SME Promotion in Japan and JICA's Cooperation in SME Promotion

October 4, 2010, Africa Union, Addis Ababa

Go Shimada,
Director, Private Sector Development Division Industrial Development Department, JICA Shimada.Go@jica.go.jp

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Shinichi Kuno and Kenshiro Imamura

Agenda
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Private Sector Development and JICA 2. Experience of Japan to promote SMEs A brief introduction to Japans SME promotion . Key Messages of the JICA Report on the Economic Development in Africa and the Asian Growth Experience . Case study Industrial Policy support to Ethiopia

1-1 Birth of New JICA on October 1, 2008

3 Consolidation of ODA implementation tools for the new JICA 1. The new JICA integrates JBICs operations covering Japanese ODA loans and overseas investment, and part of MOFAs grants 2. The new JICA provides more strategic and effective ODA as a single agency centrally managing technical cooperation, loans and grant aid FY2008

Grant aid* MOFA

Bilateral Assistance
US$1,016 million

Technical cooperation JICA ODA loans

JBIC(ODA)
US$7,440 million US$1,486 million

The new JICA

FY2009

Multilateral Assistance

Multilateral Assistance

New JICA: US$11,116 million - GA: US$1,118 million - T/C: US$ 1,596 million - ODA loans: US$ 8,402 million

* Except for certain items retained by MOFA required for policy commitments

FY2008:JPY 103.5/USD (DAC rate) FY2009:JPY 97.60/USD (IFS rate for April 31, 2009)

1-2 Synergy of Japanese ODA Now Available !

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Technical Cooperation

Grant

ODA Loan

1-3 AfT accounts for over a half of total loans.

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Total Loans and Loans for AFT 2004-2008, USD million)

Exchange rate (DAC rate) 2004: JPY108.1/USD, 2005: JPY110.1/USD, 2006:JPY111.6/USD, 2007:JPY117.8/USD, 2008: JPY103.5/USD

1-4 Asia and Africa are the main regions for JICAs AfT
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JICAs Aid for Trade by Region 2007

Loans
Middle East 4% Oceania 1%

Technical Cooperation and Grant Aid

Europe 2%

Oceania 4%

World 1%

Africa 14%

America 16% Middle East 8% Asia 46%

Asia 81%

Africa 23%

Asia

Africa

Middle East

America

Oceania

Europe

World

1-5 JICA aims to improve aid effectiveness through synergy between loans, and technical cooperation and grant aid
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JICAs Aid for Trade by Sector 2007

Loans
Industry 2%

Technical Cooperation and Grant Aid

Tourism 2% Trade Policy and Regulations 2%

Forestry 10% Agriculture 10%

Mineral Resources and Mining 2% Industry 9% Fishing 5%

Transport and Storage 16%

Transport and Storage 32%

Communications 8% Energy Generation and Supply 6% Banking and Financial Services 2% Agriculture 34% Business Support Services and Institutions 7%

Forestry 7%
Energy Generation and Supply 41%

Business Support Sevices and Institutions 3%

Communications 2%

75%

68%

Economic Infrastructure Building Productive Capacity

Transport and Storage Banking and Financial Services Forestry Mineral Resources and Mining Communications Business Support Services and Institutions Fishing Tourism Energy Generation and Supply Agriculture Industry Trade Policy and Regulations

Major Economic Infrastructure and JICA Projects

North-South Economic Corridor Mekong River Myanmar
Kunming

Loans Grant Aid Technical Cooperation

Nam Ngum Hydropower Station Nam Leuk Hydroelectric Power Plant

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East-West Economic Corridor
Yangon International Airport

Vietnam
Hanoi

Vientiane International Airport Pha Lai Thermal Power Plant Cai Lan Port

Lao PDR
Vientiane
Nong Khai

Baluchaung Hydro Power Plant

Naypyidaw Chiang Rai

Hai Phong

Hai Phong Port

Second Mekong International Bridge National Road Route 9
Da Nang Development Triangle

Yangon Port

Yangon Mawlamyine

Thailand
Phitsanulok

Savannakhet Mukdahan Hue Pakse

Lam Ta Khong Pumped Storage Power Plant

Bangkok

Sisophon Siem Reap

Hai Van Tunnel

Da Nang Port Pakse Bridge

Cambodia
Trat Phnom Penh

Kampong Cham Ho Chi Minh Vung Tau

Suvarnabhumi International Airport

Bridge over the Mekong River National Road Route 6 and 7

Southern Economic Corridor

Phu My Thermal Power Plant Cai Mep-Thi Vai Port Leam Chabang Port Tan Son Nhat International Airport Map Ta Phut Port Sihanoukville Port National Road No.1

