1. Main Issues Discussed and The Way Forward Policy Formulation in Developing Countries GRIPS Development Forum

2. Key Relations

3. 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?

4. Types of Leadership and Technocrat Teams Leadership TypeTechnocrat Teams Japan (Late 50-70s) Organizational leadership MOF, EPA, MITI (super- ministry for industrial policy) S. Korea (60-70s) Strong personal leadership EPB (super-ministry), headed by Deputy PM; reporting directly to the President Malaysia (80-90s) 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

5. 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

6. 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

7. 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

8. 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)?

9. 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) Capacity building through “learning by doing”; hands-on efforts, trial & error process

10. 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?

11. 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)?

12. 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?

13. Supplementary Note: Govt. – Business Partnerships  Vision sharing and industrial policy formulation  Priority programs Japan South Korea Malaysia Thailand

14. 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 inter- sectoral coordination Cf. Mick Foster (2001): difficulty of agricultural SWAP

15. 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

16. (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 (DCs); but their functions & institutional arrangements are diverse. Scope: vision/plan formulation, problem-solving & performance monitoring, information-sharing, etc.

17. (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

18.  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 Prime Minister MITI MOF Econ. Planning Agency, Land Agency, etc. PM’s Office - MLT Economic Plans - Comprehensive National Development Plans (physical planning) Deliberation Councils Deliberation Councils - Industrial vision - Industry-specific policies - Coordination & support to business activities (e.g., finance, technology) Participation from officials, business, academia, media, labor, consumers. Japan (late 50s-70s): Development and Industrial Vision Formulation -- Role of MITI

19. MITI Main Bureau Attached Organizations and 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 StructureInt’l Trade Transaction Export InsuranceIndustrial Location & Water TextileProduct Safety & Household Goods Quality Indication PetroleumAircraft & Machinery Industry Electrical WorksTraditional 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.

20. MITI junior staff study 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)

21.  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 EPB Deputy 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’s Council State Council Chaired by Deputy PM Govt.-Business Meetings: Export promotion Economic briefs - HCI drive, etc.

22. South Korea (60s-early 80s): Top-Down Approach -- Export Promotion  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

23. South Korea : Top-Down Approach -- 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)

24. Malaysia (90s): Multi-layered Model -- 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-)

25. Malaysia (90s): Multi-layered Model -- 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 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  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

26. MOF PM Deputy PM EPU (planning) ICU (monitoring) MITI Industry Coordination Council (ICC) Industry Policy and Incentive Committee (IPIC) Industry Cluster Working Groups (18 CWGs) Malay society Chinese society Indian society 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. Budget dialogue Annual dialogue Central Bank Industry groups Individual firms PM’s Dept. Malaysia: Mechanisms for Industrial Policy Coordination (1991-) Political Parties NPCNEAC Chaired by MOTI Minister, Govt & business. Govt. only (8 ministries/agencies) Govt.& business Vision 2020 Malaysia Plan (Five-Year DP) IMP2

27. Thailand (80-90s): JPPCC  National Joint Public-Private Consultative Committee (JPPCC) -- the first, formal govt.- business forum in the country Chaired by PM Prem; organized by the SG of NESDB Members: Deputy PM, ministers, deputy ministers of economic ministries, governor of BoT, SG of Board of Investment, representatives of the private sector (Thai Chamber of Commerce, Federation of Thai Industries, Thai Bankers Association -- three persons from each) Information-sharing, general economic affairs Open to the press, putting pressure on the PM to respond to business’s recommendations  After PM Prem, the role of JPPCC was weakened Cf. PM Prem focused on chairing 3 national committees: 1) JPPCC, 2) Eastern Seaboard Development Plan, 3) Rural development. All three committees were organized by NESDB.

28. Thailand (late 90s): Public-Private Partnerships 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.

29. Prime Minister Cabinet NESDB JPPCC Financial Sector Reform Industrial Restructuring Social Infrastructure Others National Committee on Industrial Development Sub-committee on National Industrial Restructuring Economic Cabinet Meeting Institutes Textile, 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 Bank IFCT SICGC Federation of Thai Industries Industry Associations Chamber of Commerce Commercial Banks Examine & discuss basic policy & direction Examine & discuss detailed measures & actions Information sharing; Specific MP formulation, etc. Chaired by Deputy PM Chaired by Deputy Minister, MOI Operated jointly by public ＆ private sectors Govt.-business consultation body, established in the early 80s.