1. Evolution of Government’s Role on Economic Development 1 J I C A 23 rd January, 2009 Masaki Miyaji

3. Japan Today Small Islands surrounded by sea ( Land area : 338 Sq Km, less than 1/2 of Zambia, Its 70% is mountainous) Population : 127 Million (X 12 of Zambia) GDP : over 4 Trillion US$ ( 2 nd largest in the world) No mineral resources ( Coal mines were closed 30 years ago) 60% of Japan’s Food consumption is based on import Japan’s only but the most important resource is “Human Capital Resources” Japanese Economy stands on Manufacturing with Technologies and highly controlled Skills

4. 4 Japanese experiences in developing Investment by the Private Sector (Large enterprises and MSMEs) Experiences and Instructions of FDI （ Foreign Direct Investment ） “Mozal Project” in Mozambique “Mozal Project” in Mozambique The Importance of Human Capital Resources Development The Importance of Human Capital Resources Development

5. 5 Japanese experiences in developing Investments by the private Sector (Large Enterprises and MSMEs) Japanese experiences in developing Investments by the private Sector (Large Enterprises and MSMEs)

6. 6 Impacts of micro, small & medium-sized manufacturing firms (2004/2005 ） Notes : 1.MSMEs are companies with <300 regular employees (<100 in wholesaling & services, <50 in retailing, eating & drinking places) or with capital stock of < \300 million (US$ 2.7 mill) (< \100mill in wholesaling, < \50 mill in services, retailing, eating & drinking places) 2.Small enterprises are companies with <20 regular employees (<5 in wholesaling, retailing & services) Large Enterprises Total SMEs of which Small Enterprises No.% of totalNo.% of totalNo.% of totalNo. No. of Enterprises (1,000) 4,32699.73,77787.1120.34,338 No. of Employee (1,000) 28,08671.09,85724.911,46629.039,553 Value added (US$ billion) 52455.39810.342344.7947 Capital investment (US$ billion) 3936.7--6763.2106

7. 7 Japan’s Policy fostering Economic Development and Changing Business Climate 1945 ～ 54 Reconstruction Era 1955 ～ 72 High Growth Era 1973 ～ 84 Stable Growth Era Stable Growth Era 1985 ～ 1985 ～ Transition Era Transition Era

8. 8 1945 ～ 54 Reconstruction Era ● The War destroyed production & distribution facilities & systems & systems ● The economy was democratized such as: ① Land Reform ② “Anti-Monopoly Law” established ① Land Reform ② “Anti-Monopoly Law” established ③ “Trade Unions” allowed ④ “Conglomerates” resolved ③ “Trade Unions” allowed ④ “Conglomerates” resolved ● “Priority Production Systems” as a core industry ① Iron- Steel manufacturing ② Shipbuilding ③ Coal Mining ① Iron- Steel manufacturing ② Shipbuilding ③ Coal Mining ● Fostered SME’s (established SME’s Agency) ● Improved diverse infrastructure, such as Laws, Systems & Institutions and Electricity, Railway, Port, & Road ● Established Financial Institutions to supply ample Funds

9. 9 RECONSTRUCTION DAYS （ 1945-1954 ） ～ Establishment of Institutional Framework ～ Corporative Union Law Small Business Finance Corporation People’s Finance Corporation Small & Medium Enterprise Agency (1948) Financial Schemes Insurance Schemes Laws/ Regulations Medium-sized Enterprises Credit Guarantee Association Banks MSMEs Default Small & Medium Enterprise Credit Insurance Law Credit Guarantee Association Law Micro, Small Enterprises

10. 1955 ～ 72 High Growth Era Promoting modernization and upgrading in hardware Promoting modernization and upgrading in hardware “Pyramid structure” was developed “Pyramid structure” was developed Adverse effects of expanded sub-contracting system (i.e.; pressure from parent company) became problematic. Adverse effects of expanded sub-contracting system (i.e.; pressure from parent company) became problematic. Tackled to solve “Dual Economy” : Gaps (productivity, wages, technology, funding, etc.) between large and small enterprises widened Tackled to solve “Dual Economy” : Gaps (productivity, wages, technology, funding, etc.) between large and small enterprises widened Annual GDP growth was over 10% until 1973 Annual GDP growth was over 10% until 1973 Japan became the World No.2 in terms of GNP in 1968 Japan became the World No.2 in terms of GNP in 1968