GRDP per capita in GMS Countries and Regions

Time Distance Between GMS Countries

(A) A Few Years Ago
China

C hi na

M yanmar

Lao PDR

Lao PDR Myanmar

Thai l and

Vietnam Thailand
V i etnam C ambod i a
0 40 80 (h)

Cambodia

GRDP(USD/person)
1,500 1,200 900 800 500 400 300 200 100 0 - 1,500 - 1,200 - 900 - 700 - 500 - 400 - 300 - 200 - 100

(B) After CBTI/CBTA Completion

M al ays i a

Source: Univ. of Tokyo

1-6 Menu of Technical Cooperation

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Kaizen
(Productivity & Quality Improvement)

Argentina, Paraguay; Tunisia,

Egypt; Ethiopia; Costa Rica Thailand, Philippines, Malaysia, Mexico, Chile, Turkey, Indonesia Malawi, Kenya, Uganda, Ethiopia, Nigeria, Chile, Laos, Vietnam etc

SME Consulting Services System

One Village One Product Industrial Policy Dialogue

Ethiopia, Sri Lanka, Cameroon, Ghana, Vietnam, Indonesia

1-6 Technical Cooperation (Cont)

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5 6 7 8

Industrial Standards
& Measurement
Capacity Development of Investment Promotion Agencies

Vietnam

Cambodia, Vietnam, Philippines, Mongolia, Indonesia; Zambia; etc

Capacity Development of Trade Promotion Agencies

Egypt, Mongolia, Kazakhstan

Industrial Park/ Special Economic Zones

Palestine, Laos

2-1 Experience of Japan to promote SMEs (weight of SMEs in Japan)

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Japan

The share of SMEs in terms of the added value by all industries has historically been steady at around 55 - 60%, indicating the continuity of the firm role played by SMEs despite dynamic changes of the industrial structure.
Added Value (all industries) ( trillion, left scale) 180 160 140 120 100 80 60 40 20 0
73 75 77 79 81 83 85 87 89 91 93 95 97 99 01

Share in Added Value (%, right scale) 100.0 90.0 80.0 70.0 60.0 50.0 40.0 30.0 20.0 10.0 0.0

Source: 2003 White Paper on SMEs in Japan Note: SMEs are defined a those of which the capitalisation is less than 100 million.

Ethiopia

Informal and small manufacturing sector contributes 33% of the industrial sector output, and 52% of the manufacturing sectors contribution in 1996.

2-2 Changing Goals of SME Policies in Post-War Japan

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Comparison Between Old and New Policies

Old Basic Law (1963) Policy Concept Policy Objectives Rectification of the gaps between large enterprises and SMEs Improved productivity (upgrading of the business structure of SMEs) Improved trading conditions (correction of the disadvantages in business activities) SMEs at the bottom of the structural gap between enterprises of different sizes Ability to rectify the gap The scale of the gap and ability to rectify it depend on the size of enterprise New Basic Law (1999) Fostering and support of a wide range of independent and vibrant SMEs Prompting of business management innovation and start-ups

Viewpoints to Determine Policy Targets

Difficulty of access to the management resources necessary for business growth and development This difficulty of access to management resources changes with the business size)

Source : SME Agency, New SME Basic Law: Outline of Revisions and Detailed Explanation of Each Article, Doyukan, 2000

2-3 Planning of SME Policies and SME Agency

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Policy Planning Fact-finding (interviews/studies/statistics)

SME Agency Reporting SME organizations Industrial associations

SME Policy Making Council Members representing various circles Mass media Academia

Expressing requirements, requests and concerns Politicians <Stakeholders> Competent government offices Local public bodies

Petitions and requests to solve problems SMEs

2-4 SME Policy Implementation System

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METI Regional Bureaus of the METI National Level Prefectural Level SME Level

SME Agency
Budget

Mutual Cooperation

Prefectures
Budget
Mutual Cooperation

Organization for SMEs and Regional Innovation, Japan (SMRJ) SME universities
Policy-Based Financial Institutions - JASME - NLFC - Shoko Chukin Bank

Budget Budget

SME Support Centres

Mutual Cooperation Business Consultation Seminars Information Service Dispatch of Expert

Credit Guarantee Corporations

Chamber of Commerce and Industry, etc.(520) Business Consultation Seminars Information Service Human Resources Development Programme Investment and Loan

Credit Guarantee

SMEs
Note: Compiled from a reference material published by the SME Agency (July, 2008)

