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1
Inclusive Industrial Development and Development Aid of Japan
– New opportunities for pro-poor regional cooperation through inclusive business
in the Mekong region
Go Shimada1
Associate Professor, University of Shizuoka
Visiting Scholar, Columbia University
shimada.go@gmail.com, gs2774@columbia.edu
Summary. – This paper aims to analyze the factors that have made the economic growth of Japan
inclusive in the post-World War II period. The factors identified in this paper are: (1) the GHQ policy to
transition Japan from the old regime to a democratic, non-autocratic and non-military country; (2)
inclusive industrial development, especially through productivity movement, transferring the relationship
with labor from confrontational to constructive; and (3) social security policy, such as UHC (Universal
Health Care), to protect people from poverty and starvation, and to improve living standards. These
factors are reflected in Japanese ODA policy on poverty reduction. This paper focuses mainly on
inclusive industrial development because this is one aspect that East Asian countries have in common,
and a good common ground to consider possible future collaboration among East Asian countries to
reduce poverty in the region. For future possible collaboration among Japan, China and South Korea, this
paper proposes the “horizontal collaboration” approaches. In horizontal collaboration, each donor will
implement projects independently, but in parallel under the coordination of the ADB. The projects could
be implemented geographically in any sector. The new programs and projects should be implemented in a
“starting from small to grow bigger” approach (or a “gradual” approach). This paper proposes to start
from an exchange of ideas, good practices, and history, among staff members of donor agencies. If a
project starts, then rigorous impact evaluation should be implemented to scale in the future. The ADB
should lead the entire process as a neutral partner of all the East Asian countries and donor agencies.
Keywords: Poverty Reduction, Official Development Aid, Industrial Policy, Kaizen
JEL: N15, L20, O14, O21, O53
Introduction
1 I would like to thank Armin Bauer, Shunji Matsuoka, Li Xiaofun, Lim Wonhuk and other participants
to the seminar held in Manila and Beijing for their insightful comments for the earlier version of this
paper.
2
In 2015, Japan approved the Development Cooperation Charter, revising the existing
ODA (Official Development Aid) charter. The old ODA charter was decided by the
Cabinet in 1992 and revised in 2003. Then, what is the core of the new Charter or
Japan’s ODA policy in terms of poverty reduction? Does Japan’s ODA policy have its
foundation on Japan’s own history of reducing poverty after the Second World War
(WWII)? What should be Japan’s strategy to reduce poverty in Asia? The aim of this
paper is to tackle these questions.
This paper is constructed as follows. This paper will start by examining what Japan’s
experience of economic growth and poverty reduction after the WWII is in the next
section. Then, in the second section, Japan’s aid policy and programs will be discussed
focusing on how the policy reflects Japan’s own history of economic development.
Finally, some policy recommendations will be made for future collaboration among
East Asian Countries.
1. Japan’s experience in poverty reduction and making growth more inclusive
As the World Bank (1993) discussed, East Asia, including Japan, has been known for
its record of high and sustained economic growth. This is also characterized by highly
equal income distributions (Birdsall and Sabot 1993, Page 1994). Then, how Japan did
reduce poverty in its history, especially after WWII? Actually, it is quite difficult to
track the record of poverty reduction with the government data in the case of Japan.
According to Abe (2016), there is no long-term time series data on poverty in Japan.
There was no official definition of the poverty line on much social consensus on the
definition until 2009. The Ministry of Welfare published the estimated poverty rate
from 1953 to 1965 based on a comprehensive survey of living conditions. The Ministry
terminated its publication in the mid-1960s, as it was thought that poverty was no
longer an issue in Japan.2
Therefore, instead of the poverty ratio, this paper uses “the ratio of households on
2 Some academic papers have estimated the poverty rate. For instance, Otake (2003) estimated that the
Gini coefficient very rapidly improved, especially in the 1960s. The coefficient was 0.31 in 1963, and it
became 0.25 in 1971.
3
welfare.” Even if this data is technically not very precise to grasp the poverty ratio, at
least it can show us the trend of poverty over time. This figure is not very precise
because not all the people in poverty receive welfare. If there were “the poverty ratio”
data in Japan, then “the households on welfare” data would not perfectly match it.
As shown in Table 1, as the GDP per capita increased, the number of households on
welfare rapidly decreased from around 40% in 1952 to around 20% in the mid-1970s.
This figure once dropped to less than 15% in the early 1990s. However, as GDP per
capita stagnated, recently the ratio bounced back. This indicates that inequality has
widened in Japan. During this period, the top 1% income share has been stable (or very
gradually decreasing). Therefore, it appears that Japan’s economic growth was pro-poor
growth, especially during the rapid growth period from the 1960s to the 1980s.
