Industrial Strategy towards a Learning Society for Inclusive and Sustainable Development

1. Industrial Strategy towards a Learning Society for Inclusive and Sustainable Development Akio Hosono JICA Research Institute

2. Overview and Key Issues • A New Global Partnership: Eradicate Poverty and Transform Economies through Sustainable Development, Report of High Level Panel of Eminent Persons on the Post-2015 Development Agenda: “Transform economies for jobs and inclusive growth” is one of five transformative shifts • Stiglitz (2015) Creating a Learning Society: A New Approach to Growth, Development and Social Progress

3. Overview and key issues(continued) • World Bank (2012), World Development Report 2013: Jobs are a cornerstone of development, with a pay-off far beyond income alone • Asian Development Bank (2013), TheFramework of Inclusive Growth Indicators (FIGI) • Asian Development Bank (2013), Asia’s Economic Transformation: Where to, How, and How Fast?

4. Analytical perspective: basic aspects of transformation • The above discussion implies: • When structural transformation creates a virtuous circle, it leads to higher growth and higher income per capita, and these induce further changes in the structure of the economy. (ADB 2013a) • Structural transformation is closely related with changes of endowments or assets and changing comparative advantage as well as higher efficiency of economy, innovation and technological progress. • There is no standard model for transformation. The transformation agenda differs among countries

5. 3 pillars of inclusive growth • The Framework of Inclusive Growth Indicators (FIGI) published by Asian Development Bank (ADB 2013) asserts that the outcomes of inclusive growth are achieved through three policy pillars: the sustained economic growth and development of productive jobs and economic opportunities; social inclusion to ensure equal access to economic opportunities by expanding human capacities; and social safety nets to protect the chronically poor and to address the risks and vulnerabilities of the population

6. Framework of Inclusive Growth Indicators (FIGI) Poverty and Inequality Pillar One Growth and Expansion of Economic Opportunity Pillar Two Social Inclusiton to Ensure Equal Access to Economic Opportunity Pillar Three Social Safety Nets • Economic Growth and Employment • Key Infrastructure Endowments. • Access and Inputs to Education and Health. • Access to Basic Infrastructure Utilities and Services. • Gender Equality and Opportunity Good Governance and Institutions Source: Author. Based on ADB (2013) , p.4

7. Relationship between opportunities and capacity to respond to them • The first two policy pillars of FIGI, the development of productive jobs and economic opportunities, and social inclusion to ensure equal access to economic opportunities by expanding human capacities are intrinsically related. • The High Level Panel on Post-2015 Report highlights the following first priority: “[to] create opportunities for good and decent jobs and secure livelihoods, so as to make growth inclusive”. The report then emphasizes the necessity of the education, training and skills for people to respond to the demands by businesses for more workers and to be successful in the job market. • The relationship between opportunities and capacity to respond to them could be summarized as the following figure.(opportunity and capacity nexus)

8. Relationship between opportunities and capacity to respond to opportunities Growth and Expansion of Economic Opportunity Social Inclusiton to Ensure Equal Access to Economic Opportunity Social Safety Nets (Social Protection)

9. For growth and expansion of economic opportunity: • Transformation of industrial structure is crucial • Transformation agenda is different among countries with different development phase, changing endowments, location, domestic market and global market, and other factors

10. Fig. 1 Diverse economic transformation agenda(Selected cases) Resource-poor Resource-rich Industrializing (higher skill & technology) Agrarian Urbanizing & early-industrializing High-level technology & innovation capabilities Agrarian Urbanizing & industrializing Singapore 47,210 Chile 14,310 Brazil 11,630 Thailand 5,210 Indonesia 3,620 Bangladesh 840 Some SubSahara African countries Some SubSahara African countries GNI per capita (2011) Source: Prepared by the author, GNI per capita (2012) from World Development Indicators database, World Bank.