11. 11 HIGH GROWTH DAYS （ 1955-1972 ） ～ Coping with “Dual Economy” ～ MSMEs How to Tackle “Dual Economy” Sub-contracting Systems Productivity × Wages × Technology × Funding × Productivity ◎ Wages ◎ Technology ◎ Funding ◎ Modernization of Equipments or MSMEs Lower Corporate Tax for MSMEs Exemption of MSMEs from Anti- Monopoly Law ～ WEAK ～ Adverse Effects ~STRONG ～ LARGE FIRMS Revitalization of MSMEs Nationwide Some Prescriptions

12. 12 Phase Two: Stable Growth Era ~ 1973 ～ 84 Stable Growth Era Promoted modernization & upgrading in software Promoted modernization & upgrading in software “Core” business structural shifts of enterprise was inevitable by business climate change due to oil crises “Core” business structural shifts of enterprise was inevitable by business climate change due to oil crises Subsidies in place to industrial structural shifts, in designated areas Subsidies in place to industrial structural shifts, in designated areas Stronger Yen currency damaged industries and regional economy Stronger Yen currency damaged industries and regional economy Energy-saving measures taken by enterprises Energy-saving measures taken by enterprises (led to international competitiveness) (led to international competitiveness)

13. 13 STABLE GROWTH DAYS （ 1973-1984 ） ～ Paradigm Shift ～ Towards Knowledge Intensification Business Climate Change Oil Crisis ・ Modernization of Equipments ・ Government Financial Institutions ・ Tax Regimes ・ Legal Institutional Framework Human Recourses Development Structural Changes Oil Crisis ・ Information ・ Human Capital ・ Technology Upgrading Small & Medium Enterprise College Hard Soft Small & Medium Information Centers Hard Soft Dissemination

14. 1985 ～ Transitional Era Strong Yen encouraged enterprises to invest overseas Strong Yen encouraged enterprises to invest overseas Low interest rate policy led to economic boom Low interest rate policy led to economic boom “Bubble economy” burst in 1991: “lost decade” “Bubble economy” burst in 1991: “lost decade” -Globalization led to enterprise restructuring -Globalization led to enterprise restructuring -De-regulation led to change in human resource -De-regulation led to change in human resource management & subcontracting systems management & subcontracting systems Recovery since 2002 due to export to emerging markets Recovery since 2002 due to export to emerging markets

15. 15 Virtuous Trajectory of Industrial Clusters Agriculture-based Society “Quantitative Expansion” Phase “Qualitative Improvement” Phase HOP STEP JUMP Industrial Clusters AfricaJapanChina India ~Toward Poverty Alleviation~ Limited Job Creation Geographical Concentration of Enterprises Increasing Employment Opportunity Infinite Business Opportunities

16. Industrial Cluster 16 Industrial Park

17. Industrial Cluster 17 Industrial Park Anchor Firm

18. Industrial Cluster 18 Industrial Park Anchor Firm

19. Industrial Cluster 19 Industrial Park Anchor Firm

20. Industrial Cluster 20 Industrial Park Anchor Firm

21. Industrial Park Industrial Cluster 21 Anchor Firm

22. 22 Major Industrial Clusters, led by the Government Tsubame Sanjo-City,Niigata Ohta-ku,Tokyo Suwa-City, Nagano Higashi-Osaka City 22

23. 23 Ohta-ku, Tokyo Ohta-ku, Tokyo (Population 667 Thousand) 23 ・ Industrial cluster for mechanical metalworking Kamijima Heat Treatment Industry （ 42 Employees ） ・ Heat treatment which makes stiffness of the cutting utensils (brooch, hob, drill.). Azuma Manufacturing Factory （ 2 Employees ） ・ Slotter (the machine to process the groove inside the gear) is processed. ・ Precise processing to the curved surface are possible. Sources ： Ministry of Public Management, Home Affairs, Posts and Telecommunications 「 A Statistical Table for Companies 」 Less than 5 Employees occupy almost 60%. Bird’s Eye View.

24. 24 Higashi-Osaka City Higashi-Osaka City (Population 513 Thousand) ・ Industrial cluster for machinery plastics ・ Philosophy is “ Only One“ ・ ”Niche Top” MSMEs are 61/ 548 in Japan. ”Special Economic Zone for Manufacturing”. Tokai Factory (18 Employees) ・ Plastic formation and the quality control aspect 3 dimensional measurement equipment of computer control. ・ Interior part ( for high accuracy formation technology of the micro unit ). Bird’s Eye view Asahi Manufacturing (121 Employees) ・ Part product enterprise (worldwide share 80%), concerning the cylinder head which is the heart of the VTR from compilation to casting. ・ Various aluminum materials.