Table 1: GDP per capita and households on welfare of Japan since 1952
0.0##
5.0##
10.0##
15.0##
20.0##
25.0##
30.0##
35.0##
40.0##
45.0##
0#
500#
1,000#
1,500#
2,000#
2,500#
3,000#
3,500#
4,000#
4,500#
1952#
1954#
1956#
1958#
1960#
1962#
1964#
1966#
1968#
1970#
1972#
1974#
1976#
1978#
1980#
1982#
1984#
1986#
1988#
1990#
1992#
1994#
1996#
1998#
2000#
2002#
2004#
2006#
%
GDP$Per$capita$(thousand)$
GDP#per#capita# The#ra:o#of#welfare-payment#households## Top#1%#income#share#
(Source: Author, based on the data from the Government of Japan)
Then, a question comes to our mind: what are the factors contributing to the pro-poor
growth of Japan in the post-WWII period? It seems there are three major factors: (1) the
GHQ (General Headquarters) policy; (2) inclusive industrial policy; and (3) social
4
security policy.
(1) The GHQ policy
The GHQ policy had a huge impact on how Japan recovered from the devastation of
WW II. The GHQ, especially the GS (Government Section), had a clear policy to
transform Japan from the old regime to a democratic, non-autocratic and non-military
country. The old systems that GHQ considered necessary to change were: (1) political
system and bureaucracy; (2) conglomerates (zaibatsu) which were controlled by
family-owned holding companies; and (3) landlordism. These were considered to
support Japan’s militarism during the war.
Based on such notions, as democratic reforms, the GHQ launched a series of policies to:
(a) purge leaders and public officials who were responsible for the war; (b) abolish the
internal security law, giving freedom of expression to the mass media, political parties
and organizations; (c) dissolve conglomerates and trusts; and (d) reform land
ownership.3 These policies changed the political balance between the existing old
regime and leftist political parties, small and medium enterprises, and labor movements
(Tsunekawa 2010). These changes had a huge influence on the industrial policy, which
will be discussed next, as an essence of Japan’s inclusive economic growth in the
post-war period.
The GS of GHQ was the hub for making these policies. A lot of the New Dealers, who
participated the New Deal of President Roosevelt worked in the GS.4 These include:
Courtney Whitney (Chief of the Government Section), Charles Louis Kades (Chief and
Deputy Chief of the Government Section), and Thomas Arthur Bisson (Top Economic
Analyst).5 The occupation policies strongly reflect their political and economic views.
Further, it had strong influence on industrial policies in Japan, as we will review in the
3 Land was confiscated in 1946 and 1947. This land reform equalized income inequality and expanded
the middle class a lot.
4 In his memoir, former Prime Minister Yoshida Shigeru called them “radical elements,” and mentioned
that they used Japan as a laboratory for testing their theories. Mr. Yoshida singled out T.A. Bisson for
special criticism (Schonberger 1980).
5 Bisson was one of the main architects of the dissolution of conglomerates. After going back to the
United States, he held a post at UC Berkley. He encountered the McCarren committee, which accused
him of a connection with communism.
5
next section.
(2) Inclusive industrial policy6
After the war, Japan suffered hyperinflation. There are two reasons. First, Japan’s
production capacity was totally destroyed by bombing during the war, as the following
table shows.7 Due to this supply side problem, almost no products were available in the
market, and prices went up. One of the policy priorities, therefore, was to increase
production to bring basic food and necessary goods to people and to stabilize inflation.
Second, money supply increased, monetizing the huge stock of war debts. Then, Japan
was forced to adopt austerity measures, called the Dodge Plan, by the United States.
Table 2: Indices of Industrial Production, 1946-47
Period
SCAP Index (1930-44=100)
United Nations Index (1937=100)
1946
31.8
19
January
17.7
11
August
35.9
22
December
38.1
23
1947
38.8*
25
January
33.6
20
August
40.0
25
December
-
27
* First eight months only.
(Source: Japanese Economics Statistics, GHQ, SCAP (Supreme Commander for the
Allied Powers), September 1947, pp7-9; and Monthly Bulletin of Statistics, United
Nations, February 1948, p26 as quoted by Bisson (1949))
During the same period, the dissolution of conglomerated was implemented. Bisson, the
top economic analyst of the GS of the GHQ, thought that during the war Japanese
cabinets were largely controlled by conglomerates and industrial capitalists (Schonberg
1980). In 1947, the GHQ required the stock owned by the conglomerates’ holding
6 For details of the discussion of this section, please see Shimada (forthcoming).
7 The official SCAP index is based on the low 1930-34 levels of production output. Bisson (1949:104)
mentioned that the UN index is a better measurement since Japan needs to reach at least the 1937 level of
production to become economically self-supporting.