11. Four effective approaches (strategies) for inclusive and sustainable growth • 1. Industrial strategy for transformation of industrial structure, creating new industries, diversifying industries, deepening of value chains and so on and for enhancement of skill and capabilities of human resources to respond to the opportunities created by transformation process led by leading industries: Pillars 1 and 2 • 2. Taking full advantages of externalities of leading industries of transformation: Pillars 1 and 2

12. 3. Strengthening resilience to cope with risks as a effective way for social protection: Pillars 3 and 1 • 4. Continuous efforts to strengthen preparedness of workers, farmers and others to participate in transformation, improving their capabilities and skills and at the same time self-discovering opportunities, through “capacity development”, “Kaizen” and other initiatives: Pillars 2 and 1

13. Relationship between opportunities and capacity to respond to opportunities Approach 1 Growth and Expansion of Economic Opportunity Social Inclusiton to Ensure Equal Access to Economic Opportunity Approach 2 Approach 4 Approach 3 Social Safety Nets (Social Protection)

14. 1. Leading industries (for transformation) and inclusive growth • It is essential that opportunities of employment created by the emerging new leading industries (aiming at industrial transformation) are met by workers with skills required for such opportunities • Normally they are ready to respond for years of learning in previous jobs • Noman and Stiglitz (2012, p.7) emphasize that “long-term success rests on societies’ ‘learning’. Cimoli, Dosi, and Stiglitz (2009) states that great industrial transformation entails a major process of accumulation of knowledge and capabilities at the level of both individuals and organizations. • Stiglitz (2015) Creating a Learning Society: A New Approach to Growth, Development and Social Progress

15. Strategies for economic transformation • Some outstanding cases of economic transformation were discussed by Hosono, Akio 2013, “Industrial Strategy and Economic Transformation: Lessons of five outstanding cases” in JICA and The Initiative For Policy Dialogue 2013, Working Papers: African Task Force Meeting, Tokyo: JICA Research Institute

16. Case studies confirm these points • Accumulation of capabilities for years of efforts and learning by doing is, generally, essential for successful industrial strategy aiming at economic transformation: with gradual change of factor endowments • Government, often with other actors (including private actors and international cooperation), could trigger transformation process by investment in infrastructure, technological and/or institutional innovation, etc. with rapid and drastic change of factor endowments • Once transformation started, drivers (investors, both local and foreign; increasing demand; etc.), are necessary to keep the momentum of transformation

17. Government’s initiative and independent public institutions • Governments’ initiatives with strategy or vision, generally shared with the society as a whole, including private enterprises, served as a basic guideline • Public institutions, or public-private institutions, played an important role • These institutions are generally independent or insulated from short-term political changes and close public-private relationship is maintained

18. From strategy to policies and practices • Generally, strategy, shared vision with strong ownership and awareness regarding challenges to address are crucial • Strategy should be translated into policies and pragmatic measures and practices • Roles of government evolve over phases of process of transformation: They are crucial particularly in early phases.

19. Focus of this study • Although these major transformation produced profound impact on jobs and inclusive growth, we need focus on those who still remained unable to participate in the process for different reasons: Northeast of Brazil; Northeast of Thailand; poor fishery villages in Chile; Western part of Bangladesh and so on

20. 2. Inclusive growth taking advantage of leading industries’ externality

21. 2 a. Externality of competitive products (or primary products) to be used as inputs for value chains

22. Inclusive growth with value chain • In the case of the Cerrado development, massive employment opportunities have been further created by the expansion of the value chains around Cerrado agriculture, composed of agricultural and livestock processing activities. • Engineers and skill workers as well as technology for agricultural and livestock processing had been accumulated over a long period in the southeastern agricultural zone, and there was also access to an extensive labor force all over Brazil. These engineers and skilled workers were ready to respond to the deepening of value chain, because they had a long period of learning process • However, value chain development is not necessary a spontaneous process. Local government initiatives and other stakeholders participation was crucial.

