Rethinking Zimbabwe’s Industrial Policy: Lessons from Japan and the East Asian Tigers.
I will start by an anecdote. My friend’s acquaintance travelled from Zimbabwe to China to buy stuff for resale. After buying a certain product, he complained that its quality was poor. The Chinese seller angrily retorted, “Why you complain (sic)? In Africa, you can’t even make a toy.” A typical case of bad customer service, but the take is that we have to learn to make tangible, actual products – genbutsu in Japanese. The issue of an Industrial Policy (IP) must be at the center of our government programs because it can fix more than half of our national problems.
Our economy in its current form is largely agrarian and while agricultural production is important in the contemporary political economy it is a is a myth that we can ever develop on the basis of agriculture as no economy has ever advanced on that basis. If at all we envisage transforming Zimbabwe from a third world country to a developed one, we must as a matter of course industrialize. That our economy is in bad shape needs neither a rocket scientist nor a Nobelprize winning economist to discern. There is everything wrong with an economy where the largest listed company is a mobile phone operator, followed by a beer company.
An industrial policy remains important in transforming the economies of third world countries, and while context differs in determining the success of IPs. An IP is a strategic effort and a set of programs adopted by a government to develop and grow productivity, particularly in the manufacturing sector, through targeting certain industries, providing clear guidance, subsidies, trade protection and anti-trust exemption in others. Far-eastern countries like Japan, Korea, and Taiwan are good examples where IP has been effectively used to catch-up with the West.
Lessons from the East: The rise and transformation of Japan
By far the most judicious example of industrial policy to learn from is that of Japan. In Japan’s case, the role of the Ministry of International Trade and Industry (MITI) as the IP champion is widely renowned and revered. To argue that adopting the Japanese style pro-growth IP would be replicated in Zimbabwe would be naiveté of the worst sort, as context, including ideological politics is a major factor. The main objective of the IP is to “restore the manufacturing sector’s contribution to GDP of Zimbabwe from the current 15% to 30% and its contribution to exports from 26% to 50% by 2015”. A section on necessary conditions for Zimbabwe’s industrialization reads “… there will be a critical need for close cooperation in the following key areas” like electricity, water, roads, rail and labour legislation for the IP to succeed. Yet prior to finalizing the policy, that close cooperation and consensus must have been sought and cemented. That is the greatest lesson that can come out of Japan’s successful IP. MITI championed consensus even under very difficult circumstances and disagreement – the so-called nemawashi (consultation to lay the groundwork).
Developing an IP needs a strong dose of systems thinking. That thinking does not run through the present IP. Systems thinking requires the development of a policy by breaking the system down into its constituent parts and then evaluating each in detail by looking at its inputs, processes and outputs. For example, the desired output of the IP is a 15% increase in the manufacturing sector’s contribution to GDP. The next question should be, what inputs do we need to double the output? Clearly, the inputs required are labour/skills, technology, capital, energy, water, innovation, among others. Thereafter, one needs to ask what processes should take place and what exogenous factors need to be managed, especially where exports are to be doubled. During the GNU the Prime Minister expressed shock at having discovered some equipment fitted in 1923 in some factories.
The IP clearly suffers from a resource shortage. The IP simply notes that government will identify credit lines of a short to medium term nature. The policy should specify how and what should be done for capital to flow in and for the country to attract those credit lines. It also suggests the formation of an industrial bank. However, the case of IDBZ, its capitalization issues and record in infrastructure development does not help in inspiring confidence that an industrial bank will be formed and help to capitalize manufacturing companies enabling them to double output. Relating this to the successful case of Japan’s IP, that country benefitted from a large amount of local savings. Without savings in Zimbabwe, NSSA, which has largely been involved in stock market and real estate, has a role to play in funding manufacturing. If Old Mutual, a private mutual fund, can provide $20 million for distressed companies, NSSA which collects money from everybody should be able to set a side much more than that to capitalize industry.