6
companies to be sold to the general public.8 At the same time, the GHQ adopted other
related policies as well, such as: establishment of an SME agency to support new SMEs
and help them compete with the erstwhile-conglomerate companies; enforce
antimonopoly laws in 1947; and establish Japan National Finance Corporation for
SMEs in 1953 to support SMEs financially.
Even if production increase was the policy priority in Japan, the labor movement
became very active soon after the war. This was also related to the GHQ policy
mentioned above. The GHQ released communist political leaders such as Tokuda
Kyuichi from prison as a part of policies to give freedom of expression to mass media,
political parties, and organizations. As soon as they were released, they got popular
support.9 At the same time, Article 28 of the Constitution of Japan promulgated in
November 1946, guaranteed the three rights of work (The right of workers to organize,
to bargain, and to act collectively).
Against the GHQ’s intentions, the labor movement became too active and radical for
them.10 With the establishment of the People's Republic of China in 1949 and the start
of the Cold War between the US and the Soviet Union, the GHQ changed its stance on
the labor movement, and tried to repress it.11 However, the labor movement continued
to spread all over Japan. As the labor movement became stronger, the conflict between
the government and labor movement got harder day-by-day. In 1950, the GHQ started
8 Bisson regarded the hyperinflation Japan suffered during this period as a result of conscious and
deliberate policies of conglomerates and bureaucrats. The various taxes against big stockholders became
meaningless with a devalued yen. Further, he argued the inflation raised stock valuation of those
companies, generating more gains (Schonberger 1980)
9 Bisson (1949:44) mentioned that: “The Communists were the one group that could point to a consistent
record of opposition to Japanese militarism and the war. This factor helped them to muster popular
support as soon as their leaders were released from prison.”
10 Bisson (1949:74) recalled that: “….the occupant authorities became increasingly disturbed by the
`left-wing` character of the programs sponsored by the new political parties. And after the first election in
April 1946, the emphasis of occupant policy was placed on controlling rather than encouraging the
growth of the popular movement.”
11 Because of this change in policy, as Dower (2000) described, communist leaders, such as Tokuda,
were embarrassed. Because when they are released in October 1945, he read “Appeal to the People” that
said: “We express our deepest gratitude that the occupation of Japan by the Allied forces, dedicated to
liberating the world from fascism and militarism, has opened the way for the democratic revolution in
Japan.” Later, communists were forced to justify his statement, saying that the reference to “Allies”
included the Soviet Union.
7
its red purge of government and journalism, as well as private companies (For a detail
discussion on this topic, please refer to Shimada forthcoming).
Private companies were under pressure to increase production to tackle the shortage of
all kinds of goods from basic food to steal in the market and to increase productivity
with less labor because of the strong labor union movement. Otherwise, the shortage of
labor could impede any production increase.
To develop its economy, Japan developed an industrial policy called the priority
production system, and made huge investment in infrastructure. Both of these policy
measures were the basis of Japan’s high economic growth. These policies, however, do
not explain why Japan’s economic recovery after the war was inclusive. Economic
growth does not necessarily become inclusive. The keys to understanding the
inclusiveness were the tension with the labor union, and the introduction of the
productivity movement (later called Kaizen, as a result of the tension. (Kaizen is known
as the “Toyota production system,” and literally it means “continuous improvement” in
Japanese.)
As described above, there was strong incentive for private companies to increase
productivity. At the same time, during this period the United States was enthusiastic
about transplanting the productivity movement not only in Japan, but also in war-torn
Europe as well through their aid programs such as the Marshall Plan and the Point Four
Program.12 Therefore, it was natural for the US government to support the productivity
movement in Japan as well. In 1951, the plan was drafted in Japan as well to establish a
productivity organization with support from the FOA (Foreign Operation
Administration) of the US government (JPC 2005, Shimada forthcoming).13
The plan to introduce the productivity movement met fierce opposition from labor
12 With the aid from the United States, productivity centers were established all around Europe: UK
(1948); Denmark (1949); Turkey (1949); Austria (1950); West Germany (1950); Netherlands (1950);
Trieste (1950); Belgium (1951); Italy (1951); Switzerland (1951); Greece (1953); Sweden (1953); France
(1954), among others (Shimada forthcoming).
13 This is one of precursor organizations to the USAID (United Stated Agency for International
Development).
8
union (Sohyo or General Council of Trade Unions of Japan). They feared that with
increased production, jobs could be cut and work intensified for employees. Then, in
1955 they declined to participate in the US-assisted productivity movement (JPC 2005).