23. Value chain of Soybean Products in the Western Part of Bahia Source: Tetsuo Mizobe, 2011

24. Connections between Government, Agri-business, and Farmers in the Western Part of Bahia Source: Tetsuo Mizobe, 2011

25. ①The center pivot irrigation system with a radius of 200-500 meters. Movable water pipes encircle a field. ②Loading soybeans onto a barge at the Upper Amazon port of PortoVelho ④Center pivot irrigation facilities seen from the air. ⑤The city of Lucas de Rio Verde, one of the focal points of the cerrado agricultural development by PRODECER, as it appears today (2011). ⑥Hosono (center) and Hongo (left) meeting with Tocantins State Governor José Wilson Siqueira Campos.

26. Production linkage and territorial approach: Case of Paraguay • Paraguay exported soybean for the first time in 1960. It became the most important export product of the country in 1993. Today Paraguay is among 4 largest exporters of soybean in the world. • Taking advantage of the externality of soybean as a competitive input, soybean-feed-pig production chain is formed. • For value-chains development in Paraguay, see ECLAC and JICA 2014, Study on Inclusive Development in Paraguay, ECLAC: Santiago

27. ECLAC/JICA (2014), Study on Inclusive Development in Paraguay, Santiago (Chile): ECLAC

28. 2 b. Externality of knowledge, capabilities and technology • Chile’s aquaculture: scallop, oyster, blue mussel and so on • Like in salmon farming industry, the Chilean government identified Chilean scallops (Pectinidae species) as the species that have high potential to succeed as a new industry in Chile. The Universidad Catolica del Norte and a Japanese expert successfully put Chilean scallops farming on a commercial footing in a short period of time between 1981 and 1989 and established it as a local industry.

29. Enhancing local artisanal fisher’s technical and institutional capacity in shellfish farming • When the salmon farming industry has started to being established, another development project in aquaculture was already underway in northern Chile. This project was designed to develop local artisanal fishers’ technical and institutional capacity by transferring knowledge on shellfish farming with a purpose of making their livelihoods self-sustainable. This project eventually leads to the Chinquihue Foundation initiatives for artisanal fishers in southern Chile. (oyster and blue mussel)

30. CULTIVO INDUSTRIAL: Captación de semilla y faenas de siembra y cosecha (Tongoy, IV región)

31. CULTIVO INDUSTRIAL: Faena en el mar y en tierra para manejo de long-lines (Tongoy, IV región)

32. Facultad de Ciencias del Mar

33. 2 c. Externality of infrastructure • New infrastructure constructed for leading industries essential for transformation and other purposes could be utilized for other new industries, especially for poor. • The Greater Mekong Sub-region (GMS) Development Program, which was launched by the Asian Development Bank (ADB) in 1992 with the participation of six countries in the Mekong region. The distinctive features of GMS: “The aim of this economic development corridor was to implement poverty reduction and economic growth by creating a belt that would link impoverished inland areas with port cities which have access to world market” (JICA/JBIC 2008 p. 55).

34. 3. Strengthening resilience to cope with risks as an effective way for social protection • Initiative to strengthen resilience to cope with risks as an effective way for social protection could create new economic activities and industries, enabling to achieve at the same time social protection and employment: • Some relevant cases will follow

35. 3 a An integrated approach to resilience against natural disasters • The main aspects of a standard framework of risk management are risk avoidance (or prevention, Bosai), risk reduction (Gensai) and risk transfer (insurance). In the risk avoidance (or prevention) area, in addition to a strengthened capacity for disaster risk management, quality standards of public works, seismic building codes and land use regulations are important. In the risk reduction (Gensai) area, pre-disaster investment and seismic reinforcement construction are essential.

36. Affordable earthquake-resistant houses • According to a study on two major earthquakes that affected El Salvador in 2001, 60% of the houses destroyed were those of poor people • Earthquake-resistant houses are essential for preventing tragedies caused by earthquakes. However, for these houses to be introduced in slums and poor rural villages, innovative solutions are needed. Inexpensive and easily accessible local materials have to be tested, together with the appropriate designs. The large-scale structure-testing laboratory of CENAPRED (Mexico’s National Centre for the Prevention of Disasters) was used to study the seismic behaviour of the frame and brick and adobe structures common to Mexico, Central America and the Caribbean. • The project also established technological standards for earthquake-resistant houses and increased the capacity of the government agency in charge of housing policy and construction permits. An association of private construction companies from El Salvador is currently participating in efforts to make earthquake-resistant houses more widespread.

