Keynote Speech at TICAD VI Pre-event, "Industrial Development in Africa and JICA's Perspective"
Woldorf Astoria Hotel, New York, the United States
Excellencies, Distinguished guests, Ladies and gentlemen,
It is a great pleasure to be here with you today. JICA organizes this event to debate the role of industrial development and policy in Africa. It also serves as a pre-event for TICAD VI 2016, in collaboration with our TICAD co-organizers and Columbia University. I thank you very much for your participation today and for each of your institutions' support for this event.
As many people know, many African countries have sustained high growth rates for a decade, even weathering the global financial crisis of 2008 in impressive fashion. However, Africa still faces various economic challenges; accelerate the pace of poverty reduction, narrow income gaps, create decent jobs, especially for youth, build infrastructure, and promote regional integration.
And more recently, overcoming reliance on commodity price booms for their growth has emerged as another urgent challenge for many African countries. The way to address these deep-seated development challenges can be summarized in two phrases; promoting transformation and strengthening resilience.
Indeed, I consider these as key elements of the forthcoming Action Plan for next year's TICAD VI Summit--the first to be held outside Japan, in Nairobi, Kenya, as Ambassador Maruyama mentioned. Promoting transformation and strengthening resilience of African economies, in turn, calls for the active pursuit of industrial development. I will come back to this point later.
My colleagues and I are encouraged by the international community's recognition of the pivotal role industrial development can play in Africa and elsewhere. While not solely applicable to Africa, the Sustainable Development Goals (SDGs) that were agreed to last week commit the international community to promote inclusive and sustainable industrialization by 2030.
Within the UN, the Development Group, chaired by Ms. Helen Clark, the UNDP Administrator, will lay out a new vision of inclusive and sustainable industrial development. UNIDO launched this effort last year to promote the SDG industrialization target.
For its part, the Economic Commission for Africa focused the 2015 edition of its flagship report on industrializing through trade. Specifically, it calls for trade promotion as a critical component of Africa's industrialization.
Just as importantly, the African Union's Agenda 2063 adopts a collective vision and road map to speed-up actions to transform, grow and industrialize African economies through beneficiation and value addition of natural resources.
But why exactly does Africa need industrialization now? I think there are at least three aspects to consider:
First: To accelerate the pace of poverty reduction and narrow income gaps by increasing labor productivity.
That, in turn, calls for reallocating labor and capital from subsistence agriculture and informal service sectors to more productive sectors, namely manufacturing. Yet, the share of manufacturing in Africa's GDP has continuously fallen throughout the recent economic boom.
The second aspect: To create more decent and productive jobs, especially for youth.
Africa needs to meet growing demand for youth employment. In fact, the IMF estimates 18 million new jobs need to be created every year in Africa from 2010 to 2035. There are few sectors outside labor-intensive manufacturing have been capable of absorbing such large numbers of would-be workers.
And the third aspect: To mitigate the impact of external economic shocks, such as sharp declines in the prices of oil and other commodities.
The mining sector has been the main driver of Africa's economic growth over the last decade. But falling commodity prices since last year have weighed on growth. Therefore, economic diversification in favor of modern agricultural and manufacturing sectors is sorely needed.
Industrialization is an opportunity for African countries to address these demands. But it needs to be navigated with the utmost vigilance. Starting from this premise, the JICA Research Institute and Columbia University comprehensively analyzed Asian countries' industrialization to glean useful lessons for African policymakers and development practitioners.
The result of their hard work is a new book entitled "Industrial Policy and Economic Transformation in Africa." This book was published earlier this month by Columbia University Press. In my opinion, it is a valuable reference that will surely influence current and future debates on industrial policy. I would like to thank Dr. Stiglitz and his team at the Initiative for Policy Dialogue for their partnership and support throughout this seminal research project.
Some of you might be asking yourselves; Is Asia's past industrialization really an appropriate reference for Africa nowadays? After all, some of the initial conditions in Asia then were quite different from those present in Africa. Also, the global economic environment has changed markedly since Japan's and other Asian countries' economic transformation.
Despite these dissimilarities, I think, various policy approaches and technologies used to great effect in Asia can be just as effective in Africa. Upon close inspection, we can find these particularly in the areas of agriculture, basic infrastructure, urban development, human resource development, financial market deepening, and enabling of the business environment.
Not surprisingly, then, JICA's own approach to development cooperation in Africa has Asia's experience firmly at its core. This is evident in our spearheading of the Coalition for African Rice Development, or CARD, promotion of KAIZEN, and corridor development as well as One-Stop Border Posts, or OSBP.
CARD aims to increase rice production, akin to the Green Revolution in Asia; KAIZEN helps to increase productivity through group work, like in Japanese factories; and corridor development and OSBP facilitate inter-regional trade, which is a hallmark of the Asia-Pacific region.
We are also providing African youth with master's level education and internships in Japan through, as Ambassador Maruyama said, the African Business Education Initiative, which we call ABE Initiative. Launched in 2013 at TICAD V, the ABE Initiative aims to enable participants to foster industrial expansion in their home countries, and to encourage more business partnerships between Japan and Africa.
Aside from these initiatives, Ethiopia stands out as a country where the Government is obtaining greater know-how in industrial policy design and execution with JICA's support. Ethiopia has attracted the attention of investors from around the globe, since it is believed to be the fastest-growing country in Africa and has favorable demographics plus low labor costs.
To help ensure it can fully capitalize on this interest, JICA has facilitated the Government's Industrial Policy Dialogue. We have also provided KAIZEN-related technical assistance. This assistance aims to boost the productivity of local enterprises through process improvements and quality control techniques.
I had the opportunity to visit Ethiopia in 2013 to take stock of our engagement there. I was happy to observe that our collaboration is contributing to the country's ongoing and future success. We strongly believe Ethiopia's experience provides a valuable case study for other African countries. For this reason, it is highlighted in the new book by JICA Research Institute and Columbia University's Initiative for Policy Dialogue.
Building on our work in Ethiopia, JICA is ready to extend similar support to other African countries. Moreover, we are prepared to facilitate learning among African countries about how to craft a method of KAIZEN suited to their individual contexts.
That leads me to another important point about industrial policy and development: we have to be careful to identify and select approaches and technologies applicable to each country's unique conditions and needs.
Our research with Professor Stiglitz and his colleagues reveals that the course of industrialization varies according to local circumstances and each country's comparative advantage. The experiences of East Asian countries are a case in point, since the growth models of Japan, Korea, China, Singapore, and ASEAN member-states are distinct from one another.
Therefore, there is no "one size fits all" solution when it comes to industrial policy. However, there is at least one unifying principle to keep in mind: industrial policy is more than building an industrial park and courting foreign direct investment. It is actually a wide-ranging set of policy positions encompassing infrastructure investment, human resource development, labor productivity enhancements, financial market deepening, and reliable administration.
In closing, I would like to reiterate that industrialization offers African countries a viable path to achieving quality growth, promoting transformation, and strengthening resilience. To exploit new opportunities in the global economy, African countries need a careful analysis of the methods and tools that have served others well. Our new research and ongoing work in Ethiopia underscores this very clearly.
Now is the time for the international community to closely and collectively engage with Africa to empower the continent to step onto the industrialization ladder.
In this process, African ownership and voices will be more essential than ever before. TICAD has long been an open forum with a rich tradition of respecting Africa's own development efforts. The fact that TICAD VI will be held on African soil is a clear indication of our commitment to fostering such ownership and openness.
Toward TICAD VI and beyond, JICA will remain dedicated to working with Africa and our partners to turn the continent's long-term development vision into reality.
Thank you very much.