As it was suggested by the US to have three partners (government, private companies
and labor), labor was essential to receive aid from the US. As the aid plan was stalled, a
long negotiation between the three sides was held. Finally, as a compromise, the JPC
(Japan Productivity Center) issued the three guiding principles of the productivity
movement, which was influenced by the Philadelphia declaration of ILO (International
Labor Organization) of 1944. With this, labor agreed to participate in the movement,
stressing the importance of “industrial democracy.” With this agreement, many
bureaucrats and business personnel studied productivity improvement with support
from the United States. This had significantly helped Japan’s manufacturing sector to
grow. Toyota Production System (TPS) or Kaizen was born from the productivity
movement and spread all over Japan.
The principles are as follows.
1. Expansion of employment
In the long term, improving productivity should lead to expanding employment.
However, from the standpoint of the national economy, a public-private
partnership is essential in formulating valid policies to prevent the
unemployment of surplus personnel through job relocations or other measures.
2. Cooperation between labor and management
Labor and management must cooperate in researching and discussing specific
methods to improve productivity in consideration of specific corporate
circumstances.
3. Fair distribution of the fruits of productivity
The fruits of productivity should be distributed fairly among labor, management,
and consumers in line with the state of national economy. (JPC 2005: 38)
There were dual aims. One was to enhance competitiveness to expand markets, utilizing
resources effectively and scientifically, while at the same time reducing production
costs. The other was to boost employment and to enhance real wages and the standard
9
of living. The employment and wages were very important to improve the living
standard in Japan. This also changed the nature of labor-management relations from
combative to collaborative. Without the collaborative partnership between labor and
management, the effects of high economic growth would have differed. In 1960, Prime
Minister Hayato Ikeda announced a plan to doubling the income of Japanese people in
ten years. This collaborative relationship was the basis of inclusive economic growth of
Japan. Table 3 shows wage index by industry at current prices, including small medium
industries. The increase of wages became very steep in the early 1960s in all industries.
Table 4 shows the wage rate index by industry and by size of Enterprise. It is clear the
wage increased at the same rate not only for large companies, but also for micro and
small enterprises as well. Table 5 shows the annual average of monthly consumption
expenditures per household (all households) and Engels’s coefficient. As consumption
expenditure is a proxy for wellbeing, the table shows the living standard has improved
since the 1960s with Engels’s coefficient falling steadily.
As we saw, the GHQ policy and productivity movement made Japan’s economic growth
inclusive. But, this is not all. The next section will discuss the last factor to make
economic growth inclusive.
10
Table 3: Wage Index at Current Prices by Industry (Cash Earnings)
(Establishments with 30 or more Regular Employees) (1952--2003)
0.0
20.0
40.0
60.0
80.0
100.0
120.0
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Industries covered
Mining
Construction
Manufacture of food, beverages, tobacco and feed
Manufacture of textile mill products, except apparel and other finished products
made from fabrics and similar materials
Manufacture of apparel and other finished products made from fabrics and similar
materials
Manufacture of lumber and wood products, except furniture
Manufacture of furniture and fixtures
Manufacture of pulp, paper and paper products
Publishing, printing and allied industries
Manufacture of chemical and allied products
Manufacture of petroleum and coal products
Manufacture of plastic products, except otherwise classified
Manufacture of rubber products
Manufacture of leather tanning, leather products and fur skins
Manufacture of ceramic, stone and clay products
Manufacture of iron and steel
Manufacture of nonferrous metals and products
Manufacture of fabricated metal products
Manufacture of general machinery
(Source: Author, based on Statistics and Information Department, Minister's Secretariat,
Ministry of Health, Labor and Welfare)
11
Table 4: Wage Rate Index of Scheduled Cash Earnings and Bonus in Number
of Months by Industry and by Size of Enterprise (1985-2004)
(Source: Author, based on Statistics and Information Department,
Minister's Secretariat, Ministry of Health, Labor and Welfare)
12
Table 5: Annual Average of Monthly Consumption Expenditures per Household
(All Households) and Engels’s coefficient
(Source: Author, based on statistics of the Statistical Survey Department,
Statistics Bureau, Ministry of Internal Affairs and Communications.)
(3) Social Security Policy
Another important factor to reduce poverty was social security policy. This stems from
Article 25 of the Constitution of Japan, which guarantees the right to live. The first
paragraph of this article reads: “All people shall have the right to maintain the minimum
standards of wholesome and cultured living.” Then, the second paragraph is more
specific on the policy measures: “In all spheres of life, the state shall use its endeavors
for the promotion and extension of social welfare and security and of public health.”
