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Overview Analytical Framework and Transition Dynamics

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Design, implementation and review of growth-oriented development policies. Both positive (what is) and normative ... Policy as deus ex machina --Strong leader ... – PowerPoint PPT presentation

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Title: Overview Analytical Framework and Transition Dynamics


1
OverviewAnalytical Framework and Transition
Dynamics
  • Policy Formulation in Developing Countries
  • GRIPS Development Forum

2
About This Course
  • Design, implementation and review of
    growth-oriented development policies
  • Both positive (what is) and normative (what
    should be) aspects
  • How to move from old system to new, desired
    system
  • Concrete cases rather than abstract theory or
    cross-country regressions
  • Interactive, evolving and open-ended

3
Basic Questions
  • Regarding some concrete problem in development
    policy--
  • Why is our government/ministry unable to tackle
    this problem more effectively? Who are causing
    trouble?
  • How do we draft and agree on the solution?
  • Who are instrumental in executing that solution?
  • Why plans and strategies are not implemented?
  • How should the system be changed to make
    progress?

4
Model (or Framework)
  • Not just description of individual cases with no
    commonalities or comparability
  • However, individual uniqueness should be fully
    taken into account
  • To do this, we need a relatively simple,
    flexible, and non-mathematical framework
  • This framework should help us understand, compare
    and diagnose concrete cases
  • --How different factors interact to produce
    results?
  • --What is the mechanism of institutional change
    and reform?

5
Our Tentative Framework
  • To study effectiveness of development policy and
    central administration, model should be more
    flexible than above.
  • Key players
  • (i) Central government (leader,
    ministries, etc) (ii) Local governments
    (iii) Non-government stakeholders (iv) Foreign
    governments
  • Interactive mode among players should be left to
    each case (not pre-specified).

6
Key Relations
  • Leadership style
  • Horizontal coordination within central government
  • Vertical coordination between central and local
    governments
  • Relation with non-government stakeholders
  • Relation with foreign governments
  • We assume that these five relations are
    critical in determining policy effectiveness.
  • We do not pre-impose the content of each
    relation.

7
Key Relations
8
Institutional Dynamics
  • After knowing the current and the desired system,
    how can we move from the one to the other?
  • Common obstacles
  • --Lack of knowledge or a mistake in designing
    transition steps
  • --Bureaucratic sectionalism no ministry or
    department has full authority or responsibility
    to execute reform
  • --Incompetence top leader or person in charge
    does not know or care
  • --Political resistance corruption, interest
    groups, neo-partrimonialism

9
Comparative Institutional Analysis
  • Prof. Masahiko Aoki and othersat Stanford Univ.
    and Tokyo Univ.
  • Based on evolutionary game theory
  • Some questions
  • --Why do multiple systems emerge and coexist,
    without any system dominating all others?
  • --What is the dynamic mechanism of moving from
    one system to another?

10
Key Concepts
  • Institutional complementarity
  • E.g., OJT, life-time employment, keiretsu system,
    main banks were mutually consistent in Postwar
    Japan
  • Strategic complementarity
  • E.g., people in competitive society study
    professional skills, people in connection society
    give parties gifts.
  • Path dependence
  • E.g., because of these complementarities, a
    system, once started, will have little incentive
    to deviate.

11
Forces of Systemic Change
  • Collective mutation
  • Foreign pressure (contact with another system)
  • Policy as deus ex machina
  • --Strong leader
  • --Political parties, interest groups, peoples
    movement
  • --Researchers, advisors, intellectuals
  • Those who are inside the country but do not
    follow the rules of the existing system initiate
    change against resistance
  • Combining policy and foreign pressure

12
Collective mutation
Foreign pressure
Policy
Policy and foreign pressure
13
Tentative Hypothesis on High and Low Performers
in East Asia
  • Not all East Asian countries are high performers
    some remain as poor as the low income Sub-Saharan
    African countries.
  • To achieve middle income (1,000),
    liberalization, opening up and receiving FDI is
    sufficient.
  • To achieve higher income (10,000), private
    dynamism and good industrial policy are both
    essential.

