Industrial Master Plans and Action Plans

Policy Design and Formulation in Developing Countries

Proactive Industrial Policy Even under globalization, industrial policy is both necessary and

possible. In fact, many countries already practice industrial policies consistent with WTO, regional integration and bilateral FTAs.

But new policy must be different from old ones: planning, laissez-faire, infant-industry promotion (Korea), FDI-led industrialization with slow integration (ASEAN4).

Proactive industrial policy must satisfy the following: Promotion of markets and international integration A strong and wise state to guide the private sector Retaining sufficient policy tools for catching up Dynamic capacity building of both government and private

sector through concrete actions & projects Internalization of skills & technology Effective public-private partnership Deep industrial knowledge shared by government and

businesses

Policy Learning International best policy practices (and failures) must be

collected and compared systematically. East Asia abounds in good examples, but we can also learn from other regions.

Using them as references and building blocks, government must acquire general capability to create a policy most suitable for a particular country, time and sector.

Do not copy other countries uncritically, or reject their experiences as irrelevant. Learning (knowledge collection) and thinking (adaptation to your country) must be combined.

Learning steps: Collect and analyze policy documents of other countries Seminars & advice by invited foreign officials and experts Policy missions to foreign country governments (write reports) Discuss how foreign experiences can be used in formulating

policies

What to Be Learned?

Basics Policy content Policy procedure Policy organization Policy documentation

More advanced National leadership National movement for mindset change Developmental state (politics & development) Exit to an advanced society

Studies & surveys

Brainstorming

Top leader

Set broad goals &

direction

Draftingwork

Businesses Ministries ＆ agencies

Academics & consultants

Comments& revisions

Finalize& approve

Regions & localities

Stakeholderconsultation

1. Vision

4. Substantive stakeholder participation

2. Consensus building

3. Documentation

Standard Policy Making Procedure(Five Necessary Conditions)

5. A secretariat with sufficient authority andresponsibility to coordinate the entire process

(Drafting may be outsourced)

Taiwan: Statute for Industrial Innovation, 2010

Task forceunder

Ministry of Economic Affairs

Minister providing vision & key ideas

Private sector hearings

with six sectoral business

associations

Brainstorming; agreeing on goals

& directions

Stakeholderconsultations

Documentation

Draftingby MoEA

official with lawyer’shelp for wording

The 3-year process was managed by Chung-hua Institution for Economic Research (a think tank winning competitive bidding).

Dissemination(“Island Tour”)

Inter-ministerial meetings

with MoEA chairing

Furtherrevision &approval

by National Assembly

Thailand: Automotive Industry Master Plan 2007-2011

“CEO Forum”

FDI & local firmsExporters

MoI, MoST, MoEduProfessors’ team

(Chulalornkorn Univ)

M/P SteeringCommittee

Organized by MOI

BusinessesOfficialsExperts

Brainstorming; agreeing on goals

& directions

Set up formal committee for drafting M/P

Subcommittees study identified

issues

Gov’t

Business

Experts

Business

Gov’t Experts

Human resource

Productivity

Marketing

Engineering

Investment& linkage

M/PDraftingBy TAI staff

Comment & dissemination

(Informal) (Formal)

The whole process (1 year) is managed by Thailand Automotive Institute (TAI)

Implementation

Vietnam: Traditional Policy Drafting Process

Prime Ministe

r

Minister DraftingTeam

MPI & otherMinistries

Inter-ministerial review

Internal review

Order

SubmitReview for approval

Submit

Business Community

Internationalexperts

Technical assistance(sometimes)

No permanent channel for continuous policy dialogue

(case-by-case, temporary, ad hoc)

Appeal letter to Prime Minister when problems arise

Contact Ministry when necessary

Interviews, symposiums (sometimes)

Government

MPI & otherMinistries

Data

Alternative Policy Organizations

Who will draft and execute policies, and how? The following approaches are not mutually exclusive; some countries use more than one.

Technocrat group directly under PM or President

National Councils or Committees Super-ministry Sector/issue-specific institute acting as a hub Strong leader without institutionalization

- Elite technocrat group with full planning authority given by top leader

- Members are selected officials, business leaders & experts with good education & experience

BusinessesAcademics Experts

PM or President

Technocrat Group(Policy Maker)

Direction, full authority for policy making

Faithful execution and

reporting

Policy, guidance and monitoring

Faithful execution

and reporting

Ministries (Policy Implementers)

Korea – Econ. Planning BoardMalaysia – Econ. Planning UnitThailand – NESDBTaiwan – Kuomintang ElitesIndonesia – BAPPENASChile – “Chicago Boys”

Technocrat Group Approach

National Council/Committee Approach

National Council or Committee

Ministries and agencies

working groups or task forcesfor specific issues and sectors

PlanSupport

Implement

PM or President

Chair, give mandate

BusinessesAcademics

Experts

National Productivity and Continuing Education Council (NPCEC)

Working Committee for Productivity and Continuing Education (WCPCE)

ConstructionBCA

UnionsIndustry

Low wage workers

Sector working groups (12 priority sectors)

Precision Eng.EDB

UnionsIndustry

ElectronicsEDB

UnionsIndustry

Transport Eng.EDB

UnionsIndustry

General Mfg.SPRINGUnionsIndustry

F & BSPRINGUnionsIndustry

RetailsSPRINGUnionsIndustry

Research & benchmarking

Infocomm and logistics

Cross-cutting issues

NationalProductivity

Fund

Productivity& Innovation

Credit

OversightReview & approval

ScrutinyDraft & propose Skills Dvt. Fund

Lifelong Learning E.F.