This article was not included in the initial GHQ draft of the constitution. It was Tatsuo
Morio, a Diet Member of the Socialist Party (House of Representatives), who proposed
this article. At the time of discussing the Constitution, people were in the middle of
starvation. That is why he proposed the right of living as a part of the basic human
13
rights.
Soon after the war, the government organized a committee for economic reconstruction,
inviting 21 economists such as Okita Saburo and Hiromi Arisawa (Okita et al., 1946).
Their report became a blue print for Japan’s reconstruction from the Japanese side. In
the report, they strongly argued that social security was one important policy Japan
needed to launch. They wrote that without social security, post-war Japan would not
become a democratic and modern country, and people would remain poor in both urban
and rural areas under a semi-feudal society. If semi-feudal characteristics persisted in
villages and factories, they said that it would be difficult to improve the quality of labor.
Together with the labor movement and productivity movement, the social security
policies based on this article 25 went hand-in-hand to reduce poverty and improve the
living standards. Based on the article 25, Japan adopted a comprehensive social health
insurance model and achieved universal health coverage in 1961. At that time in Japan,
a relatively large part of the population was still engaged in informal employment. Even
if Japan achieved rapid economic growth in the 1950s, poverty was still a persisting
social problem. There were many people who were not covered by any health insurance
and had to cover their medical expenses by themselves. (Around 30 percent of the
population was not covered by health insurance in 1955.) At the time of the Cold War,
social security, especially the UHC (universal heath coverage), was a political priority
for the LDP (Liberal Democratic Party) (Shimazaki 2013). Table 6 shows Social
Security Benefit Expenditure and Ratio to National Income from 1951 to 2004. The
expenditure has expanded since the early 1970s, and the ratio of social security
expenditure to national income has steadily grown since the 1950s.
14
Table 6: Social Security Benefit Expenditure and Ratio to National Income (F.Y.1951-2004)
(Source: Author, based on the statistics from the Cabinet Office and
the National Institute of Population and Social Security Research)
Although the first two factors (industrial policy and social security policy) seem to be
different, the UHC became possible only after Japan raised the necessary financial
resources with its economic growth around 1955. As we have reviewed, the GHQ
policy, inclusive industrial policy, and social security policies were the main factors
making the high economic growth inclusive. Then, the next question we will tackle is
how Japan’s own history of economic development influenced to its aid policy on
poverty reduction.
2. Japan’s ODA Policies and Programs
Regarding the current aid policy of the Government of Japan, there are several key
documents such as the Development Cooperation Charter of Japan (2015) and
statements by Prime Minister Shinzo Abe and President Shinichi Kitaoka of JICA. In
terms of poverty reduction, all documents put emphasis on the importance of human
security as a core of the aid policy and programs.
15
1Human Security
Then, what is the concept of human security? Former President of JICA, Sadako Ogata
explained the concept like this: “….to ensure that the growth outcomes extend to all
people in a sustainable manner and so that they can participate in the growth process,
allowing no exclusions based on nationality, religion, customs or traditions, income or
assets, education or academic background” (Ogata 2012). Here, human security has two
aspects: growth and poverty reduction, which are the core of Japan’s economic
development since the 1950s.14
It seems that the core of the human security concept is deeply rooted in the concept of
the right to live, which Article 25 of the Constitution of Japan guarantees. That is
probably the reason why human security is very important in Japan compared with other
countries. The concept is very natural for Japanese because in Japan’s recent history it
worked very well protecting the lives under poverty and starvation and improving the
living standard. There are several universities which have courses’ dedicated to human
security. For instance, the University of Tokyo has a graduate course in human security.
The concept first gained international attention with the publication in 1994 of the HDR
(Human Development Report) by the UNDP. It was an attempt to add a “human face”
to economically focused development assistance. During the 1997-98 Asian financial
crisis, which sparked major social upheavals adversely affecting millions of people in
the region, then Japanese Prime Minister Obuchi suggested that economic progress was
inextricably linked with stable social conditions and proposed the concept of “human
security” as a way to provide a social safety net for vulnerable people.
Following the financial crisis, Japan and the United Nations took joint steps to develop
this concept. The UN Millennium General Assembly decided to establish the
Commission on Human Security through the joint initiative of the then
Secretary-General Kofi Annan and the Prime Minister Mori of Japan to define this
concept. The commission was co-chaired by Amartya Sen and Sadako Ogata. The
14 President Kitaoka also follows in her steps, but with more emphasis on the importance of SDGs
(Sustainable Development Goals).
16
submitted report “Human Security Now” from the Commission identified "people" at
the center in formulating policies and building institutions, and advocated two
approaches, the “bottom up” and the “top-down.”