14
Per Capita GDP in 2004 (PPP) World Bank data
Green participants in East Asian production
network
15
Different Speed of Catching Up in E. Asia
Per capita real income relative to US(Measured
by the 1990 international Geary-Khamis dollars)
Sources Angus Maddison, The World Economy A
Millennium Perspective, OECD Development Centre,
2001 the Central Bank of the Republic of China
and IMF International Financial Statistics (for
updating 1998-2006).
16
Ingredients for High Performance
Private Dynamism (Primary Force)
Good Policy (Supplementary)
  • Each society has different capability in commerce
    and industry, largely determined by climate,
    geography and history (but sometimes mutable)
  • Quick response to business opportunities
  • Alertness vs. relaxed attitude toward life
  • Tenacity and dedication for manufacturing
  • Conservatism vs. acceptance of change and
    innovation

To break away from poverty trap and low
governance situation, leadership quality is key
(strong political will and economic literacy)
FDI, donors to align to and support good
policy
Elite group effective government
Top leader
17
Lazy Workers in Japan(Early 20th Century)
  • Survey of Industrial Workers, Ministry of
    Agriculture and Commerce, 1901
  • Japanese workers are only half as productive as
    American workers.
  • They stop working when supervisors are not
    watching.
  • Skilled workers are few, and they are often too
    proud and lazy.
  • Job hopping is rampant in comparison with US.
  • Japanese workers never save.

? Even todays high performers started with low
capacity in private and public sectors.
18
South Korea Unpromising Place with Inept
Institution
  • The Lessons of East Asia Korea, K. Kim D.M.
    Leipziger (1993)
  • Heavily dependent on US foreign aid for food,
    fuel and other raw materials, Korea was not seen
    as a promising place for major investments.
  • During the period from 1940 to 1960, the Korean
    bureaucracy was a kind of spoils system.
  • The East Asian Miracle, The World Bank (1993)
  • At late as 1960, the Korean civil service was
    widely viewed as a corrupt and inept institution.
  • In less than two decades, this view has been
    dramatically altered. By the late 1970s, the
    bureaucracy had become one of the most reputable
    in developing world. How did this come about?

19
Thailand Haphazard Planning, Shortage of
Qualified Personnel
  • World Bank Mission Report 1959
  • Investments have been authorized without first
    trying to find out if they would serve urgent
    needs, if they would be as productive as other
    alternatives, or if the particular forms of
    investment chosen were the best means of
    attaining their objectives.
  • There is a shortage of trained manpower and of
    managers and administrators qualified by
    experience to operate industrial concerns and
    government departments efficiently.
  • It will be most difficult, if not impossible, to
    find suitably trained and sufficiently
    experienced Thai personnel who can be spared from
    present assignments to fill all these important
    senior positions.

Source A Public Development Program for
Thailand, Report of a Mission organized by the
IBRD at the request of the Government of
Thailand, The Johns Hopkins Press, 1959.
20
Policy DesignDesirability vs. Feasibility
  • Development is both a political process and an
    economic process.

What should be doneHRD technology Infrastructur
e Integration competition Systemic transition,
etc
What can be done Leadership Political
constraintsPopular sentiment Administrative
capacity
(mainly economics)
(mainly politics)
  • Each country is unique in what needs to be done
    as well as what can actually be done.
  • Any policy maker must work with economic and
    political space simultaneously.

21
Policy Design (cont.)
  • Policy advice without feasibility consideration
    cannot be implementedregardless of whether
    proposed actions are a few or many, common or
    tailor-made.Eg. macro conditionality (fiscal
    monetary austerity), transitional strategy
    (big-bang vs. gradualism), external opening,
    governance, growth diagnostics, etc.
  • We need to figure out a policy sequence which is
    both desirable and feasible in each countrys
    context.
  • While the government is directly responsible for
    politics, outsiders can indirectly assist in
    overcoming political problems.

22
Dynamic Capacity Development
  • Goal orientation long-term vision ? phased
    strategies ? concrete action plans.
  • Direct most effort to perfecting your strengths
    rather than correcting your general weaknesses
    (dont worry too much about Kaufman index or
    investors ranking).
  • Stop abstract thinking and start concrete action
    NoIs industrial policy useful? What is the
    role of state? YesLets build this port
    industrial zone successfully, etc.
  • Achieve successes one by one, and be proud.
  • Top leaders take political risk and
    responsibility to move things fast forward.

23
A Comparison of East and West
24
GRIPS Development Forum (GDF) Policy Advisory
Activities
  • Vietnam Development Forum (2004-now)
  • Industry monozukuri, supporting industries
  • Macro coping with crisis, financial system
  • Social issues protection of vulnerable, social
    securities
  • Environment community based, coping with growth
  • Ethiopia (just starting, PM Meles)
  • Evaluating ADLI and Ethiopian dev. policies
    (GRIPS)
  • Introducing kaizen to selected factories (JICA)
  • Japanese ODA policy making (ongoing)
  • Hub for discussing Japanese aid to Africa
  • Japanese/E Asian style development cooperation
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