination & support to business activities (e.g., finance, technology)

Participation fromofficials, business,academia, media,labor, consumers.

Japan (late 50s-70s): Development and Industrial Vision Formulation

MITI

Main Bureau Attached Organizationsand External Bureaus

Deliberation Councils

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

Agency of National Resources ＆ Energy

Patient Office

SME Enterprise Agency

Agency of Industrial Science & Technology

Trade & Investment Training

Other

Industrial Structure Int’l Trade TransactionExport Insurance Industrial Location & WaterTextile Product Safety & Household Goods Quality IndicationPetroleum Aircraft & Machinery IndustryElectrical Works Traditional Crafts Industry......... ...................

Minister

Politically appointed VM

Administrative VM

Deputy VMs

Special assistants

Source: Adapted from D.Okimoto (1989)Figure 3.2 p.117

(*) Industrial Structure Council: influential in the 60s (18 special committees): industrial pollution, int’l economy, consumer economy, heavy industry, chemical industry, etc.

MITI junior staffstudy group

Japan: Industrial Vision Formulation and the Deliberation Council

Hearing: Learned individuals Interested parties Overseas employees Local representatives Others

MITI Research group(subcommittee)

Deliberation council

Conduct survey;compile data

Public relations: Publications Explanatory meetings Lectures Others

(Briefings, subcommittees’ reports)

(Prepare draft)

(Report)

(Feedback)

Outside lecturers

Source: Ono (1992)

Direct presidential control over economic policies

EPB as super-ministry

Research institute (KDI, etc.), providing analysis for MLT economic policies

Govt.-business: close and cooperative relations

Performance-based rewards & penalties

(Blue House) Economic

Secretariats

President

FinanceBusiness

EPBDeputy PM

KDI

MTI

Ministries/Agencies

- Development planning- Public investment planning- Budget- Monitoring- Aid management

South Korea (60s-70s): Development Vision and Govt.-Business Partnerships

Five-year plan Economic Minister’sCouncil

State Council

Chaired by Deputy PM

Govt.-BusinessMeetings:

Export promotion Economic briefs- HCI drive, etc.

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): Heavy and Chemical Industry (HCI): 6 strategic industries

(industrial machinery, shipbuilding, electronics, steel, petrochemicals, etc.)

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):

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)

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

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.

Prime Minister & PM’s Dept.

Ministry of Industry & Trade

Malaysia (90s): Malaysia Incorporated Malaysian Business Council (MBC) (91)

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 Malaysia Inc. Officials’ Committee (93)

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 (tog

ether with Malaysia Inc.). Its implementation was supported by:

Industrial Coordination Council (ICC), chaired by Minister of MOI Members: 8 officials from MOI, EPU, MOF, CB, related economic ministri

es (PS levels), 15 business representatives (Chamber of Commerce, FMM, major industrial associations)

Monitor the progress of IMP2 and examine problems suggested by IPIC, CWGs

Industrial Policy and Incentive Committee (IPIC): Members: officials only (8 ministries/agencies)

Public-Private Cluster WG (18 CWGs) and Strategic Thrust and Initiative Task Force (STITF) Participation of private sector

MOF

PMDeputy PM

EPU(planning)

ICU(monitoring)

MITI

Industry Coordination Council (ICC)

Industry Policy and IncentiveCommittee (IPIC)

Industry Cluster Working Groups (18 CWGs)

Malaysociety

Chinesesociety

Indiansociety

Chambers of Commerce

Source: Adapted from Takashi Torii, “Mahathir’s Developmentalism and Implementation Mechanism:Malaysia Incorporated Policy and BCIC,” ch.4, Higashi (2000), pp. 166, Figure 2.

Budgetdialogue

Annualdialogue

CentralBank

Industrygroups

Individual firms

PM’s Dept.Malaysia: Mechanismsfor Industrial Policy Coordination (1991-)

Political Parties

NPC NEAC

Chaired by MOTI Minister, Govt & business.

Govt. only (8 ministries/agencies)

Govt.& business

Vision 2020Malaysia Plan (Five-Year DP)

IMP2

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.

Prime MinisterCabinet

NESDB

JPPCC

Financial Sector Reform

Industrial Restructuring

Social Infrastructure

Others

National Committee on Industrial Development

Sub-committee on National Industrial Restructuring

Economic Cabinet Meeting

InstitutesTextile, Food, Automobile, Iron & Steel, SME,

Productivity, Mgt. System Certificate, etc.

Source: Shigeki Higashi “Industry: Business and Government in a Changing Economic Structure”ch.3, Suehiro & Higashi (2000), p.166. Figure 3

Public-Private Partnership for Industrial Restructuring(Thailand after 1997)

Line Ministries Thai EXIM BankIFCTSICGC

Federation of Thai IndustriesIndustry AssociationsChamber of Commerce

CommercialBanks

Examine & discuss basicpolicy & direction

Examine & discuss detailedmeasures & actions

Information sharing; Specific MP formulation, etc.

Chaired by Deputy PM

Chaired by Deputy Minister, MOI

Operated jointly by public ＆ privatesectors

Govt.-business consultation body, established in the early 80s.