The “bottom-up” approach concentrates on empowering people. The purpose is to
promote the enhancement of people’s ability to act on their own behalf. It was various
development measures, such as education, access to information, assurance of health
care, and the provision of social safety nets. The “top-down” approach emphasizes the
importance of protecting people and ensuring their safety, basic rights, and freedoms
through the firm establishment of the rule of law and judicial institutions.
In Japan, the “human security” concept was incorporated into the ODA policy
framework as one of its five basic policies when renewing its ODA Charter in 2003, and
in 2005 and is included in the Medium-Term Policy on ODA. Based on these policies,
the “First Phase of JICA’s Reform Plan,” announced in March 2004, lists human
security as one of the three pillars of JICA’s reform, and human security became the
cornerstone of JICA’s policy and action15. As we see, inclusive growth has become one
of the major pillars of our operation, evolving from the concept of human security.
Then what are the major programs and projects for Japan’s ODA? There are certain
issues and sectors on which Japan focuses. Traditionally, Japan put strong emphasis on
infrastructure and PPP (Public Private Partnership). Table 7 shows the trend of Japan’s
ODA. Recently, resilience became part of the core of Japan’s ODA policies, and Japan
hosted the Third UN World Conference on Disaster Risk Reduction in Sendai in 2015.
During the SDGs (Sustainable Development Goals) negotiation, Japan strongly insisted
that resilience should be a part of the SDGs. This came from the experience of the
Tohoku Earthquake in 2011. Another issue highlighted was gender, which is a policy
priority for Abenomics under Prime Minister Abe.
15 Then, in 2011 JICA published “Thematic Guidelines on Poverty Reduction”, setting four primary
development objectives are identified: Economic capabilities (ensuring means of livelihood and increasing
income), human capabilities (improving the basic ability to make a living), protective capabilities
(overcoming vulnerability), political and socio-cultural capabilities (realizing political and social
participation).
17
Table 7: Japan’s Official Development Assistance and Foreign Direct Investment
(Source: ODA White Paper 2014, Ministry of Foreign Affairs)
Then, what is Japan’s strategy for inclusive growth, especially coming from Japan’s
own development experience? It is inclusive industrial policy and UHC (Universal
Health Care). This paper will mainly discuss inclusive industrial policy, touching on the
UHC. It is because inclusive industrial policy is the area this paper considers the most
appropriate for the ADB (Asia Development Bank) and the East Asian donors to
collaborate on together for the future. Table 8 shows the regional distribution of Japan’s
ODA (0.1 billion, disbursed base). The table suggests that East Asia has been the most
important region for Japan strategically.
18
Table 8: Regional Distribution of Japan’s ODA (0.1 Billion Yen, disburse base)
(Source: Author, based on the statistics from Economic Cooperation Bureau)
(2) Inclusive Industrial Policy
In light of Japan’s own historical experience, as we reviewed, industrial sector
development, especially the productivity movement, has been the key to making the
economic development pro-poor. Therefore, the productivity movement has been the
core of JICA’s major approach to inclusive growth. For JICA, industrial sector
development aims not only to foster the private sector, but also to support high levels of
employment and rising wages. The World Bank (2009) stressed the importance of
structural transformation for economic diversification and competition, including the
importance of productive employment as a means to improve the lives of socially
excluded groups, rather than on direct income redistribution. This is because
employment bridges inclusiveness and growth.16
With the productivity movement or Kaizen, JICA has extended its assistance to many
16 Productivity and quality improvements are important not just to nurture a firm, but to develop
industrial clusters. As Otsuka and Sonobe (2011) argued, the introduction of improvements is critical for
sustainable private sector development.
19
developing countries in Asia and Latin America in particular, and recently to the Middle
East and Sub-Saharan Africa. Japan itself introduced productivity and quality
improvements in 1955 at the start of it’s era of rapid economic growth, learning from
the American business management model. There were dual aims. One was to enhance
competitiveness to expand markets, utilizing resources effectively and scientifically,
and at the same time reducing production costs. The other was to boost employment and
to enhance real wages and the standard of living. The employment and wages were very
important for inclusive growth17.
In 1983, JICA started cooperation with Singapore’s National Productivity Board (NPB),
which evolved into the present SPRING-Singapore. After the success of the project, the
cooperation expanded to Thailand, the Philippines, Hungary, Brazil, Tunisia and
Ethiopia, among others (Ueda 2009, Kikuchi 2009, Hosono 2009, GRIPS 2009,
Shimada 2011, 2009 and forthcoming). The following table shows the list of Kaizen
projects up to 2009).