2-5 National Measures for Local SMEs Promotion

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SMEA : Policy

SMRJ : Implementation

SMRJ : (Organization for Small & Medium Enterprises and Regional Innovation, Japan)
- Newly Established in 2004 by Merging JASMEC, JRDC, and ISIF - Staff Number : 811 - Capital : \1,094 billion (US$10 billion) - Branches & Offices : 10 - SME Universities : 9 campuses

2-6 SMRJs Supports for Company Operations

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-HRD program making -Advice of experts Human Resources

-Expert dispatching

Infrastructure

-Leasing facilities
-Industrial Parks

-Subsidy for grade up -Funding, Investment

Funding

Information

-SMRJs Web sites -Advice counter

3-1 Key Messages of the JICA Report on the Economic Development in Africa and the Asian Growth Experience
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Industrialization Strategy as a process NOT a

piece of document A trial and error process: be aware, some may end up in flops, but it has be embraced as part of the game Support measures adopted in accordance with institutional capacity one may as well begin with neutral cross sectoral measures Most support measures are permissible for LDCs, even under todays international rules

3-2 Diversified Paths of Development in Asia

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Diversity across Countries Domestic Capital-Dependent vs. Foreign Capital-Dependent Natural Resource-Rich vs. Natural Resource-Poor Interventionism vs. Liberalism Diversity over Time IS EO (IS EO) Globalization

Diversity in growth-leading Industries Heavy industry, consumer electronics, textiles, agro-processing, human resources, ICT

A self-owned process of strategic responses to the changing environment and challenges/opportunities

3-3 Transition of Development Strategies in Asia

3-4 Role of the international community

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Embrace diversity of development strategies in

Africa and support countries with strong commitment to advance own strategy Sustain efforts to maintain/enhance market access of African products Invest in large-scale infrastructure with regional impact Support technological capacity building in Africa

4-1 Case Study : Industrial Policy Support to Ethiopia

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TICAD IV (May 2008)

Symposium : Economic Development in Africa and the Asian Growth Experience (May 2008)

G8 Hokkaido Toyako Summit (Jul. 2008)

The Initiative for Policy Dialogue (IPD) African Taskforce Meeting in Addis Ababa (Jul. 2008)

Follow up Japans enhanced support to Africa

4-2 Industrial development support framework in Ethiopia

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Request from Prime Minister Meles July, 2008

Support to formulate development policy Exchange of views on industrial development strategy, and recommendations by the Japanese side based on Asian development experience. Support to nurture private companies Technical cooperation of JICA for enhancing competitiveness of private companies on the basis of JICAs experience in Tunisia.

The project of policy dialogue on industrial development

The project on quality and productivity improvement (KAIZEN)

4-3 The project of policy dialogue on Industrial Development

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4-4 The project on quality and productivity improvement KAIZEN 1

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What is KAIZEN? KAIZEN, in Japanese management, means continuous improvement of productivity and quality without additional cost, in a participatory process and a bottom-up approach. This management practice method has spread among Japanese companies in Japan and abroad. JICA has also offered assistance for KAIZEN to many developing countries in Asia and Latin America in particular.

4-5 The project on quality and productivity improvement KAIZEN 2

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Profile of the project

1. Objective: To formulate a national plan for enhancing activities on quality and productivity improvement for Ethiopian enterprises in industrial sector To formulate a manual for explaining and guiding the quality and productivity improvement activities To transfer relevant skills and techniques to the staff members of the Kaizen Unit, Ministry of Trade and Industry 2. Period: 2 years (August 2009April 2011) 3. Implementing Institutions: - Ministry of Trade and Industry (MoTI) - Japan International Cooperation Agency (JICA)

4-6 The project on quality and productivity improvement KAIZEN 3

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Major activities -1
Situation analysis on quality and productivity improvement

activities of Ethiopian industry Visit to the factories in industrial sector for preliminary diagnosis Phase Preparation for the pilot project 1 a. selection of methodology for quality and productivity improvement b. set the criteria and selection process for the pilot companies c. selection of 30 pilot companies

4-7 The project on quality and productivity improvement KAIZEN 4

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Major activities - 2
Implementation of the pilot project

Phase 2

a. to visit the pilot companies to diagnose the situation, and to give guidance on the quality and productivity improvement activity (KAIZEN) with the staff members of the Kaizen Unit, MoTI b. to repeat factory visit periodically and give KAIZEN advice and to monitor the KAIZEN process c. to evaluate the pilot project and compile recommendations to the factories

Phase Formulation of a National Plan including an Action Plan of KAIZEN 3 Formulation of a Manual

Thank you for your attention