Chaired by Deputy PMMembers from ministries/agencies,business, unions Joint secretariat: MTI, MOM (ministers)

Led by MTI, MOM (PS level)Inter-agency coordination

Sectoral “Productivity Roadmap” for the next 10 years

Financial Incentives

Economic Strategies Committee: Report

Review & submit

Singapore Now: New Productivity Drive

My Proposal for Vietnamese Government

National Competitiveness Council

Ministries and agencies

Working groups for specific issues or sectors

Plan

Support, report, draft

Implement

Prime Minister

Direct, give mandate

SMEs

Commission studies, reports

Chaired by PM (or DPM)Secretariat: Government OfficeMembers: Heads of concerned ministries

Higher EducTVETClustersSupportingindustries

Secretariat:MPI

Ministries, businesses, experts

Secretariat:MOIT

Ministries, businesses, experts

Secretariat:MOIT

Ministries, businesses, experts

Secretariat:MOLISA

Ministries, businesses, experts

Secretariat:MOET

Ministries, businesses, experts

Super Ministry Approach

One ministry with broad authority for industry (sectors, trade, technology, training, standards, SMEs, FDI, IPR, regional development…)

Performing multiple tasks—planning, interface with politicians, working with businesses and other stakeholders, trade negotiation, drafting laws and regulations, monitoring, dissemination….

Highly motivated and capable officials and extensive information networks are needed.

No charismatic leader is needed for this approach to work.

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 IndustriesBureau

Consumer Goods Industries Bureau

Agency of National Resources& Energy

Patent Office

SME Enterprise Agency

Agency of Industrial Science & Technology

Trade & Investment Training

Other

I ndustrial 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

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

Organizational Structure of Japan’s Ministry of International Trade and Industry, 1960s

Special Institute as a Hub Government creates/designates a special

institute for promoting a specific sector or a specific issue.

This institute becomes a hub of policy making and implementation (secretariat function)—as well as a service provider for consultation, training, testing, etc.

The institute works closely with relevant ministries, businesses and experts/researchers.

The institute prepares a policy draft.

Name Start-up date Organizations

Thailand Productivity InstituteJun. 1995

Originated from MOI industry promotion dept. 20Board members, 161 staff.

Thai-German InstituteNov. 1995

Financial cooperation from KfW, GDC. Technicaltraining (CNC, CAM/CAD, etc.), 12 Board members,79 staff, 5 German experts.

Thailand Textile InstituteJun. 1997

Based on MOI industry promotion dept. and industryassociation. 20 Board members, 27 staff.

National Food Institute (NFI)Oct. 1996

Based on MOI industry promotion dept. and industryassociation. 20 Board members, 27 staff.

Management Systems CertificationInstitute (MSCI) Mar. 1999

Originated from Thai Industrial Standard Institute(TISI). 14 Board members, 55 staff.

Thailand Automotive Institute (TAI)Apr. 1999

Supporting industry development. 20 Boardmembers, 28 staff

Electrical & Electronics Institute(EEI) Feb. 1999

Supporting industry development. 29 Boardmembers, 28 staff.

Foundation for Cane & SugarResearch Institute Apr. 1999

Originated from Cane & Sugar Research Institute.13 Board members.

Institute for SME DevelopmentJun. 1999

Modeled on Japan’s SME Univ. Operated byThammasat Univ. in cooperation with 8 localuniversities. 21 Board members.

The Iron & Steel Institute of Thailand Dec. 1998(cabinet approval)

Aimed at joint marketing promotion of four steelcompanies (oversupply)

Thailand: Special Institute (around the time of Asian Financial Crisis)

Prime Minister

Visions to be concretized

Relevantministry

ExpertsPrivatesector

Specializedinstitute

Directaccess

Industry-specificcommittees

Thailand should become:-“Detroit of Asia”-“Hub of Tropical Fashion”-“Kitchen of the World,” etc.

High level coordination

Operational levelcoordination

Instruct

Report

Thailand under Thaksin Administration (2001-2006)Strong PM, quick decision, running the country like a business corporation

Documentation DraftingImplementationResults.

Producing documents is the means, not the end. Generally speaking, short & concise is better than

long and complex. Large documents are usually not read.

Only include information and arguments necessary for the policy actions proposed.

Drafters can be officials, consultants, academics or a mixed team. As long as key contents are agreed and necessary studies have been prepared, anyone can draft policy documents.