Beyond the ODA, Japan has tried to promote the productivity movement through the
APO (Asian Productivity Organization). The APO was established in 1961, and is an
international organization. It was the JPC that proposed establishing the APO. Since
then, productivity organizations were established in Asian countries including the one in
Singapore established with JICA’s cooperation. Those are: Bangladesh (established in
1982), Cambodia (2004), China (1961), Fiji (1984), Hong Kong (1963), India (1961),
Indonesia (1968), Iran (1965), Korea (1961), Philippines (1961), Singapore (1969), Sri
Lanka (1966), Thailand (1961), and Vietnam (1996).
17 JICA’s industrial sector development is not just the manufacturing sector. In line with the discussion
made by Rodrik (2007), and Norman and Stiglitz (2012), JICA’s approach to industrial development has
a broader scope, including value chain development from agriculture and the processing industry to the
service sector, and various economic condition developments, such as legal infrastructure (e.g. economic
law and civil law) as well as physical infrastructure.
20
Table 9: List of major JICA Kaizen projects
(Source: Ueda 2009: 58)
(3) Inclusive Business
Recently, JICA’s assistance for industrial development has expanded into the area of
inclusive business as well. In collaboration with the Ryohin Keikaku Co., Ltd. (MUJI),
the JICA jointly planned seven items for MUJI Christmas Home 2012, a Christmas gift
project proposed by MUJI. Producers supported under JICA's One Village One Product
projects in Kyrgyzstan and and Kenya created products as per MUJI specifications that
were purchased directly by MUJI and marketed as Christmas gifts. These products were
sold at MUJI stores located in countries throughout the world as well.
Under its One Village One Product projects, JICA tries to stimulate local industry that
uses local resources, providing technical assistance for product development, production,
and market development for the products. By utilizing private sector sales channels, the
market for the products produced in Kyrgyzstan and Kenya will be expanded overseas,
thereby contributing to the development of local industry. Other effects of the project
have been to create a mass production system and to improve the production and control
21
technology, with the aim of achieving the control and level of quality that is found in
Japan. These activities are expected to increase the interest in and concern for issues in
developing countries on the part of those who ultimately end up with these products and
who may not have thought about the conditions in these developing countries before.
The projects also established production and marketing systems so that the producers
can expand their markets themselves.18
3. Possible collaboration for the East Asian Counties for Poverty
Reduction in the Region
This section will discuss what can be done for the possible collaboration for East Asian
Countries to reduce poverty in the Region. This section, first, discusses how to
collaborate among East Asian countries, then, second, proposes possible sectors for
collaboration.
(1) Institutional set-up of collaboration
It is beneficial and important for East Asian countries to work together, not just for
donor countries, but also for the poor in Asian countries. To realize such a collaboration,
the ADB should lead the movement, as a neutral catalyst to coordinate among East
Asian countries.
Then, what kind of blue print of collaboration should the ADB draw? There are several
formats of collaboration: co-financing, co-funding, joint-project operation, vertical
collaboration and horizontal collaboration (sectorial or geographical) among others.
Among these possible ways of collaboration, probably, it would be better to start from
“horizontal collaboration.” In horizontal collaboration, each donor implements a project
independently, but in parallel, under a blue print made by the ADB. The projects could
be implemented based on geograpy in any sector (e.g. X area: Country A, Y area:
18 According to JICA (2016), the local producers explained how this project affected them. One said,
"This initiative provided us with really good training, and enabled us to improve our product quality over
last year." Another said, "For village women without work, this has been an excellent opportunity to earn
money and contribute to the family budget."
22
Country B, Z area: Country C). Or the project could be divided sector-wise in one area
(e.g. Agriculture: Country A, Education: Country B, Health: Country C).
The reasons are two fold. First, the staff members of donor agencies tend not to
appreciate donor collaboration. It is because very often the collaboration does not
increase the efficiency of the aid programs and projects because it increases red tape. If
we implemented each project horizontally (independent but in parallel), each donor
agency could operate separately and procedurally easier. Second, there is some political
sensitivity among East Asian countries, so it is easier to work independently, rather than
together.
(2) Possible Areas of Collaboration
Regarding the possible areas of collaboration, East Asian countries have a common
experience. That is inclusive industrial development. In the case of Japan, it was the
productivity movement. The other Asian countries have similar but different
experiences. This diversity of historical experience would be a strong point of this East
Asia collaboration, because partner countries can select the best approach (or the best
mixed approach) based on their own country’s context at that time. There is no one-size
fits-all policy for inclusive industrial development. As we have seen, in the case of
Japan, policy choices were made under the circumstances of a highly path-dependent
situation.