25. 25 Suwa-City, Nagano Suwa-City, Nagano （ Population 53 Thousand ) ・ Industrial cluster for precision instrument industry ・ De facto “Oriental Switzerland" ・ Aiming toward “Manufacturing Kingdom Suwa” Production of the clock part, other than precise part processing. Takashima Industry ( 250 Employees) Bird’s Eye View

26. 26 Tsubame-Sanjo City, Niigata （ Population 44 Thousand) ・ Industrial cluster for the metal house wear Ezawa Manufacturing （ 17 Employees ） Stainless steel, aluminum, iron, brass and titanium.

27. 27 Experiences and Instructions of FDI （ Foreign Direct Investment ） “Mozal Project” in Mozambique

28. Mozal S.A.R.L. Photograph from

29. 29 Mozambique at a Glance Mozambique General Information (Data Source: Economist Intelligence Unit Country Profile 2006) ① Land Area : 799,380 k ㎡ ② Population :19.8 million ③ Capital :Maputo ④ Ethnic :African 99.66% (Makhuwa, Tsonga, Lomwe, Sena, and others), European 0.06%, Euro-Africans 0.2%, Indians 0.08% ⑤ Language :Portuguese (Official), Makua-Lomwe, Tsonga and Sena-Nyanja ⑥ Religions :Catholic 23.8%, Muslim 17.8%, Zionist Christian 17.5%, other 17.8%, none 23.1% ⑧ Others :At independence in 1975, Mozambique was one of the world’s poorest countries. A Brutal civil war from 1977-92 exacerbated the situation. Namibia Before (1996) After (2007) Virgin Bush Cutting Edge Facility GDP: US$2.897 billion GDPPC: US$180 GDP: US$7.839 billion GDPPC: US$382 Data Source: IMF World Economic Outlook IMF staff estimation for 2007 Photograph taken before 2005

30. Mozal S.A.R.LMozal Phase 1Mozal Phase 2 ① Business Aluminium Ingot Smelter ② Location Maputo/Mozambique ③ Construction start May 1998June 2001 ④ Operation start June 2000April 2003 ⑤ Production Capacity 280,000 tons ⑥ Shareholders & Equity Mitsubishi Corp 25 ％ BHP Billiton 47 ％ IDC 24 ％ Mozambican Govt 4％4％ ⑦ Total Cost US$1,200 MilUS$710 Mil ⑧ Employee 1,135 （ as of Aug 2006 ） ⑨ Reduction Technology AP35 （ Pechiney Technology ） ---Upgraded in 2006 from AP30 ⑩ Electricity Supply Supplied from South Africa ⑪ Alumina Supply Supplied from Australia ⑫ Aluminium Ingot Offtake Pro-rata basis 30 Mozal General Overview

31. Mozambican Govt IDC Mitsubishi Corp BHP-Billiton Mozal Project Mitsubishi Corp BHP-Billiton 47% 25% 24% 4% Offtake Project Finance Dividend MOZAL Project Scheme IFC DEGCOFACE PROPARCOCDCEIB JBIC CGIC DBSA EDC 31

32. Key Drivers for Investment 1.Competitiveness of production cost 2.Governments’ strong commitment and supports (both Mozambique & SA GVMT) 3.Participation of Reputable Policy lending institution (IFC, JBIC, IDC, DBSA, DEG, CDC, COFACE, EIB, PROPARCO, CGIC, EDC) 4.Reliable Partner (BHP-Billiton & IDC) 32

33. Key Drivers for Investment 1.Competitiveness of production cost 2.Governments’ strong commitment and supports (both Mozambique & SA GVMT) 3.Participation of Reputable Policy lending institution (IFC, JBIC, IDC, DBSA, DEG, CDC, COFACE, EIB, PROPARCO, CGIC, EDC) 4.Reliable Partner (BHP-Billiton & IDC) 33 A)The production cost is the cheapest in the world. B)This project is strong against depression through special purchasing contract of 2 major cost factors, electricity and alumina. A)The production cost is the cheapest in the world. B)This project is strong against depression through special purchasing contract of 2 major cost factors, electricity and alumina.