39. 3 b. Agro-foresty in arid and semi-arid region to cope with climate change • About 83% of the total land surface of Kenya is covered by arid and semi-arid land (ASALs) that is vulnerable to global warming and climate change, and is also characterized by a very high incidence of poverty. Therefore, one of the most serious challenges faced by the country is to cope with desertification of ASALs, preserving their ecology and environment, while at the same time reducing poverty in these regions. This means the introduction and consolidation of an inclusive green economy as well as enhanced community resilience against drought  in this vast area.

40. Kenya relies on firewood and charcoal for more than 70% of its total energy consumption and around 90% of the energy consumption in homes. The increasing demand for firewood and charcoal, caused by a combination of a growing population that has doubled in the last 20 years, overgrazing, and disordered cultivation has devastated forest areas. • Through the Farmer Field School (FFS), techniques for seedling production, fruit tree planting (mango, grevillea, and others), poultry raising, vegetable cultivation, compost utilization, and woodlot creation were disseminated. • Kenya Forestry Service and Equity Bank, a private bank, is facilitating the farmers’ activities of production and marketing through “Support to Community Based Farm Forestry Enterprises in Semi Arid Areas of Kenya Project (SCBEFE)”

41. Learning Participatory Forest Management in Arabuko Sokoke forest in Mombasa

42. Learning seed germination test at KEFRI (Kenya Forestry Research Institute) seed center

43. At a farmers plot in Kibwezi

44. Learning briquette making at KEFRI Karura center

45. 3 c. Reduce risk of urban slums through re-urbanization • In many developing countries, urban sprawl, slums and inadequate infrastructure provision are commonly observed in the process of urbanization. Programs of “urban redevelopment” with land readjustments could be an effective approach to address urban poverty, slums and disaster prevention. After urban areas are subdivided and settled, whether legally or illegally, it is extremely difficult to re-arrange property patterns, and it is both difficult and expensive to assure land for proper public purposes and facilities. Land readjustment is a public-private partnership model, which local governments, residents and landowners bearing the urban development costs and sharing benefits in places where land use patterns are inadequate and/or risky. Normally every transformed lot will be smaller than the original one due to the significant increase in public spaces, but lot value will be higher due to the added facilities as well as to improved safety and disaster prevention. • De Souza, Felipe Francisco and Cintia Estefania Fernandez (2012)

46. MIB es la estrategia municipal para acompañar la formación de barrios y evitar su deterioro mediante el establecimiento de mecanismos y herramientas adecuadas de gestión Quebrada Juan Bobo PROYECTO PILOTO ボゴタ市都市開発公社（Empresa de Desarrollo Urbano, EDU)資料 Alcaldía de Medellín

47. 2006 ボゴタ市都市開発公社（Empresa de Desarrollo Urbano, EDU)資料

48. 2008 ボゴタ市都市開発公社（Empresa de Desarrollo Urbano, EDU)資料 Nuevo Sol de Oriente

49. Medellin Miracle In 1991, Medellin was considered the most violent city of the world. Homicides per 100.000 habitants decreased from 381 in 1991 to 26 in 2007. (En 1991 fuimos la ciudad más violenta del mundo. De 381 homicidios por cada 100.000 habitantes en 1991 pasamos a una tasa de 26 en 2007.) VOLVER ボゴタ市都市開発公社（Empresa de Desarrollo Urbano, EDU)資料

50. Hecho físico: METROCABLE Enfoque de hábitat Santo Domingo Cerro Santo Domingo Popular Microterritorio MIB NORORIENTAL: Mejoramiento Integral de Barrios Enfoque de espacio público Tratamientos urbanos Andalucía Quebrada La Herrera 3 2 Quebrada Juan Bobo 1 Sistemas Naturales Área de influencia Metrocable Acevedo Acción zonal GEOREFERENCIACION Localización Alcaldía de Medellín ボゴタ市都市開発公社（Empresa de Desarrollo Urbano, EDU)資料