Comparison of Master Plan Structure0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Malaysia: Third IndustrialMaster Plan

Thailand: First AutomotiveIndustry ES

Thailand: SecondAutomotive Industry ES

Thailand: SecondAutomotive Industry

Thailand: Small and MediumEnterprises

Thailand: SupportingIndustries ES

Thailand: Food Industry ES

Thailand: Leather, leathergoods, footwear ES

Indonesia: National IndustrialDev. Policy

India: National Strategy forManufacturing

India: Industrial Policy ofMaharashtra State

Vision

Targets

Situation analysis

Policy issues

Action plans

Action Plan Template The following template is actually used in Vietnam-

Japan Industrialization Strategy (2011-ongoing). Only essential items are included to save time &

energy; total about 5 pages.

1. Situation analysis (about 2 pages, essential facts only for promoting this industry)

2. Vision for 2020 (one sentence)

3. Targets (3-5 items, one phrase each)

4. Policy issues (3-5 items, one phrase each, policy efforts required for targets above)

5. Action plan (who, what, by when, success criteria in table format)

6. Monitoring mechanism (1-2 sentences, common for all industries)

Thailand AutomotiveM/P 2007-2011

Vision 2011 4 Objectives 5 Strategies 12 Action Plans

Strong coordination by Mr. Vallop of Thailand Automotive Institute

Effective stakeholder networking – FDI, local producers, government, donors

Process-based action mechanism – annual budget and projects for implementing actions (no matrix)

Drafting team at Thailand Automotive Institute

Vision—“Asia’s auto production base with value-added and strong parts industry”

Thai Automotive Vision, 5 Strategies and12 Action Plans

Source: Thailand Automotive Institute, The Automotive Industry Master Plan 2007-2011 Executive Summary, p.4.

Vietnam-Japan Joint Initiative

Purpose: Improve Vietnam’s investment climate to become an attractive investment destination

Background: (1) Japan is the largest implementer of FDI and largest donor in Vietnam; (2) public private dialogue; (2) Vietnam joined WTO in Jan. 2007.

Scheme: (1) Action Plan is agreed among Vietnamese & Japanese governments and Japanese private companies.(2) Monitor progress and announce final result.

Phase 1, 2003-2005 (44 items, 85% achieved) Phase 2, 2006-2007 (46 items, 94% achieved) Phase 3, 2008-2010 (37 items, 81% acheived) Phase 4, 2011-2012 (70 items, 87% achieved) Phase 5, 2013-2014 (100 items, ongoing)

Procedure for Action Plan Vietnam-Japan

1. Japanese Business Associations in Vietnam identify problems and study support measures.

2. Bilateral dialogue to agree on problems and solutions (two governments & Japanese FDI)

3. Agree on Action Plan4. Execute Action Plan Vietnam—review/adjust laws and regulations Japan—ODA support5. Monitor Action Plan Interim monitoring (one year later) Final monitoring (two years later)

Organization for Action Plan Vietnam-Japan (Phase 4)

Vietnamese Side Japanese Side

Ministry of Planning and Investment (MPI)

J.Embassy,JICA,JETRO in Vietnam

Japanese Bus. Assn. (HN/HCM) WT1 Power supply WT2 Labor market WT3 Macroeconomy WT4 General (SI, IPR, customs) WT5 Retail distribution WT6 Infrastructure

Gov’t Office

M of Finance

M of Industry & Trade

M of Sci/Tech

M of Transp

M of Post/Tel

M of Resource

M of Justice

M of Labor

Coordinate

MoFAMETIKeidanrenCoord

inateCo-work

A/P Drafting & MonitoringVietnam-Japan

Joint Committeeheaded by

Japanese ambassadorKeidanren chairman

MPI Minister

Task Forceheaded by MPI Minister & GD

attended by Japanese Bus. Assn.

Japanese ConsultantsHearing from companies

Preparing action plan draft

Drafting Action Plan

Monitoring Action Plan

Evaluation Committeeheaded by

Japanese ambassadorKeidanren chairman

MPI Minister

Monitoring Committeeheaded by MPI Minister & GD

attended by Japanese Bus. Assn.

Task Forceheaded by MPI Secretary & DGDattended by Japanese Bus. Assn.

Action Plan Format Sample:

(Phase I, Item 29) Adoption of international accounting standard (total 2 pages)

(1) Current status—Explanation of current situation and citation of relevant laws & regulations (2 paragraphs)

(2) Issues raised by enterprises—Gap between local and global accounting system adds cost and ambiguity, etc (2 paragraphs)

(3) Views expressed by Vietnamese Gov’t—Statement of proposed law revisions and future direction (2 paragraphs)

(4) Concrete solution measures:1. Clarification of all accounting and auditing standards and

integration into international standards.2. From 2004, PR & implementation of Accounting Law

Common deadline: Action within 2 years

Reasons for Success

Excellent bilateral relationship between VN & JP High level political involvement Public Private Partnership Commitments with a deadline on Action Plan and

monitoring Support by ODA for implementing Action Plan Openness and transparency of the result

(Cited from the presentation of Mr. Kyoshiro Ichikawa, Senior Investment Advisor & JICA expert, Hanoi, Dec. 2007)