34. Key Drivers for Investment 1.Competitiveness of production cost 2.Governments’ strong commitment and supports (both Mozambique & SA GVMT) 3.Participation of Reputable Policy lending institution (IFC, JBIC, IDC, DBSA, DEG, CDC, COFACE, EIB, PROPARCO, CGIC, EDC) 4.Reliable Partner (BHP-Billiton & IDC) 34

35. Key Drivers for Investment 1.Competitiveness of production cost 2.Governments’ strong commitment and supports (both Mozambique & SA GVMT) 3.Participation of Reputable Policy lending institution (IFC, JBIC, IDC, DBSA, DEG, CDC, COFACE, EIB, PROPARCO, CGIC, EDC) 4.Reliable Partner (BHP-Billiton & IDC) 35 IFC DEGCOFACE PROPARCOCDCEIB JBIC CGIC DBSA EDC

36. Key Drivers for Investment 1.Competitiveness of production cost 2.Governments’ strong commitment and supports (both Mozambique & SA GVMT) 3.Participation of Reputable Policy lending institution (IFC, JBIC, IDC, DBSA, DEG, CDC, COFACE, EIB, PROPARCO, CGIC, EDC) 4.Reliable Partner (BHP-Billiton & IDC) 36

37. Why Mozambique? Q: No bauxite - Alumina, in Mozambique. Electricity coming from SA. Why Mozambique? A: 1)Potential charm point: Cahora Bassa dam – future Hydroelectric-power generation Full production would fully cover the electrical demand in whole Africa of today. 2)Port capability in Maputo 37

38. 38 Mozal S.A.R.L In Mozal Board, amount and menu of activity of MCDT is checked and discussed. MCDT has close communication with Mozal every month. Mozal Community Development Trust (MCDT) 1.Mozal Community Development Trust (MCDT), as a None Profitable Organization, started its operation in January 2001 and its main aim is to share the success of Mozal with local community via various programs. 2.It has a very transparent activity by disclosing budget and audit each year and also report to Mozal the progress of each activity on monthly basis. 3.Mozal donates approximately US$5Million each year. MCDT Mozal Board IFC, Government, NGO Local Community, Private Company Financial and Know- How support MOZAL CSR Activity

39. 39 MCDT Activity 1.Policy “Together we make a difference” (Mozal CSR policy aims for the sustainable development in harmony with Local Community.) 2.Principal of Activity ・ Align development initiatives with those of National, Provincial and Local Government to fight poverty within the framework of the action plan to Reduce Absolute Poverty (PARPA) ・ Act as catalyst by creating pilot projects in other areas ・ Establish partnerships with various organization to achieve sustainable results Involve all relevant stakeholders, including government, NGOs, community structures and the private sector. 3.Main Development ・ Small Business Development ・ Education & Training ・ Health & Environment ・ Sports & Culture ・ Community Infrastructures

40. 40 Support to the Chicken FarmAgricultural Development ProgramProduction of the Carpets MCDT Teacher’s training and capacity buildingDonation of the computers to the UniversitySupport to the Primary Schools Donation of the equipment to the HospitalSupport to the National Park Total Control of the Epidemic

41. 41 MCDT Sponsoring of the art exhibition Community Sports Tournament Uniforms distribution to the teams Classroom BuildingConstruction of the ClinicSchool Project

42. Development The Importance of Human Capital Resources Development

43. 43 Curiosity Passion AspirationKaizen Backbone of the Economic Requirement Backbone of the Economic Requirement Strategy Ambition Marketing Branding Collaborating with Research Institutes Stable Operational Financing Innovation Craftsmanship Not Necessarily Highly-Academic Product Differentiation Human Capitals Go for a “Niche” Markets Challenge the “Status Quo” Willingness

44. 44 1.Compulsory Educational System （ Since 1947 ） -A Key “Driver” for Significant Literacy Improvement- Source ： Ministry of Education, Culture, Sports, Science and Technology ”Basic Report on Schools”2004 Almost 100% Enrollment Ratio Drastic Increase in High School Attendance Almost double Students Pursuing Higher Degree Sky-rocketed Within 50 years Basic Literacy Improvement

45. Domestic Resource Mobilization Efforts for AFRICA ～ ”Sequencing” IS THE KEY WORD ～ Ⅳ. INDUSTROAL AGGLOMERATION Ⅲ. REGIONAL INDUSTRIES Ⅱ.PRODUCT SERVICES Ⅰ. NEED × SEEDS Efforts ・ Appropriate Tax regimes ・ Proper Legal/Institionary Framework － Export Credit － Insurance ・ Technology Transfer From Abroad ・ EPZs(Export Processing Zones) Efforts ・ New Product Development － Dispatch Export ・「 One Taw ban, One Products 」 Initiative ・ Rural Credit Scheme for SMES ・ Credit rationing by the Governments ・ Collaboration via Cooperative in Local Communities Efforts ・ Enactment of basic SME laws － Dispatch Exports ・ Primary Industry Development － TA for Farmers － Initiation of fishers Program ・ Basic Infrastructure Development － Road, Bridge, Ports etc. Efforts ・ Mapping Exercise － Identification of Market Needs (ex) African Food Show Case ・ Rural Credit Scheme for Individuals (ex ） Gramean Bank Model 45