Therefore, I would like to propose to the ADB and East Asian countries to share their
own historical development with less developed Asian countries as well as with each
other. Actually, it would be beneficial to start by sharing knowledge among staff
members of donor agencies in East Asian countries. Then, those trained staff members
can draft a plan of collaboration. This sharing information is important in itself, but it
also has another meaning. When starting a new approach, it would be better to start
small, then, if successful, the program can be scaled-up.
In this regard, I also would like to propose that rigorous impact evaluation should be
implemented at the start of the program to know the effects of this new approach.
Without knowing the impact, we should not scale-up the project. What is more, if we
23
know the impact precisely, then it would be a powerful tool to convince the leaders of
each East Asian country. The role of ADB in leading this activity is huge and important.
Conclusions
As this paper covered, the GHQ policy had a huge influence on making the post-war
period economic growth inclusive. Under that influence, especially because of the
tension with labor unions, industrial development became inclusive. The productivity
movement and its philosophy promote sharing the prosperity with employees, and
improved the living standards of people during the high economic growth without
widening the income gap. To complement this movement, social security policy
promoted the protection of people during difficult times and helped them out of poverty.
Japan’s ODA policy on poverty reduction is also hugely influenced by the nation’s own
history, not just emphasizing “pro-poor,” but “pro-poor through growth (or industrial
development).” Other East Asian countries have similar, but different experiences.
Therefore, it would be useful to share those experiences in parallel, so that the partner
countries have choices. The partner countries can choose what they consider important
in their own context. To start, probably, donor countries of East Asia should first start
learning about each other, learning their histories, and sharing the good practices of aid
programs and projects. Rigorous impact evaluation is needed to scale-up regional
collaboration in the future, after fine-tuning the programs and projects. It is the role of
ADB as a neutral catalyst to lead this movement, coordinating with East Asian countries
and the AIIB (Asia Infrastructure Investment Bank).
24
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27
Grants provided
through multilateral
institutions
1 Myanmar 3,238.45 48.27 48.65 3,287.10 2,044.67 2,803.45 -758.78 2,528.32 5,331.76
(127.75) (48.27) (48.65) (176.40) (2,044.67) (1,638.13) (406.54) (582.94) (2,221.07)
2Viet Nam 23.99 -105.30 129.28 1,551.12 373.51 1,177.61 1,306.89 1,680.41
3 Indonesia 11. 31 0.17 85.86 97.16 870.99 1,789.09 -918.09 -820.93 968.16
4Thailand 23.60 1.08 48.38 71.98 535.23 800.26 -265.03 -193.05 607.21
5China 5.15 -24.40 29.55 295.57 1,117.77 -822.20 -792.64 325.12
6 Philippines 63.03 33.64 59.88 122.91 133.81 658.21 -524.41 -401.50 256.72
7 Mongolia 31.01 -25.12 56.13 126.03 17.00 109.04 165.16 182.16
8 Malaysia 0.70 0.23 10.19 10.89 133.66 305.00 -171.35 -160.46 144.54
9 Cambodia 74.29 5.64 46.20 120.50 22.89 1.90 20.99 141.49 143.39
10 Laos 40.33 -38.11 78.44 1.4 3.88 -2.48 75.96 79.84
11 Timor-Leste 8.72 -11.7 4 20.46 1.71 -1.71 22.17 22.17
Multiple countries in East Asia 0.13 0.13 7.66 7.79 ---7.79 7.79
3,520.70 89.14 511.85 4,032.55 5,717.07 7,879.42 -2,162.34 1,870.21 9,749.62
(410.00) (89.14) (511.85) (921.85) (5,717.07) (6,714.10) (-997.02) (-75.17) (6,638.93)
3,475.69 89.02 442.84 3,918.53 5,293.76 6,735.31 -1,441.54 2,476.99 9,212.30
(364.99) (89.02) (442.84) (807.83) (5,293.76) (5,569.99) (-276.22) (531.61) (6,101.60)
(ASEAN total)
Grant aid
Japan’s Assistance in the East Asia Region
AreaEast Asia
Calender year2013
(Unit: US$ million)
Rank
Country or region
Grants
Loan aid
East Asia region total
Total
(Gross
disbursement)
Total
(Net
disbursement)
Technical
cooperation
Total
Amount
disbursed
(A)
Amount
recovered
(B)
(A)-(B)
*1 Ranking is based on gross disbursements.
*2 Grant aid includes aid provided through multilateral institutions that can be classified by country.
*3 Aid for multiple countries is aid in the form of seminars or survey team dispatches, etc. that spans ove
(Source: ODA White Paper 2014, Ministry of Foreign Affairs)