The IP also promotes cluster development – the targeting of specific sectors, such as the chemical industry, agro-processing industry and metals and electricals sector. This is noble in developing competencies in these sectors where the country has an advantage. But the policy is not clear on exactly what the government shall do with these sectors to double their output. For example, much of the section on the metals and electricals cluster simply describes the revival of Ziscosteel. It is not clear what aspects of electricals the IP will promote. It also lacks an examination of the value-chain elements of those specifics cluster areas and how they will be developed to create sustainable competences.
What can be discerned from MITI’s success was how it leveraged industrial keiretsu (related value chain companies), providing comprehensive and clear support to sectors such as electronics, chemicals, rail and so on. A sector that is a prospective clear winner, though it does not constitute hard manufacturing, that could have been supported by the IP is the software industry, which can easily position Zimbabwe as a software outsourcing hub for Africa. Clearly, the policy spells out a cluster development approach that seeks to promote certain productive industries. Critical to developing a country’s competencies in specific sectors is the development of innovation and heavy investment in research and development (R&D).
Here is a good example of how Japan supported the semi-conductor cluster in order to chip away at the dominance of the United States during the 1970s. The Asahi Shinbun in 1976 reported that, a VSLI (very large scale integration) R&D project was started jointly by the government and the private sector. To do so, the VLSI Technology Research Association was formed comprising five domestic producers in two groups, viz “Fujitsu-Hitachi-Mitsubishi and NECToshiba. The firms together with MITI created a joint research institute comprising “100 researchers from the member firms and MITI’s Electronics Research Institute. During the following four years, about 70 billion yen, including a government subsidy of 30 billion yen was spent. The technology necessary to develop VLSI was developed and the association disbanded…”. Our own MIC needs to learn from this and provide guidance towards joint research that stresses the necessity of pooling R&D efforts to efficiently use scarce scientific manpower and research funds. One way of generating funding for technical research is to redirect the funds from state and private lotteries towards scientific research, and then licensing the patents out to the private sector.
The MIC’s IP encourages import substitution. However, the policy is not clear on export promotion with regards to the quality of output for exports and its competitive pricing. Apart from a general comment on the Standards Association of Zimbabwe, the policy contains no robust measures on setting sustainable standards on the goods to be exported. To export value added goods, while protecting some local industries from foreign competition as proposed in the policy, we must necessarily go beyond import substitution to export promotion. Yet fundamental production inefficiencies in our factories render our goods uncompetitive internationally.
The policy lacks mechanisms to ensure the supported clusters are put under pressure to reduce per unit costs of production through production efficiency, use of technology, eliminating waste and ramping up output. The policy also lacks a program of technical cooperation with international and local agencies to engender technology transfer and diffusion. In order to catch up, the country must work with developed countries. For example, Korea’s electronics industry was a great beneficiary from Japanese and American engineers and scientist and their innovations. That is how companies like Samsung quickly developed competencies in memory chips, particularly dynamic random access memory. In the same vein, Sharp Corporation of Japan also leveraged RCA’s patents on liquid crystal to create liquid crystal displays (LCDs). This is the only way Zimbabwe can leap-frog itself to the latest technology curve.
Eventually, the success of Zimbabwe’s shall be function of implementation of the policy. First, the policy needs to be improved clear of all vagueness and the missing links. Another lesson that can be drawn from the Japanese example is the mutual cooperation between government and the private sector – the cooperation of government and business as collaborators and not as adversaries. Also the use of administrative guidance (gyōsei shidō) by MITI as an instrument of enforcement can help our own MIC is implementing its own policy. This entailed the use of persuasion, advice, and influence to push corporations towards a direction viewed as desirable by MITI’s bureaucrats who also had the power to give or to withhold government contracts, import permits, tax concessions, loans, grants, subsidies, licenses, foreign currency and approval of oligopolistic cartels. In conclusion, the current policy lacks a clear program of agreed actions that will double Zimbabwe’s manufacturing output and most of all, there is need to learn from successful frontrunners.
*Taurai Chinyamakobvu is a consultant and scholar of Japanese technology and business methods. The opinions expressed herein are his. Feedback can be sent to email@example.com